Pakistan Daily Economy Update - 17 January

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1. January 17 , 2023 KCCI - eBulletin Senate passes SBP (Amendment) Bill-2021 List of Upper house of the parliament, on 16th Jan’23, passed by majority vote the State Bank of Pakistan Amendment Bill 2021, a Indicators private-member bill that seeks to ensure that the “minimum credit/lending of the commercial banks to the private sector for USD-Interbank establishing industry and commercial activities in the smaller provinces is at par with those provinces’ total deposits in the USD-Open MKT Source: banks.” BR. Imported urea: ECC approves DTP, incidental charges ECC of the Cabinet stated that fixation of price of imported urea at par with domestic urea would help the govt. in saving of around PKR 750Mn and reduce estimated subsidy impact from PKR 22.9Bn to PKR 22.2Bn. Ministry of Industries and Production proposed that dealer transfer price (DTP) of 50kg imported urea bag be fixed at PKR 2,340/bag by the NFML and incidental charges estimated by the NFML may be approved as under transportation charges from KPT at PKR 421/bag and transportation charges from Gwadar PKR 835, followed by TWPP bags PKR 63, stock handling warehouse and labor charges PKR 110, total incidental charges from KPT would be at PKR 594 and from Gwadar at PKR 1,008. The ministry requested for approval of dealers transfer price and incidental charges, which were approved by the ECC. BR. Govt. makes three financing models for e-bikes Govt. has reportedly prepared 3 different financing structures to provide E-Bikes to interested persons, to be finalized after final approval of ECC and Federal Cabinet. A high level meeting presided over by PM has directed Ministry of Industries and Production to finalize the policy for local manufacturing of E-Bikes latest by 1st Mar’23. M/o Industries & Production shall in consultation with Finance Division and Revenue Division decide the timeline for 100% production of E-Bikes and provision of allied services. BR. 0.08% 0.10% KSE-100 index FIPI 16-Jan 16-Jan Pts. $ Mn 39,721 -2.01 -1.49% NM** Crude Oil 16-Jan $/bbl 79.04 -0.93% Gold 16-Jan $/oz 1,920.7 0.04% Gold (10g) Local 16-Jan PKR 157,580 -0.81% Silver 16-Jan $/oz 24.46 0.16% Cotton(KHI)-40 kg 16-Jan PKR 21,434 0.00% Kibor-6M 16-Jan % 17.11 -0.03% 6-Jan $ Bn 4.34 WoW -22.12% Remittances Jul-Dec 22 $ Bn 14.05 -11.10% Exports* Jul-Dec 22 $ Bn 14.25 -5.80% Imports* Jul-Dec 22 $ Bn 31.38 -22.63% Trade Balance* Jul-Dec 22 $ Bn -17.13 32.64% Current Account Foreign Direct Inv. Jul-Nov 22 Jul-Nov 22 $ Bn $ Bn -3.10 0.43 56.28% -46.04% Forex Reserves YoY Jul-Oct 22 LSM Growth* % 2.89 % 25.02 Jul-Dec 22 Avg. CPI Discount Rate % 16.00 Nov-22 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* **Not Meaningful; WoW= week on week; YoY=Year on Year; Major Currencies 325 315 305 295 285 275 265 255 245 235 225 215 205 195 185 175 165 155 145 Jan-22 GBP, 16-Jan-23, 304.5 EUR, 16-Jan-23, 269.8 USD, 16-Jan-23, 237.6 Apr-22 GBP USD Jul-22 EUR Oct-22 Jan-23 Source: KCCI Research Quote of the Day "It is better to fail in originality than to succeed in imitation." Herman Melville CY20 CY21 Net Reserves with Banks 5.58 5.85 CY19 6.20 CY18 Net Reserves with SBP 11.4 13.42 17.69 20.5 23.9 Liquid Foreign Exchange Reserves ($ Bn) 7.10 LCs issue: CMOs likely to get force majeure for new projects Govt. is likely to grant force majeure to cellular mobile operators (CMOs) for 10 new infrastructure projects worth PKR 8Bn, which are facing serious problems in implementation due to the non-opening of LCs for the equipment’s imports. All the CMOs had requested the USF for delaying these projects to be implemented in un-served and under-served areas of the country. BR. 228.34 238.75 18.1 Inputs: exporters promised hassle-free imports Finance Minister Ishaq Dar said on 16th Jan’23 that exporters of textile products, leather goods, surgical instruments, carpets, and sports goods would be given complete facilitation on the import of raw material/inputs to meet their export requirements. In this connection, the MoC and FBR are taking measures to considerably increase exports through speedy payment of refunds, export facilitation, technological changes and registration of 90% of the exporters under the EFS. FBR and MoC would jointly approach SMEs to register themselves with the completely automated EFS. BR. PKR PKR 11.49 Centre spends 44% less on development in 1HFY23 Federal development spending fell drastically by 43.68% to PKR 151.42Bn in 1HFY23 from PKR 268.87Bn in 1HFY22 to create a space for unbridled current expenditures. In absolute terms, expenditures so far account for 20.82% of the total revised allocation of PKR 727Bn, drastically short of the development spending target, according to data released by the Ministry of Planning and Development on 16th Jan’23. Economists believe that the massive drop in development spending in the current fiscal year would not only slow down the economy but would take a toll on revenue collection as well. It is believed that the development expenditure is being curtailed to contain the rising fiscal deficit owing to the increase in current expenditures. Govt. now estimates its overall expenditures to surge past budget target by about PKR 1Tn due to about PKR 900Bn higher interest payments and expected PKR 422Bn revenue shortfalls that may need to be bridged through additional tax measures in 2HFY23. \ Main driver of development expenditure which reached PKR 151.42Bn is because of 41.15% share in total spending by state-run corporations — power sector entities and NHA — to PKR 62.32Bn in 1HFY23. Breakdown showed that the utilization of development funds by state-run corporations stood on the higher side chiefly because of a more than 32% surge in power sector projects which increased to PKR 36.45Bn from PKR 27.6Bn in 1HFY22. NHA’s expenditure on the other hand dropped to PKR 25.87Bn in 1HFY23 against PKR 35.72Bn in 1HFY22. Dawn. 16-Jan 16-Jan 6.59 Steel bar hits new peak of PKR 243,500 While seeking govt.’s help in opening LCs amid fear of industry closure, manufacturers have pushed up the price of steel bars to an all-time high of PKR 243,500/ton citing a continuous increase in raw material prices, supply chain disruptions and soaring production cost. In another development, rate of galvanized sheet or cold rolled sheet used in making home appliances and automobiles has been raised by PKR 14,000 to PKR 280,000/ton. Previous record rate of steel bars was PKR 236,000/ton hit in Jun’22. Dawn. Change Daily 13.8 Ministry, SBP agree to take measures for clearance of palm oil stuck at warehouses In a bid to avert any shortage of ghee/cooking oil in Ramazan, Ministry of Industries (MoI) and SBP on 16th Jan’23 agreed to remove bottlenecks for speedy clearance of 385,000 tons of palm oil stuck at customs bonded warehouses due to non-retiring of documents. Edible oil industry sources claimed that an understanding has been reached between the SBP and MoI for opening of new LCs by the banks to keep the edible oil industry running and ensure stability in prices. Dawn. Value 7.29 SBP issues framework on outsourcing to CSPs SBP on 16th Jan’23 issued “Framework on Outsourcing to Cloud Service Providers (CSPs)” to set out minimum requirements for SBP’s Regulated Entities (REs), including Banks, DBs, Microfinance Banks, DFIs, EMIs, Payment System Operators and Payment System Providers to outsource their material and non-material workloads to CSPs, through a risk-based approach in a safe and secure manner. Henceforth, SBP has directed to ensure that all existing cloud-outsourcing arrangements are compliant with the requirements of the framework by 31st Dec’23. BR. Unit 6.55 Pakistan, Iran sign 39 MoUs to boost trade Pakistan and Iran have signed 39 MoUs to enhance bilateral trade, improve economic relations and ensure cooperation in various fields such as transportation, tourism, fisheries, mines and minerals. The MoUs were signed at the conclusion of a two-day meeting of the joint border trade committee on 15th Jan’23. The meeting discussed various issues relating to the implementation of agreements signed between the two countries in 2010 and 2006 for increasing trade volume and providing facilities for import and export at the Pak-Iran borders. It was agreed that the authorities concerned would be approached to increase the number of items included in the PTA signed between Pakistan and Iran and reduce tariff. It was decided that both countries would take measures to increase bilateral trade to $ 5Bn annually and also try to achieve balance of trade. Both sides agree on opening of more joint border markets and an additional border crossing point shall be opened at Kohak-Panjgur in order to increase bilateral trade. The two sides agreed that relevant ministries and authorities would be approached to sign a FTA between Iran and Pakistan. It was agreed that efforts shall be made by both sides to reduce import tariff on fresh fruits through negotiations with the relevant authorities. Dawn. Date / Period CY22 Total Liquid FX Reserves Source: KCCI Research, SBP Note **Green-colored change in indicators depicts Improvement, whereas Red demonstrates Deterioration **If any Pakistani company is interested in establishing joint ventures with Uzbek companies in Pakistan, specifically in Pharmaceuticals, production of construction materials, electric engineering, and agriculture industries. They may contact marjanfatima11@gmail.com or secretary@kcci.com.pk.