Pakistan Daily Economy Update - 1 August

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1. Aug . 1, 2017 KCCI - eBulletin FBR’s collection for July stands at impressive PKR 200Bn The FBR has provisionally collected about PKR 200Bn in taxes in Jul’17, taking an exceptionally good start in the new fiscal year, but questions remain over growth sustainability in the months ahead in a politically unstable setting. The PKR 200Bn provisional collection is about PKR42Bn or 26.5% higher than the collection in Jul’16. The key reason behind this impressive growth is withholding tax payments by the provincial governments of Punjab and Sindh, made in July due to delayed release of funds, although some pertain to the previous FY17. Tribune. Petroleum products prices to remain unchanged in August In the absence of a political leadership, the bureaucratic machinery of the state has struggled to take a routine monthly decision to revise prices of petroleum products and decided to keep them unchanged for the month of Aug’17. The secretaries of petroleum, finance and law and justice spent more than 12 hours in consultations, at times also touching base with the presidency for a direction whether or not to implement recommendations of Ogra issued last week. However, an amended summary taken to the president for approval to revise the prices was declined. It is legally deemed difficult to change sales tax rates on petroleum products in the absence of a prime minister or the cabinet; continuation with the existing rates would generate about PKR 8Bn of additional windfall revenue. Dawn. Pakistan’s largest refinery to resume production this week Pakistan’s largest oil refinery, which had caught fire two years ago shortly after inauguration and had been staying closed since then, is set to resume production later this week. Byco Petroleum Limited, in a notification to the PSX said that the company will resume production at its 120,000 bpd refinery and would supply products to the market by 5thAug’17. The refinery, reconstructed at a cost of around PKR 2Bn, will produce diesel, furnace oil, motor gasoline, jet fuel JP-1, kerosene oil and light diesel oil. The addition would take oil production by the company to 155,000 bpd. Tribune. LNG imports meeting up to 25% of gas shortage Ongoing imports of LNG are meeting up to 25 % of gas shortage, which currently hovers around 2.5Bn cubic feet per day, and as per official estimates, Pakistan has saved approximately $ 1.7Bn by importing LNG, which is cheaper than furnace oil. Pakistan has so far imported 6.1 Mn tons of LNG through the country’s only LNG terminal, which is located at Port Qasim. Operated by Engro, the terminal has handled 94 LNG cargo ships within 28 months and re-gasified approximately 285Bn cubic feet of gas into the national distribution network. Dawn. Cotton committee to assess crop next week The Cotton Crop Assessment Committee (CCAC) will be meeting next week to assess the volume of the current cotton crop. Key personnel of relevant ministries and government departments, including the Trading Corporation of Pakistan, representatives of growers, Pakistan Textile Mills Association (Aptma), Pakistan Cotton Ginners Association (PCGA) and Pakistan Central Cotton Committee (PCCC) will attend the meeting. The committee would also assess per acre crop output and average plant population and crop outlook. Dawn. Pakistan invites Azerbaijan to join CPEC Pakistan has invited Azerbaijan to join CPEC due to its strategic location as a transit hub for East-West China Europe Corridor, a part of Chinese bigger regional connectivity Silk Road plan. Former Prime Minister Nawaz Sharif had directed the Commerce Ministry to establish joint working groups on trade, investment and communications with Tajikistan and Azerbaijan for effective engagement on trade and economic issues. The News. OGDCL TFC tenor extended by another three years The ECC of the Cabinet has further extended the tenor of OGDCL’s Privately Placed Term Finance Certificates (TFC) of PKR 82Bn by three years after the financially weak power Distribution Companies (Discos) expressed their inability to repay the principal amount. TFC investor agreement for PKR 82Bn was executed between PHPL and OGDCL for the purposes of funding repayment liabilities of Discos on the terms and conditions approved by the Finance Division. Ministry of Water and Power apprised that the grace period of 36 months of PKR 82Bn term finance facility has been completed and payment of semi-annual installments on account of principal portion amounting to PKR 10.250Bn has become payable semi-annually. BR. Liabilities: power sector given PKR 30Bn fresh guarantee \ The Finance Ministry has provided a fresh guarantee of PKR 30Bn to the power sector for settlement of its liabilities on account of repayment of loan and interest payment through a fresh loan. A syndicated term finance facility for PKR 30.95Bn was executed between Power Holding (Private) Limited and consortium of local commercial banks for the purpose of funding the repayment liabilities of the Discos in pursuance of the ECC decision in 2014. As a result of limited available fiscal space and liquidity, the power sector does not have capacity to pay principal installments of the loan and the Ministry of Water and Power and the Ministry of Finance are working on a settlement plan for the PHPL financing facilities. BR. Cement prices up by PKR 10-15 per bag The prices of different brands of cement have been increased in retail markets by PKR 10-15 per bag as the manufacturers have passed on the impact of additional taxes and duties announced in the budget FY18. The rates of cement, 50-kg bag, have been increased to PKR 550-565 from PKR 540-550 in different cities of northern region of the country. Earlier the cement prices were increased by PKR 10 -20 to PKR 540 -550 per 50kg bag after the announcement of enhanced Federal Excise Duty (FED) by 25% in the budget. The Nation. Mobile phone users cross 140.5 Mn Mobile phone users in the country, which were 133.2 Mn till Jul’16, have reached 140.5 Mn by May’17, increasing by around 7.3 Mn new users in their subscribers during the period. As per statistics issued by Pakistan Telecommunication Authority (PTA) Mobilink is still leading the operators with its around 53 Mn customers, while the subscriber base of Telenor has reached 41 Mn. Zong has 28.2 Mn customers while Ufone stands with 18.5 Mn customers. The Nation. Pakistan, India begin dialogue on Indus hydropower projects Pakistan and India have initiated a formal dialogue mediated by the World Bank to iron out differences over the Indus hydropower projects being built by the latter despite the former’s objection. The meeting is being held on the invitation of the World Bank in Washington DC where talks are expected to conclude on Aug. 1, 2017. The News. US policy uncertainty holding down investment: Fed official US political uncertainty over health care and tax reform is causing businesses to hold off on investments, Fed Vice Chair Stanley Fischer said. Low investment, in turn, is one factor contributing to stubbornly low interest rates. Slow economic growth is the main factor holding down long-term interest rates, even after the Fed raised the benchmark federal funds lending rate by a full point in the past 18 months, including two rate hikes this year. The US economy grew by 2.6 % in the second quarter, more than double the pace in the first three months of the year. The longer-term potential growth rate has slowed to 1.5%, half what it was in the years leading up to the 2008 financial crisis. BR. Economic Indicators List of Indicators Date / Period Unit Value Change Daily Crude (AU'17) Gold (JY'17) Gold (10g) Local Silver (JY'17) Cotton(KHI)-40 kg Kibor-6M 31-Jul 31-Jul 31-Jul 31-Jul 31-Jul 31-Jul 31-Jul 31-Jul 31-Jul 31-Jul PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 105.40 107.40 46,010 -17.89 50.18 1,271.0 43,885 16.82 6,805 6.15% Forex Reserves 21-Jul $ Bn 20.40 -0.01% 0.05% 0.21% NM** 2.62% 0.01% 0.00% 0.54% 0.00% 0.01% WoW -2.06% YoY -3.08% -1.63% 18.67% -36.32% -148.57% 4.58% USD-Interbank USD-Open MKT KSE-100 index FIPI Jul-Jun 17 Remittances $ Bn 19.30 Jul-Jun 17 Exports* $ Bn 20.45 Jul-Jun 17 Imports* $ Bn 53.03 Jul-Jun 17 Trade Balance* $ Bn -32.58 Jul-Jun 17 Current Account $ Mn -12,098 Foreign Direct Inv. $ Bn 2.41 Jul-Jun 17 Jul-May 17 LSM Growth* % 5.69 % 4.16 Jul-Jun 17 Avg. CPI-FY17* Discount Rate % 5.75 Jul-17 WoW= week Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful on week; Major Currencies 145 GBP, 31-Jul-17, 138.4 135 125 EUR, 31-Jul-17, 123.8 115 105 95 Jul-16 USD, 31-Jul-17, 105.2 Oct-16 GBP USD EUR Jan-17 Apr-17 Jul-17 Source: KCCI Research ; Oanda.com Quote of the Day "It is not length of life, but depth of life." Ralph Waldo Emerson Chart of the Day Pakistan - Gross Domestic Product FY17 (Current Prices) Agriculture, 7369.927, 25% Services, 16825.93, 56% Industry, 5700.107, 19% Value in PKR Bn Source: KCCI Research, SBP Disclaimer This report has been prepared by KCCI Research & Development Cell. The information contained herein have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith. Such information has not been independently verified. icon represents the sole viewpoint of the KCCI R&D Cell, and is stated to enrich the readers' understanding of the news item. The R&D Dept. bears no responsibility for its correctness or accuracy. Contact: res@kcci.com.pk