Pakistan Daily Economy Update - 15 December

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1. Dec . 15, 2017 KCCI - eBulletin Pakistan can become high-income economy: WB WB has claimed that Pakistan can join the group of high-income economies if the country achieves a sustainable GDP growth rate of 8%. On the flip side, in case the country maintains as usual growth rate of 4-5%, then in next 30 years half of the population will not be able to get social benefits. The World Bank’s country director said the bank has been working in the country for the past many decades in many areas of development. He said the population in Pakistan is growing at 2.5% annually. At this rate the youth of this country will face serious crisis in job market. The News. Govt. to take every step to avoid IMF program: top official Following the conclusion of first Post Program Monitoring (PPM) of Extended Fund Facility, Secretary Finance Shahid Mahmood has stated that Pakistan would take every step to avert taking a new program from the IMF. He further stated he will discuss a plan to this effect with Prime Minister Shahid Khaqan Abbasi, who is holding the portfolio of finance minister as well, when he returns from abroad. BR. Govt says no IMF bailout needed, mulls another bond launch Pakistan plans launching another international bond in about 45 days to manage external vulnerabilities and said it would do everything possible not to go for another IMF programme in any circumstances. This came on the conclusion of 10-day comprehensive talks with IMF that identified a couple of near-term challenges mostly arising out of pre-election political instability but otherwise noted strong economic growth prospects and healthy fundamentals. Dawn. IMF says rupee devaluation a welcome move for economic growth IMF has claimed that the move by SBP to allow market-based adjustment in the exchange rate appears a ‘welcome move’ as a flexible regime would help the country support exports and economic growth. IMF said the flexible exchange rate regime will help Pakistan strengthen economic resilience – a comment bearing up with the market’s argument that rupee’s recent freefall got an IMF’s push. The News. IMF raises the alarm about fiscal deficit, external sector At the conclusion of Post-Program Monitoring of $ 6.64Bn External Fund Facility (EFF), IMF Mission Chief Harald Finger has stated that Pakistan should focus on two pillars of economy - tightening of fiscal deficit and external side - by addressing the loss of foreign exchange reserves. He further stated that pre-election phase could bring some difficulties and that IMF hopes the govt. will take necessary steps to ensure stability throughout this period. The Mission Chief further stated that IMF has nothing to do with adjustment of exchange rate allowed by the SBP in the past few days and that this is an independent policy decision. BR. Economy still poised for 5.6% growth: IMF Political uncertainty in Pakistan has not impacted the economy and despite difficult situation, the country is still poised to grow by 5.6% this year, said Harald Finger, the IMF’s Mission Chief to Pakistan. We have seen that political uncertainty that Pakistan has experienced for the last few months has decoupled from economic developments, said Finger while responding to a question whether former prime minister Nawaz Sharif’s disqualification impacted the economy. But things will depend how the political and security situation evolves in the coming months. It cautioned Islamabad about careful phasing in of new external liabilities to contain external stability risks – in a veiled reference to CPEC-related repayment obligations. Tribune. ECO countries agree to double trade volume to $ 120Bn: Sartaj At the end of the 28th Meeting of the Regional Planning Council (RPC) of the Economic Cooperation Organization (ECO) held from Dec. 11 14, 2017, Deputy Chairman Planning Commission, Sartaj Aziz stated that ECO countries have agreed to double the trade volume from current $ 60Bn to $ 120Bn. The meeting was attended by Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyz, Pakistan, Turkey, and Turkmenistan. He said that feasibility study of the Islamabad-Tehran-Istanbul corridor has been completed and under the plan, a container train will connect these ECO countries through the corridor. He further said that for trade promotion, it has been decided that an ECO Reinsurance Company (ECORC) will be established. The headquarters of the ECORC will be at Karachi. Besides, the meeting of the ECO trade ministers will be held during Jan. 23-24, 2017 at Islamabad. The Nation. \ Cotton output may drop to 12.6Mn bales on Punjab lows Cotton production is feared to plunge to 11Mn bales during the current season against the revised target of 12.6Mn bales as the country’s key crop producing province Punjab is likely to receive an output setback. There is a further decline in cotton output compared with the already downward revised estimates as Punjab’s output failed to pick up despite hefty increase in the acreage. The Central Cotton Advisory Committee’s meeting, scheduled early 2018, and is expected to present the final cotton estimate. The United States Department of Agriculture estimated Pakistan’s 2017/18 cotton production at 10.55Mn bales of 170kg each and it would be up around 0.6Mn bales from the last year. The News. Sindh CM says his govt digitising all depts to ensure transparency Sindh CM Syed Murad Ali Shah has said that the provincial government is taking all out-steps to digitalise its departments in order to bring transparency and efficiency as part of digital advancement. Addressing the participants of leadership Summit on “Scaling the Fourth Industrial Revolution”, the Sindh CM said that the Land Revenue Department has become best in Sindh after its computerisation and digitalisation of the land records. Daily Times. Govt. rejects all bids in auction for PIBs The federal govt., in its fifth auction in a row, has rejected all the bids for PIBs as overall bids remained on the lower side. For ongoing FY18, some PKR 52.4Bn have been raised through PIBs in Jul.’17. The SBP conducted auction for PIBs for 3-, 5-, 10-, and 20-year maturity to raise some PKR 50Bn. Participation was very thin and bids worth only PKR 6.12Bn with total realized value of PKR 6.44Bn were received for the sale of 3-year, 5-year and 10-year long-term govt. securities. No bid was received for 20-year PIBs. BR. Rupee slumps to 112 per dollar The devaluation of Pakistani rupee against US dollar continued on Dec. 15, 2017 and the exchange rate crossed 112 figure against the dollar in the open market despite the claims by SBP to take necessary measures in this regard. The Nation. Steel bar prices up by PKR 5,000 Steel traders have decided to raise the price of steel bars by PKR 5,000/ton. Dealers have stopped selling steel bars, thus creating an artificial shortage in order to further increase the prices. A week back, quality steel bars were selling at PKR 83,000-84,000/ton. Trader have urged government to control rates of steel bars as dealers have unjustifiably raised rates of steel bars after a sudden rise in dollar against Pakistani rupee. Dawn. SBP’s forex reserves up by $ 2Bn The liquid foreign exchange reserves held by the country stood at $ 20.69Bn during the week ended on Dec. 8, 2017 as against $ 18.74Bn held in the previous week. The foreign reserves held by the SBP has increased by $ 2.01Bn to $ 14.67Bn as against $ 12.66Bn. Net forex reserves held by commercial banks stood at $ 6.02Bn as against $ 6.08Bn a week earlier. BR. Saudi king orders $ 19Bn stimulus for private sector Saudi King Salman has issued a decree allocating 72Bn riyals ($ 19.2Bn) of stimulus funds to support the Saudi private sector. The package aims to boost the role of the private sector in light of economic reforms to diversify the Saudi economy away from oil following a slump in crude prices. The funds will be used to finance 16 initiatives, the largest of which earmarks $ 5.7Bn to provide subsidised housing loans to citizens. The decree states that $ 1.33Bn will be used as a first instalment for the newly established exports promotion fund which will eventually have capital of $8Bn. Daily Times. Economic Indicators List of Indicators Date / Period Unit Value Change Daily 14-Dec 14-Dec 14-Dec 14-Dec 14-Dec 14-Dec 14-Dec 14-Dec 14-Dec 14-Dec PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 110.09 110.05 38,224 1.97 57.13 1,254.3 46,714 15.85 7,341 6.20% -0.39% -0.45% -1.54% NM** 0.83% -0.08% 0.55% -0.94% 0.73% 0.00% WoW 10.36% YoY 1.29% 10.49% 21.12% -28.56% -121.91% 74.44% USD-Interbank USD-Open MKT KSE-100 index FIPI Crude (FE'18) Gold (JA'18) Gold (10g) Local Silver (JA'18) Cotton(KHI)-40 kg Kibor-6M Forex Reserves $ Bn 20.69 8-Dec FY18 Jul-Nov 17 Remittances $ Bn 8.02 Jul-Nov 17 Exports* $ Bn 9.03 Jul-Nov 17 Imports* $ Bn 24.06 Jul-Nov 17 Trade Balance* $ Bn -15.03 Jul-Oct 17 Current Account $ Mn -5,013 Foreign Direct Inv. $ Bn 0.94 Jul-Oct 17 Jul-Sep 17 LSM Growth* % 8.36 % 3.59 Jul-Nov 17 Avg. CPI Discount Rate % 5.75 Sep-17 WoW= week Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful on week; Major Currencies 155 GBP, 14-Dec-17, 146.8 145 135 EUR, 14-Dec-17, 129.2 125 115 105 95 Dec-16 USD USD, 14-Dec-17, 108.5 Mar-17 GBP EUR Jun-17 Sep-17 Source: KCCI Research ; Oanda.com Quote of the Day "People don’t choose their careers—they are engulfed by them." John Dos Passos Chart of the Day BREAK UP OF FEDERAL TAX REVENUES (1QFY18) Other taxes 2% Stamp duties 1% GDS 1% Excise duty 4% GIDC, Property, Motor vehicle Taxes 2% Sales Tax 34% Sales Tax on Services GST 5% Petroleum Levy 5% Direct Taxes 32% International Trade tax 14% Source: KCCI Research, MoF 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