EASING INFLATION MAY ALLOW 50-100 BPS CUT
BANKS PROVIDE ENOUGH MONEY TO AGRICULTURE SECTOR
Nov 23 - 29, 2009
The central bank in its next review of policy rate by end of this month is expected to announce a cut in interest rate ranging 50 to 100 bps on the back of declining trend in inflationary pressure which is estimated to settle around 11 percent by June 2010.
It may be noted that the Year-on-Year (YoY) inflation is assumed to settle at 11% in financial year 2009-10. The declining inflation besides recent improvement in macro numbers are in fact raising the expectation for easing policy rate by the State Bank of Pakistan.
The latest macro data on the external front during the period of July-October 2009 has shown improvement which is evident from decline in trade deficit by 41% YoY and remittances growth of 32% YoY. However with increase in commodity prices and fragile security situation, the improvement on the economic front now depends much on exports and the next two months would be critical for export targets of the current financial year especially due to unabated rise in the cost of doing business.
Commenting on the current situation of exorbitant rise in energy prices, Salim Parekh, Chairman, SITE Association of Industry has shown his apprehension that sharply increasing trends of cost of doing business would lead to ruining the domestic industry, rendering the millions of workers jobless.
It seems that the government is trying it level best to close manufacturing industry instead of managing electricity/gas crisis which includes theft, over employment, non payment of huge amounts by the government departments to KESC and SSGCL etc. The government has succumbed to IMF pressure.
SITE Association has expressed deep dissatisfaction at the inability of the government to rectify the real causes, but the government rather has unfortunately opted for easy solution by increasing tariff across the board by 20% in four months.
The skyrocketing prices of cotton yarn and practically its non-availability, has already played havoc to the local value added textile manufacturers and brought them at the brink of collapse. An exorbitant increase by terminal operators in Terminal Handling Charges (THC) has added fuel to the fire for the value added textile exporters who are striving on very thin margins of profit in order to earn valuable foreign exchange for the country.
There is an improvement in macro indicators, but the monetary environment is actually linked to the external account where domestic resource gap estimated at 5.3% of GDP in FY09 which needed to be bridged by inflows from friends of Pakistan (FoDP) and the US.
This, in turn, coupled with a favorable balance of domestic & external demands is likely to buttress the recovery process. The balance of payment estimates are likely to be revised in the wake of changing oil prices at $74/bbl. Oil bill is estimated at $5.7billion for financial year 2009-10. Current account deficit is $7.7bn as against previous estimate of $7.2billion while trade & services deficit is $15.2billion and workers remittances $8.5billion, financial and capital account surplus $9billion, FDI $2.5billion, net portfolio outflow $300million, and net disbursement $1.6billion.
Tokyo pledged $2.2billion and Kerry-Lugar bill $1.5 billion and IMF financing is of $4.35billion. The central bank reserves are expected to touch $14.8billion, which is sufficient for 5.3 months import cover by end of the current fiscal year.
The appetite for agriculture credit, being provided by the commercial banks as well as the specialized financing institutions, shows a rising trend without indicating any trickle down effect on food prices.
People naturally attach hopes that the agriculture sector where the financial sector of the country pours huge money should enhance the supply of agriculture produces, which is the only way out to contain the food inflation going wild with every passing day.
Theory of demand and supply which determines the market prices is absolutely missing in the domestic scene and despite reports of bumper crops the price hike of agriculture produce continues to persist otherwise the increasing funding by the commercial and specialized banks should have resulted in additional supplies of the food grains in the market.
The agricultural credit disbursements by commercial and specialized banks rose 9.10 percent year-on-year to Rs 62.839 billion in the first four months (July-Oct) of the current fiscal year (2009-10). In absolute terms, disbursement of credit to the agriculture sector increased by over Rs5.239 billion in July-October 2009 when compared with total disbursement of Rs 57.60 billion in the same period last year.
Overall credit disbursement by five major commercial banks including Allied Bank Limited, Habib Bank Limited, MCB Bank Limited, National Bank of Pakistan and United Bank Limited stood at Rs 36.915 billion in July-Oct 2009 compared with Rs 31.454 billion in July-Oct 2008, depicting an increase of Rs 5.461 billion or 17.36 per cent. Zarai Taraqiati Bank Limited, the largest specialized bank, disbursed a total of Rs 14.585 billion in July-Oct 2009, up 20.65 percent when compared with Rs 12.089 billion in the same period last year, while disbursement by Punjab Provincial Cooperative Bank Limited stood at Rs 694.427 million in July-Oct 2009 compared with Rs 882.732 million in the same period last year. Besides, 14 domestic private banks also loaned a total of Rs 10.644 billion in July-Oct 2009 compared with Rs 13.173 billion disbursed in July-Oct 2008.
It may be recalled that the State Bank of Pakistan has set an indicative agricultural credit disbursement target of Rs 260 billion for FY10. Banks disbursed a total of Rs 233.01 billion credit to the agricultural sector in financial year 2008-09.
TDAP POSTPONES EXPO PAKISTAN EXHIBITION 2009
The Trade Development Authority of Pakistan (TDAP) has postponed the Expo Pakistan 2009 scheduled for December 3-5, 2009, which will now be held on February 26-28, 2010 at Karachi.
The TDAP has postponed the Expo Pakistan Exhibition on the recommendation of Exhibition Committee headed by Sindh Minister for Commerce & Industry, Mr. M. A. Rauf Siddiqui and comprised of 30 members representing Trade and Industry and Federal & Provincial Governments Organizations.
The Committee after detailed deliberations in its last meeting held on November 13 recommended unanimously that Expo Pakistan 2009 should be rescheduled for February 2010. Accordingly, the TDAP accepted the recommendations to organize the event on February 26, 27 & 28, 2010 at Karachi.