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Pakistan Daily Economy Update - 8 December

IM Insights
By IM Insights
1 month ago
Pakistan Daily Economy Update - 8 December

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  1. December 08 , 2022 KCCI - eBulletin Business confidence score declines as economic fundamentals worsen Pakistan’s business confidence score (BCS) decreased to -4% in Sept-Oct’22, against positive 17% in Mar-Apr’22 2022, Overseas Investors Chamber of Commerce and Industry (OICCI) announced on 7th Dec’22. The comprehensive Business Confidence Index (BCI) Survey revealed that highest drop in confidence was recorded in the “services sector” (24%), followed by “retail & wholesale trade” (22%), and manufacturing sector (20%). The survey sample consisted of 42% respondents from the manufacturing sector, 33% from the services sector Source: and 25% from the retail/wholesale trade. Despite recording a significant drop in confidence of 20%, the manufacturing sector recorded a net confidence level of positive 3%, whereas services and retail sector stood at negative 8% and 14% respectively. The News. SECP tightens rules for digital lending SECP has tightened the rules for companies engaged in digital lending of small loans to the public via mobile apps and e-wallets. Under the new rules, these companies will have to obtain an NOC from PTA to get their licenses, and introduce terms and conditions in Urdu to facilitate citizens. A senior officer from the regulator told that, “SECP has, so far, issued licenses to only three such companies, while all other companies running loan products through mobile apps are illegal, against whom action is being taken. So far, over 40 illegal mobile apps have been blocked while action is being taken against the others,” he said. Tribune. Date / Period Unit Value Change Daily USD-Interbank USD-Open MKT 7-Dec 7-Dec PKR PKR 224.16 232.00 0.02% 0.26% KSE-100 index FIPI 7-Dec 7-Dec Pts. $ Mn 41,819 0.23 0.67% NM** Crude Oil 7-Dec $/bbl 72.58 -2.54% Gold 7-Dec $/oz 1,798.0 0.88% Gold (10g) Local 7-Dec PKR 141,460 0.60% Silver 7-Dec $/oz 22.92 2.63% Cotton(KHI)-40 kg 7-Dec PKR 17,683 0.00% Kibor-6M 7-Dec % 16.96 -0.01% 25-Nov $ Bn 7.50 WoW -4.18% Remittances Jul-Oct 22 $ Bn 9.90 -6.18% Exports* Jul-Nov 22 $ Bn 11.93 -3.34% Imports* Jul-Nov 22 $ Bn 26.34 -20.03% Govt. borrows PKR 1.21Tn from banks to bridge fiscal gap Govt. has been borrowing extensively from the banking system to bridge the widening fiscal gap. SBP data showed that the federal govt. borrowed PKR 1,213Bn from the banks during 5MFY23 against the net debt retirement of PKR 38.7Bn during 5MFY23. The key issue in the talks with IMF is the widening of the fiscal gap as it rose to 1% of GDP in 1QFY23 compared to 0.7% in 1QFY22. Fiscal deficit target for FY23 has been projected at 4.9% but increased borrowings indicate it could not be achieved and the over-reliance on banks’ money may hamper the govt.’s economic plans. Dawn. Forex Reserves Trade Balance* Jul-Nov 22 $ Bn -14.41 30.03% Authority launched for digital certification IT and Telecommunication Minister Syed Amin Ul Haque on 7th Dec’22 inaugurated the Public Key Infrastructure (PKI) for National Root Certification Authority (NRCA), as a step towards the achievement of “accelerated digitization”. NRCA will be the first to establish trust and security in electronic transactions/communications in the country. It will be globally recognized through WebTrust audit and highly secured PKI setup for accreditation of Certification Service Providers (CSPs). Dawn. Current Account Foreign Direct Inv. Jul-Oct 22 Jul-Oct 22 $ Bn $ Bn -2.82 0.35 44.51% -52.06% Japan provides $ 38.9Mn grant as flood aid On 2nd Dec’22, the Japan govt. announced its plan to provide grant assistance of $ 38.9Mn to Pakistan as part of Japan’s supplementary budget to deliver life-saving aid to the flood victims, in addition to USD 7Mn in Sept’22. The proposed areas of support include emergency medical assistance, food distribution, agriculture and livestock restoration, livelihood recreation, and gender-based violence risk mitigation and response. BR. Housing sector: SHE announces investing $50m in 3 years Sustainable Housing Ecosystems (SHE), a joint consortium between Altair, AMC and Trellis on 7th Dec’22, announced to invest $ 50Mn in Pakistan during the next 3-years, aimed at providing affordable homes to the lower and middle income people of the country, at a roundtable conference “Resilient and Sustainable Housing for All: Delivering for People and Planet’. The participants noted that Pakistan has one of the lowest housing finance to GDP ratio of 0.25% compared to 3% in Bangladesh, 11% in India and 70% in EU. They observed with concern that around 30%, i.e., 65Mn people in Pakistan are facing houses shortage and need around 10Mn homes indicating that there is huge potential for investors. BR. Instant supply of 50MMCFD of natural gas for re-sale Ghiyas Abdullah Paracha, a senior leader of the CNG Association has said that instant supply of 50Mn Cubic Feet per Day (MMCFD) of local unutilized natural gas to the CNG Stations for its re-sale to the motor vehicles can benefit by approximately $ 778.93Mn annually to the country and the govt. can generate approximately $191.7Mn/annum. BR. After floods, acute poverty, malnutrition become major challenge for Sindh govt. High levels of malnutrition, stunting and food insecurity continue to threaten lives of mothers and children in Sindh despite multiple interventions in decades. This concern was raised at a conference held on 7th Dec’22 at a local hotel to review the EU’s Program for Improved Nutrition in Sindh (PINS) Launched through EU partnership with the Sindh govt. in 2018, which has been concluded this year. Dawn. \ List of Indicators YoY Jul-Sep 22 LSM Growth* % -0.40 % 25.14 Jul-Nov 22 Avg. CPI Discount Rate % 15.00 Oct-22 Sources: KCCI Research, PMEX , NCCPL, KSE, SBP, PBS* **Not Meaningful; WoW= week on week; YoY=Year on Year; Major Currencies 305 295 285 275 265 255 245 235 225 215 205 195 185 175 165 155 145 Dec-21 GBP, 7-Dec-22, 294.8 EUR, 7-Dec-22, 250.9 USD, 7-Dec-22, 230.9 USD DISCOs hamper market competition Nepra has aired serious concern over an attempt by the DISCOs to block the implementation of Competitive Trading Bilateral Contract Market (CTBCM) model, which is aimed at ending the monopoly of existing companies by bringing new players to the electricity market and encouraging competition, pushing down tariffs and improving customer services. DISCOs’ representatives called for leaving their exclusive right untouched in areas where they had built the power distribution infrastructure. New players could function in the areas where DISCOs had no infrastructure of their own, they suggested. Tribune. Sep-22 Dec-22 Source: KCCI Research “We cannot solve problems with the kind of thinking we employed when we came up with them.” Albert Einstein Pakistan's Imports from China FY13 to 4MFY23 ($ Bn) ‘Pakistan to be 6th top economy by 2075’ A research paper published by international investment bank Goldman Sachs said Pakistan might well be the 6th largest economy in the world by 2075 given “appropriate policies and institutions” are in place. Written by economists Kevin Daly and Tadas Gedminas and titled “The Path to 2075,” the paper projects that the five largest economies by 2075 will be China, India, United States, Indonesia and Nigeria. The projection about Pakistan’s economic status is based on its population growth, which, along with Egypt and Nigeria, can place it among the largest economies in the world in the next 50 years. By that time, the research projects Pakistan’s real GDP will have grown to $ 12.7Tn and its GDP per capita to $ 27,100. Among key risks to their projections, the economists highlight “environmental catastrophe” and “populist nationalism”. Dawn. UBL, SEDF to provide subsidized credit UBL and the Sindh Enterprise Development Fund (SEDF) recently signed an agreement for institutional collaboration to provide subsidized credit to the SMEs in Sindh. UBL will provide project financing to SMEs and agriculture sector while SEDF will provide mark-up subsidy on the loans provided by the bank. Tribune. Jun-22 EUR Quote of the Day Foreign banks threaten to pull out if forced to implement interest-free regime, Senate panel told Amid reports that foreign banks, including those from China, may find it difficult to operate in Pakistan after the financial system becomes fully compliant with Sharia, the central bank has conceded challenges related to public debt, foreign banks, external debt commitments and monetary policy that would need to be addressed by a steering committee of all stakeholders under a 5-year transformation plan. The committee asked SBP and the finance ministry to engage with the Bank of China and the Industrial and Commercial Bank of China, who entered Pakistan after much effort. Dawn. Pakistan seeks emergency $ 3Bn Saudi cash injection Pakistan on 7th Dec’22 requested Saudi Arabia to urgently provide $ 3Bn in cash after its forex reserves fell to a critically low level. The current reserves stand at around $ 6.7Bn, which are not enough to service the $ 8.8Bn principal and interest payments during 3QFY23, according to the sources. Pakistan has estimated that it would receive $ 6.2Bn in foreign commercial loans, down from the previous estimate of $ 7.5Bn. Of the estimated foreign commercial loans of $ 6.2Bn, $ 3.5Bn will come from China. The remaining $2.7Bn will be provided by the non-Chinese foreign commercial banks having shorter maturity periods. Tribune. Mar-22 GBP 17.30 13.30 8.82 4.73 5.98 11.47 10.08 10.16 9.57 7.02 4.13 Source: KCCI Research, SBP Note **Green-colored change in indicators depicts Improvement, whereas Red demonstrates Deterioration **If any member is interested in exploring investment opportunities in Afghanistan, they may refer to their ongoing projects at https://bit.ly/3FgfACn . Interested businesses may contact secretary@kcci.com.pk or a.ameer.farooqi@gmail.com .