Pakistan Daily Economy Update - 28 November

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1. November 27-28 , 2022 KCCI - eBulletin Payments to Google: SBP rejects allegations SBP has strongly refuted the recent news about certain payments to Google being stuck, and claimed them as baseless and misleading. The fact of the situation was that in order to facilitate domestic entities, SBP specified certain IT related services, which can be acquired from abroad for their own use and make forex payments against up to $ 100,000/invoice. Such services include, Satellite Transponder, International Bandwidth/Internet/Private Line Services, Software License/Maintenance/Support, and service to use electronic media and Source: databases. Entities desirous of utilizing this option designate a bank, which is approved by SBP one time. Subsequently, after designation, such payments can be processed through the designated bank, without any further regulatory approval. However, during recent off-site reviews, it was observed that the Telcos were allowing their customers to purchase above mentioned products through airtime and then remitting funds abroad reflecting such transactions as payments for acquisition of IT related services. Thus, in effect the Telcos were acting as intermediaries/payment aggregators by facilitating acquisition of services by their subscribers, thereby in violation of forex regulations, SBP revoked the designation of banks of Telcos for such payments. BR-Sun. CAD unchanged despite flood losses According to the latest monetary policy statement, announced on 25th Nov’22, SBP has kept its outlook on the deficit unchanged at 3% of GDP, or around $ 10Bn of GDP for FY23, despite the emergence of flood related losses amounting to over $ 30Bn. Tribune-Sun. Govt. to pay heavy price for borrowing after rate hike Interest rate hike will cost heavily to the govt., as it will have to re-price the PKR 5Tn maturity of treasury bills and PIBs in the next 3-months. SBP has increased its policy rate by 100 basis points to 16% to tame inflation but the other aspects of higher interest rates were not considered for serious thought. The higher interest rate has already annoyed the trade and industry, which rejected this surprise move calling it an attempt to increase the cost of doing business. They warned that the increased cost of doing business would seriously hamper economic growth. The govt. estimates that the economy could expand around 2% in FY23 against about 6% in FY22. According to SBP data, the govt. would raise PKR 4.9Tn from Nov 2 to Jan 25 to pay the maturing amount of T-bills of PKR 4.765Tn and PKR 360Bn of PIBs. DawnSun. Sindh seeks new gas allocation policy for catering to needs Sindh govt. has demanded that federal govt. enact a new gas allocation policy to meet the actual needs of the province in the energy sector. In a letter to Petroleum Minister, Sindh Energy Minister asked him to resolve the issue of shortage of electricity and gas in the province, saying: “It has been observed with concern that injustice is being committed with the province of Sindh on the issues of gas and electricity and fulfilment of its demands.” Dawn-Sun. Tax reforms recommendations to FBR: Supertax has successful large businesses: PBC Pakistan Business Council has observed that the supertax has penalized successful large businesses and signaled benefits of remaining small and under the radar, promoting fragmentation. According to the set of recommendations by PBC on tax reforms in FBR, significant changes are required in the structure, talent, and technology of FBR and in fiscal policy to make taxation equitable, broad-based and effective in raising the country’s tax-to-GDP ratio. Under the key reforms, all income beyond a certain threshold irrespective of source should be taxed. The fiscal policymaking should be separated from collection of taxes. An audit function independent of the FBR and preferably composed of the leading firms of accountants be established to inspire confidence of tax payers, among several other recommended reforms. BR-Sun. Agreements with IPPs: DFIs underscore need for amendments Over half a dozen DFIs, including ADB, British International Investment plc (BII), Deutsche Investitions - Und Entwicklungsgesellschaft mbH (DEG) and five others, have sought amendments in pacts with IPPs to replace USD LIBOR with Secured Overnight Financing Rate (SOFR), to be applicable from 30th Jun’23. BR-Mon. Railway gets 46 modern coaches from China After receipt of 46 completely built units (CBUs) manufactured in China, PR is set to soon start manufacturing 184 similar coaches (passenger, luggage and brake vans) at its carriage factory in Islamabad in association with Chinese engineers under the technology-transfer component of the 230 coaches’ purchase contract. Dawn-Mon. PR faces dire technical challenges An official of the Ministry of Railways told that the railways had only 332 locomotives in a running condition out of 461, while 129 (28%) diesel-electric locomotives were non-functional. Tribune-Mon. \ Green Line train service to resume next month List of Indicators Date / Period Unit Value Change Daily USD-Interbank USD-Open MKT 25-Nov 25-Nov PKR PKR 223.94 231.00 0.01% -0.11% KSE-100 index FIPI 25-Nov 25-Nov Pts. $ Mn 42,937 0.46 0.08% NM** Crude Oil 27-Nov $/bbl 76.07 -0.54% Gold 27-Nov $/oz 1,750.7 -0.25% Gold (10g) Local 25-Nov PKR 136,580 -0.10% Silver 27-Nov $/oz 21.29 -0.87% Cotton(KHI)-40 kg 26-Nov PKR 17,683 -1.20% Kibor-6M 25-Nov % 15.90 0.01% Forex Reserves 18-Nov $ Bn 7.83 WoW -1.68% Remittances Jul-Oct 22 $ Bn 9.90 -6.18% Exports* Jul-Oct 22 $ Bn 9.55 1.11% Imports* Jul-Oct 22 $ Bn 21.02 -16.14% Trade Balance* Jul-Oct 22 $ Bn -11.47 26.57% Current Account Foreign Direct Inv. Jul-Oct 22 Jul-Oct 22 $ Bn $ Bn -2.82 0.35 44.51% -52.06% YoY Jul-Sep 22 LSM Growth* % -0.40 % 25.49 Jul-Oct 22 Avg. CPI Discount Rate % 15.00 Oct-22 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* **Not Meaningful; WoW= week on week; YoY=Year on Year; Major Currencies 305 295 285 275 265 255 245 235 225 215 205 195 185 175 165 155 145 Nov-21 EUR, 27-Nov-22, 247.8 USD, 27-Nov-22, 229.9 USD Feb-22 GBP May-22 EUR Aug-22 Nov-22 Source: KCCI Research Quote of the Day “Success is peace of mind, which is a direct result of self-satisfaction in knowing you made the effort to become the best of which you are capable.” John Wooden Pakistan Railways has decided to resume operations of the Green Line Express passenger train from Islamabad to Karachi via Lahore and vice versa from Dec’22. PR has also sought proposals about resumption of the operations of Fareed Express and Pakistan Express, which were previously running between Lahore and Karachi (via several branch line stations) and Rawalpindi-Karachi via Faisalabad and Khanewal, respectively. In a meeting, the participants also accorded approval to reduce freight train charges in a bid to increase revenue. Dawn-Sun. CPI General Inflation (%) at National Level Govt. plans to deregulate POL products’ market by 2027 Govt. has planned to fully deregulate its petroleum products market by 2027 after the country’s oil refineries make necessary technical upgradation in by 31st Dec’26, according to the draft of the upcoming Pakistan Oil Refining Policy. The govt. plans to offer various incentives, including a 10-year income tax holiday and tariff protection for six years to oil refineries in the country that are willing to upgrade their hardware to produce fuel with Euro-V specifications. The minimum financing for the upgradation of hardware would roughly be around $ 45Bn. The deregulation will allow OMCs to set the prices themselves, based on the quality of fuel, location and other value-added services. BR-Sun. Suspected consignments, delinquent staff: FBR endorses DGI&I Sost’s enforcement action FBR has fully endorsed the enforcement action of the Directorate General of Intelligence and Investigations - Customs at Sost Dry Port for checking suspected consignments and disciplinary proceedings against delinquent customs officials. FBR has rolled out Customs digital clearance system, i.e., WeBOC at Sost Dry Port for ease of doing business and enhanced transparency during clearance of Chinese consignments coming through the Pak-China border. BR-Sun. GBP, 27-Nov-22, 288.6 24.9 21.3 13 27.3 26.6 23.2 13.4 13.8 12.2 12.7 PIA to start Islamabad-Xian-Islamabad direct flights next month PIA was granted permission by CAA China to operate direct weekly passenger flights on the Islamabad-Xian-Islamabad route from Dec’22. PK-856 will depart from Islamabad International Airport every Tuesday for Xian and PK-857 will return to Islamabad on the same day. BR-Sun. ‘Mafia’ grabbing land on both sides of M9 With a mushroom growth of housing societies, the builder mafia has illegally possessed swathes of land on both sides of Karachi-Hyderabad Motorway M9, according to a number of complaints filed in the local courts. Tribune-Sun. Lack of planning harms LNG supply chain Analyzing the LNG framework and its supply chain, auditors have pointed out several deficiencies like deficiencies in the legal structure and infrastructure and lack of strategic planning have marred the LNG supply chain in Pakistan. In its report for FY22, the Auditor General of Pakistan said that gas utilities were helping in the sale and purchase of LNG between importers and buyers without any agreement. Gas utilities and consumers have no back-to-back agreements, which lead to disputes among stakeholders in the LNG supply chain. Tribune-Sun. Source: KCCI Research, PBS Note **Green-colored change in indicators depicts Improvement, whereas Red demonstrates Deterioration **If any member is interested in the procurement of high-tech products in the field of off-shore drilling and recording of siesmic waves, they may contact secretary@kcci.com.pk or SRC “Progress” JSC (a Russian Company) (https://en.samspace.ru/).