Pakistan Daily Economy Update - 4 July

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1. July 04 , 2022 KCCI - eBulletin Trade deficit hits highest level on record as imports soar Pakistan’s trade deficit has ballooned to an all-time high of $ 48.66Bn in the outgoing fiscal year from $ 30.96Bn a year ago, indicating an increase of 57% on the back of higher-than-expected imports, despite a ban imposed on more than 800 items in May’22. The coalition govt.’s battle against a bloated trade gap has failed to produce the desired result as it widened by 32.3% to $ 4.84Bn in Jun’22 from $ 3.66Bn in Jun’21. Dawn-Sun. Pakistan haunted by rising cost of production Worried by the downward trajectory of the country’s economy, business leaders have warned that the rising costs of doing business could render Pakistan unable to compete with other countries in the region. The KCCI President Mohammad Idrees and BMG Chairman Zubair Motiwalla shared their views on the high soaring inflation rates at 21.32% in Jun’22. They have termed rising interest rates, the uncertain situation of the US dollar, skyrocketing fuel prices, higher gas and power tariffs, and unabated food inflation to be extremely serious issues that needed to be addressed by the govt. on a priority basis. Dawn-Sun. Pakistan seeks Qatar gas on deferred payment Amid severe energy crunch and unprecedentedly expensive fuel imports, authorities in Islamabad are engaging with Qatar at different levels to ramp up LNG supplies to Pakistan to make up for shortage of four to five cargoes (about 400-500Mn cubic feet of gas per day) every month. The single bid again from Qatar at $ 40/Mn British thermal units (mmBtu) for a July delivery was too expensive to be accepted against Qatar’s long-term contract price of $11-14. Dawn. Jul-May 2021-22: Pakistan’s exports to US increase by 23% Pakistan’s YoY exports to the US have increased by 23%. Last year, the total volume of exports, for the first time crossed $5Bn. Exports grew to $6.16Bn in the Jul-May FY22, which were $2.4Bn for FY21. Pakistan’s total exports to the US in Services and IT have crossed $2Bn. BR-Sun. ‘Big risk’ on small loans from unregistered players As Nano-lending FinTech gains popularity among the unbanked population of the country, several non-licensed companies have entered the fray and the authorities are unable to stop them. Nano-credit refers to small loans amounting to as low as Rs50 that the poorest of the poor can obtain for days or weeks through their phones. Within one year of the introduction, business volumes of these digital lending platforms crossed PKR 10Bn in FY22. Dawn-Sun. Coal starts coming in from Afghanistan The country has started importing coal from Afghanistan and supplying it to the coal-fired power plants in different cities. At present, fewer than 3,000 tons of coal are being brought daily at the Khushhal Kot railway station. However, the supply is expected to touch 20,000 tons after the beginning of coal operation from Kundian in Mianwali district and Sibi in Baluchistan, which would receive coal in trucks via the Wesh-Chaman border. Earlier, reports suggest that the Afghan coal price more than doubled from $ 90/ton to around $ 200 after Pakistan decided to buy the commodity from its neighbor. Dawn-Sun. Investments in renewable energy to generate over 300,000 jobs World Bank study named, “Renewable Energy Jobs and Sector Skills Mapping for Pakistan”, estimate that new investments in gridconnected and off-grid renewable energy projects in Pakistan could generate more than 190,000 direct and 137,000 indirect jobs by 2030. The renewable energy industry provided about 14,000 direct and over 11,000 indirect jobs in 2020 against an installed base of 1,995MW of grid-connected wind and solar projects and an estimated 2,600MW of off-grid solar photovoltaic installations. Following the Integrated Generation Capacity Expansion Plan (IGCEP) pathway, new investments in about 3722MW of grid-scale wind projects and 7533MW of solar photovoltaic (PV) projects have the potential to provide over 105,000 direct jobs by 2030. Dawn-Sun. Private sector wage payments: Digitalization to boost account ownership: World Bank Digitalizing private sector wage payments in Pakistan would result in a 13% increase in account ownership and would bring around 20Mn unbanked adults into the formal financial system, says the World Bank. The bank in its latest report, “The Global Findex Database 2021, Financial Inclusion, Digital Payments, and Resilience in the Age of Covid-19”, stated that mobile phones could help facilitate electronic wage payments because more than 80% of adults who received private-sector wages in cash in Pakistan have a mobile phone. BR-Sun. NBFCs disburse cumulative loan of PKR 13bn in 2 years \ Despite Covid-19 and other technical hurdles, the newly licensed digital lending FinTech Non-Banking Finance Companies (NBFCs) have disbursed cumulative loan over PKR 13Bn to 600,000 borrowers in last two years. According to the latest SECP data, out of the total amount, over PKR 11Bn have been disbursed only in the first nine months of FY22. BR-Sun. DMC East manages to break even at PKR 3.3Bn District Administrator Rehmatullah Sheikh approved the balanced budget of PKR 3.31Bn FY23. It was mentioned that PKR 1,650Mn in OZT, PKR 700Mn in property tax, PKR 100Mn in betterment tax, PKR 550Mn in terms of immovable property fee and a revenue of PKR 312.70Mn is expected from own resources in FY23, projecting total revenue at PKR 3,312.70Mn. For the expenditure, the allocation is set as; PKR 1,842Mn has been earmarked for Establishment, PKR 351Mn for Salary Expenditure, PKR 162.50Mn for Repair and Maintenance and PKR 956Mn for Development Expenditure. Tribune. CPEC Thar coal project back in spotlight Work on a stalled priority project of the CPEC initiative in Thar Coal Block IV is expected to begin as Pakistan is exploring possibilities of utilizing indigenous coal resources for producing cheaper electricity amid exorbitant prices of fossil fuels in the international market. A consortium of Oracle Power, China National Coal Development Co and the Private Office of Sheikh Ahmad Dalmook Al Maktoum, plans to establish a 1,320-MW coal-fired, mine-mouth power plant, integrated surface coal mine, and coal-to-gas and coal-to-diesel conversion facilities in Thar Coal Block IV at an estimated cost of $4Bn. Tribune-Sun. Air travel FED not applicable on tickets issued before July 1: FBR FBR has announced that the enhanced rate of the FED of PKR 50,000 would not be applicable on Club, Business & First class international air tickets issued before 1st Jul’22. FBR has further clarified that as FED is chargeable at the time of issuance of air tickets; therefore, the enhanced rate of FED at PKR.50,000 (previously PKR.10,000) is not applicable on the Club, Business & First class international air tickets already issued before 1st July,2022. BR-Sun. Cooking oil imports eat up $3.6Bn Pakistan’s imports of cooking oil spiked to $3.56Bn in the 11MFY22, which was equivalent to 60% of the three-year IMF loan program of $6Bn. The edible oil imports were 44% (or $1.1Bn) higher compared to $2.47Bn in the 11MFY21, according to latest data of PBS. Besides, the price of cooking oil shot up close to PKR 550/liter in the domestic market compared to around PKR 200/liter in Jan’19. Tribune-Sun. Sindh govt. relaxes business hours Sindh govt. has relaxed early market closure timings and suspended all notifications pertaining to operational hours of businesses for a week, allowing businesses and market to operate late at night until July 10 in view of Eidul Azha. The restrictions will be re-enforced from July 11. Tribune. List of Indicators Date / Period Unit Value Change Daily USD-Interbank USD-Open MKT 30-Jun 3-Jul PKR PKR 204.85 205.00 -0.13% 0.24% KSE-100 index FIPI 1-Jul 1-Jul Pts. $ Mn 41,630 0.46 0.22% NM** Crude Oil 3-Jul $/bbl 108.19 -0.22% Gold 3-Jul $/oz 1,809.1 0.42% Gold (10g) Local 1-Jul PKR 121,660 0.00% Silver 3-Jul $/oz 19.78 0.57% Cotton(KHI)-40 kg 2-Jul PKR 17,897 0.00% Kibor-6M 30-Jun % 15.35 0.02% Forex Reserves 24-Jun $ Bn 16.20 WoW 13.97% Remittances Jul-May 22 $ Bn 28.41 6.26% Exports* Jul-May 22 $ Bn 28.85 27.78% Imports* Jul-May 22 $ Bn 72.18 44.28% Trade Balance* Jul-May 22 $ Bn -43.33 -57.85% Current Account Foreign Direct Inv. Jul-May 22 Jul-May 22 $ Bn $ Bn -15.20 1.60 -1184.8% -4.91% YoY Jul-Mar 22 LSM Growth* % 9.40 % 12.15 Jul-Jun 22 Avg. CPI Discount Rate % 13.75 May-22 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful, WoW= week on week; YoY=Year on Year Major Currencies 275 265 255 245 235 225 215 205 195 185 175 165 155 145 Jul-21 GBP, 3-Jul-22, 246.5 EUR, 3-Jul-22, 212.3 USD, 3-Jul-22, 205.0 USD Oct-21 GBP Jan-22 EUR Apr-22 Jul-22 Source: KCCI Research Quote of the Day “Our greates weakness lies in giving up. The most certain way to succeed is always to try just one more time.” Thomas A. Eddison Pakistan's Top 10 Export Commodities in 11M-FY22 ($ Mn) Made-up Textile Articles 5,149.3 Kintted Articles of Apparel 4,390.2 Not-Knitted Articles of Apparel 3,306.3 Cotton 3,210.0 Cereals 2,632.2 Copper and Articles 779.4 Articles of Leather 678.0 Salt, Earth', Lime and Stone 460.1 Optical and Medical Inst. 457.2 Beverages, Spirits and Vinegar 434.9 0 2000 4000 6000 Source: KCCI Research; SBP Note If any member is facing any issues pertaining to PakistanAfghanistan investment and trade policies or has project proposals is requested to share the information at secretary@kcci.com.pk for forwarding to the Board of Investment.