Pakistan Daily Economy Update - 18 April

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1. Apr . 18, 2017 KCCI - eBulletin Govt’s planned tax amnesty scheme to benefit growth: governor During a meeting at KCCI, Governor Sindh Muhammad Zubair has said that a tax amnesty benefiting the manufacturing and industrial sectors as well as the capital market is under consideration; the scheme will be growth oriented and for all sectors. On the businessmen’s criticism of the FBR, the governor said the revenue body should be praised for its contribution in tax collection, which has almost doubled during the past 4 years. The increased share in revenue would help the provinces to raise budgetary allocations for health and education projects. The News. Jul.-Mar.’17 FDI up 12% on M&As The country’s Foreign Direct Investment (FDI) has posted an increase of 12% during 9MFY17 amounting to $ 1.60Bn during 9MFY17 compared to $ 1.43Bn in 9MFY16, depicting 12.4% increase supported by mergers and acquisitions. During the period under review, portfolio investment declined by 3.3%, standing negative at $ 362Mn. However, net foreign investment in Pakistan, comprising FDI, portfolio investment and foreign public investment increased by 116.4% to $ 2.23Bn during 9MFY17 compared to $ 1.03Bn in 9MFY16. Month-on-month basis, with an increase of 39%, FDI stood at $ 297Mn in Mar.’17 against $ 213Mn in Mar.’16. BR. Projected growth outlook: World Bank warns Pakistan of significant downside risks The World Bank (WB) report titled "South Asia Economic Focus, Globalization Backlash" has warned Pakistan of significant downside risks to the projected growth outlook, saying that slower progress in much-needed structural reforms could weaken growth prospects. The WB has stated that economy is projected to grow by 5.2% in FY17 and that Pakistan is vulnerable to significant decline in remittance flows while current account deficit is expected to widen to 2.2% in FY17 and 2.4% by FY19. Furthermore, foreign exchange reserves are projected to decline to 3.2 months of imports by FY19 while fiscal deficit is projected to be 4.8% in FY17. BR. Lower agriculture output may mar overall growth prospects The govt. is likely to miss the GDP growth target of 5.5% for the current FY17 with a considerable margin based due to lower than estimated growth in agriculture sector which was estimated at 3.8% growth. Farm output growth would not be higher than 2.5% due to lower than projected production of cotton and wheat and this is an extremely optimistic estimate. Wheat production is expected to be 25.5Mn tons against the target of 26Mn tons for FY17. BR. Budget deficit may be set at PKR 1.44Tn as govt. looks at populist policies The govt. may set FY18 budget deficit target at around PKR 1.44Tn, which may slightly deviate it from the path of fiscal consolidation, as it starts implementing politically populist policies ahead of the next general elections. The IMF expects the budget deficit would exceed to a whopping PKR 1.5Tn in 2017, a projection that the finance ministry has not fully accepted yet. Tribune. PKR 1.8Tn sought for next year’s development budget Minister for Planning and Development Mr. Ahsan has said that the Planning Commission has received a demand of PKR 1.8Tn from various ministries and agencies for next year’s development schemes, but the commission was proposing PKR 1Tn for PSDP of FY18. Dawn. Electricity shortfall widens to 5,500MW The electricity shortfall surged once again to about 6,000MW as temperatures rose to 46-47 degrees Celsius in most of the southern region, resulting in unscheduled load shedding of 12-16 hours. Ministry of Water and Power has said that the electricity demand reached close to 19,000MW while overall power supply was around 13,500MW, leaving a 5,500 MW gap that was filled through systematic closer of feeders to protect the system stability. Dawn. Sindh waiting for Centre’s nod to utilize 650MW generation capacity, PA told CM Mr. Murad has told the Sindh Assembly that the generation capacity of around 650MW was almost ready in the province but it could not be utilized as the federal government has not granted required permission. He said that he had met the prime minister after assuming office and requested him to grant permission and sort out issues related to tariff and had also written a letter to the federal government but to no avail. Mr. Shah said that Sindh government was ready to provide funds for installation of transmission lines, which is the responsibility of the Centre, but there has been no response so far. Dawn. 3,600MW electricity will be added to grid by next month Minister for Planning, Development and Reforms Ahsan Iqbal has said some 3,600MW of electricity would be added to the national grid in May’17, which would help reduce energy shortfall in the country. He said a total of 10,000 MW of electricity would be added to the grid by May’18, bridging the entire gap in demand and supply. The News. Amendment to PERA, 1992 suggested: SBP seeks to curb practice of whitening of money The SBP has proposed amendment to Protection of Economic Reforms Act, 1992 to curb the rampant practice of whitening of money, abolition of section 165A (access to customer information to FBR) and deletion of section 111 (4) of the Income Ordinance, 2001, which provides immunity from source of any amount remitted from outside of Pakistan in foreign exchange through banking channels. According to SBP, some businessmen are remitting the undeclared income through unofficial channel outside Pakistan whilst no taxes are paid on such income; however, the same becomes white money at a very small cost of 3% - 4%. BR. PCGA urges govt. to bring down WHT to 0.2% Pakistan Cotton Ginners Association (PCGA) has urged the govt. to bring down withholding tax to 0.2%, instead of 1% that is currently being charged, in the upcoming budget for FY18. The industry has also requested for withdrawal of cotton standardisation fee (CSF) @ PKR 5/per bale and exemption of sales tax on electricity bills of ginning industry. On electricity bills ginners are being charged sales tax while all the textile chain is exempted from sales tax. BR. Domestic debt: PKR 5.397Tn interest on loans paid: Dar The govt. has paid PKR 5.397Tn interest on the total domestic debt of PKR 54.33Tn matured since Jan.’12 while domestic debt of PKR 11.08Tn will mature over the next three years based on outstanding as at end-Dec.’16. BR. K-P signs 11 MoUs with Chinese companies The Khyber-Pakhtunkhwa (K-P) govt. has signed 11 MoUs with Chinese companies for completion of various development projects taking place in the province under CPEC framework. The projects fall in the spheres of I.T, special economic zones, power plants, oil refinery, infrastructure and e-commerce. Tribune. SBP bans recreational trips of bankers SBP has banned recreational trips of bankers and directed the banks to formulate foreign travel policy for their staff. It has been decided that henceforth the banks shall not send their staff abroad whether such tours are sponsored by banks themselves or by third parties, their overseas alliances directly or indirectly. The News. Fauji Cement’s profit declines 54% Fauji Cement Company Limited (FCCL) has announced a net profit of PKR 1.97Bn (EPS: PKR 1.43) for 9MFY17, which is down 54% compared with the profit of PKR 4.33Bn (EPS: PKR 3.14) in 9MFY16. The News. Economic Indicators List of Indicators Date / Period Unit Value Change Daily 17-Apr 17-Apr 17-Apr 17-Apr 17-Apr 17-Apr 17-Apr 17-Apr 17-Apr 17-Apr PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 104.86 106.40 47,125 -2.87 53.21 1,284 43,971 18.41 7,288 6.17% 7-Apr $ Bn 21.74 0.00% 0.28% -0.95% NM** -0.13% -0.14% 0.20% -0.32% 0.75% 0.01% WoW 0.88% YoY -2.29% -3.06% 18.67% -38.80% -120.51% USD-Interbank USD-Open MKT KSE-100 index FIPI Crude (JU'17) Gold (MY'17) Gold (10g) Local Silver (MY'17) Cotton(KHI)-40 kg Kibor-6M Forex Reserves Jul-Mar 17 Remittances $ Bn 14.06 Jul-Mar 17 Exports* $ Bn 15.12 Jul-Mar 17 Imports* $ Bn 38.50 Jul-Mar 17 Trade Balance* $ Bn -23.39 Jul-Feb 17 Current Account $ Mn -5,473 % 4.01 Avg. CPI-FY17* Jul-Mar 17 Mar-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 Apr-16 GBP, 17-Apr-17, 131.8 EUR, 17-Apr-17, 111.6 USD, 17-Apr-17, 105.0 Jul-16 USD Oct-16 GBP Jan-17 Apr-17 Source: KCCI Research ; Oanda.com EUR Quote of the Day “The goal of education is not to increase the amount of knowledge but to create the possibilities for a child to invent and discover, to create men who are capable of doing new things.” Jean Piaget Chart of the Day Top 10 Foreign Direct Investors in Pakistan (9MFY17 Vs. 9MFY16) 594.83 590.5 China France 67.6 51.86 29.8 41.71 82.7 41.62 78.1 33.29 90.4 8.37 93.4 3.43 42.8 0.01 105.6 USA Italy U.A.E UK Hongkong Switzerland Egypt Norway -51.53 -100 161.51 33.9 0 100 200 9MFY17 300 400 500 600 700 9MFY16 Value in $ Mn 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