Pakistan Daily Economy Update - 13 July

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1. Jul . 13, 2017 KCCI - eBulletin Moody’s affirms B3 rating, risks remain Moody's Investors Service has affirmed Pakistan’s B3 rating and senior unsecured ratings, but cautioned that domestic politics, stalling of the govt.'s post-IMF program reform agenda and geopolitical risks may continue to represent a significant constraint on the rating. Its report added that large fiscal deficits and a reliance on short-term debt have contributed to a very high gross borrowing requirements. At about 32% of GDP, Pakistan's projected gross borrowing need for 2017 is one of the highest among rated sovereigns. With nearly 31% of outstanding govt. debt in foreign currency in FY16, Pakistan is exposed to marked changes in the cost of refinancing debt, should the local currency weaken abruptly. BR. Pakistan, Iran decide to finalize agreement on trade in goods At the second meeting of the Trade Negotiation Committee (TNC) on Pakistan - lran Free Trade Agreement (PIFTA) held through Jul. 11-12, 2017 in Islamabad, both countries have decided to finalize agreement on trade in goods before next meeting to be held in Nov.’17 in Tehran. Both sides agreed to form two sub committees at this stage of negotiations: (i) the Customs Procedures and Trade Facilitation Subcommittee and (ii) the Subcommittee on Non-Tariff Barriers (TBT/SPS). Pakistan will convey Terms of References (TORs) and operative mechanism of these Subcommittees with Iran within one month. BR. Govt decides not to remove SECP chief Despite a legal provision under the SECP Act, 2016 (Disqualification of Members and Commissioners — No person shall be appointed or continue as Member or Commissioner if he has been convicted of an offence involving moral turpitude.), the finance ministry has decided not to suspend or remove the chairman of SECP, Zafar Hijazi. Mr. Hijazi, while addressing the SECP employees, announced that the SECP had forwarded a summary to announce bonus for the employees one and a half times higher than that of last year. Besides, he asked the employees to abide by the SECP code of conduct and announced that he would remain the chairman to make the commission a strong and effective regulator. Dawn. Pakistan looks at inflow of $ 2Bn as four auto companies get permission Pakistan is hoping that $ 2Bn will make its way into the country as it seeks investment in its auto sector with the arrival of four new companies. Under the auto policy, four companies (United Motors, Kia-Lucky Motors, Nishat Group, and Regal Automobile Industries) have been granted permission to set up their in Pakistan, whereas each plant needs an investment of around $ 500 Mn. Within a week, two more firms will reportedly be allowed to set up plants which is expected to attract around a further $1Bn as investment. Five more entrants who have applied include Habib Rafiq Private Limited, Khalid Mushtaq Motors, Pak-China Motors, Foton JW Auto Park, and Cavalier Automotive Corporation. Tribune. Mango exporters blame airlines for losses Mango exporters are asserting that foreign airlines are charging PKR 175 per kg to transport mango to Manchester/London from Karachi while charging only PKR 85 per kg to Manchester and PKR 120 per kg to London from Bombay. This appears to be open discrimination against Pakistan as India is its only regional competitor in the segment. Besides, airlines are mishandling transportation of the export orders, and consume higher delivery time than they commit, causing decay of the fruit causing the overseas buyers to reject the orders. Hence, they have approached the Competition Commission of Pakistan (CCP) to probe and take action against the airlines. Tribune. Reko Diq dispute: Govt. files petition Pakistan has filed a petition in International Center for Settlement of Investment Disputes (ICSID) for a temporary stop to proceedings on Reko Diq dispute over the mining lease in Balochistan. Pakistan has sought to disqualify an arbitrator appointed by the Australian joint venture company - Tethyan Copper Company (TCC). It is the second time Pakistan has filed an objection against an arbitrator appointed by TCC. BR. SAARC members urged to focus on removal of non-tariff barriers While chairing a meeting with the SAARC Chamber of Commerce and Industry led by its president Suraj Vaidya, Commerce Secretary Younus Dagha said that SAARC region holds immense trade and investment potential for which special focus and effort is required for regional integration. The Secretary further said that SAARC member countries must focus on removal of Non-Tariff Barriers (NTBs) and work for enhancing B2B interaction to boost trade. Vaidya updated the Commerce secretary on the progress made on the permanent headquarters building project at Islamabad. The Nation. Oil tanker inferno: Shell Pakistan pays PKR 248Mn to Ogra Shell Pakistan Ltd. (SPL), a subsidiary of Royal Dutch Shell, has made the payment of PKR 248Mn to OGRA on Jul. 12, 2017to compensating fire victims of an oil tanker that would be disbursed among the families with the help of provincial and local administration in Punjab. The OGRA report shows that the SPL had completely ignored the safety standards of the vehicles procured from the contractors. BR. Power ministry admits additional surcharge loan payment The Ministry of Water and Power has admitted before the Public Accounts Committee (PAC) that despite tariff reduction in power sector due to decline in the international petroleum prices, the consumers did not get a relief of it because of government imposed two additional surcharges \ to cover payment of commercial loans and its interest, line losses, tariff rational and other additional taxes on the electricity bills that further burdened the electricity consumers. Giving details of the additional taxes collected from the consumers through their electricity bill including 43 paisa per unit of debt servicing surcharge and PKR 1.23/unit of Tariff Rational surcharge to return PKR 371Bn of commercial loan and its interest. The News. Change Daily Crude (AU'17) Gold (JY'17) Gold (10g) Local Silver (JY'17) Cotton(KHI)-40 kg Kibor-6M 105.32 106.75 43,792 -8.21 45.59 1,219.4 43,200 15.87 6,645 6.14% Forex Reserves 30-Jun $ Bn 21.37 -0.01% 0.42% -0.74% NM** -0.63% 0.31% 0.40% 0.54% 0.82% 0.00% WoW 0.04% YoY -3.08% -1.63% 18.67% -36.32% -132.03% 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-May 17 Current Account $ Mn -10,641 % 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 Major Currencies 175 165 155 145 135 125 115 105 95 85 75 Jul-16 GBP, 12-Jul-17, 135.0 EUR, 12-Jul-17, 120.1 USD, 12-Jul-17, 104.9 Oct-16 USD GBP Jan-17 Apr-17 Jul-17 Source: KCCI Research ; Oanda.com EUR Quote of the Day "Talent does what it can; genius does what it must." Edward G. Bulwer-Lytton Chart of the Day Car Sales in Pakistan YoY 130,000 110,000 90,000 70,000 50,000 30,000 10,000 No of Units 57,452 52,676 NCCPL enforces new CGT regime National Clearing Company of Pakistan has enforced CGT regime in the range of 7.5% and 20% on shares with effect from 1st Jul, in line with the amendment to the Finance Act 2017. The Finance Bill 2017/18 proposed fixed rate of 15% for filer and 20% for non-filer irrespective of holding period of securities. However, the government reconsidered the proposal and restored the slab-mechanism in the Finance Act 2017. The News. Value PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 97,960 Index drops to year’s lowest level Stocks continued the losing streak on 12th Jul‘17 with the KSE-100 index recording a loss of 328 points or 0.74% to close at 43,792.19, the lowest level in 2017. The benchmark has shed 17% value since its peak on 24th May. Market participation improved with the volume rising 16% to 215Mn shares from a day before. The traded value surged 27% to PKR 12.6Bn from a day ago. Dawn. Unit 12-Jul 12-Jul 12-Jul 12-Jul 12-Jul 12-Jul 12-Jul 12-Jul 12-Jul 12-Jul 25,726 Murad wants KCR route cleared of encroachments Sindh CM Mr. Shah has said that the federal government is creating ‘unnecessary’ hurdles to delay PKR 276Bn Karachi Circular Railway (KCR) project, which has a 43.2 km-long route and ordered the Sindh transport minister to restart the anti-encroachment drive to clear the KCR route. He said that he would not allow any delaying tactics. He is also going to write a letter to Federal Finance to urge him to call an ECNEC meeting to approve the KCR project and would also ask him to stop the CDWP member(s) from striding over the federal minister’s decisions by raising unrealistic objections. Dawn. Date / Period 37,004 Neelum power project to become operational by March, PAC told The Public Accounts Committee (PAC) has been informed that the 969MW Neelum-Jhelum Hydropower Project would become operational by 30th Mar‘18. Wapda chairman briefed the committee that filling of the dam would start in Oct ’17 and the dry test of the turbine would be conducted in Jan‘18, while the first unit would start power generation in Feb‘18. Mr. Hussain said that the average annual water inflow in the country’s rivers was 145 million cusecs, but only 14m cusecs could be stored as the country had only two major reservoirs, adding that no reservoir had been built over the past 40 years. Dawn. List of Indicators USD-Interbank USD-Open MKT KSE-100 index FIPI 96,100 Work on Kurram-Tangi Dam in full swing Construction work of Kurram-Tangi Dam, having a capacity of 83.4MW, is in full swing in North Waziristan Agency (NWA). The dam will be completed at a cost of about PKR 30Bn in five years. The dam will also irrigate 30,062,000 acres of land in North Waziristan Agency and Bannu district. The Nation. Economic Indicators Honda Suzuki FY17 FY16 Toyota Source: KCCI Research, PAMA 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