Pakistan Daily Economy Update - 10 October

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1. Oct . 10, 2017 KCCI - eBulletin Upcoming polls to deteriorate Pak fiscal position: WB The World Bank (WB), in its report on “South Asia Economic Focus (SAEF), Growth out of the Blue” has warned that upcoming national elections in 2018 would deteriorate Pakistan’s fiscal position that would affect debt trends and maintain debt at the current high level. The bank has stated that macroeconomic risks have increased substantially during FY17. The external balance is particularly vulnerable given the persistent current account deficit, affecting the country’s reserve position. Improving the external balance hinges upon a revival in exports, a slowdown in imports, and stable remittance flows. The pressure on the current account is expected to persist as the trade deficit will remain elevated during FY18 and FY19. The Nation. South Asia no longer world’s fastest-growing region The World Bank has said in its recent report that South Asia is no longer the fastest-growing region in the world. The report further says that despite benign global conditions, South Asia has forfeited the economic growth trend, with East Asia and Pacific back to the top position. However, growth in South Asia is expected to remain robust, adding that it is likely to become the fastest-growing region once again in the next two years. According to the twice-a-year South Asia Economic Focus (SAEF) report, growth in South Asia is expected to be 6.9% in 2018. It is anticipated to stabilize around 7% over the medium term. The report also stated that growth in Pakistan is expected to increase to 5.3% during FY18 and 5.8% in FY19 with export growth likely to increase to 5.8% and 6.6% respectively while imports are expected to grow at slower rates. The growth in govt. consumption is forecasted to be moderate from 11.9% this year to 9.4% in 2019. Dawn. Muddled World Bank report: Pakistan ‘needs’ $ 31Bn this year to stay afloat A World Bank report has warned that Pakistan’s external sector situation could become unsustainable due to a lack of policy actions. The report, however, appears to exaggerate the problem due to the claim that Islamabad needs $ 31Bn this year to meet foreign financial obligations. In its biannual South Asia Economic Focus (SAEF) report, the bank said that external account pressure is to persist in FY18, adding that the current external situation can become unsustainable in absence of adequate policy response. One year ago, Pakistan was in a comfortable position, as international reserves were large enough to cover the current account deficit, the service of external debt, and even the total volume of foreign portfolio investments in the country. Tribune. Senate body gives directives for KCR groundbreaking by Dec 25 The Senate Standing Committee on Planning, Development and Reform has directed the Ministry of Railways and the province of Sindh to make every effort to ensure groundbreaking of the Karachi Circular Railway (KCR) project by 25th Dec’17 with a warning that any unnecessary delay will not be tolerated. DG Planning, Railways, informed the committee that feasibility report and PC-1 of the project had already been approved but the framework agreement and award of commercial contract had not yet been agreed. Hence, ground-breaking of the project by 25th Dec’17 looks ambitious. Tribune. 1QFY18 fiscal deficit restricted to 0.9%: govt. The govt. has claimed that fiscal deficit has been restricted to 0.9% during 1QFY18 despite higher development spending. However, there are concerns over non-tax revenue because $ 1.2Bn under the Coalition Support Fund (CSF) are unlikely to be received in FY18. The provisional data released by the govt. notes that PKR 765Bn have been collected from FBR during 1QFY18 while Provinces transferred PKR 570Bn including arrears as compared to PKR 416Bn for 1QFY17. Total expenditures during 1QFY18 were PKR 894Bn against PKR 914Bn for 1QFY17. As a result, overall budget deficit is recorded at PKR 324Bn compared to PKR 438Bn. BR. SBP extends subsidy on export of wheat up to Oct. 30, 2017 Following the directives of the federal govt., State Bank of Pakistan (SBP) has announced to extend the subsidy on export of wheat and its products up to Oct. 30, 2017. The subsidy on export shall be allowed to those exporters who have lifted the wheat from go downs of Food Departments of respective provincial governments during the period Aug. 19, 2016 to Mar. 15, 2017. BR. Deregulation of HSD may be notified today The govt. is likely to issue a notification on Oct. 10, 2017 (today) regarding deregulation of High Speed Diesel (HSD) for OMCs and dealers price after seeking its approval from the federal Cabinet. The ECC approved the deregulation of HSD price with a directive that the impact of the policy would be reviewed after three months. Ogra would develop a mechanism to monitor the OMCs' \ commercial stock position, inventory system and fuel marker system. BR. Unbundling of gas network postponed till resolution of constitutional issues In a major development, the federal government has acceded to the demands of Sindh and KP and has decided to resolve the constitutional issues before pressing for unbundling of gas network system of the country. Sindh and KP have stuck to their stances during Inter-Provincial Coordination Committee meetings on gas sector reforms and opposed unbundling of gas network, arguing that implementation of the Constitution must be prerequisite prior to going for gas reforms. Under gas sector reforms, the federal govt. wants to make four gas distribution companies out of existing two companies (SSGC and SNGPL), with every province having a gas distribution company, and the Centre having control of gas transmission line. The News. Real-time access to fuel, power data for provinces approved The Inter-Provincial Coordination Committee (IPCC) has directed the govt. entities to formulate a mechanism within three weeks for sharing real-time production data of oil, gas and electricity with the provinces, otherwise the matter will be taken up with the CCI. The federal govt. agreed that it will share the available data of oil, gas and electricity production with the provinces on a weekly basis. The provinces have been demanding real time access to data on production of oil, gas and electricity to ascertain their share in consumption and revenue calculation under a transparent and verifiable mechanism. Dawn. Revised package a step in the right direction: Textile Industry Textile industry has termed the revised export package by the govt. a step in the right direction to overcome national trade deficit. ECC of the cabinet has approved the export package in a bid to give a boost to shrinking exports. Under the package, 50% of the incentive will be offered to eligible textile and non-textile exporters on the same terms as was given during 2HFY17 without the condition of 10% increase in shipments. The remaining 50% of the incentive will be provided if an exporter achieves increase of 10% or more in shipments compared to the corresponding period of the previous year. BR. Chinese FDI jumps over three-fold since FY15 China has emerged as the biggest cross-border investor in Pakistan, with foreign direct investment (FDI) inflows more than tripled from $ 319.1 Mn in FY15 to $ 1.19Bn in FY17. According to a report by KPMG Pakistan on Investment in Pakistan, construction projects that have received FDI from China in FY17 include the Thakot-Havelian section of the Karakoram Highway, Sukkur-Multan section of the Peshawar-Karachi Motorway, and the Lahore Orange Line project. Pakistan has welcomed the Chinese largesse with open arms, especially in the wake of CPEC. But the report said that the country became a less attractive destination for the investors of other countries during FY15-17; direct investment from the US fell by 68% during the period. The News. Economic Indicators List of Indicators Date / Period Unit Value Change Daily 9-Oct 9-Oct 9-Oct 9-Oct 9-Oct 9-Oct 9-Oct 9-Oct 9-Oct 9-Oct PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 105.43 106.70 41,100 3.49 49.86 1,284.4 44,914 16.95 6,484 6.16% 29-Sep $ Bn 19.76 0.01% -0.14% -0.51% NM** -0.02% 1.24% 0.77% 2.17% 0.84% -0.01% WoW -1.44% YoY 13.18% 11.80% 24.85% -33.52% -102.10% 154.74% USD-Interbank USD-Open MKT KSE-100 index FIPI Crude (DE'17) Gold (NO'17) Gold (10g) Local Silver (NO'17) Cotton(KHI)-40 kg Kibor-6M Forex Reserves Jul-Aug 17 Remittances $ Bn 3.50 Jul-Aug 17 Exports* $ Bn 3.50 Jul-Aug 17 Imports* $ Bn 9.79 Jul-Aug 17 Trade Balance* $ Bn -6.29 Jul-Aug 17 Current Account $ Mn -2,601 Foreign Direct Inv. $ Bn 0.46 Jul-Aug 17 Jul-17 LSM Growth* % 12.98 % 3.39 Jul-Sep 17 Avg. CPI-FY18* Discount Rate % 5.75 Sep-17 WoW= week Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful on week; Major Currencies 155 145 GBP, 9-Oct-17, 138.0 135 125 EUR, 9-Oct-17, 123.4 115 105 95 Oct-16 USD Jan-17 GBP EUR Apr-17 Jul-17 USD, 9-Oct-17, 105.1 Oct-17 Source: KCCI Research ; Oanda.com Quote of the Day "The biggest adventure you can take is to live the life of your dreams." Oprah Winfrey Chart of the Day 55,000.00 PSX-100 Index 53,000.00 51,000.00 49,000.00 47,000.00 45,000.00 43,000.00 41,000.00 39,000.00 Source: KCCI Research, SCS Trade 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