Pakistan Daily Economy Update - 6 July

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1. Jul . 6, 2017 KCCI - eBulletin Rupee falls in likely devaluation The rupee fell 3.1% against the dollar in an apparent devaluation, tumbling to 108.25 per dollar after closing at 104.9 on Jul. 4, 2017. State Bank of Pakistan (SBP), in its statement, has said that Pakistan's $ 300Bn economy has shown strong fundamentals but the deficit in the external account has been rising. The Central Bank is of the view that this depreciation will address the emerging imbalance in the external account and strengthen the growth prospects of the country. BR. SBP says fall to address external pressures, help economy SBP has confirmed that PKR-US$ exchange rate in the interbank market depreciated by 3.1% on Jul. 5, 2017 and said that the current exchange rate is broadly aligned with the economic fundamentals while the current changes are attributed by rising external deficit. According to SBP, while almost all macroeconomic indicators have been showing encouraging picture, deficit in the external account has been rising for some time. Accordingly, the exchange rate adjusted in the market and SBP is of the view that this depreciation in the exchange rate will address the emerging imbalance in the external account and strengthen the growth prospects of the country. The economists believe that the current depreciation is mainly due to rising current account, which reached $ 8.9Bn in 11MFY17 compared to $ 3.2Bn same period of last fiscal year largely attributed by increase in goods trade deficit of $ 23Bn. BR. Dar slams “artificial” drop: meeting today Following reports of rupee depreciation against the US dollar and describing it as an artificial phenomenon, Finance Minister Ishaq Dar has convened a meeting of the presidents of the banks on Jul. 6, 2017 (today). The Minister has said that the current political situation is being exploited by certain individuals, banks and entities, resulting in an "artificial" rise of the inter-bank rate of the US dollar against rupee, thus negatively impacting the country's foreign exchange market. The Minister has further said that the responsible persons and entities in this matter will be identified and appropriate action will be taken against them in the national interest. BR. SBP revises external sector statistics SBP has revised external sector statistics by incorporating permissible offshore accounts transactions. In order to improve the quality of external sector statistics, the SBP has enhanced the coverage by getting information of permissible offshore foreign currency accounts transactions related to energy and power sectors. As per the revised data, current account deficit has reached $ 10.6Bn mark during 11MFY17 as against the earlier stated figure of $ 8.93Bn. BR. PKR 100Bn paid to federal govt.: State Bank acquires PSPC SBP has acquired Pakistan Security Printing Corporation (PSPC) by paying PKR 100Bn to the federal govt. In order to have full control over the process of banknotes manufacturing and issuance, the SBP has been in negotiations with the federal govt. for over two years to acquire the banknotes and prize bonds printing function of PSPC. According to a press release, other functions of PSPC such as the printing of passports, national identity cards and stamp papers have been separated and vested in National Security Printing Company Private Ltd (NSPC), a newly established entity fully owned by the federal government. Dawn/BR. Karachi needs $ 10Bn to address infrastructure gaps: WB official The World Bank Country Director for Pakistan Patchamuthu Illangovan (Illango) has stated that Karachi city needs $ 10Bn to address its infrastructure gaps. The Country Director has further stated that International Finance Corporation (IFC) finances private sector with long and short term capital to boost growth and create jobs and $ 300Mn have been approved to support reforms in access to finance and doing business to create jobs. BR. \ Trade, energy & defense sectors: Pakistan, Tajikistan agree to focus on all avenues With focus on regional connectivity, trade and energy Pakistan and Tajikistan have agreed on exploring new avenues of cooperation by increasing collaboration in economy, defense and security, agriculture and education. Prime Minister Nawaz Sharif along with President Emomali Rahmon have inked a joint declaration aimed at enhancing regional connectivity between the two countries and the region at large. The two countries have also agreed to take measures to boost it to $ 500Mn in the next three years. BR. Economic Indicators List of Indicators Record volume of cargo handled at Karachi Port A record cargo volume of 52.49Mn tons was handled at Karachi Port during FY17, registering a growth of 4.89% over the previous year’s 50.05Mn tones. According to details, dry cargo handling jumped 7.46% to 37.17Mn tones during the year as against 34.59Mn tons last year. The import of bulk cargo made a remarkable growth of 23.85% at 10.05Mn tons as against 8.12Mn tons handled in FY16. The import of liquid bulk cargo, however, declined by 0.45% to 14.00Mn tons from 14.06Mn tons of previous year. Dawn. Oil sales increase to 10-year high at 26 Mn in FY17 The country’s oil sales have increased 11% to a 10-year high at 26 Mn tons in FY17, driven by low prices, growing aggregate demand and increasing auto sales. White oil products including motor gasoline and diesel led the incline in oil sales as their sales moved up 16% and 10%, respectively, while furnace oil sales improved 7% due to increased demand from power sector. In Jun’17 however, OMC sales were down 4% year-on-year to 2.1 Mn tons as diesel and furnace oil sales declined by 7% and 13%, respectively. Tribune. FBR issues PKR 8.2Bn tax recovery notice to SSGC FBR had issued a notice to SSGCL to pay a disputed PKR 8Bn tax, after a court dismissed utility firm’s petition to adjust the amount under unaccounted for gas (UFG) losses. The calculation for this recovery has been carried out in the light of the SHC judgment. The News. Unit Value Change Daily 5-Jul 5-Jul 5-Jul 5-Jul 5-Jul 5-Jul 5-Jul 5-Jul 5-Jul 5-Jul PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 108.25 107.88 45,413 -4.92 45.50 1,225.9 43,157 16.04 6,484 6.14% 23-Jun $ Bn 21.36 3.19% 2.84% 0.04% NM** -2.67% 0.27% 0.66% 0.09% 0.00% -0.01% WoW 4.90% YoY -2.13% -3.13% 20.60% -42.12% -132.03% Crude (AU'17) Gold (JY'17) Gold (10g) Local Silver (JY'17) Cotton(KHI)-40 kg Kibor-6M Forex Reserves Jul-May 17 Remittances $ Bn 17.46 Jul-May 17 Exports* $ Bn 18.54 Jul-May 17 Imports* $ Bn 48.54 Jul-May 17 Trade Balance* $ Bn -30.00 Jul-May 17 Current Account $ Mn -10,641 % 4.16 Avg. CPI-FY17* Jul-Jun 17 May-17 Discount Rate % 5.75 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* ** Not Meaningful WoW= week on week; YoY=Year on Year Major Currencies 175 165 155 145 135 125 115 105 95 85 75 Jul-16 GBP, 5-Jul-17, 137.7 EUR, 5-Jul-17, 120.8 USD, 5-Jul-17, 106.5 Oct-16 USD GBP Jan-17 Apr-17 Jul-17 Source: KCCI Research ; Oanda.com EUR Quote of the Day The return we reap from generous actions is not always evident. Francesco Guicciardini Builders wary as cement prices continue rise Cement prices have gone up by nearly PKR 50/bag since Jul‘16 after manufacturers passed on the impact of additional taxes and duties announced in the last two budgets. The impact of budgetary measures taken in FY17 was PKR 36 on a 50-kilogram bag, including federal excise duty of PKR 30 and general sales tax of PKR 6. Similarly, the impact of this year’s measures was PKR 17.50/bag, including PKR 12.50 FED, PKR 2.50 sales tax and PKR 2.70 withholding tax. Dawn. Cement sales up 5.4% to 40.9MT Cement industry witnessed a 5.4% surge to 40.9Mn tons in its sales during FY17, broken its annual growth record of the past 5 years as local construction sector boomed. Local cement sales rose 10.4% to 36.4Mn tons during FY17, while exports sharply fell 22.8% to 4.5Mn tons. Industry’s annual capacity utilization reached 89%, a rate that was last achieved in FY06. The News. Date / Period USD-Interbank USD-Open MKT KSE-100 index FIPI Chart of the Day Balance of Payments Account of Pakistan (FY0711MFY17 FY16 -10,641 -8,593 11MFY17) 313 FY15 FY14 FY13 FY12 FY11 FY10 FY09 FY08 FY07 -15,000 -10,000 -5,000 Capital Account Current Account Mn US$ 0 5,000 Financial Account Source: KCCI, 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