Pakistan Daily Economy Update - 22 September

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1. Sep . 22, 2016 KCCI - eBulletin Monetary policy on Sept 24 SBP has said it will announce monetary policy for the next two months on September 24. The monetary policy committee will discuss the all economic indicator to decide the policy rate, which is currently at 5.75%. In the last policy meeting the central bank kept the benchmark interest rate unchanged on expectation of rising inflation. The News. Economic Indicators Date / Period Unit Value USD-Interbank 21-Sep PKR 104.76 0.11% Current account deficit increases by 92% The country's current account deficit has sharply increased by 92% during 2MFY17 primarily due to lower goods and services exports. SBP revealed that the country’s current balance has posted a deficit of $ 1.32Bn during Jul.-Aug.’ of FY17 compared to $ 686Mn in the same period of FY16. The cumulative deficit of goods, service and income was surged by 15% during the period under review. With current increase, combined deficit of goods, services and income has surged to $ 4.91Bn during 2MFY17 compared to $ 4.26Bn in same period of FY16. BR. USD-Open MKT 21-Sep PKR 105.00 -0.21% KSE-100 index FIPI 21-Sep 21-Sep Pts. $ Mn 39,771 -1.16 -1.41% NM** Crude (JU'16) 21-Sep $/bbl 45.60 2.43% Gold (MY'16) 21-Sep $/oz 1,334.6 1.58% Gold (10g) Local 21-Sep PKR 45,612 1.66% World Bank approves $ 390Mn additional financing for power expansion generation The World Bank has approved an additional financing of $ 390Mn to help sustainable expansion of Pakistan's electricity generation capacity. The additional financing will help in installation of a power house at the existing Tunnel Five that will enhance the total capacity at Tarbela to 6,298MWs. The project will be financed from the International Bank for Reconstruction and Development (IBRD), with a variable spread and 20 years maturity including a 6-year grace period. This will be the first World Bank supported project in South Asia to be jointly financed with the Asian Infrastructure Investment Bank (AIIB) that would be providing $ 300Mn. BR. Silver (MY'16) 21-Sep $/oz 19.84 3.32% Cotton(KHI)-40 kg 21-Sep PKR 6,629 0.82% Kibor-6M 21-Sep % 6.04% -0.01% 9-Sep $ Bn 22.86 -0.54% RD on import of wheat increased FBR has increased regulatory duty on the import of wheat from 40% to 60% from Sept. 9, 2016. According to a notification, the FBR has amended SRO 254(I)/2015 dated Mar. 30, 2016 which deals with the imposition of the RD on the import of wheat, wheat flour, Maida and Semolina. The decision in the increase of regulatory duty has been made by the Economic Co-ordination Committee of the cabinet. BR. Remittances Jul-Aug 16 $ Bn 3.09 -3.17% Exports* Jul-Aug 16 $ Bn 3.14 -8.19% Imports* Jul-Aug 16 $ Bn 7.88 10.21% Trade Balance* Jul-Aug 16 $ Bn -4.74 -27.06% Current Account Avg. CPI-FY17* Jul-16 Jul-Aug 16 $ Mn % -591 3.84 -152.56% Factory closures: over 0.5Mn jobs lost in two years A global news agency has reported that around 100 factories have been closed down in Pakistan in the past two years with at least 500,000 people lost their jobs during this span and about two-thirds of bed wear exporters have stopped working in the past five years. The report further states that buyers have shifted to Bangladesh and Vietnam as ongoing energy crisis has made it impossible for them to meet deadline of orders as well as the fact that foreign buyers are less comfortable visiting Pakistan in spite of visible improvement in security situation. In this regard, exporters have complained that govt. has neither provided them any support nor planned how textile industry should move ahead. BR. List of Indicators WoW Forex Reserves 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 Importance of cross-border power trade highlighted In a two-day (Sept. 22 – 23, 2016) third Saarc Energy Regulators' Meeting, held in Islamabad, Chairman Nepra has hinted at the possibility of CASA 1000 project being extended to India. In this regard, Pakistan has also submitted a draft MoU to India on importing 1,200MW electricity. CASA project would enable Afghanistan and Pakistan to import 1,300MW electricity from Central Asian countries. The Chairman said that currently, some of the Member States are already involved in cross border electricity trade within the region. Outside the region, Pakistan is importing 100MW from Iran for electricity supply to its coastal area. BR. 165 Pakistan, South Korea to move forward on FTA Pakistan and South Korea are all set to kick off formal negotiation on FTA aimed at boosting bilateral trade. In a meeting between the Republic of Korea Ambassador Dr. Dong-gu Suh and Commerce Minister Khurram Dastgir Khan, the two sides agreed to push forward the FTA process when the ambassador called at the minister’s office where he has said that Some Korean companies have shown keen interest to invest in hydro-power plants and IT sector in Pakistan. Tribune. 105 SBP denies $ 4.9Bn remittances to India SBP has categorically rejected a report that suggests an outflow of $ 4.9Bn from Pakistan to India as remittances and has termed it contrary to facts. The data of balance of payments showed that $ 116,000 worth of worker remittances flew from Pakistan to India in FY16 and inflows from India to Pakistan stood at $ 329,000. Tribune. Textile exports fall to $ 2.07Bn in 2MFY17 The textile exports fell 2.64% to $ 2.07Bn in 2MFY17 as the country faced a significant drop in the export revenues of raw cotton, yarn and cloth due to weak crop output and soft international prices. The data showed that cotton cloth exports dropped 4.12% to $ 352.23Mn during 2MFY16. Yarn exports dipped 16.64% to $ 217.29Mn, while raw cotton earned the country only $ 10.19Mn in foreign exchange in the period under review as compared $ 22.99Mn a year earlier. The News. Govt. raises PKR 219.15Bn in PIBs auction The govt. raised PKR 219.15Bn in an auction of Pakistan Investment Bonds (PIBs) against the pre-auction target of PKR 100Bn for which the central bank received offer worth PKR 295.8Bn. Cutoff yield in the three maturities have witnessed marginal decline. The cutoff yield in three-, five- and 10-year maturities have come down to 6.19%, 6.70% and 7.79%, respectively, as against 6.20%, 6.70% and 7.80%, respectively, in the auction held on August 24. The SBP accepted bids worth PKR 122.57Bn in the short-term maturities, i.e., three-year PIBs. Meanwhile, bids accepted in five- and 10-year maturities are at PKR 84.14Bn and PKR 12.43Bn, respectively. The News. Mari Petroleum borrows PKR 9Bn to step up hydrocarbon search Mari Petroleum Company Limited (MPCL) has borrowed PKR 9Bn from Habib Bank Limited in a bid to accelerate the search for untapped oil and gas deposits in the country, particularly in Sindh and Balochistan. The financing facility will allow the company to invest aggressively in exploration and development activities, which will result in more discoveries and enhanced production. The borrowed amount is equivalent to 91% of PKR 9.92Bn the company spent on exploration activities in FY16. Tribune. Govt raises almost PKR 1Tn revenue from oil, gas consumers With increasing tax rates, the country’s oil and gas sector has emerged as the single largest revenue spinner with more than PKR 912Bn contribution to the national exchequer during the fiscal year ended on Jun, 30. 2016 despite tepid international prices. Dawn. SECP to share financial stability set-up with SBP The Coordination Committee of SECP and SBP have decided that the Commission would share its financial stability set-up with the central bank. Both institutions have set up departments for financial stability related issues and coordination. In the meeting, issues regarding the Draft Netting of Financial Contract Bill were discussed and a broad agreement on the draft was reached. However, further review of the draft would be undertaken by the SECP. The News. Leaks reveal another 150 Pakistanis own offshore firms After the names of 259 Pakistanis with links to offshore companies surfaced in one of the worlds biggest-ever data called the Panama Papers in May, another cache of leaked documents emerged carrying the names of 150 Pakistanis who own companies in the Bahamas, a constellation of over 700 islands. The data shared by the International Consortium of Investigative Journalists (ICIJ) with its media partners is originally obtained and released by German newspaper Süddeutsche Zeitung. Dawn. Change Daily 155 GBP, 21-Sep-16, 136.1 EUR, 21-Sep-16, 116.9 145 135 125 115 95 USD, 21-Sep-16, 104.3 85 75 Sep-15 Dec-15 USD Mar-16 GBP Jun-16 Sep-16 Source: KCCI Research ; Oanda.com EUR Quote of the Day "Peace is not absence of conflict, it is the ability to handle conflict by peaceful means." Ronald Reagan Chart of the Day 1200 1000 Pakistan's Commodity Group Wise Export & Imports in 1MFY17 972.09 800 595.21 600 387.58 400 0 228.38 202.26 200 30.98 Textile Group Value in $ Mn Food Group Petroleum Group Exports Petroleum Food Group Group Textile Group Imports 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