Pakistan Daily Economy Update - 18 February

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1. Feb . 18, 2017 KCCI - eBulletin SBP introduces new rules to curb terror financing and money laundering SBP has introduced new stringent rules for banks and other financial institutions against money laundering and terrorism financing. The central bank has asked all the banks, development financial institutions (DFI) and micro finance banks (MFB) to remain watchful and continuously monitor their account holders. Any similarity between the identifying information of the customer and that of proscribed entities and persons including national identification number, address, etc. may be viewed with suspicion and properly investigated for necessary action as per requirements. Tribune. Pakistan to export seafood to China via land route Pakistan will start the export of seafood to the Xinjiang Uygur autonomous region using the CPEC route. After a successful trial last month, regular shipments are to start on 1st Apr’17. Tribune. Govt. firms up: $ 600Mn loan from Chinese banks Finance Ministry has reportedly finalized arrangements for $ 600Mn commercial loan where terms and conditions of the two financing facilities of $ 300Mn each (total $ 600Mn) to be provided by Industrial Commercial Bank of China (ICBC) and Bank of China have been negotiated. The proceeds of the financing will be utilized for balance of payments and budgetary support. The interest will accrue to Bank of China in Pakistan under the Second Protocol to Avoidance of Double Taxation Agreement (ADTA) between Pakistan and China. BR. CPEC energy projects: Pakistan, China revise ‘priority list’ Pakistan and China have signed a revised priority list of energy projects they plan to complete in the next 2 years under the multibilliondollar corridor programme. The Energy Expert Group agreed to upgrade another 660MW Hubco coal-fired power plant to the prioritized list but downgraded the 1,320MW Rahim Yar Khan Power project to its actively promoted list, which carries projects that will be completed in the next 5 years. The parties also upgraded the Oracle Power project to the priority list. The Energy Expert Group signed the list in light of an understanding reached during a Special Meeting for China-Pakistan Energy Projects held in Beijing in Dec. Tribune. Current account deficit almost doubles to $ 4.71Bn in July-Jan Pakistan’s current account deficit widened by 90% in 7MFY17, standing at $ 4.72Bn compared with 2.5% ($ 2.48Bn) in 7MFY16. Trade deficit rose to $ 17.42Bn in this period from $ 13.54Bn a year ago due to increased exports and decreased imports. Exports fell to $ 11.68Bn from $ 12.07Bn, while imports rose to $ 29.11Bn from $ 25.61Bn. Remittances decreased 1.87% to $ 10.94Bn during the period under review. The News. Sales tax further increased on High Speed Diesel (HSD) FBR has raised sales tax on High Speed Diesel (HSD) where hike has now totaled up to 29.5%. In the past two months, FBR has already increased sales tax on HSD about 4% of sales tax. Due to the price hike of crude oil in the international market, the revenue collecting body of the govt. has been constantly increasing taxes on petroleum products. The Nation. Pakistan, Hong Kong ink pact to avoid double taxation Pakistan and Hong Kong have signed the pact on avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income. The agreement once ratified, shall benefit individuals and companies working in Pakistan and Hong Kong by providing safeguards against paying double taxation on the incomes of the residents of both jurisdictions. The Nation. Old, used auto parts: import subject to strict controls: FBR FBR has claimed that import of old and used auto parts is subject to strict procedures and controls with remote chances of re-assembly into vehicles. Finance Standing Committee has been informed about groups’ involvement in auto parts import from Japan which later on rejoined in the shape of cars. In this regard, adjudicating officers have confiscated the old and used auto parts and a minimum fine of 20% of value of such goods is imposed, in lieu of confiscation, which is over and above the customs duties, other taxes and penalties imposed under relevant law. BR. GE locomotives to enhance Pakistan’s cargo capacity US Ambassador to Pakistan David Hale has said that many of General Electric (GE) locomotives being delivered to Pakistan Railways (PR) will support power plants and improve the rail company’s capacity to carry even more cargo to the industrial heartland. He was speaking at a ceremony at the Karachi Cantonment Railway Station to mark the handing over of 2 GE locomotives to PR. In Jun’15, GE signed a deal with PR for the delivery of 55 state-of-the-art diesel locomotives. Tribune. FBR makes headway towards implementing OECD treaty FBR has evolved common reporting rules for the banking sector to bring it on a par with International Reporting Standards (IRS) for the exchange of financial information about bank accounts of non-residents with the Organization for Economic Cooperation and Development nations. The move is aimed at reducing the possibility of tax evasion. The new rules will be communicated to banks to seek all information from non-residents who keep bank accounts in Pakistan. The new rules will empower banks to submit a report to the FBR field formation regarding non-compliant non-residents. Dawn. Ogra to specify ‘fair price’ for LPG next week Amid criticism from the industry, Ogra has said that it would come up with another “reasonable price” for LPG next week after completing its internal assessment and consultation process with stakeholders. The notified price of PKR 900/cylinder of 11.8kg on 8th Feb‘17 sparked a controversy in the industry and tussle with the petroleum ministry. Dawn. Economic Indicators List of Indicators Date / Period Unit Value Change Daily Crude (FE'17) Gold (JA'16) Gold (10g) Local Silver (JA'17) Cotton(KHI)-40 kg Kibor-6M 17-Feb 17-Feb 17-Feb 17-Feb 16-Feb 16-Feb 17-Feb 16-Feb 17-Feb 17-Feb PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 104.84 107.10 49,376 -3.49 53.82 1,239 43,457 18.07 7,218 614.00% Forex Reserves 10-Feb $ Bn 21.82 0.01% -0.33% -0.43% NM** 0.45% 0.41% 0.40% 0.56% 0.00% 607.87% WoW -0.94% YoY -1.86% -3.21% 19.32% -20.29% -90.24% USD-Interbank USD-Open MKT KSE-100 index FIPI Jul-Jan 17 Remittances $ Bn 10.95 Jul-Jan 17 Exports* $ Bn 11.69 Jul-Jan 17 Imports* $ Bn 29.11 Jul-Jan 17 Trade Balance* $ Bn -17.43 Jul-Jan 17 Current Account $ Mn -4,716 % 3.85 Avg. CPI-FY17* Jul-Jan 17 Jan-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 Feb-16 USD May-16 GBP Aug-16 Nov-16 Feb-17 Source: KCCI Research ; Oanda.com EUR “Success is not measured by what you accomplish, but by the opposition you have encountered, and the courage with which you have maintained the struggle against overwhelming odds.” Orison Swett Marden Chart of the Day 40% Percentage of Population Below Poverty Line (2016) 35% 30% Proposal to hike gas tariff by 5% to cover UFG losses Independent consultants have suggested allowing 5% unaccounted for gas (UFG) losses allowance to gas utilities in consumer tariff for the next five years with targets for their gradual decline. The consultants – KMPG Taseer Hadi & Co – appointed by Ogra, however, conceded that the proposed UFG benchmark was the highest in comparable gas markets and that its conclusion was mostly based on contributions and arguments of the gas utilities in addition to the regulator. It provided a comparison of 11 nearest matching markets. Dawn. 15% OGDC’s earnings drop 12% on higher exploration cost Oil and Gas Development Company (OGDC) has posted a net profit of PKR 30Bn (EPS: PKR 6.98) for 1HFY17, down 12% from PKR 34.20Bn (EPS: PKR 7.95) in 1HFY16. Tribune. EUR, 17-Feb-17, 111.4 USD, 17-Feb-17, 104.6 Quote of the Day Heavy traffic’s timings to be strictly implemented, says minister Timings of the movement of heavy traffic within the metropolis would be strictly observed in order to ease pressure of traffic flow as well as to help control road mishaps. This was decided at a meeting presided over by Sindh Transport Minister. It was also decided that, fines would be imposed on heavy traffic violating the timings of movement within the city limits. Dawn. Reckitt Benckiser plans expansion CEO of Reckitt Benckiser Pakistan has said that the company will invest in expanding its production lines in 2017 and ahead. Investment will include capacity expansion of existing brands at the Mauripur factory where the company has recently purchased new land. He said that there has been an increase of over 25% in employment in the last one year, with over 1,000 people working in the company. Dawn. GBP, 17-Feb-17, 130.3 25% 20% 10% 5% Source: KCCI Research,WB 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