Pakistan Daily Economy Update - 29 December

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1. Dec . 29, 2016 KCCI - eBulletin KSE index gains 400% since 2009: Forbes With an improving macroeconomic environment, the Pakistan Stock Exchange index has gained close to 400% since 2009, and 40% this year alone, leaving neighbouring markets in the dust. According to a report carried by Forbes business magazine, there are a couple of overseas endorsements for Pakistan’s market reforms, like $ 1Bn in support from the World Bank, and domestic acquisitions from foreign suitors such as that of K-Electric by Shanghai Electric Power Co. Another overseas endorsement was the inclusion of Pakistan’s market into MSCI’s emerging market index. The News. US embassy shifting commercial service dept to Karachi The US Embassy has decided to shift its commercial service department from Islamabad to Karachi in Mar’17 in order to boost business ties with Pakistan, a statement said on Wednesday. Grace Shelton, Consul General of the USA told local businessmen that the US consulate is working in close coordination with the Ministry of Commerce, the Sindh Board of Investment, and the US Pakistan Business Council to organise the Fifth Annual Business Opportunities Conference in 2017 in Pakistan. The News. Gas prices for power sector slashed by 35% The govt. has slashed gas prices for the power sector and IPPs along with the industry by about 35% to PKR 400 per MMBTU from PKR 613 per MMBTU aimed at eliminating price disparity and reduce electricity generation cost. Similarly, the govt. would charge general sales tax at PKR 100 per MMBTU on the gas sale price for the aforesaid consumers. BR. Sugar export allowed The Economic Co-ordination Committee (ECC) has approved the allocation of an additional 50 MMCFD gas to Thermal Power Station Guddu (TPSG/GENCO-II) and allowed the export of 225,000 metric tons of sugar till Mar. 31, 2017. The meeting, chaired by Finance Minister Ishaq Dar, has also approved issuance of a guarantee of PKR 54.46Bn by the govt. of Pakistan in favor of SBP for principal debt of the preference shares and returns thereon. BR. MoF urged to clear PKR 102Bn power subsidy claims Water and Power Ministry has reportedly urged the Finance Ministry to clear power subsidy claims of PKR 102Bn immediately aimed at paying the IPPs and PSO. Presently, total stock of circular debt stood at PKR 320Bn in addition to PKR 360Bn parked in the PHPL. Ministry of Water and Power had sought a PKR 208Bn subsidy for power sector in financial year 2016-17 against PKR 144Bn earmarked in 2015-16 but the government had extended only PKR 116Bn for subsidy; of which PKR 95.4Bn for Discos and PKR 22.6Bn for KE. A 44% increase has been projected in subsidy in FY17 due to new generation injected into the system as sale of electricity is expected to increase by 20-25%. BR. FBR suggests Shariah-compliant criteria for companies The FBR has proposed Shariah-compliant criteria for companies, trading shares on a stock exchange to avail the reduced tax rate under Income Tax Ordinance 2001. In this regard, SRO 1173(I)/2016 has been issued to amend rules including company’s business should not process or manufacture anything not permitted by Shariah, should maintain company’s free float at 30% of the outstanding shares, should be Riba-free financing; however, company may be leveraged through Islamic modes of financing obtained from licensed Islamic financial institutions. Furthermore, company investments should be Shariah compliant; therefore, it would not be permissible to acquire non-Shariah compliant instruments/securities which yield interest or income that is not Halal. BR. Proposed Insurance Bill: PKR 50Mn paid-up capital requirement set for insurers The proposed Insurance Bill, 2016 has set a minimum paid-up capital requirement of PKR 50Mn for insurers registered exclusively to undertake micro insurance business in Pakistan, and special requirements for Takaful (Islamic insurance) business and registration/regulations for companies to undertake reinsurance business. Similarly, no person other than a public company formed and registered under the Companies Ordinance, 1984 and a body corporate shall be eligible to undertake micro-insurance business in Pakistan. BR. Economic Indicators Date / Period Unit Value Change Daily USD-Interbank List of Indicators 28-Dec PKR 104.85 -0.01% USD-Open MKT 28-Dec PKR 108.20 0.09% KSE-100 index FIPI 28-Dec 28-Dec Pts. $ Mn 47,425 -5.37 1.07% NM** Crude (FE'17) 28-Dec $/bbl 53.93 0.09% Gold (JA'16) 28-Dec $/oz 1,143 0.24% Gold (10g) Local 28-Dec PKR 42,685 0.00% Silver (JA'17) 28-Dec $/oz 16.06 0.53% Cotton(KHI)-40 kg 28-Dec PKR 6,645 0.00% Kibor-6M 28-Dec % 6.15% 0.00% Forex Reserves 16-Dec $ Bn 23.13 -0.70% Remittances Jul-Nov 16 $ Bn 7.87 -2.50% Exports* Jul-Nov 16 $ Bn 8.19 -3.93% Imports* Jul-Nov 16 $ Bn 19.96 8.83% Trade Balance* Jul-Nov 16 $ Bn -11.78 -19.90% Current Account Avg. CPI-FY17* Jul-Nov 16 Jul-Nov 16 $ Mn % -2,601 3.92 -90.97% WoW YoY Nov-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 175 165 155 145 GBP, 28-Dec-16, 128.3 135 125 115 EUR, 28-Dec-16, 109.3 USD, 28-Dec-16, 104.7 105 95 85 75 Dec-15 USD Mar-16 GBP Jun-16 EUR Sep-16 Dec-16 Source: KCCI Research ; Oanda.com Quote of the Day FBR starts budget preparation exercise FBR has started budget preparation exercise for FY18. In this regard, FBR has issued instructions to all chambers and federations in order to benefit from collective wisdom of the general public and all the stake holders. All the Chambers of Commerce & Industry, bodies of trade and industry, provincial bodies and regulatory authorities, proposals are invited for the upcoming Budget 2017-18. The FBR has requested that these proposals may be provided by Jan. 15, 2017. BR. "Violent men have not been known in history to die to a man. They die up to a point." Senate panel proposes amnesty for all sectors The Senate Standing Committee on Finance has recommended FBR to introduce amnesty scheme for all sectors, especially industrial sector along with the real estate sector. FBR Member Rehmetullah Wazir informed the committee that under the real estate scheme, transactions worth PKR 1.4Bn had been made so far and the FBR had collected PKR 50Mn taxes. The News. Chart of the Day Independent directors to occupy 33% of bank boards SBP has increased the minimum number of independent directors from 25% to 33% of the total board members from Mar 31st ‘18. The size has been increased in the wake of changes being made by regulators after 2006-07’s global financial crisis. The SBP has also issued revised instructions on independent directors of the banks and development finance institutions. Dawn. Bank holiday The State Bank of Pakistan has announced that all banks/development finance institutions/microfinance finance banks shall remain closed on Jan 2nd ‘17 for public dealing. However, all the employees will attend the office as usual. Dawn. Mahatma Gandhi FUEL-WISE ELECTRICITY GENERATION IN PAKISTAN (FY15) Renewable Nuclear Coal 0.7% 5.4% 0.1% Oil 36.8% Gas 26.5% JCC meeting begins today The 6th Pakistan-China JCC will meet in Beijing to review progress on the ongoing corridor-related projects and identify new ones. A strong Pakistan delegation which includes chief ministers of four provinces will represent at the committee meeting. Working groups formed by the two countries on Gwadar, transport and industrial cooperation would submit their recommendations to the committee meeting. Dawn. Favourable outlook: Fertiliser sales in November jump 20% year-on-year Total fertiliser sales jumped to 1.58Mn tons in Nov’16 compared with 1.32Mn tons in Nov’15 (up 20% year-on-year and 68% month-on-month), according to figures released by the National Fertilizer Development Centre. On a cumulative basis, total fertiliser sales posted a growth of 3% year-on-year to 7.83Mn tons during 11CY16. Tribune. Auction for PIBs: government rejects all bids as banks seek higher margin SBP has conducted the auction for PIBs for 3-, 5-, 10-, and 20-year maturity to raise some PKR 50Bn for the federal govt. to meet its increasing financial requirements. Overall, the bids of worth PKR 46.99Bn with a total realized value of PKR 47.099Bn were received for the sale of 3-year, 5-year and 10-year long-term govt. securities, however, no bid was received for 20-year variety. BR. Hydel 30.4%Source: KCCI Research, Pakistan Energy YearBook 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