Pakistan Daily Economy Update - 1 June

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1. Jun . 1, 2016 KCCI - eBulletin Zero-rate decision to boost exports by 25% According to the Exporters Readymade Garments, the decision to reintroducing zero-rate sales tax regime for the textile sector will boost Pakistan’s exports by 25%. Exporters said that the govt. should immediately release the stuck up refunds of sales tax, duty drawback and drawback on local taxes and levies (DLTL). They also urged to bring down the tariffs of electricity, gas and water for the export sectors and give incentives as per our regional competitors. The News. Prices of petrol, HOBC to remain unchanged The govt. has decided to keep prices of petrol and High Octane Blending Component (HOBC) unchanged for the month of Jun.’16. While the govt. has approved partial increase in the prices of other products, including High Speed Diesel (HDS) by PKR 3.34/liter, Light Diesel Oil (LDO) by PKR 2.23/liter and Kerosene Oil by PKR 1.98/liter, govt. authorities have said that old prices will continue during Jun.’16 and there will be no increase in this regard to facilitate common masses. The govt. will bear a burden of PKR 8.5Bn as a result of not increasing petroleum prices. BR. 10MFY16: services trade posts $ 1.75Bn deficit Services trade deficit declined sharply by 17% during 10MFY16, mainly due to lower import bill. The country's services trade registered a deficit of $ 1.76Bn during 10MFY16 compared with $ 2.11Bn in the same period of FY15. During the period under review, services sector exports fell by 14% as Pakistan's services sector exports stood at $ 4.41Bn in 10MFY16 as against $ 5.16Bn in the corresponding period of FY15, down $ 748Mn. Similarly, services sector imports decreased by 15% or $ 1.09Bn to reach $ 6.168Bn in 10MFY16 compared with $ 7.27Bn in the same period of last fiscal year. BR. Auction for 3G: setback to government as major player quits The govt. has suffered a setback in its efforts to generate around PKR 42Bn of non-tax revenue from the sale of 3G license as the leading cellular company in the country, Mobilink has announced that it would not participate in the auction process. The auction for Next Generation Mobile Services (NGMS) Spectrum (3G) in the 850 MHz range is scheduled to be held on Jun. 20, 2016 with a base price of $ 395Mn. BR. FBR to begin electronic data exchange with China FBR will implement electronic data exchange (EDE) between Customs administration of China and Pakistan to facilitate trade and combat commercial frauds. This bilateral initiative set to go online in June 2016 is going to help Pakistan and China verify the Certificates of Origin issued for claiming preferential tariff under Pak-China Free Trade Agreement. The FBR is also trying to expand the scope of EDE to all the traded goods to maximize its benefits for better customs controls and enhanced trade facilitation. The News. To meet power shortage, PSO imports increased furnace oil Pakistan State Oil (PSO) has announced that the company, through higher imports, has ensured increased supply of furnace oil to the power plants in order to help reduce electricity outages during the current summer season, particularly in Ramadan. The company placed orders for the import of eight to nine vessels; each of which will bring 65,000 tons of fuel oil from May-end to July. Some of them have arrived and others are on their way that will reach in June. Tribune. Engro Corp plans another LNG terminal Engro Corp plans to build a second LNG terminal with a capacity of around 400 to 600Mn cubic feet a day, in a move that seems to convey its strategic expansion in the energy sector, while holding back its traditional fertilizer business. The company plans to build a 450MW LNG power plant worth $ 700Mn. Tribune. Port Qasim to have two more LNG terminals Two more liquefied natural gas (LNG) terminals will be set up at the Port Qasim with a cumulative capacity of 1Bn cubic feet per day (bcfd), Chairman of the Port Qasim Authority (PQA) said. Of the two, the Fauji Foundation will build a terminal with a capacity of 600Mn cubic feet (mmcfd) while the second terminal of 400mmcfd capacity will be built by a Gulf emirate investor. He added that a coal terminal at the port would also start functioning by the end of this year and it would cater to the needs of power plants located at Port Qasim only. However, a 660MW coal-fired power plant at Sahiwal would be given special right to use the terminal. Dawn. List of Indicators Unit Value 31-May PKR 104.86 Change Daily 0.04% USD-Open MKT 31-May PKR 105.15 -0.36% KSE-100 index FIPI 31-May 31-May Pts. $ Mn 36,062 -0.99 -1.31% NM** Crude (JU'16) 31-May $/bbl 48.90 -0.99% Gold (MY'16) 31-May $/oz 1,217.8 -0.57% Gold (10g) Local 31-May PKR 41,057 -1.44% Silver (MY'16) 31-May $/oz 16.01 -2.06% Cotton(KHI)-40 kg 31-May PKR 6,039 -0.89% Kibor-6M 31-May % 6.14% 0.00% Forex Reserves 20-May $ Bn 21.61 1.37% Remittances Jul-Apr 16 $ Bn 16.03 5.18% Exports* Jul-Apr 16 $ Bn 17.32 -12.99% Imports* Jul-Apr 16 $ Bn 36.34 -3.70% Trade Balance* Jul-Apr 16 $ Bn -19.02 -6.68% Current Account Avg. CPI-FY16* Jul-Apr 16 Jul-Apr 16 $ Mn % -1,519 2.79 17.71% WoW YoY May-16 Discount Rate % 5.75 Sources: KCCI Research, PMEX, NCCPL, KSE, SBP, PBS* ** Not Meaningful WoW= week on week; YoY=Year on Year Major Currencies 175 165 GBP, 30-May-16, 153.7 155 145 135 EUR, 30-May-16, 117.0 125 115 105 95 USD, 30-May-16, 105.2 85 75 May-15 Aug-15 USD Nov-15 GBP EUR Feb-16 Source: KCCI Research ; Oanda.com Quote of the Day “Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.” Steve Jobs Chart of the Day FOREIGN DIRECT INVESTMENT FROM US TO PAK 60.0 40.0 20.0 - Deferred: ECC puts off decision on gas allocation for Engro plant The govt. has stopped short of approving a proposal for allocating gas supply to Engro Fertilizers from Mari Petroleum Company and - 20.0 providing unutilized gas in the Habib Rahi reservoir to other fertilizer manufacturers. The petroleum ministry was seeking allocation of 31Mn cubic feet of gas per day (mmcfd) for Engro Fertilizers from the output of Mari Petroleum. It also suggested that any unutilized - 40.0 gas in the Habib Rahi reservoir could be supplied to the fertilizer industry connected to the Mari Petroleum network. Tribune. FY13 FY14 FY15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Undeclared supplies: Finance Bill will amend tax laws to disallow input tax credit The Finance Bill 2016 will amend tax laws to disallow input tax credit on undeclared supplies to control the use of fake and false claims of input tax credit, causing huge loss to the national exchequer. It is proposed to make it mandatory for the registered persons to file the supply part of the return early so that the buyer can claim credit against declared supplies. It is further proposed to include an enabling provision in section 8, whereby the proposed system can be made effective from the date to be notified by FBR. BR. Date / Period USD-Interbank Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Govt. to impose PKR 170-190Bn new taxes in budget The govt. has decided to enhance taxes on cement, poultry, sugar, marble and mobile phones in the upcoming budget for FY17. The federal cabinet has approved the budget, which set tax collection target at PKR 3.64Tn, as against outgoing year’s target of PKR 3.10Tn. The govt. will impose new taxes between PKR 170Bn and PKR 190Bn in the budget, and will also persist with the imposition of super tax on affluent and rich individuals, association of persons and companies earning income above PKR 500Mn. The govt. will impose 4% super tax temporarily on all banks and 3% on other companies and individuals, having an annual income of over PKR 500Mn. BR. Economic Indicators Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Filers, non-filers in salaried class: different tax slabs to be introduced The govt. is planning to introduce different tax slabs for filers and non-filers in salaried class to increase tax rate by 15% for each slab for non-filers in the upcoming budget of FY17. Currently, same tax rates are applicable on filers and non-filers salaried persons where most of them do not file returns. A large number of them shall pay tax on other income if they file return. In this regard, discrepancies have been detected in the returns and many cases of short tax deductions have been noted. At present, 309,941 salaried persons are filers and 1,038,193 are non-filers, reflecting a total of 1,349,134 salaried persons. Tax deducted from filers amounted to PKR 58.75Bn and tax deducted from non-filers stood at PKR 20.71Bn, i.e. total of PKR 79.46Bn. BR. 10MFY16 $ 46Bn CPEC: Projects worth $ 30Bn already under way - 60.0 Minister for Planning, Development and Reform Ahsan Iqbal has said that the projects worth $ 30Bn out of a total portfolio of $ 46Bn Source: KCCI Research, SBP have been initiated in the last one year, adding that there was no bureaucratic hurdle in the implementation of CPEC. The minister Disclaimer said that most of the $ 30Bn active portfolio is in the private sector while financing agreements of road infrastructure projects of the public sector have also been signed. Tribune. This report has been prepared by KCCI Research & Development Cell. The information contained herein have been compiled or arrived at based upon SBP announces bank holiday information obtained from sources believed to be reliable and in good faith. SBP and all banks/ development financial institutions, microfinance banks would remain closed for public dealings on Ramadan 1, Such information has not been independently verified. icon represents the sole viewpoint of the KCCI R&D Cell, and is 1437 AH for deduction of Zakat. The News. stated to enrich the readers' understanding of the news item. The