Pakistan Daily Economy Update - 21 August

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1. Aug . 20 - 21, 2017 KCCI - eBulletin Pakistan-Indonesia PTA moving in right direction Pakistan and Indonesia has reportedly agreed on concessions for 20 different items during bilateral negotiation under Preferential Trade Agreement (PTA). Indonesia has agreed to give concession on major exports from Pakistan including rice, textile, ethanol, Kinnow and mangoes during renegotiation on PTA. Pakistan can export these fruits to Indonesia for the whole year and the timelimit has been removed. Both the countries agreed to expand PTA and go for a FTA between them. BR - Mon. Oil tankers to go on strike as safety talks with Ogra fail Oil tankers owners have decided to go on strike from Monday (21st Aug’17) after negotiations with Ogra have failed. Meanwhile, seeking to defuse the situation, the Ministry of Energy (Petroleum Division) has called a meeting of all stakeholders. Negotiations between Ogra and APOTOA failed to yield any result as both sides refused to budge from their positions over implementation of high safety standards. The oil tankers’ owners maintain the new standards are too high and expensive to be implemented in Pakistan, keeping in view the conditions of the roads as well. Dawn-Sun. Murad visits Karachi areas, gives go-ahead for construction of Sunset Boulevard flyover Sindh CM has asked the officials to begin construction of the PKR 650Mn flyover on Sunset Boulevard as he visited several areas to identify alternative traffic routes to ensure uninterrupted work on several ongoing schemes. He asked for construction work to be finished because of impending launch phase-II of the Karachi Package worth PKR 12Bn. Dawn-Mon. Energy policy seeks to focus on balanced mix Reducing the use of thermal power sources aimed at achieving a balanced mix for the country's energy requirements is the objective of the currently under-preparation energy policy by the newly-created Energy Ministry headed by Prime Minister Shahid Khaqan Abbasi. The policy is expected to be finalized within the next two weeks. Prime Minister has recently directed that a roadmap be prepared focusing on natural gas and domestic coal for energy production. The purpose of this roadmap would be to shift from expensive thermal power plants to gas by 2019. BR – Mon. Govt deploys contingency plans to revive external position Economic managers have swung into action to avert an impending balance of payment crisis and sustain the economic achievements made during the last four years. The government is preparing short- to medium-term contingency plans to cope up with the arising situation on the external account front. Plan of action is under consideration and efforts would be made to save hard-earned macroeconomic gains achieved by the county after taking tough actions under the last IMF loan programme. The News-Sun. Govt breaks the bank for MNAs’ uplift schemes Despite being beset on all sides by political challenges, govt. has disbursed all the funds earmarked for parliamentarians’ development schemes for FY18. This is in stark contrast to less than 1% released for the rest of the country’s core development programme. Under the government’s own disbursement mechanism, 20% each is released in the first two quarters, followed by 30% each in the last two quarters. In contrast, no funds have so far been released for the all-important ‘Energy for All’ and ‘Clean Drinking Water for All’ initiatives, which were allocated PKR 12.5Bn each. Similarly, no funds have been disbursed to special federal development projects, which were allocated PKR 35Bn. Dawn-Sun. ‘Over-representation’ of Punjab on CCI comes under question Prime Minister Shahid Khaqan Abbassi has raised Punjab's representation in the Council of Common Interests (CCI) to 4 with Sindh represented by 2 while KPK and Balochistan one each. PM's Office has issued a notification for reconstitution of the CCI by inducting two federal ministers from Punjab along with the Prime Minister and CM Punjab that gives a total of 4 to Punjab, one federal Minister and CM from Sindh and one member each from the four provinces. BR – Mon. Immovable property: court rules that Sindh’s sales tax on rent is illegal Sindh Sales Tax on rent of immovable property has been declared ultra vires by Sindh High Court (SHC). In this regard, the levy and collection of Sindh Sales Tax had been challenged where case has placed on Aug. 18, 2017 in the cause list for announcement of judgment before a divisional bench of SHC (Tax DB). The Board, in the provincial finance bill 2017-18, has reduced the rate of Sindh Sales Tax on immovable property from 8% to 3%. The impugned law requires a landlord to charge sales tax whereas tenant was also \ under obligation to withhold the entire amount of sales tax and deposit the same through filing of withholding statement. BR - Sun. 2,379MW to be added to grid next year The first unit of Neelum-Jhelum Hydropower Project (NJHPP) and Tarbela-IV Extension will start generating 2,379MW power during 2018. With a power generation capacity of 969MWs, the first unit of NJHPP would start operation in Feb.’18, 2nd in Mar.’18 and the 3rd and 4th units would be ready for inauguration in Apr.’18. Similarly, for 1,410MW Tarbela-IV Extension, the first unit would be ready for power generation by February 2018, second by April 2018 and the third unit by May.’18. Among the ongoing projects, Kachhi Canal is ready for inauguration during the current month. The Nation – Mon. Economic Indicators List of Indicators Date / Period Unit Value Change Daily Crude (AU'17) Gold (JY'17) Gold (10g) Local Silver (JY'17) Cotton(KHI)-40 kg Kibor-6M 18-Aug 18-Aug 18-Aug 18-Aug 18-Aug 18-Aug 18-Aug 18-Aug 18-Aug 18-Aug PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 105.40 106.60 43,078 1.80 48.84 1,288.1 43,714 17.01 5,950 6.15% Forex Reserves 11-Aug $ Bn 19.94 0.00% 0.00 -0.13% NM** 3.98% 0.37% 0.20% -0.64% -8.98% -0.01% WoW -0.31% YoY 16.04% 10.58% 36.74% -55.46% -148.57% 162.81% USD-Interbank USD-Open MKT KSE-100 index FIPI Jul-17 Remittances $ Bn 1.54 Jul-17 Exports* $ Bn 1.63 Jul-17 Imports* $ Bn 4.84 Jul-17 Trade Balance* $ Bn -3.20 Jul-Jun 17 Current Account $ Mn -12,098 Foreign Direct Inv. $ Bn 0.22 Jul-17 Jul-May 17 LSM Growth* % 5.69 % 2.91 Jul-17 Avg. CPI-FY17* Discount Rate % 5.75 Jul-17 WoW= week Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful on week; Major Currencies 145 125 105 USD, 20-Aug-17, 105.2 95 Aug-16 USD Nov-16 GBP EUR Feb-17 May-17 Aug-17 Source: KCCI Research ; Oanda.com Quote of the Day "The first duty of a government is to maintain law and order so that the life, property, and religious beliefs of its subjects are fully protected by the State." Muhammad Ali Jinnah Chart of the Day 8.00 7.00 Govt to raise up to $ 1Bn through Eurobond The government is planning to raise $ 500Mn to $ 1Bn by floating Eurobond in the international debt market. The government has consulted international banks to assess the likely market response. Pakistan has a good track record of borrowing from the international market as it has never defaulted. A deepening political crisis, record trade and current account deficits, falling remittances, declining manpower exports and a steep slide in foreign exchange reserves are posing a challenge to the government. Dawn-Sun. 3.00 Stocks down 5% in turbulent week on panic-selling Politics took a heavy toll on stock market in the outgoing week as the KSE-100 index slid 4.9% to close at 43,078 points. Unending political uproar affected the average daily turnover, which shrank 3.4% from the preceding week to 184Mn shares. The benchmark index has lost about 10% value since the start of 2017. It’s down 19% since reaching its peak of 52,876 points on 24th May‘17. Dawn-Sun. EUR, 20-Aug-17, 123.7 115 Govt plans to waive billions of rupees in cess payment The government has planned to introduce a bill in parliament for making amendments to the Gas Infrastructure Development Cess (GIDC) Act 2015 in an attempt to waive half of the cess arrears worth billions of rupees from the CNG filling stations. The Ministry of Finance, Ministry of Petroleum and Natural Resources and CNG industry have agreed on this formula for half payment amounting to PKR 12Bn, covering the period 1st Jan’12 to 22nd May’15. Tribune. KCCI for action against exchange firms KCCI President Shamim Ahmed Firpo has urged SBP to take strict action against exchange companies that are reluctant to accept the old-design $ 100 notes. They are charging a fee of 3-4% to exchange the old-design bills, he said in a statement. Dawn-Sun. GBP, 20-Aug-17, 137.2 135 6.00 Pakistan's External Debt Payment Schedule (20172023) 7.43 7.07 5.83 5.00 4.803 4.57 4.26 4.49 3.761 2.8 1.60 1.46 1.31 1.09 0.99 1.00 0.00 4.60 3.774 3.48 4.00 2.00 5.79 5.76 2017 2018 External Debt ($ Bn) 2019 2020 Principal Amount ($ Bn) 2021 0.83 2022 0.73 2023 Interest Payment ($ Bn) Source: KCCI Research, MoF Values in $ Bn 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