Pakistan Daily Economy Update - 7 September

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1. Sep . 7, 2016 KCCI - eBulletin Budget 2017-18: repayment of debt to create serious BoP issues The repayment of $ 12.2Bn debt rescheduled by the Paris Club till Sept.’17 will create serious balance of payment issues in FY18. The Paris Club creditors agreed on Jan. 23, 2001 with Pakistan govt. for the restructuring of its public external debt. The then agreement stated that non-official development assistance credits are to be repaid over 18 years, with 3 years of grace and progressive payments, at the appropriate market rates. Currently, Pakistan's public sector external debt is $ 61.36Bn as of Mar.’16, more than doubled in 16 years. BR. IMF looks to expand special drawing rights INF is exploring ways to broaden the use of its Special Drawing Rights after the leaders of the G20 reached a consensus on the matter at the G20 Summit in Hangzhou to enhance the resilience of the international financial system, IMF chief Christine Lagarde has said. The call for greater use of SDR, a synthetic reserve currency administrated by the IMF, has been strongly backed by China as the country has been working to lift the global profile of its currency. The yuan will be officially included in the IMFs currency basket on Oct 1. Dawn. Land compensation: govt. decides to alter PC-1 of Diamer-Bhasha dam The govt. has reportedly decided to alter PC-I of Diamer-Bhasha dam slightly and ensure payment of land compensation to the stakeholders in the light of an agreement signed on Feb.’10. The federal govt. had allocated PKR 32Bn under Public Sector Development Program for FY17 for construction of Diamer-Bhasha Dam. Upon completion of the Diamer-Bhasha dam, Pakistan's existing 30-day water storage capacity would reach 90 days. BR. FBR to tap finance ministry for PKR 2.45Bn recovery FBR will request Finance Ministry to settle PKR 2.45Bn in unpaid taxes outstanding against the state-owned Pakistan Steel Mills (PSM) for the last three years. In this regard, Large Taxpayers Unit (LTU) Karachi has already issued a notice to the PSM. The Appellate Tribunal Inland Revenue also ordered the mills to defray an additional PKR 76.4Mn. PSM officials have said that such matters will be resolved at the ministry level. The News. FBR plays with figures to prove low tax impact on POL products FBR has used creative accounting to show positive results in terms of taxes on petroleum products this month. Unlike the past practice of notifying the rate of sales tax on petroleum products, the FBR announced the impact of the tax and compared the figures of Sep 2016 with those of Apr 2013. According to FBR’s calculations, the impact of sales tax on per-litre price of petrol was PKR 10.71 this month as against PKR 14.86 in Apr 2013, PKR 19 on high-speed diesel (HSD) versus PKR 15.78, PKR 12.86 on high-octane blending component (HOBC) as against PKR 19.18, PKR 2.06 on kerosene compared to PKR 14.28, and PKR 4.64 on light diesel oil (LDO) as against PKR 13.55. Dawn. Economic Indicators Date / Period Unit Value USD-Interbank List of Indicators 6-Sep PKR 104.66 0.29% USD-Open MKT 6-Sep PKR 104.90 -0.67% KSE-100 index FIPI 6-Sep 6-Sep Pts. $ Mn 39,689 -5.30 1.05% NM** Crude (JU'16) 6-Sep $/bbl 44.88 -0.66% Gold (MY'16) 6-Sep $/oz 1,351.0 1.76% Gold (10g) Local 6-Sep PKR 43,628 0.20% Silver (MY'16) 6-Sep $/oz 20.07 2.78% Cotton(KHI)-40 kg 6-Sep PKR 6,790 0.00% Kibor-6M 6-Sep % 6.04% 0.00% Forex Reserves 26-Aug $ Bn 23.04 -0.18% Remittances Jul-16 $ Bn 13.28 -20.14% Exports* Jul-16 $ Bn 1.48 -7.45% Imports* Jul-16 $ Bn 3.56 5.52% Trade Balance* Jul-16 $ Bn -2.08 -17.20% Current Account Avg. CPI-FY17* Jul-16 Jul-Aug 16 $ Mn % -591 3.84 -152.56% WoW YoY Jul-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 Provinces seek more taxation powers The representatives of all the four provinces have demanded to authorize the provinces to collect General Sales Tax (GST). In this regard, members of the working groups of 9th National Finance Commission Award held two-day-long deliberations where all the provinces were unanimous that after the passage of the 18th Constitutional Amendment, expenditures of provinces have increased manifold. It was resolved in the meeting that provinces may be given share on the basis of population and backwardness. It was also decided that for the constitution of 9th NFC Award, holding of new census may not be made an issue since conducting census is an obligation of Federation that must be fulfilled. BR. 155 Pakistan refuses to endorse Pakistan has turned down a proposed plan of Turkmenistan to build a separate transmission line for electricity export and asked it to join the Central Asia South Asia (Casa) 1,000-megawatt power supply project. Pakistan is required to pay transmission line charges under the Casa project to exporters Tajikistan and Kyrgyzstan and if the transmission line is used in winter, when electricity will not be available from these sources, the charges will come down and the project will become more feasible, according to an official aware of the development. Tribune. 85 Coal importers eye PSM’s idle jetty, other equipment Coal importers from the private sector have sought government’s permission to use Pakistan Steel Mills’ (PSM) idle jetty, cargo conveyor belt and other equipment until the Pakistan International Bulk Terminal becomes operational. In communications with the ministries of industries and production and ports and shipping, the importers explained that a permission would help bring down the cost of imported coal by $ 4 a tonne and, therefore, ultimately benefit the PSM which would be earning more than PKR 100Mn a month. Dawn. ADB extends business plan for Pakistan ADB has decided to extend its current Country Operation Business Plan (COBP) for Pakistan to 2017-19 which contains the indicative resource allocations and pipeline projects for the next three years. The current business plan covering 2016-18 period, is aligned with ADB’s country partnership strategy (2015-19). The total allocations for the plan stand at $ 5.91Bn. The prominent sectors covered are energy, transport, disaster management, water and urban services, agriculture and infrastructure financing. It will benefit federal government, provinces, AJK, Fata and Gilgit-Baltistan. Dawn. SC verdict clips finance minister’s wings The wings of Finance Minister have been clipped in the wake of a Supreme Court (SC) ruling which implies that decisions of the Economic Coordination Committee (ECC) should not be implemented without ratification from the cabinet. To comply with the court order, the ECC – the economic decision-making body with Dar as chairman – agreed in its meeting held on Aug. 29, 2016. to place all its fresh decisions before the cabinet for approval. Tribune. Commerce ministry sets scores of targets for 2016 Amid disappointing performance of the commerce ministry and dwindling exports as a consequence, the ministry has set scores of targets to be achieved by the end of this year in a bid to improve its performance. The key targets include revamping the Trade Development Authority of Pakistan (TDAP) and signing the under-discussion free trade agreements (FTAs) with Turkey and Thailand by the end of this year. Tribune. GBP, 6-Sep-16, 139.6 145 135 EUR, 6-Sep-16, 116.9 125 115 105 95 USD, 6-Sep-16, 104.5 75 Sep-15 Dec-15 USD GBP Mar-16 Jun-16 Sep-16 Source: KCCI Research ; Oanda.com EUR Quote of the Day Cotton output estimates cut to 11.27Mn bales The Cotton Crop Assessment Committee (CCAC) slashed cotton production estimates by 20% i.e. to 11.27Mn bales against the initial estimates of 14.1Mn bales for FY17. The country missed the crop production target by around 30% in FY16; remaining around 10Mn bales which caused 0.5% to GDP growth. However, prospects for the current season are not very bright as well and the country may face significant shortfall in the crop production as well. BR. Nepra allows PKR 0.36 per unit raise in K-Electric tariff Nepra has allowed, under its monthly tariff adjustment formula, an increase of PKR 0.36 per unit in power tariff for K-Electric consumers for the month of Jun.’16. According to NEPRA, above adjustment shall be applicable to all the consumer categories except lifeline consumers of K-Electric billed for Jun.’16. The adjustment shall be shown separately in the consumer bills of Sept.’16. The Nation. Change Daily "Simplicity is the glory of expression." Walt Whitman Chart of the Day Cement Sale's of Pakistan 5 4 3 1.87 2 2.33 1 0.50 0 Local Amount in Mn/Tonnes 2.26 1.79 0.50 Export Jul-16 Jul-15 Total Source: KCCI Research, APCMA 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