Pakistan Economy Daily Update - 12 April

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1. Apr . 12, 2016 KCCI - eBulletin Next fiscal year: Budget allocation process begins amid uncertainty The govt. has begun the process of allocating the indicative budget for development and current expenditures for the next fiscal year to about 6 dozen departments amid uncertainty over actual size of the development budget due to pressing demands from the energy and highway authorities. The formal process to approve the 2016-17 development budget began with the first session of the Priorities Committee with 17 govt. ministries and departments. For the next fiscal year, MoF has so far proposed PKR 655Bn for development spending – a ceiling that is highly fluid and for the outgoing fiscal year, the govt. had allocated PKR 326Bn for running the civil govt. This amount is proposed to be increased by 5% to 7% for the next year. Tribune. Power import deal: Premier to visit Tajikistan for CASA-1000 project in May Prime Minister Nawaz Sharif will visit Tajikistan next month to attend the ground-breaking ceremony of the Central Asia-South Asia 1,000 (Casa-1,000) project that will help Pakistan get cheaper and clean energy to minimize electricity shortages. The ground-breaking of the project will take place on 11TH May, 2016. All agreements have been signed to implement the project and the process of laying the transmission line was under way. PM said the Casa-1,000 power import project would help Pakistan get cheaper and clean energy to minimize electricity shortages and build close economic relations with countries in the region, particularly Kyrgyzstan and Afghanistan. Tribune. Efficient operations: Hydroelectric power production rises 18% Wapda hydel power stations delivered about 4.73Bn units of low-cost electricity to the national grid during the 3QFY16 due to better hydrological conditions and efficient operation and maintenance of power stations. The power generation showed an increase of 722Mn units (18%) compared to the corresponding period of previous fiscal year. At present, Wapda’s hydel power generation capacity stands at 6,902MW, which is about one-third of the total installed capacity in the country. Tribune. Russia-funded project: ECC approves strategy for North-South pipeline The govt. has approved the construction of Russian-funded 1,100 km long North-South gas pipeline on Build Own Operate and Transfer (BOOT) model, which will start from Nawabshah and end at Kasur and sought legal advice for setting up a special purpose vehicle for project execution to deflect adverse impact of sanctions against the Russian company. In addition to approving the execution strategy of the North-South pipeline, ECC of the Cabinet has also approved PKR 95Bn settlement of power sector dues that included PKR 25Bn fresh borrowing.,. Tribune. WB projects Pak economy to grow by 4.5% in FY16 Pakistan’s economic growth is projected at 4.5% in the ongoing FY16. According to the World Bank report, increased energy availability and improved security conditions, economic growth is picking up albeit slowly in FY16. Growth in Pakistan is projected to accelerate from 4.2% in FY15 to 4.5% in FY16 and 5.1% by FY18, broadly in line with the underlying potential output growth and capital accumulation, supported by a growing industry and services sector on the supply side and strengthening investment flows on the demand side. The Nation. CPEC faces political economy risks: World Bank China-Pakistan Economic Corridor (CPEC) is mired in political economy risks and the government will need to address concerns and build consensus among all stakeholders that the corridor delivers on its potential, says a World Bank report "South Asia Economic Focus Spring 2016, fading tailwinds". For the corridor to deliver on its potential, the government will need to address concerns and build consensus among all the stakeholders. To unlock its high-growth potential, Pakistan needs to maintain the momentum in reforming its business climate, access to finance and trade regime. BR. Car sales accelerate on cheap financing, taxi scheme Sales of locally produced light commercial vehicles, vans and jeeps grew 35% during the 9MFY16 where local vehicle sales stood at 166,898 units versus 123,638 units in the same period last year. Pak Suzuki Motor Company’s sales increased 51% year-on-year (YoY) to 100,663 units in 9MFY16. Similarly, Indus Motor sold 47,504 units in 9MFY16 versus 40,141 units in 9MFY15. Whereas, Honda Atlas Cars sold 18,542 units in 9MFY16 compared to 16,405 units in the same period of previous year.Tribune. Thar coal project achieves $ 2Bn financial close after govt guarantee The government has issued guarantee to Engro Powergen Thar Ltd (EPTL) to formally recognise its $ 2Bn financial close of the coal mining and power project at Thar. Extracted coal will be utilised by a mine-mouth power plant of 2x330 (600MW) being established by ETPL, a joint venture company of Engro Powergen, China Machinery and Engineering Company, Habib Bank Ltd and Liberty Mills Ltd. Commercial operations date (COD) for phase 1 of both projects is expected to take place by mid-2019. Dawn. Bill to turn PIA into company adopted After over four months of political wrangling, the PIA bill seeking conversion of the national airline from a corporation to a limited company finally sailed through a joint sitting of parliament. The house adopted an amended Pakistan International Airlines Corporation (Conversion) Bill 2016 after opposition parties agreed to vote for it following a written assurance and announcement by the govt. that all show-cause notices, suspension and transfer orders against employees of the airline stood withdrawn. The law will now allow the government to park PIA’s liabilities and surplus staff with a new entity and enable the divestment of up to 49% shares to the private sector. Dawn. Businessmen strike deals worth $ 225Mn at TEXPO Pakistan As many as 650 business meetings took place between local exhibitors and international buyers during the recently concluded TEXPO Pakistan which concluded. According to TDAP, the event was fruitful for the country as the businessmen made deals worth $ 225Mn. Overall 230 companies from the leading exporters of the country had set up 320 stalls in 4 exhibition Halls and over 450 foreign buyers/importers from around 60 countries visited the event. A total of 650 business meetings took place between domestic exhibitors and international buyers. BR. Economic Indicators Date / Period Unit Value USD-Interbank List of Indicators 11-Apr PKR 104.74 Change Daily 0.05% USD-Open MKT 11-Apr PKR 104.30 -0.95% KSE-100 index FIPI 11-Apr 11-Apr Pts. $ Mn 33,566 -3.23 -1.18% NM** Crude (MY'16) 11-Apr $/bbl 41.72 2.13% Gold (MY'16) 11-Apr $/oz 1,258.6 1.37% Gold (10g) Local 11-Apr PKR 42,128 -0.31% Silver (MY'16) 11-Apr $/oz 15.93 3.61% Cotton(KHI)-40 kg 11-Apr PKR 5,350 1.90% Kibor-6M 11-Apr % 6.36% 0.01% Forex Reserves 25-Mar $ Bn 20.42 -0.48% Remittances Jul-Feb 16 $ Bn 12.71 6.04% Exports* Jul-Feb 16 $ Bn 13.87 -13.26% Imports* Jul-Feb 16 $ Bn 28.98 -4.95% Trade Balance* Jul-Feb 16 $ Bn -15.10 -4.22% Current Account Avg. CPI-FY16* Jul-Feb 16 Jul-Mar 16 $ Mn % -1,859 2.64 4.52% WoW YoY Apr-16 Discount Rate % 6.00 Sources: KCCI Research, PMEX, NCCPL, KSE, SBP, PBS* ** Not Meaningful WoW= week on week; YoY=Year on Year Major Currencies 175 165 GBP, 11-Apr-16, 148.3 155 145 EUR, 11-Apr-16, 119.3 135 125 115 105 95 USD, 11-Apr-16, 104.5 85 75 Apr-15 Jul-15 USD Oct-15 GBP Jan-16 EUR Apr-16 Source: KCCI Research ; Oanda.com Quote of the Day “Obstacles are those frightful things you see when you take your eyes off your goal.” Henry Ford Chart of the Day Portfolio Investment Snapshot in Pakistan ($ Mn) 2,000 1,500 1,000 500 0 -500 FPI Source: KCCI Research, SBP 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