Pakistan Daily Economy Update - 12 July

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1. Jul . 12, 2017 KCCI - eBulletin Trade deficit up by 36.32% in FY17 Pakistan's trade deficit clocked in at $ 32.58Bn for the just concluded FY17, up by 36.32% compared to $ 24Bn during FY16. Exports remained significantly lower than expectations, declining by 1.63% to $ 20.45Bn during period under review against $ 20.79Bn a year before. On the other hand, imports have increased to $ 53.03Bn from $ 44.69Bn from FY16. Month-on-month basis, trade deficit of $ 2.62Bn has been recorded in Jun.’17 compared to $ 2.79Bn in Jun.’16, reflecting 6.09% decline where exports increased to $ 1.92Bn from $ 1.65Bn and imports inclined to $ 4.53Bn from $ 4.44Bn. BR. SBP analyses decline in textile exports SBP has urged the textile industry to invest more in upgrading physical and human capital to produce high-quality products at competitive prices. The SBP in its recent report said that decline in textile exports is mainly explained by lower exports quantum of products like cotton and fabric, even as global cotton prices rebounded. The SBP report has further noted that exports of some high value-added items has increased, nonetheless, in terms of price factor, the gains in export values are still not appearing. In fact, Pakistan's high value-added exports to advanced economies face tough competition from regional competitors. BR. Doomsday at the stock exchange Stock investors were in for a rude awakening aimed at political instability, as the KSE-100 index took a plunge of 1,000 points even before the opening bell had died down. By the close of trading, the benchmark index tanked 2,153 (-4.65%) points, the biggest-ever single-day decline since 25th Feb’09 after which index closed at 44,120.58. Dawn. KE prepares for crucial hearing A grueling wait is about to end for the management and sponsors of K-Electric, as a crucial hearing by Nepra on their review petition for a multi-year tariff (MYT) is scheduled for tomorrow (13th Jul‘17). The last determination of the MYT by Nepra had slashed the seven-year tariff by PKR 3.5/unit. As part of the MYT, the management announced an investment plan of PKR 254Bn, involving the $ 1Bn-900MW power plant at their Bin Qasim site, along with another 700MW plant for which land acquisition has already been completed. Dawn. Ogra, PC oppose deregulation of diesel prices Amid opposition from the Planning Commission and Ogra, Ministry of Petroleum is seeking deregulation of HSD prices, with petrol to follow at a later stage, to encourage OMCs and dealers to invest in additional storage capacity. In a summary moved to ECC of the Cabinet, the petroleum ministry has proposed an outright 33 paisa per litre increase in dealer commission and OMC margin on petrol at the rate of 19 paisa and 14 paisa per litre, respectively, with effect from 1st Jul‘17. Dawn. Money laundering: notices issued to businessmen, others Anti-Money Laundering Cell of the Directorate General of Intelligence and Investigation has issued notices to 20 businessmen/individuals, in major cases of money laundering committed through gift arrangements. Due to absence of gift tax in the country, a large number of taxpayers are laundering their tax-evaded money through gifts received from their parents, siblings and spouses who are either out of tax net or have no known sources of income. The data gathered by the Anti-Money Laundering Cell relating to TY16 revealed that 2,785 individuals declared having received gifts in their wealth statements, aggregating over PKR 102Bn in TY 16 alone. BR. Reko Diq gold mine project: Pakistan may face $ 11.5Bn penalty An arbitration tribunal of the World Bank has ruled in favor of Tethyan Copper Company Pvt Ltd (TCC) in a case involving the Reko Diq gold mine project in Balochistan. As a result of the ruling, Pakistan may face a penalty of $ 11.5Bn for not awarding the project to TCC. The World Bank’s International Center for Settlement of Investment Disputes (ICSID) had earlier rejected Pakistan’s application to dismiss TCC’s claims on grounds of corruption and malpractices by the latter. The move was futile, however, as the court ruled against the government for unlawful denial of the mining lease for Reko Diq to TCC- a joint venture between Chile’s Antofagasta and Canada’s Barrick Gold Corporation. Reko Diq has estimated reserves of 11.65 Mn tons of copper and 21.18 Mn ounces of gold. Tribune. \ Shell Pakistan says to pay fine for tanker fire Shell Pakistan Ltd. (SPL) has agreed to pay the fine imposed by the OGRA of about PKR 257Mn ($ 2.4Mn) in damages and compensation for a tanker explosion that killed more than 200 people in Ahmadpur East in order to comply with the regulator's directives. SPL will pay the fine imposed by OGRA; however, the company reserves the right to contest the fine and has stated that the matter is under investigation and appropriate course of action will be decided once more information is known and investigations are concluded. BR. Auto sales rise Data released by auto industry showed that the FY17 has ended on a positive note with impressive sales of trucks and tractors followed by slight sales growth in cars and buses. A total of 185,781 cars were sold in the FY17 compared to 181,145 units in FY16. In heavy vehicles, total truck sales swelled to 7,499 units from 5,550 units. Overall sales of tractors surged to 54,992 units from 33,986 units in FY16. Dawn. Govt to set up transit facilities at Wagah, Torkham, Chaman The government aims to establish state-of-the-art facilities at Wagah, Torkham and Chaman border crossing points under the Integrated Transit Trade Management Systems (ITTMS) project. The government will spend PKR 255.38Mn during FY18 for ITTMS which will be run under ADB’s Ribs Project with foreign assistance of PKR 155.38Mn. The total cost of the project has been estimated at PKR 31.6Bn, including a foreign assistance component of PKR 26Bn. Dawn. IDB, ECO financing sought for railway projects The Ministry of Railways is seeking financing by the Islamic Development Bank (IDB) and the Trade and Development Bank of Economic Cooperation Organisation (ECO) for infrastructure projects along the Pakistani section of the Islamabad-TehranIstanbul route. The Islamabad-Tehran-Istanbul journey is about 6,506km with 1,900km in Pakistan, 2,570km in Iran and 2,036km in Turkey. This trade link has been established under TTFA signed by the Economic Cooperation Organization. Dawn. NA body to discuss PSM rehabilitation plan tomorrow National Assembly Standing Committee on Industries and Production is scheduled to meet on Jul. 13, 2017 (tomorrow) to consider three-phased $ 1.29Bn Pakistan Steel Mills (PSM) rehabilitation plan. The required financing for phase 1 (revival plan for 1.1 MTPY) will be $ 112Mn, followed by $ 280Mn for second phase for (expansion plan 1.5 MTPY and $ 900Mn for phase three (3 MTPY), totaling it to $ 1.29Bn. 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 11-Jul 11-Jul 11-Jul 11-Jul 11-Jul 11-Jul 11-Jul 11-Jul 11-Jul 11-Jul PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 105.33 106.30 44,121 11.49 45.88 1,215.6 43,028 15.78 6,591 6.14% Forex Reserves 30-Jun $ Bn 21.37 0.10% 0.00% -4.65% NM** 2.69% 0.18% 0.00% 1.22% 0.83% -0.01% WoW 0.04% YoY -3.08% USD-Interbank USD-Open MKT KSE-100 index FIPI Jul-Jun 17 $ Bn 19.30 Jul-Jun 17 Exports* $ Bn 20.45 -1.63% Jul-Jun 17 Imports* $ Bn 53.03 18.67% Jul-Jun 17 Trade Balance* $ Bn -32.58 -36.32% Jul-May 17 Current Account $ Mn -10,641 -132.03% % 4.16 Avg. CPI-FY17* Jul-Jun 17 May-17 Discount Rate % 5.75 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful WoW= week on week; YoY=Year on Year Remittances Major Currencies 175 165 155 145 135 125 115 105 95 85 75 Jul-16 GBP, 11-Jul-17, 135.4 EUR, 11-Jul-17, 120.1 USD, 11-Jul-17, 105.2 Oct-16 USD GBP Jan-17 Apr-17 Jul-17 Source: KCCI Research ; Oanda.com EUR Quote of the Day "The pen is the tongue of the mind." Horace Chart of the Day REMITTANCES RECEIVED BY PAKISTAN (FY11-FY17) 18.72 20.00 18.00 19.92 19.30 FY16 FY17 15.84 16.00 14.00 12.00 13.19 13.92 11.20 10.00 8.00 6.00 4.00 2.00 0.00 FY 11 FY 12 FY 13 FY14 Values in $ Bn FY15 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