Pakistan Daily Economy Update - 6 January

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1. Jan . 6, 2017 KCCI - eBulletin KCCI not to submit budget proposals in protest, seeks end of FBR’s discretionary powers KCCI has decided not to submit Budget Proposals to federal government this year, and instead has written a letter to the PM Mr. Nawaz requesting him to withdraw FBR's discretionary powers. KCCI said that its budget proposals were constantly ignored in the last 4 budgets, on the contrary, many discretionary powers were granted to FBR in these budgets. KCCI highlighted that massive discretionary powers were entrusted to corrupt FBR officials who used these powers to further twist arms of existing registered taxpayers which is why overall tax base remains limited between 800,000 to 900,000 income taxpayers. Daily Times. K-Electric shelves coal power project on unviable tariffs K-Electric has shelved a mega project of converting its furnace-based plants with a gross 420MW capacity to low-priced coal after the utility failed to secure cost-effective tariffs from the regulator. K-Energy has said the National Electric Power Regulatory Authority (Nepra) awarded tariffs for coal converted plants after a long delay, but the tariffs were not feasible for being even lower than the cost. K-Electric Limited (KEL) awarded the coal conversion contract to K-Energy. The News. Economic Indicators List of Indicators Date / Period Unit Value Change Daily USD-Interbank 5-Jan PKR 104.81 -0.03% USD-Open MKT 5-Jan PKR 108.40 -0.09% KSE-100 index FIPI 5-Jan Pts. $ Mn 48,714 -3.25 0.02% NM** Crude (FE'17) 5-Jan 5-Jan $/bbl 53.69 1.04% Gold (FE'16) 5-Jan $/oz 1,181 1.45% Gold (10g) Local 5-Jan PKR 42,600 0.00% Silver (FE'17) 5-Jan $/oz 16.59 0.86% There's 'way out' for those who want to come into tax net: Dar Following selection of 93,277 cases for audit through computerized balloting, Finance Minister Ishaq Dar has said that some 'way out' can be provided to those who wanted to come into tax net. FBR has selected 7.5% cases for holding audit under Universal Self-Assessment Scheme (USAS). Parametric computer balloting has been carried out as per Audit Policy 2016 for selection of cases for audit for Tax Year 2015. Out of total 93,277 cases, the FBR has selected 2,173 cases for audit from corporate sector income tax, 82,090 cases from non-corporate sector of income tax, 987 cases from Sales Tax (corporate), 7,976 from Sales Tax (non-corporate), 30 cases from FED (corporate) and 21 cases from FED (non-corporate). NTNs of cases selected for audit have been displayed on the official website of FBR. BR. Cotton(KHI)-40 kg 5-Jan PKR 6,897 0.00% Kibor-6M 5-Jan % 6.13% -0.01% 30-Dec $ Bn 23.16 -0.53% 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% Minister for early finalisation of new company law In a meeting with Finance Standing Committee, Finance Minister Ishaq Dar has called for early promulgation of the new company law for which he suggested that sub-committees of both Houses of the Parliament should sit together for early finalisation of the Companies Bill 2016. He said that the new areas being introduced through the new company law include a global register of beneficial ownership, which has been a cause of concern for the stakeholders. BR. Trade Balance* Jul-Nov 16 $ Bn -11.78 -19.90% Current Account Avg. CPI-FY17* Jul-Nov 16 $ Mn % -2,601 3.88 -90.97% Cement dispatches grow 8.65% to 19.81Mn tons Cement dispatches grew 8.65% to 19.81Mn tons in 1HFY17, led by growing demand in the domestic market industry. Whereas, cement sales increased 11.07% and cement exports decreased by 3.53% in in 1HFY17 . While, cement exports to Afghanistan, which is the main export destination, declined 11.72% in the period under review. However, cement exports to India increased 79.64%. Tribune. WoW Forex Reserves 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 Mass transit projects: ECC likely to grant exemption from taxes, duties The ECC is likely to grant exemption from taxes and duties on import of equipment for rail-based mass transit projects in provinces under CPEC on Jan. 6, 2016 (today). The ECC will also consider a request for reduction in the price of imported urea available with National Fertilizer Marketing Limited (NFML). The Planning Ministry had requested for exemption in duties and taxes, including withholding tax, on the import of equipment for Lahore Orange Line mass transit project as well as for Quetta and Karachi projects. BR. 145 SBP proposes issuance of ISBs, tax exemption on NSS The SBP has proposed introduction of Islamic Saving Bonds and tax exemption on National Savings Scheme's (NSS) return on small investment aimed at attracting more investment. The downward revision in NSS rates continued to dampen the net investment in NSS instruments, which recorded an increase of only PKR 26.8Bn during 1QFY17. As the share of NSS in domestic debt stock has been falling persistently, SBP has suggested that this trend needs to be reversed in order to reduce the govt.'s reliance on borrowing from banks and external sources. BR. 85 Forex reserves down to $ 23.16Bn Pakistan’s foreign exchange reserves declined to $ 23.16Bn as of 30th Dec’16 from $ 23.28Bn a week ago. The forex reserves held by the central bank fell by $ 30Mn to $ 18.26Bn against $ 18.29Bn in the preceding week. The foreign exchange reserves of commercial banks reduced to $ 4.89Bn as compared to $ 4.98Bn during the previous week. The News. FBR penalizes Customs agents for not filing returns FBR is taking action against custom agents for their failure to file sales tax returns despite the fact that the service providers are already filing returns with the provincial authorities. The power of collection and monitoring of sales tax on services has been delegated to provinces after the 18th amendment to the constitution in 2010. But, the FBR initiated penal action for non-filing of sales tax returns against taxpayers who provide services exclusively within jurisdiction of a provincial govt. The News. Govt plans 10-paisa per unit surcharge to cover Neelum-Jhelum cost overruns The government is expected to impose 10-paisa/unit surcharge for all electricity consumers for at least 18 months to finance cost overruns of PKR 500Bn Neelum-Jhelum Hydropower Project and extend PKR 3/unit reduction in power tariff for industrial consumers for 6 months. The cost of 969-megawatt run of the river project in Azad Kashmir kept on increasing with latest estimates at PKR 500Bn for targeted completion in 2018. The 10-paisa per unit surcharge was extended for 1 year up to 31st Dec‘16 when the total cost was approved at PKR 404Bn early last year. So far, the surcharge contributed about PKR 70Bn. Dawn. Tarbela-4 extension: Company suspends contract, may go to international court The contractor of Tarbela-4 extension project has issued a contract suspension notice to Wapda and has threatened to approach the international court following the govt. move to recover the incentive money paid under a work acceleration plan. The contractor has said it would reclaim in the international court the disputed amount of $ 130Mn. The govt. had committed to paying $ 50Mn as an incentive to the contractor if it succeeded in completing the Tarbela hydroelectric power fourth extension project by Jun’17. Tribune. Hydropower projects encounter troubled sales tax waters The federal govt. is likely to grant blanket exemption from levy of billions of rupee sales tax on construction and related services for hydropower projects being constructed under CPEC arrangements. In this regard, China Three Gorges South Asia Investment Ltd (CSAIL) has approached PPIB for resolution of sales tax issue which, according to the firm, is the most critical impediment hampering the progress of hydropower projects by CSAIL under the CPEC. CSAIL is currently developing two hydropower projects in Pakistan, which are under the CPEC i.e. 720MW Karot Hydropower project and 1,124MW Kohala Hydropower project. BR. Jul-Dec 16 GBP, 5-Jan-17, 127.5 135 125 115 105 EUR, 5-Jan-17, 109.9 95 USD, 5-Jan-17, 104.3 75 Jan-16 Apr-16 USD GBP Jul-16 Oct-16 Jan-17 Source: KCCI Research ; Oanda.com EUR Quote of the Day "Risk comes from not knowing what you're doing." Warren Buffett Chart of the Day Foreign Exchange Reserves in Pakistan (1HFY11 - 1HFY17) 25 23.1636 20.8123 20 17.2132 17.0261 15.2679 13.858 15 10 8.5214 5 0 1HFY11 1HFY12 1HFY13 1HFY14 Value in $ Bn 1HFY15 1HFY16 1HFY17 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