Pakistan Daily Economy Update - 6 June

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1. Jun . 6, 2017 KCCI - eBulletin Sindh unveils PKR 1.04Tn deficit budget Sindh Chief Minister Murad Ali Shah, who also holds the portfolio of finance, presented the Sindh budget, for FY18 with total provincial receipts estimated at PKR 1.02Tn against an estimated expenditure of PKR 1.04Tn, resulting around PKR 20Bn increase in the deficit. Education would get the largest chunk of the budget while nearly 49,000 jobs would be created for the next financial year. Receipts from the federal govt. on account of revenue assignment, straight transfer and grants are estimated at PKR 627Bn. The current expenditure stands at PKR 699Bn. The Nation. PKR 12Bn reserved for Karachi’s mega projects The Sindh govt. has allocated PKR 12Bn for mega projects of Karachi in the upcoming budget of FY18, 20% more than what was reserved in the last FY17. Around 67.7% of this amount is meant for 14 new projects. These include construction of four new flyovers, construction, reconstruction and remodeling of existing roads, and improvement of water supply lines in the city. Similarly, around PKR 4Bn have been assigned for the completion of already existing 15 projects. The Nation. PKR 274Bn allocated for infrastructure development Sindh govt. has announced an increase of PKR 49Bn to PKR 274Bn in the upcoming FY18 for infrastructure development from PKR 225Bn during FY17 despite its failure to spend more than 50% of its development budget in the 10MFY17. The chief minister has vowed to spend 88% of the development budget for the outgoing year by the year end. According to the Annual Development Plan 2017-18, an amount of PKR 24Bn has been allocated for education sector while PKR 18.82Bn have been earmarked for health infrastructure. The Nation. 10% increase in security budget The Sindh government has announced a 10% increase in the budget for security with a plan to recruit 10,000 more policemen in FY18 to improve police-to-citizens ratio, especially in Karachi. CM said that the budgetary allocation for security in FY18 was proposed at PKR 92.91Bn out of which PKR 2Bn will be spent on purchasing vehicles for the law enforcement agencies. Dawn. Sindh Budget: Sales tax on telecom services increased Sindh government has increased the sales tax on telecom services to 19.5% from 19% in order to bring it at par with other provinces. This will allow the provincial government to generate an additional amount of PKR 400Mn. CM has also announced concessionary measures to boast economic activity, which include: reduction of Sindh Sales Tax on Travel Agents and Tour Operators to 8% from 10%; reduction of SST on services provided by specific class of Indenters and call centers to 3% from 13% and reduction of SST to 3% from 8% on the services of renting of Immovable property. Dawn. PKR 13.75Bn set aside for exploitation of Thar coal deposits The Sindh government has earmarked PKR 13.75Bn in FY18 for the exploitation of huge Thar coal reserves for power production, which is set to start from June 2019. The allocation for Thar coal projects includes PKR 2.09Bn for five new projects of infrastructure development. The project at block-II of Thar coalfield is on schedule and Sindh Engro Coal Mining Company is working to expand the coalmine to 22 MTPA (metric tons per annum) and generate 2,600MW by the year 2021. Initially, 600MW will be produced by Jun’19. Tribune. PKR 84Bn put under ‘charged expenditure’ Members of the Sindh Assembly will have no say over the spending of more than PKR 84Bn by the government under the head of “charged expenditure” from its over PKR 1.04Tn budget for FY18. The charged expenditure includes the provincial governor’s remuneration and expenditures relating to his office, remunerations paid to judges of the high court, the speaker, deputy speaker of the provincial assembly (PA) and administrative expenses, including remuneration paid to officers and servants of the courts and secretariat of the PA. Dawn. Senate body seeks tax exemptions for local industry Senate’s Finance Standing Committee has recommended the govt. to provide the same tax exemptions to the local industry as has been given under CPEC so that they can compete with Chinese products. Similarly, the committee has also recommended imposing income tax and enhancing Federal Excise Duty on ghee industries located in FATA and PATA (Provincially Administered Tribal Areas). The Nation. FBR mulls withdrawal of duty exemptions After incurring a loss in duty collection over the past few years, the government is trying to minimize the impact of free and preferential trade agreements by withdrawing duty exemptions on the import of certain items in FY18. The net revenue impact of preferential trade deals in 2016-17 is estimated to be PKR 41Bn. Pakistan alone lost over PKR 6Bn because of the duty-free import of 24.3Mn mobile sets mostly from China in FY17. Dawn. PSX to put 20% stake on sale for investors from today Economic Indicators List of Indicators Date / Period Unit Value Change Daily 5-Jun 5-Jun 5-Jun 5-Jun 5-Jun 5-Jun 5-Jun 5-Jun 5-Jun 5-Jun PKR PKR Pts. $ Mn $/bbl $/oz PKR $/oz PKR % 104.86 106.50 50,121 -8.32 47.39 1,280.0 43,114 17.53 7,288 6.15% 26-May $ Bn 21.77 0.00% 0.47% 3.22% NM** -0.69% 0.00% 0.70% -0.06% 0.00% -0.01% WoW 3.63% YoY -2.79% -2.29% 19.88% -40.12% -204.75% USD-Interbank USD-Open MKT KSE-100 index FIPI Crude (JY'17) Gold (JY'17) Gold (10g) Local Silver (JY'17) Cotton(KHI)-40 kg Kibor-6M Forex Reserves Jul-Apr 17 Remittances $ Bn 15.60 Jul-Apr 17 Exports* $ Bn 16.92 Jul-Apr 17 Imports* $ Bn 43.47 Jul-Apr 17 Trade Balance* $ Bn -26.56 Jul-Apr 17 Current Account $ Mn -7,247 % 4.18 Avg. CPI-FY17* Jul-May 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 Jun-16 GBP, 5-Jun-17, 135.0 EUR, 5-Jun-17, 117.9 USD, 5-Jun-17, 104.7 Sep-16 USD GBP Dec-16 EUR Mar-17 Jun-17 Source: KCCI Research ; Oanda.com Quote of the Day "Genius is the ability to renew one's emotions in daily experience." \ PSX will launch IPO for 20% of its stakes from 6th June‘17 (today) in line with its demutualization process that already saw a sell-off of the bourse’s strategic 40% stakes to Chinese-led investors. The bidding for the 20% stakes of PSX will commence between June 6 and 7 with the bourse putting 160.29Mn shares on sale through a book building at a floor price of PKR 28/share. Dawn. WB projects 5.5% growth for Pakistan According to the recently issued World Bank’s “Global Economic Prospects” in Jun.’17, Pakistan’s economic growth is projected at 5.5% for the next FY18 where growth rate in FY17 is expected to pick up to 5.2%, reflecting an upturn in private investment, increased energy supply, and improved security. However, Pakistan govt. has estimated economic growth at 6% for the upcoming financial year 2017-18. The report further says that Pakistan’s fiscal deficit should narrow further, as a result of revenue-led fiscal consolidation. The Nation. Engro hints at closing milk plant in Sukkur as tax policies bite Engro Foods has hinted at closing down its Sukkur milk production plant if the government does not change its adverse tax policies. The company’s profitability declined dramatically after sales volumes plunged 20% for the first time in 10 years due to a sudden spike in tax liabilities, said MD of Engro Foods. While explaining the plight of the dairy industry to the Senate Standing Committee on Finance that completed its proceedings on tax proposals for 2017-18, he went on to say that FrieslandCampina – the Dutch company that recently acquired 51% stake in Engro Foods at a price of $ 450Mn may also think of winding up due to the unpredictable tax policies. Tribune. PM to order more funds for power generation PM Mr. Nawaz has called a special meeting of Cabinet Committee on Energy (CCE) to find out why he was led to conduct early inauguration of the 1,200MW Bhikki Power Project in Punjab. The prime minister is also expected to order release of more funds to existing power houses for sustaining their maximum generation capacity till the end of summer. In the last CCE meeting, PM had ordered the Ministries of Finance, Water and Power and Petroleum and Natural Resources to reconcile circular debt claims as the power sector had put total bills at PKR 401Bn. Dawn. NEPRA admits K-Electric’s request to buy 11MW from LCPL NEPRA has admitted the K-Electric's Power Acquisition Request for the purchase of 11 MW net power from Lotte Chemical Pakistan Limited (LCPL). K-Electric has entered into a Power Acquisition Contract with LCPL to procure 11MW power from LCPL's 48.1 MW (gross capacity) Cogeneration Captive Power Generation Unit at Port Qasim. Daily Times. Gold price rises in global, local markets Gold price went up by $ 12 to settle at $ 1,279 from $ 1,267 in the international market. Following footprints of international market, gold price witnessed a hike of PKR 350 per tola in the local market to reach PKR 50,300 from PKR 49,950. Likewise, price of 10 gram gold was recorded at PKR 43,114 after an increase of PKR 300. However, silver price witnessed a slight decrease of PKR 5 to settle at PKR 725. The Nation. Paul Cezanne Chart of the Day SINDH-BUDGETED EXPENDITURE FY18 (PKR Bn) PROVINCIAL ADP, 344.07 CURRENT REVENUE EXPENDITURE, 666.47 CURRENT CAPITAL EXPENDITURE, 32.64 Source: Research, Source: KCCIKCCI Research,FdSindh 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