Pakistan Daily Economy Update - 18 August

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1. Aug . 18, 2016 KCCI - eBulletin Govt. may set up ‘new’ company to borrow PKR 200Bn The govt. may set up a new company to borrow about PKR 200Bn from banks and return taxpayers’ refunds it has got over the years. The govt. has discussed creating a Special Purpose Vehicle (SPV) under the FBR to raise debt outside the federal budget at an interest rate List of Indicators equivalent to Karachi Interbank Offered Rate (KIBOR) plus at least 1% to pay back refunds, according to the Ministry of Finance. The move is likely to face resistance from the International Monetary Fund (IMF) and therefore, the govt. will formally announce the new setup after the USD-Interbank expiry of the IMF Programme, ending on 30th Sep, 2016. Tribune. USD-Open MKT Economic Indicators Date / Period Unit Value Change Daily 17-Aug PKR 104.71 0.00% 17-Aug PKR 106.30 0.00% 17-Aug 17-Aug Pts. $ Mn 40,058 -9.23 0.02% NM** 17-Aug $/bbl 47.61 0.98% 17-Aug $/oz 1,347.4 0.66% 17-Aug PKR 45,600 -0.85% 17-Aug $/oz 19.71 -0.55% 17-Aug PKR 7,111 -0.75% 17-Aug % 6.02% 0.00% 5-Aug $ Bn 22.60 -1.67% Remittances Jul-16 $ Bn 13.28 -20.14% Exports* Jul-16 $ Bn 1.48 -7.45% Imports* Jul-16 $ Bn 3.56 5.52% Trade Balance* Jul-16 $ Bn -2.08 -17.20% Current Account Avg. CPI-FY17* Jul-Jun 16 Jul-16 $ Mn % -2,525 4.12 6.79% KSE-100 index FIPI Input tax adjustment: promulgation of ordinance on the cards A Presidential Ordinance may be promulgated before the end of current month to restore the facility of input tax adjustment to provinces by amending the relevant provisions of the Finance Act 2016. The govt. is ready to withdraw amendment introduced through Finance Act 2016 Crude (JU'16) of disallowing input tax adjustment against provincial services provided that; provinces are ready to pay due amount to the FBR on account of Gold (MY'16) tax adjustments. The provinces have yet to pay over PKR 21Bn to the FBR on account of tax adjustments. In this regard, Finance Minister Gold (10g) Local Ishaq Dar chaired a meeting with the officials of the FBR. BR. Silver (MY'16) Cotton(KHI)-40 kg FBR chairman concedes: impact of every indirect tax passed on to consumers one way or another Chairman FBR Nisar Muhammad Khan has acknowledged that the impact of every indirect tax is passed on to the consumers one way or Kibor-6M another and power distribution companies as well as industrialists also pass on sale tax on electricity to the household consumers. In this regard, committee meeting has recommended to the govt. to waive off 17% sale tax on household consumers. The FBR and govt. came under Forex Reserves severe criticism during the committee meeting regarding imposition of heavy indirect taxation on utilities used by the ordinary citizen. BR. SBP sells PKR 372.8Bn worth T-bills; yields remain flat The SBP sold PKR 372.89Bn worth of market treasury bills (MTBs) in the auction, which was higher than the pre-auction target of PKR 300Bn. The yield on Pakistan’s 6-month benchmark treasury bills remained flat at 5.9%. The central bank sold PKR 212.09Bn worth of sixmonth paper. The cut-off yield on 12-month paper remained unchanged at 5.9% from the previous auction held on August 3. However, the bank sold PKR 55.24Bn of long-term paper. The News. Pakistan largest Indian cotton importer Pakistani spinners have turned to be the largest buyers of Indian cotton, purchasing more than 2.5Mn bales during FY16 season, despite 9% import duty. The country faced almost 40% cotton shortage, which panicked the textile millers who rushed for Indian fiber. Pakistani cotton importers left China behind this season, which earlier was the largest buyer of Indian cotton. Earlier in Oct.-Dec. 2015 quarter, Pakistan replaced Bangladesh to be the largest buyer of Indian cotton on the back of a sharp decline in its domestic production due to widespread crop damage from whiteflies. The Nation. Seeing winter demand, govt. plans fresh LNG tenders The govt. has planned to float fresh tenders for the import of LNG in an effort to meet domestic needs in the upcoming winter season, when demand reaches its peak as people consume more gas for heating and cooking purposes. However, the govt. rejected the offer of Shell, citing a comparatively higher price and offered the tender to energy-rich Qatar, which agreed to match the price quoted by Gunvor. Now the govt. has planned that the newly established state-owned firm Pakistan LNG Limited will float two tenders this month for the import of 200 mmcfd of LNG to cope with the expected surge in demand during winter this year. Tribune. LPG quota system abolished but for two firms, PAC told Except for two private companies, the quota for liquefied petroleum gas has been abolished by the Oil and Gas Development Company (OGDCL) for all entities over the past few years, the Public Accounts Committee (PAC) learnt on Apr, 17. 2016. OGDCL M.D in his statement said the OGDCL had been distributing 360 metric tonnes (MT) of LPG by quota until 2007 when it started the allocation through open bidding. One of the two companies is Capgas, a subsidiary of the Pakistan Oil Fields Ltd, and the other is WAK Gas. Dawn. Ministry to approach private sector to achieve exports target Commerce Ministry has decided to approach private sector to educate them on the provisions of Strategic Trade Policy Framework (STPF 2015-18) to achieve exports target of $ 35Bn by Jun. 30, 2018. In this regard, Ministry has translated the STPF 2015-18 and the enforced SROs in Urdu with the assistance of USAID funded Pakistan Regional Economic Integration Activity (PREIA) and will hold awareness seminars in different cities with their technical assistance. The seminars will take place at Karachi, Lahore, Sialkot and Faisalabad on Aug. 18, 22, 24 and 26, 2016 respectively. The Nation. Chinese team reviews Gwadar progress A 10-member Chinese delegation have visited Gwadar and reviewed progress on various ongoing projects. The delegation visited the Gwadar Port, Gwadar Expressway, Free Zone, Pak-China Friendship Primary School, Faqeer colony and some other projects related to the development of the city. The delegation was informed that the completion of CPEC and the functioning of Gwadar port would bring about a positive economic impact not only on Pakistan but the entire region. Tribune. Iran’s energy firm intends to set up wind power project Iran’s leading energy firm has applied for a license with the govt. to set up 50MW wind power project in Jhimpir of Thatta district, expressing its intention to bring in more than $ 100Mn in investment. The $ 113Mn worth of project is expected to start commercial operations by Oct 2017. There exists a huge wind corridor on the coastal belt across Sindh, starting from Gharo-Ketti Bandar up to Jhimpir. The News. ‘Pakistan’s Geographical Indication protection law long overdue’ The much-awaited draft Geographical Indication (GI) Bill 2016 was presented by the Intellectual Property Organisation (IPO) before relevant stakeholders including lawyers, businessmen and bureaucrats. The meeting observed that Pakistan’s GI protection law has been long overdue and IPO should expedite the process of making the draft into a law. The panelists highlighted issues confronting trade without GI protection and certification. Dawn. Number of people paying tax voluntarily remains meagre Only one-third of the potential taxpayers who were issued notices by the FBR voluntarily filed their tax returns during the last three years. The revenue collected from these filer’s amounts to PKR 1.769Bn, as per the FBR official. Around 345,430 notices were issued to potential taxpayers between Jul 2013 and Jun 2016, but only 121,031 people filed their tax returns. Of those who did not file their returns, the FBR projected a revenue of PKR 22.47Bn from 72,673 cases. But the bureau could only recover PKR 851Mn during the period under review. Dawn. Dar directs to stop illegal activities in currency markets Finance Minister directed the SBP to make all-out efforts to stop illegal activities in the currency and exchange markets. The minister gave these directions during a meeting with SBP Governor . The central bank governor briefed the finance minister about the crackdown against illegal currency business as well as illegal exchange companies. Various other measures were approved in the meeting to make the crackdown more effective. Dawn. Centre-provinces row on service tax ‘to hurt investment climate’ A body comprising manufacturing and services companies urged the federal and provincial governments not to drag the matter of input sales tax on services in courts as it could damage the climate for investment. Sindh High Court on Aug, 16. 2016 granted a stay order against the federal government’s move to deny offset of input sales tax on services paid to provinces against output sales tax on products payable to the federal government. The Finance Act of 2016, in departure of established principle of value added taxes, disallowed this offset which the finance minister in his budget speech had acknowledged as a move to pressure provinces to settle amounts due to the federation. Dawn. WoW YoY Jul-16 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 GBP, 17-Aug-16, 136.4 EUR, 17-Aug-16, 118.0 145 135 125 115 105 95 USD, 17-Aug-16, 104.7 85 75 Aug-15 Nov-15 USD Feb-16 GBP May-16 Aug-16 Source: KCCI Research ; Oanda.com EUR Quote of the Day "If you believe in yourself enough and know what you want, you’re gonna make it happen." Mariah Carey Chart of the Day NET COLLECTION OF GST (DOMESTIC) FROM MAJOR REVENUE SPINNERS FY16 VS. FY15 242,185 POL Products 24,445 Electrical Energy Cement 23,290 Cigarettes 20,981 8,042 Services Sugar 10,865 Food Products 12,318 8,847 beverages 22,513 Fertilizer 0 Value in $ Mn 28,326 23,767 14,426 Natural Gas 269,764 37,379 18,241 15,733 15,473 15,105 13,172 11,480 50,000 100,000 150,000 FY15 FY16 200,000 250,000 300,000 Source: KCCI Research, FBR 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