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Sep 25 - Oct 01, 2000

Petroleum prices up by 10 per cent

The government on Friday increased petroleum prices by an average of 10.4 per cent to offset the impact of a steep rise in the international market.

"The upward revision in the oil prices was inevitable because of still increasing petroleum prices in the world market," said Petroleum and Natural Resources Minister Usman Amindduin.

He told a news conference that the prices of Super, Regular as well as HOBC had been raised by 50 paisas a litre. The prices of kerosene, he added, had gone up by Rs2.75, High Speed Diesel (HSD) by Rs1.75, Light Diesel Oil (LDO) by Rs2.50, and JP-4 by Rsl.50 a litre.

In reply to a question, he said only 15pc GST was being levied on the petroleum products except Motor Spirit, which, he added, was a heavily taxed item contributing Rsl5 billion to the exchequer.

He stated that the overall impact of the increase on the exchequer was estimated to be around Rsl2 billion and added that 85pc of the petroleum products were being imported to meet the needs.

Asked about plans to lessen dependence on the imported petroleum products, Mr Aminuddin said a three-year plan was under consideration to convert power houses from furnace oil to gas.

"The government will soon withdraw 15pc GST on the CNG kits to make it economical for consumers to convert their vehicles from diesel to the CNG."

He had no answer when asked whether the government had planned to offer any relief to the already burdened common man.

Since December 11, prices of diesel have increased from Rs10.66 to Rsl3.50 a litre.

The Organization of Petroleum Exporting Countries (OPEC) was not making any commitment whether it would pump more crude in the market or persist with the current supplies. The consumer countries were trying to prevail upon OPEC to stabilize the prices at $24 a barrel.

$250m IMF tranche in November

The International Monetary Fund (IMF) has indicated to offer about $250 million as a first tranche of the $650 million in November to help ease Pakistan's severe balance of payment pressure.

This was tentatively agreed between the two sides following the conclusion of a broad agreement reached on Thursday after two weeks of negotiations.

The proposed letter of intent (LoI) or an 'Ad Referendum' that has been agreed was to be made public on Friday as was said by Finance Minister Shaukat Aziz on Thursday before leaving for Prague.

Sources said under the agreement the current year's financing gap of $3.5 billion will be filled by the IMF, Paris Club, World Bank and the Asian Development Bank (ADB). The IMF alone was likely to provide $600 to $650 million.

The proposed financing package for next nine months was being finalised in such a manner that the IMF, the World Bank and the ADB would provide $1.5 billion and the $2 billion loans will be rescheduled by the Paris Club.

Rupee hits new low

The rupee fell to a record low of 57.80 in the Inter-bank market on Tuesday, shedding 3.2 per cent of its value or 190 paisa against the dollar in a single session. In mid-November 1998, the rupee had fallen to 57.60 against the dollar.

Bankers said the rupee closed at 57.80 to a dollar against its previous close of 55.90 as higher corporate demand coupled with outward remittances of foreign investors sucked in some $25 million to $30 million from banking system amid nominal supply of green backs.

After the withdrawal of the cap on inter-bank exchange rate on July 20, the rupee has been sliding down. Since then it has lost 9.5 per cent of its value: it has come down to 57.80 against the dollar from 52.30 on July 20.

On Tuesday the rupee fell by 200 paisa or 3.3 per cent against the dollar in the open market. It closed at 60 to a dollar down from 58 on Monday.

ADB to give $800m

The Asian Development Bank (ADB) will offer $800 million to Pakistan for undertaking a number of projects, including KESC restructuring and initiating an export promotion programme.

An ADB mission, led by Mashruk Ali Khan, met Finance Minister Shaukat Aziz on Wednesday and informed him that more than $800 million were in the pipeline to be provided for Micro Finance Bank, capital market development loan and rural/urban development.

$50m for promotion of IT

Federal Minister for Science and Technology Dr Atta-ur-Rahman has said that Pakistan will soon get $50 million for the promotion of Information Technology.

He also disclosed that Internet rates will be further reduced during next few weeks.

SBP raises repo rate by 1%

The State Bank on Monday increased discount and repo rate from 11 to 12 per cent. This confirms all earlier indications that SBP was going to pursue a tight monetary policy and check dollarization of bank deposits and stop capital flight.

The one per cent increase in discount and repo rate reverses partly the two per cent reduction in the rate made in January. Before January 4 repo and discount rate was 13 per cent that was reduced to 11 per cent to help the banks cut their lending rates and provide an impetus to the industry for a quick revival.

Onion price shoots up

The price of onion has shot up to Rs16-18 per kg in the markets depending on the area due to what its dealers describe as shortage of commodity. In the first week of this month, onion was selling at Rs12 per kg. In Subzi Mandi, the wholesale price, which was quoted at Rs8 per kg, surged to Rs13 per kg for grade one quality.

ITI shares

Bata Pakistan Limited, the transnational shoe making company, said on Monday that it had received an offer "from a party" to purchase all shares of its wholly-owned subsidiary: International Tanners & Industries (Pvt) Limited (ITI) for cash consideration of Rs25.2 million.

Treasury bill rates up

The State Bank on Wednesday raised the yield on treasury bills of different maturity by 1.17 to 1.52 per cent to contain dollarization and check capital flight because due to falling rupee parity against the US dollar.