Pakistan Daily Economy Update - 9 June

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1. Jun . 9, 2016 KCCI - eBulletin Sindh Budget to be presented on Jun. 11, 2016 The Sindh budget for Fiscal Year 2016-17 will be presented in Sindh Provincial Assembly on Jun. 11, 2016 which will be presented by List of Indicators Sindh Finance Minister Syed Murad Ali Shah at 11:00 a.m. The Provincial Finance Minister will later on; address the post-budget press conference on Jun. 12, 2016 at the Sindh Assembly Building, Karachi. BR. USD-Interbank Economic Indicators Date / Period Unit Value Change Daily 8-Jun PKR 104.57 -0.09% 8-Jun PKR 104.56 -0.42% 8-Jun 8-Jun Pts. $ Mn 37,426 76.15 0.09% NM** USD-Open MKT Senate body finalizes budget recommendations Finance and Revenue Standing Committee has passed three different bills, including ‘Corporate Restructuring Companies Bill, 2016’, KSE-100 index ‘Deposit Protection Corporations Bill, 2016’ and ‘Financial Institutions (Secured Transactions) Bill, 2016’. In this regard, committee met FIPI Crude (JU'16) for discussing and finalizing recommendations for the Finance Bill 2016-17. The Nation. Dar reviews Draft Companies Bill 2016 In a meeting chaired by Finance Minister Ishaq Dar, progress on draft Companies Bill 2016 was reviewed. In this regard, Chairman SECP briefed on the consultative process carried out by the Commission for making the bill a comprehensive law covering all aspects of corporate governance. He said that SECP had held extensive consultations with all stakeholders and had also held seminars to disseminate information regarding the new bill as well as to solicit recommendations for the various sectors. BR. Govt. eyes 3% reduction in debt-to-GDP ratio in 2 years The govt. has planned to bring the debt to GDP ratio down 3% to 60% in the next two fiscal years from the present 63%. As per the amendments to the Fiscal Responsibility and Debt Limitation Act, 2005 through the Finance Bill 2016, the public debt should be reduced by 0.5% every year within a period of 5 financial years (from 2018/19 to 2022/23) and a reduction of 0.75% every year (from 2023/24 to 2032/33). This will reduce the total public deficit to 50% of the estimated GDP. The govt. has also aimed to reduce the fiscal deficit to 4% of the GDP during the next 3 years, from financial year 2017/2018 and maintain it at a maximum of 3.5% of the GDP thereafter. The News. CCP calls for withdrawal of sales tax exemptions The Competition Commission of Pakistan (CCP) has advised Sindh Revenue Board (SRB) and Punjab Revenue Authority (PRA) to withdraw the exemptions granted to the informal, non-corporate transporters of goods, from sales tax on inter-city carriage of goods by rail or road. CCP observed in a policy note that the exemptions granted to the non-corporate entities had placed the corporate sector at a competitive disadvantage. The News. FBR’s collection rises to PKR 2.64Tn The Federal Board of Revenue (FBR) collected PKR 2.643Tn in taxes in the first 11 months (July-May) of this fiscal year, a growth of nearly 20 % as compared to a collection of PKR 2.212Tn. Heavy reliance on regulatory duties and withholding taxes has helped the FBR raise the size of tax collection during the outgoing fiscal year. Dawn. 8-Jun $/bbl 51.54 2.32% Gold (MY'16) 8-Jun $/oz 1,263.5 1.53% Gold (10g) Local 8-Jun PKR 41,057.00 0.00% Silver (MY'16) 8-Jun $/oz 17.01 3.64% Cotton(KHI)-40 kg 8-Jun PKR 6,093 0.00% Kibor-6M 8-Jun % 6.13% -0.01% 27-May $ Bn 16.03 -25.83% Remittances Jul-Apr 16 $ Bn 16.03 5.18% Exports* Jul-Apr 16 $ Bn 17.32 -12.99% Imports* Jul-Apr 16 $ Bn 36.34 -3.70% Trade Balance* Jul-Apr 16 $ Bn -19.02 -6.68% Current Account Avg. CPI-FY16* Jul-Apr 16 Jul-May 16 $ Mn % -1,519 2.82 17.71% WoW Forex Reserves YoY May-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 175 165 145 Duty cut on fibre optic raw material sought A Lahore-based manufacturer of fibre optic patch cords and pigtails has approached the National Tariff Commission (NTC) seeking reduction in import duties of raw material. Fibre Electronics in its application sought reduction of duties on import of raw material/inputs, collection of general sales tax from traders at the retail stage and curbing the practice of clearance of finished product by weight, a statement issued by the NTC said.Dawn. 135 Federal and provincial levels: IPPs upset over mode of output tax collection IPPs have agitated at the General Sales Tax (GST) output tax collection at the federal and provincial levels as it will increase end consumers' electricity price. In this regard, IPPs have approached Water and Power Ministry against Finance Bill 2016 proposing certain amendments including amendments in the Sales Tax Act, 1990 (STA). An IPP pays sales tax (GST output tax) in accordance with the provisions of the STA after adjusting the sales tax which it has already paid to its suppliers ("GST-Input Tax"). BR. 85 Reform delays to dampen growth prospects: World Bank A World Bank report on "Global Economic Prospects" has stated that reform delays may be related to entrenched political obstacles to privatization in Pakistan, which would compromise future productivity and dampen growth prospects, besides increasing fiscal pressures. The Bank has projected a 4.5% GDP growth rate for Pakistan in 2016, 4.8% in 2017 and 5.1% in 2018. The report further says that domestic risks to growth and fiscal positions include setbacks in reform implementation. BR. $ 500Mn IMF tranche to take reserves to $ 22Bn by month-end Pakistan’s foreign exchange reserves are likely to surge to $ 22Bn by Jun.’16 end as IMF’s executive board has already showed satisfaction over country’s economic situation and will approve second last tranche of $ 500Mn for ongoing loan program. Pakistan had completed 11 reviews under 3-year Extended Fund Facility program for an amount of $ 6.4Bn approved in Sept.’13. The twelfth and last review under is tentatively planned for Aug.’16 or Sept.’16. The Nation. $ 8.2Bn Railtrack upgrade project wins go-ahead Pakistan has cleared two important projects of $ 10Bn for upgrading a mainline of the Pakistan Railways (PR) to smoothen the CPEC traffic, and construction of a gas pipeline. China will provide loans for both the projects equivalent to 85% ($ 8.5Bn) of the cost of each project. According to the project documents, the cost of upgrading of PR existing Mainline (ML-I) and establishment of a dry port near Havelian is $ 8.2Bn, which the Chinese govt. will finance with a $ 7Bn concessionary loan. Tribune. Sui lease extension: PPL to pay 10% bonus to Balochistan Pakistan Petroleum Limited (PPL) will pay 10% of wellhead gas price as lease extension bonus to the govt. of Balochistan for the oldest Sui field that is producing gas for the last 60 years. The Ministry of Petroleum and Natural Resources had informed the ECC that it had signed a MoU with the govt. of Balochistan, which fixed the wellhead gas price for Sui field at 55% of the price set in the petroleum policy of 2012. The company will also pump an investment of PKR 20Bn into exploration activities during the lease period in the province. Tribune. Engro Corporation sells shares in fertilizer subsidiary at PKR 19.3Bn Engro Corporation sold more than one-fifth of its shareholdings in Engro Fertilizers Limited (EFERT), Pakistan’s second biggest fertilizer making firm, to local and foreign investors at approximately $ 184Mn (PKR 19.3Bn). The company has said it sold 295Mn shares of EFERT to local and foreign institutional investors and high net worth individuals. Whereas, in the quarter ended March, EFERT’s earnings dropped 30% to PKR 2.12Bn (LPS: PKR 1.55). The company’ profit amounted to PKR 3.05Bn (LPS: PKR 2.30) in the same quarter last year. The News. RLNG price lower than the price of domestic natural gas The price of RLNG is now lower than the price of domestic natural gas as the latter is heavily taxed, including GIDC. In this regard, several other sectors have put forward requests to the govt. for RLNG. Initially PSO purchased LNG on spot basis, the price of which was higher as compared to the LNG that would be purchased under the recently inked agreement. In addition, the margins of PSO and gas companies have also contributed in increasing the price of imported commodity. In this regard, OGRA has opposed 'exorbitant' margins of PSO and gas companies. BR. GBP, 8-Jun-16, 150.7 155 EUR, 8-Jun-16, 117.9 125 115 105 95 USD, 8-Jun-16, 103.6 75 Jun-15 Sep-15 USD GBP Dec-15 EUR Mar-16 Jun-16 Source: KCCI Research ; Oanda.com Quote of the Day “The secret of joy in work is contained in one word – excellence. To know how to do something well is to enjoy it.” Pearl S. Buck Chart of the Day KSE-100 INDEX (JUN.'15- JUN. 1, 2016) 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Value in Basis Points Source: KCCI Research, PSX 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