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Pakistan Daily Economy Update - 8 May

IM Insights
By IM Insights
6 years ago
Pakistan Daily Economy Update - 8 May

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  1. May . 08, 2018 KCCI - eBulletin Exchange firms ask for PKR 1 on each dollar remitted Exchange companies, during their meeting with the SBP, have asked to provide PKR 1 on each dollar to the remitter from abroad, as it will reduce illegal transactions of money; Hundi and Hawala systems usually provide PKR 1 - 2 per dollar above the market rate. The SBP already provides air time equal to PKR 1 to those who remit money through their mobile wallet account. The SBP has consented to into the matter to take a decision on the proposal. The open market recently witnessed large fluctuations as the dollar was traded as high as PKR 119.50 before falling back to PKR 117.30 within three days. It eroded the investments of many speculators while at the same time destabilized the market. Dawn. Exchange companies urge SBP to abolish Pakistan Remittance Initiative Exchange companies have demanded the SBP to abolish the Pakistan Remittance Initiative (PRI) and provide exchange rebate to the remitter directly to boost remittance flows. In a meeting with the SBP, currency dealers said PRI should be abolished as the banks and foreign institution were benefitting through this initiative on account of commission/rebate. The News. Senate body on finance asks govt to increase cash withdrawal limit The Senate Standing Committee on Finance has asked the govt. to jack up limit of cash withdrawal from banks up to PKR 100,000 from existing PKR 50,000 for deduction of 0.4% withholding tax, allow purchase of property up to 10 Marla in cities (about 302 sq. yards) and cars to 1000cc for non-filers. It also recommended that owners of motorcycles must be excluded from the provision. FBR Senior Member Dr. M. Iqbal informed the committee that the provision is only related to the restriction on purchase of new vehicles by the non-filers. The Committee rejected the FBR’s proposal to impose advance tax on persons remitting amount abroad through deduction of credit cards. Dr. Waqar Masood, former Federal Secretary Finance, backed the step of the FBR to check under-invoicing; if commercial importers continued to operate under the existing regime, under-invoicing could not be stopped at import stage, he opined. The News. OECD-backed tax laws sail through Senate The Senate panel on Finance withdrew objections over legal changes suggested by the Organisation for Economic Cooperation and Development (OECD), thereby allowing the govt. to tax foreign companies, including US tech giants such as Google, Amazon and Facebook (the govt. has proposed imposing a 5% tax on digital revenues). It endorsed three of four major changes suggested by the OECD to change its fiscal laws to crack down on tax avoidance by foreign firms. After the latest changes, Pakistani laws will be compliant with OECD regulations. Tribune. Purchasing vehicles: auto makers suggest changes in restrictions for non-filers The Pakistan Automotive Manufacturers Association (PAMA) has suggested changes in the budget that could otherwise gravely harm the auto industry. In a letter to the Finance Minister, PAMA drew attention to new section 227C in the income tax ordinance that restricts non-filers from purchasing motor vehicles. Presently there are only 1.2Mn filers in the country, and the new condition would result in a sudden drop in sales to about 240,000 units annually from current projected figures of 350,000 units, it contended. This law would frustrate new foreign investors in the industry and would cause them to lose confidence in govt. policy. As an alternate, PAMA proposed different tax rates for filers and non-filers for the next five years. Tribune. Govt mulls legal changes to pave way for K-Electric transfer The govt. has come up with changes in the legal framework surrounding the K-Electric deal. A meeting of the Cabinet Committee on Energy (CCoE), deliberated on the revised framework presented by the Privatisation Commission. The previous legal arrangement, including the sale and purchase agreement (SPA) of the erstwhile KESC, allowed only one management and assets transfer after the first privatisation. This SPA is now being revised to take into account various options and eventualities, and how assets should take hands smoothly, not only for Shanghai Electric of China to take over K-Electric from Abraaj but how all future transactions should move should a situation go bad. Various stakeholders would now examine the proposed structure from legal, judicial, financial and contractual aspects and come back with their comments to move forward. Dawn. Govt to raise PKR 150Bn via floating rate-based Pakistan Investment Bonds The govt. has decided to issue, for the first time, floating rate Pakistan Investment Bonds (PIBs) to raise PKR 150Bn, to attract longterm debts on the prospects of high interest rates. The SBP is expected to hold auctions of the 10-year bonds on May 16th, June 13th and July 11th, while each auction has a target of raising PKR 50Bn. The floating PIBs would serve to ease rollover risks associated with govt. treasury bills. The coupon rate on the floating rate PIBs will be equal to the benchmark rate plus/minus a margin decided in the \ auction. Benchmark rate would be the weighted average yield of the 6-month market treasury bills (MTBs) as determined in the most recent 6-month MTB auction. The News. Govt. likely to withdraw duty on dry milk import The govt. is likely to abolish regulatory duty (RD) on import of dry milk to keep interest of foreign investors in the lucrative dairy sector intact. Secretary Commerce Younus Dagha, during a meeting with the Ambassador of Netherlands, assured that Pakistan would abolish RD on dry milk. He said that the Commerce Division is cognizant of the issue faced by Friesland Campina regarding RD on dry milk and is closely working with the stakeholders to find an amicable solution. The News. Number of return filers reaches 1.38Mn The no. of return filers for the tax year 2017 have risen by 21% to 1.38Mn ( as of 6th May) from 1.14Mn in TY16, while the FBR is confident that new measures announced in budget FY19 would push the tally further up to 2Mn before the launch of new Active Taxpayers List on March 1, 2019. The News. ‘9% GDP Next Level and Beyond’: Policies to continue no matter who is in next govt, says PM PM Abbasi has promised that Pakistan’s economic policies would continue without any disruption irrespective of which political govt. came into power after elections. While addressing an international conference titled “9% GDP Next Level and Beyond”, organized jointly by the Board of Investment (BOI), he said that Pakistan has a very mature legal system and investors will have very high returns. Ambassadors of Germany, Japan, the UK, China and Turkey as well as the representatives of various international companies, investors and other officials attended the conference. In a panel discussion, the foreign dignitaries opined that if Pakistan invests in its population by providing them good education and training, the country could easily reach up to 9% GDP growth. The News. Development of 'exclusive economic zone' pivotal for growth: PM Abbasi PM has stated that a greater emphasis needs to be placed on utilising Pakistan’s ‘exclusive economic zone’ in an efficient manner. He said this while addressing the International Maritime Symposium on ‘Impact of Belt and Road Initiative on Geo-Economics of Indian Ocean’. He highlighted that the exclusive economic zone comprises approximately 40% of the country’s land mass, which thus far remains undeveloped. Abbasi stressed the important role that the Indian ocean can play, being an important hub of global energy and trade. Tribune. Engro Corp plans PKR 2.5Bn investment in Thar coal power project Engro Corporation has decided to invest around PKR 2.5Bn to acquire an estimated 17% stake in Siddiqsons Energy, which is setting up 330MW power plant in Thar coal-fired power generation facility in Block-II, district Tharparkar. The project cost is estimated at $ 500Mn with debt-equity ratio of 75:25. The News. Economic Indicators List of Indicators Date / Period Unit Value Change Daily 7-May 115.62 117.65 0.00% -0.68% Crude (JU'18) 7-May 7-May 7-May 7-May PKR PKR Pts. $ Mn $/bbl 44,379 -0.26 70.04 -0.36% NM** 0.32% Gold (MY'18) Gold (10g) Local 7-May 7-May $/oz PKR 1,314.4 49,157 -0.09% -1.29% Silver (MY'18) Cotton(KHI)-40 kg 7-May 7-May $/oz PKR 16.45 8,038 -0.31% 0.00% Kibor-6M 7-May % 6.51 $ Bn 17.71 0.00% WoW 3.40% Remittances 27-Apr FY18 Jul-Mar 18 $ Bn 14.61 YoY 3.55% Exports* Imports* Jul-Mar 18 Jul-Mar 18 $ Bn $ Bn 17.08 44.38 13.08% 15.57% USD-Interbank USD-Open MKT KSE-100 index FIPI Forex Reserves Jul-Mar 18 Trade Balance* $ Bn -27.30 Jul-Mar 18 Current Account $ Mn -12,029 Foreign Direct Inv. $ Bn 2.09 Jul-Mar 18 Jul-Feb 18 LSM Growth* % 6.24 % 3.70 Jul-Apr 18 Avg. CPI Discount Rate % 6.00 Mar-18 WoW= Sources: KCCI Research, PMEXweek , NCCPL, KSE, SBP, PBS* ** Not Meaningful on week; -17.18% -50.55% 4.44% Major Currencies 175 GBP, 7-May-18, 156.5 165 155 145 EUR, 7-May-18, 138.1 135 125 115 USD, 7-May-18, 115.7 105 95 May-17 USD Aug-17 GBP EUR Nov-17 Feb-18 Source: KCCI Research ; Oanda.com Quote of the Day "Successful people do what unsuccessful people are not willing to do. Don't wish it were easier; wish you were better." Jim Rohn Chart of the Day Sea Freight Charges Paid by Pakistan 3 2.5 2.28 2.38 2.43 2.04 2 1.50 1.5 1.38 1 0.5 0 FY13 FY14 FY15 FY16 FY17 9MFY18 Source: KCCI Research, SBP Figures in $ Bn 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