This page will present selected news related to: Economy; Energy
sector; and Power sector of Pakistan on a monthly basis
Pakistan: Economy, Energy/Power Sector Update, August 2019:
7. IMF conditions: June, 22, 2019: Umar said there were five main conditions of the IMF deal. These were electricity prices, gas prices, tax rates, policy rate of the State Bank and rupee valuation.
Pakistan: Economy, Energy/Power Sector Update, September 2019:
1. ARE Policy:
Sep.,2,2019: A group of energy sector experts have opposed the draft
Alternative & Renewable Energy (ARE) policy saying it is unstructured,
deficient and contradictory to various regulations and codes and fails to
provide a clear roadmap for renewable energy development.
T They observed that the document finalised by the federal government appeared to
be a conceptual working draft rather than complete procurement policy, based on
which stakeholders, developers and investors and implementing agencies could
join Centre`s efforts for immediate bankable business model. `Such draft ARE
policy cannot be put to effect, because it is an unstructured, deficient and
contradictory to various regulations and codes and does not provide any clear
roadmap for the sector development,` said a report jointly finalised by these
experts. They pointed out that the rights of the provinces regarding setting up
of power plants proposed in the draft policy were confused and in conflict with
the provisions of the Constitution. THe role of the provinces in issuing
letters of intent (LOIs) has been completely circumscribed and the provinces
have been limited to developing projects` to sell energy within their own
boundaries.The experts said that if the rationale was to give full powers for
planning and approving projects to the federal government as the single power purchaser,
then instead of excluding the provinces from the process the new policy should
require issuance of tripartite consultation and agreement among the federal and
provincial governments and the investors, as was currently the case for Azad
Jammu and Kashmir.Also, the provinces are currently required under Section 13
of the Power Policy 2015 to coordinate with the PPIB on hydropower projects a
principle that should also be followed in the case of A RE projects as part of
the National Energy Policy to be approved by the Council of Common Interests
(CCI).The experts were of the opinion that the federal government should retain
regulatory control on integration of provincial shares in development of energy
sources and the provinces must retain administrative authority to develop their
own ARE resources. The report said that the provinces should be given targets
to develop renewable projects of various technologies in line with proposed
national energy policy and ensure that provinces meet their targets and timings.
The provinces should spell out ARE zones as per resource availability. Given
the current status of draft ARE policy, the experts highlighted the need for
restructuring of certain procurement, targets, business models and agreement
mode and sharing it with the provinces before it was taken up by the CCI for
approval and implementation as a bankable document. They said the current draf
t policy conceptualised various business models, but respective domains were
not clearly defined, and they were not mutually exclusive and was making
stakeholders apprehensive. The draft policy was also short of bringing out
indicative figure for new generation capacity. Also, the policy did not
indicate technology wise maximum or minimum capacity addition cap on a yearly
basis.The experts said the proposed policy was unclear for the developer to
determine its competitive advantage in the seller market and hence failed to
take into account the development of competitive market, which was a key
mandate of power regulator, central power purchases and the national grid
company as emphasized by the parliament in recent amendments to Nepra Act,
1997. As such, the policy for procurement was not aligned with national grid
code and amended Nepra Act 2018. THe policy did not provide the year-wise share
or a floor and cap for the private sector and the treatment of
government-to-government project treatment made it very difficult for the
private sector to work out business plan for Pakistan market. There was also no
competitive bidding for G2G projects in the policy that was a seriously
undesirable flaw. `The current approach is liable to fail the new ARE policy if
approved in same unwanted shape .Uncertainties and missing information
(criteria, capacity targets, schedules, fees and timelines etc) would be
factored in by developers and push up competitive bidding price,` it said.
2. One year review: Sep., 2, 2019: The fiscal side showed a grim picture in
2018-19 and appears to remain a challenge throughout the current year, if not
beyond.The market sentiment and investor confidence remains uncertain. Years. The fiscal year came to an end with
a historic budget deficit of 8.9 per cent of GDP the highest at least since
1979-80 an era when deficits were driven mostly by investments in development.
But last year`s deficit fell in the textbook definition of a `bad deficit`
because it overwhelmingly emerged due to massive revenue shortfalls.Development
was just 3.1pc of GDP, down from 4.6pc in 2017-18 when deficit stood at 6.6pc
of GDP. All major fiscal indicators both on expenditure and revenue side showed
deterioration during 2018-19. Not only did the original budget targets remain
elusive, but the revised targets set in the supplementary budget were also
missed by a wide margin. Even the revised estimates announced as part of the
Federal Budget 2019-20 in June remained a far cry.This present a frightening
picture. One, the revised estimates given in June was so close to the end of
the fiscal year that there should have been nothing in doubt. What happened in
the last 20 days of the year that pushed the budget deficit from 7.2pc of GDP
to 8.9pc a massive Rs800 billion or 1.7pc of GDP and was unknown to budget
makers and the International Monetary Fund that was part of the exercise? Two,
how are next year`s budget targets reliable? It was, nevertheless, clear that
concrete steps were not at hand to reign in expenditures even though revenue
shortfall surfaced much earlier in the first three quarters of the year.
Increases in the discount rate and currency devaluation are reported to have
played the key role close to 5.8pc of GDP in increasing the deficit.
Development fell by almost 45pc over the previous year. One of the most damning
outcomes of the last fiscal year was an unprecedented steep fall in the tax to
GDP ratio, perhaps justifying the need for a massive Rs1.550 trillion worth of
additional taxation measures during the current year. The overall revenue to
GDP ratio flattened out to 12.7pc in 2018-19 compared to 15.2pc a year before. Non-tax revenues last year amounted to
Rs427bn, almost 44pc lower than Rs760bn in 2017-18. As such, the non-tax
revenue amounted to just 1.1pc of GDP, exactly half of the 2.2pc of GDP in
201718. Non-tax revenue to GDP ratio was the lowest since 2001-02. On the other
hand, the large scale manufacturing (LSM) output plunged 3.64pc over the
previous year, showing a contraction in industrial activity. The contraction
was almost across the board petroleum sector went down by 8.35pc and general
industry went down by 2.83pc. High-speed diesel output dropped 10pc a clear
indication of the downturn in economic activity.The performance of key
industries like textiles, food & beverages, coke &
petroleum,pharmaceutical & chemicals, automobile, non-metallic mineral
products, iron & steel and paper and board was in the negative while
fertilisers, engineering machinery and electronics performed better. exports
were down by 1pc during 2018-19. Imports on the other hand also dropped by
almost 10pc, bringing down the overall trade deficit by more than 15pc to
$31.8bn. the massive 52pc import contraction came about from power machinery as
was long expected with the majority of the CPEC-related energy projects either
completed or in the final stages. A major improvement was noted in the over
31pc reduction in the current account deficit to $13.6bn at the end of 2018-19
when compared to $19.6bn a year earlier. The foreign exchange reserves at
$15.6bn now are enough for more than three and half months of imports, even
though the country`s net international reserves still remain in the negative. The
total debt and liabilities, on the other hand, have jumped almost 35pc to
Rs40.215tr at the end of June 2019 when compared to Rs29.879tr on June 30,
2018. As such, the total debt and liabilities now stand at 104pc of GDP meaning
that the size of the total economy is smaller than its debt and liabilities for
the first time in 18 years. Total debt increased by about 33pc from Rs28.437tr
to Rs37.748tr, accounting for about 98pc of GDP. The gross public debt also now
stands at 85pc of GDP or Rs32.705tr compared to Rs28.437tr in June 2018. Based
on some of these indicators, the New York based Standard & Poor`s (S&P)
rating agency has affirmed Pakistan`s sovereign rating at B-negative long term
and `B` short term, with a long-term stable outlook. The S&P forecasts the Pakistan economy to
slow down to 2.4pc of GDP during the current fiscal year a 12-year low. Taken
together with relatively fast population growth of approximately 2pc per year,
real per capita economic growth will fall to an anemic 0.4pc.That will
contribute to a decline in Pakistan`s 10-year weighted average per capita
growth to 1.8pc, below the global average of 2.3pc for economies at a similar
level of income. The agency forecasts GDP per capita to fall to just above
$1,200 by the end of this fiscal year, versus $1,565 in fiscal 2017-2018 owing
to over 25pc exchange rate loss.
3. PTI power sector performance: Sep., 5, 2019: The electricity generation in
FY19 grew barely 1 percent year-on-year to 122 billion units, which translates
into 103 billion units of actual consumption, after factoring in the system
losses. The losses have continued to be high, close to 20 percent, and in cases
of some discos, even higher than easier thresholds. The regulator's inability
to have a tighter control and instead allowing far more than threshold losses
as part of final tariffs, has been a massive problem, and there was no progress
on this front. . The benefit of a much improved generation were not transferred
to the customer.. In fact the tariffs kept on increasing as Pakistan entered
yet another IMF program. The tariff increase was made a structural benchmark,
in order to reduce the cost differential and put a lid on the ballooning
circular debt, which had crossed Rs 1 trillion. The rise of unfunded subsidy
has been a major problem, and the issue exacerbated with the government's
relief scheme for industrial users in general and export industries in
particular. That takes out another 25 percent of total power consumption out of
the tariff hike; instead this requires room for more subsidies, which have not
been allocated. Either the government will have to roll back some of it, or
will end up running higher subsidies, or in case of delayed payments, another
round of circular debt may well be in the offing.. the capacity payments. Not
that the government is not looking to recover the difference between price and
cost, but there is little debate on the elephant in the room, that is the
capacity payment component. The amount of upwards adjustment that may be
required for FY19 determinations for respective discos, could be too hot to
handle. The capacity payments in FY16
were Rs280 billion or Rs3.4 per unit sold. This increased to Rs644 billion or
Rs6.2 per unit in FY18, constituting almost 60 percent of the power purchase
price. Much of it has to do with CPEC related power projects, as lopsided
take-or-pay contracts were always going to cause trouble. The dependable
generation capacity in FY19 went up by almost 20 percent year-on-year to 31000
MW. The demand did not grow. The RLNG plants are fully available, among many
others from the CPEC projects. No demand growth and higher generation
availability, with contracts based on take-or-pay, it is estimated that the
capacity payments component for FY19 would be north of Rs900 billion. The
currency devaluation has also played its role. Now with almost Rs9 per unit as
capacity payment, it is obvious that the benefit of lower fuel price and
improved generation mix was never going to materialize. And there is more to
come in lieu of tariff adjustments. The latest IMF program, like any other IMF
program, is overly focused on price as the key to reforms. Yes, price is an
integral part of the power sector reforms, but it is surely not the only one.
It did not work back then, it will not work now. The government is due to
announce the revised tariffs for FY19 by September end, as per the IMF's
structural benchmark. And the budgeted subsidy may not be enough to cater for the
increase.. The governance reform, the focus on transmission, privatization of
DISCOs and commercially opening up the market are all key component of the
reform, which have sadly taken a backseat, as price becomes the focus. The
first year was a missed opportunity; the second could be a disaster, if they
don't look beyond pricing as means of reforms.
4.
Dasu
Progress: Sep., 13, 2019: The World Bank remains moderately
satisfactory with progress on $4.1 billion Dasu hydropower project, as Pakistan
struggles to end a five-year old dispute over land acquisition that has also
put a $100 million tranche at stake, a notch above from the last rating of
moderately unsatisfactory. However, it has linked the future ratings with
Pakistan’s ability on how quickly it resolves a five-year old dispute over cost
of land acquisition for the project. The lingering dispute has also put at
stake the over $100 million World Bank loan for land acquisition whose extended
deadline is going to expire by end November.The total project cost is $4.1
billion and the World Bank has given $588.4 million loan for its construction,
which is nearly 15% of the total cost. It has also extended guarantees to
acquire another $460 million loan from commercial banks, which has increased
its exposure in the project to $1.1 billion or one-fourth of the total
cost. Out of $588.4 million, the World
Bank had given $111 million for land acquisition. Due to almost negligible
disbursements, the World Bank gave one-year extension to utilise funds for land
in November last year, which is also going to lapse in the next two months. It
was the third extension, which this time had been taken by the government of
Prime Minister Imran Khan. In its extension report, the World Bank had noted
that the continued slow progress of land acquisition is delaying project
implementation. Land acquisition has still only reached 740 acres, out of 1,987
acres required for the construction areas, and a total of 9,135 acres including
reservoir area needed for the project. The frequent interruption of work by
project affectees, delayed payments by the Water and Power Development
Authority (Wapda) to revenue staff and to project affectees, lack of control on
illegal construction, poor safety management by contractors, consultants and
Wapda and delayed decisions by Wapda on procurement and contract management in
particular local area development program have contributed to slow progress on
land acquisition, according to a World Bank’s report of November last year. The
project had been planned to be completed by 2021 – a deadline that both the
World Bank and Pakistan will miss. There is no possibility of taking any action
against those who are responsible for the delayed completion of the project.
5. Orange
Train: Sep., 21, 2019:
Delay in construction of Orange Line Metro System has escalated the premium
cost of the project by 50 percent. The suspension of development work on this
mega project has cost Rs11 billion to the national exchequer, officials in
Punjab Mass Transit Authority reveal. The estimated premium cost of the project
was Rs22 billion but it has increased to Rs30 billion. An additional Rs3
billion has been allocated for the construction of footpaths for this project
adding the total premium cost to Rs33 billion. That after some portions of the
project was dropped by the PTI government.
6. ADB Forecast: Sep., 27, 2019: The
Asian Development Bank (ADB) on Wednesday forecast Pakistan’s economy to slow
down further and set the GDP growth target at 2.8 per cent for FY20 given the
need for government to address sizable fiscal and external balances. The ADB’s ‘Asian Development Outlook 2019 Update’ said
fiscal adjustments would suppress domestic demand, and demand contraction will
keep growth in manufacturing sector subdued. However, agriculture sector will
recover from weather-induced contraction this year, with major incentives in
the agriculture support package of the government included in the budget for
FY20. .Commenting on the report, Yang said that, “Pakistan needs to press ahead
with macroeconomic and structural reforms; revitalising public sector
enterprises; improving revenue collection, energy and water security, and
leveraging improved security and regional cooperation opportunities, to secure
the hard won gains and promote growth. “Pakistan needs to continue efforts to
stabilise and protect the economy against external risks, rising global prices,
current account deficit, rising debt servicing, and continued losses of public
sector enterprise,” On the external
front, the trade deficit shrank by nearly half in July, the first month of
FY20, from $3.4bn a year earlier to $1.8bn. With further narrowing of the trade
deficit and a continued positive trend in workers’ remittances, the current
account deficit is projected to narrow further to 2.8pc of GDP in the ongoing
fiscal year
RE Policy: Sep., 30,2019: PAKISTAN`S Renewable Energy (RE) Policy 2006 that
yielded almost 1,950 megawatts of commercially operated wind, solar and biomass
plants connected to the national grid can definitely be regarded as a success
story .In 2018 the policy was repealed. Presently, due only to the
non-existence of any policy vehicle for over a year, a void has been created in
which neither the previous policy exists nor the new one has been finalised,
thus discouraging investments. There is nothing wrong in considering
competitive bidding as a fundamental priority in the realm of renewable energy.
However, this provision was already contained in the original policy therefore
there was no need to get embroiled in the cumbersome process of formulating a
new one. The RE Policy 2006 is a comprehensive document, equipped with
an assortment of available options such as on-grid, off-grid, net-metering,
wheeling and banking of energy with little or no change in the role of stakeholders
as well as incentives offered to investors. Thus, in the face of the
consensus-based policy paraphernalia already in place, the question for a new
policy does not arise. But why is the same exclusivity of competitive
bidding not applied to thermal projects with considerably higher tariff and
higher risks? The RE Policy 200f, formulated in consonance with the Nepra Act,
incorporates three modes of awarding tariffs: i) competitive bidding (solicited
proposals), ii) negotiation (cost plus tariff for unsolicited proposals and
iii) up-front tariffs. However, in the draft of the new policy,
alltariff award options are blocked for general investors except competitive
bidding. This is a potentially risky strategy since it puts all the eggs in one
basket. Furthermore, despite its benefits, this model has never reached
fruition in the country`s energy history. In a country like Pakistan,
which has already been a hotbed of debates between the federal and provincial
governments in the realm of energy, the consensus-based RE policy 2006 was
nothing less than a blessing. On the other hand, the new policy still
has to get approved from the Council of Common Interests (CCl), and that is not
going to be a piece of cake, especially since the role of the provincial
governments has been eroded in the draft.
The draft also introduces an oddity in the form of a government-to-government
(G2G) arrangement, whereby dealings with foreign governments are supposed to be
executed through the preferential cost-plus mode instead of undergoing
competitive bidding. If modes of tariff award other than competitive
bidding are deemed inappropriate, then why are such models available for G2G
arrangements under the new draft RE policy? This discrimination will ultimately
result in the loss of credibility and fractured confidence of market players.As
things stand, many critical queries are being shoved under the rug. For
example, the 30 per cent share of RE being targeted in the draft policy is
unlikely to be achieved without a convincing road map.There is a lack of
clarity on how the target will be divided amongst various RE technologies as
well as how the proportionate share of provinces will be determined, especially
since each province has a distinct resource advantage. It is yet to be
ascertained whether future energy demand will be estimated based on historic
numbers or anticipated economic growth. Moreover, the time it takes to finalise
the competitive bidding arrangements, and the scheme and broad parameters of
bidding in the wind and solar sectors have not been decided upon as well.Lastly,
no firm date of connecting the first unit of RE to the national grid under the
new policy has been given. With a lack of tangible answers, the fate of
renewable energy sources is in shambles.
Pakistan: Economy, Energy/Power Sector Update, August 2019:
1. Economic
issues: Aug., 6, 2019: Reko Diq: The
recent $5.9 billion award by the
World Bank’s court (ICSID) against Pakistan is a classic outcome of misplaced
patriotism, incompetence and corruption. Like India, and as suggested by the UN
trade organisation UNCTAD, Pakistan should have long ago denounced the unequal
investment treaty which allowed a foreign company to sue it. The court’s
award on Reko Diq is now final and contesting it further may be futile and
impede foreign investment, and further delay exploitation of the huge ($1
trillion) deposits of copper and gold in and around Reko Diq. While rejecting
the award in principle, the government ought to explore a pragmatic solution
which circumvents the exorbitant award and enables early, efficient and
beneficial exploitation of the mineral resources. LNG imports: , an
intricate game appears to be underway to determine who gets the sorely needed
third terminal. To remove the smell of rotting fish, the government should make
the entire decision-making process on the LNG business totally transparent. ‘Autonomous’
entities: Over 300 government entities cumulatively lose two per cent of
Pakistan’s GDP each year. Everyone agrees these entities have to be
restructured, divested or closed down. For over a decade, nothing has moved.
Previous governments found it difficult to divest or restructure politically
sensitive but commercially disastrous entities like PIA and the Steel Mills.
The temptation is to sell off the most profitable enterprises first (eg the two
Punjab power plants). Instead of trying to reinvent the wheel, the government
would do well to hire one or more specialist firms to propose a plan and
execute it quickly. Housing and wealth creation: The allocation
of government land and financing of home acquisitions are traditional vehicles
for wealth creation and GDP expansion, as illustrated by the history of America
and modern China. In Pakistan by contrast, government land has been parcelled
out through official entities mostly to house the rich and powerful rather than
the poor or middle class. This has accentuated economic and social inequality.
The prime minister’s housing scheme can be the vehicle not only to provide
shelter, but also create wealth for the poor and middle class (and expand GDP)
through the allocation of adequate land and cheap credit for affordable housing.
SMEs: The heavy borrowing on the local market by recent governments
has consistently squeezed out lending to small and medium enterprises which are
the main creators of jobs, goods and services. Today, many SMEs in Pakistan are
borrowing money for business development at exorbitant 20pc to 30pc interest
rates from so-called private financing channels. A conscious policy is required
to provide easier credit at market rates through normal banking channels to
SMEs. SEZs: The establishment of Special Economic Zones including
under CPEC have been delayed mainly due to the fight over whose land would host
the zones (and be sold at enormous profit). The government ought to promulgate
a law on ‘eminent domain’, allowing it to requisition sites for SEZs at
pre-industrial prices. This will save the government money and speed up
creation of the SEZs. Waste disposal: Pakistan’s major cities are
drowning in their own filth, as illustrated by Karachi’s plight after last
week’s monsoons. Karachi produces 11,000 tons of solid waste daily; Lahore
7,000; Hyderabad 4,000, etc. Waste-to-power plants are one answer to dispose of
solid waste. Some Latin American countries are paying 16-20 cents p/kwh to have
US and Swedish companies fully finance the installation of the most efficient
plants. In Pakistan, provincial authorities offer nine to 10 cents. The one
Chinese plant set up in Lahore at this rate has been abandoned. Realistic power
rates and collection fees are essential to attract investment for these
waste-to-power plants. Thar coal: Pakistan will be unable to fully
exploit the vast Thar coalfield for power generation because there is
insufficient water to cool the plants, the carbon emissions will be
unacceptably high and the electricity produced is not much cheaper than
alternatives because the cost of mining (with outdated equipment) is very high
($40 vs $8 in Virginia, US). Thar coal could be used for power, fertiliser and
other purposes if gasified to pipeline quality, the carbon emissions captured
and mining made more efficient. Advanced technologies to achieve this are
available. The government and power companies need to make the decision to
invest in and apply these technologies. Manufacturing: In
Pakistan, manufacturing contributes only 10pc to GDP. The country will remain
non-industrialised unless it builds the essential tariff and non-tariff
‘protections’ for its nascent domestic industries (disregarding the suicidal
‘liberalisation’ advocates) and/or encourages its enterprises to enter into
joint ventures with efficient foreign producers (who will enter such joint
ventures if they cannot export into Pakistan). CPEC: Pakistan needs
infrastructure to develop; only China is ready to build it; its official loans
are ‘cheap’ (2pc to 3pc with long repayment periods, akin to ‘grants’). The
loans for power projects to Pakistani companies were ‘commercial (around 6pc
interest). Chinese companies have executed most of the projects, since Pakistan
had limited capability to do so. The equipment supplied for the power plants
was mostly Chinese but many of the turbines and boilers were sold by America’s
General Electric. The power projects are highly profitable, perhaps excessively
so. There is no ‘debt trap’. The Chinese loans will be easily repaid (unless
the projects are rendered economically unviable by retroactive conditions).
Expanded cooperation with China remains the best route to Pakistan’s industrial
and commercial development. In the afterglow of the Washington visit, some
among Pakistan’s business and official elite seem susceptible to the Western
propaganda against CPEC and China. They risk making a major strategic blunder.
2.
Power losses: Aug., 12, 2109: The power sector has achieved in
its revenues a record increase of over Rs121 billion while curtailing line
losses worth Rs16bn, or 1.4 per cent. . Under the campaign to curb electricity theft, Rs1,368 million
was recovered from 5,318 power thieves after registering 36,000 FIRs against
the, The Aerial Bundled Cable is another
project to control and pre-empt illegal connections through direct hooking,
thereby controlling the menace of kundas and reducing line losses in high-loss
areas. The Peshawar Electric Supply Company and Sukkur Electric Supply Company
have already started installation of these cables as and where they clear
feeders in their anti-theft campaign. The power division has chalked out a
comprehensive plan to arrest the growth in circular
debt. Accordingly, after June 2019 the growth is to be reduced from Rs38bn
to Rs26bn per month. By June next year the growth will be brought to Rs8bn per
month, while by December 2020 it will be brought to zero.
3.
CPEC Phase II: Aug., 15, 2019: With the authorities still busy in evaluation and land acquisition, work on
any of the nine special economic zones (SEZs) to be set up in the country under
China-Pakistan Economic Corridor (CPEC) has not yet begun Most of these economic zone projects are either at the stage of land acquisition
or their feasibility reports are being finalized The official document shows
that none of these SEZs have so far been provided with basic amenities as
utility departments are still doing calculations and making evaluations. As far as the provision of basic amenities
is concerned, the document says that PC-1 for the provision of electricity will
be submitted by Aug 30. The power division will then evaluate the proposal and
process for funding through the Public Sector Development Programme (PSDP).“The
petroleum division is making necessary arrangements for provision of gas at the
zero point of the zone,” it says, adding that the provincial government will
ensure provision of “adequate supply of water”. till under consideration
between the management of the NIP and the PSM. They will organise meetings
shortly to resolve the issue of land and its pricing,” the National Assembly
was informed.
4.
Coal plant: Aug., 18, 2019: The government confirmed on Sunday successful commercial operations of
a $2 billion 1,320MW coal-fired power plant set up by the China Power Hub
Generation Company (CPHGC) under the China-Pakistan Economic Corridor (CPEC)
project. The CPPA said the power producer had called
for declaring its commercial operation date (COD) from Aug 17, 2019, while its
engineer — SGS — had also issued certificate of initial tested capacity that
came out at 1,249MW. Therefore, it called upon the National Power Control
Centre (NPCC) to issue dispatch instructions to the CPHGC keeping in view the
system requirements. Separately, the CPHGC announced that it had successfully
declared the COD of its 1,320MW (2x660) imported coal power plant and
integrated jetty with coal transshipment capacity of 4.2 million tonnes per
annum. The CPHGC is a joint venture between the Hub Power Company (Hubco) and
China Power International Holding (CPIH) and a part of early harvest energy
projects under the CPEC framework agreement. On Sunday, the company said it had
developed the plant in a record time, as per schedule and within the projected
cost, and would add nine billion units (kWh) of electricity to the national
grid every year, meeting the electricity needs of four million households in
the country.The project’s two units achieved synchronisation with the national
grid on Dec 28, 2018 and May 28, 2019, respectively, while the Integrated Coal
Jetty became operational in December last year with the arrival of the first
shipment of coal.
5.
Industries growth declines:
Aug., 21, 2019: It was for the first time in the past 10
years that the LSM sector recorded a negative growth. Last time in fiscal year
2008-09, the LSM had contracted 6% in the aftermath of global economic meltdown
and hyperinflation. The contraction in the last fiscal year was even higher
than the negative 2.1% estimate of the government published in the Economic
Survey of Pakistan hardly three months ago. Owing to the poor output, the share
of LSM in total national output plunged to a 19-year low of 10.1%. In fiscal year
2000-01, the LSM share in the total national gross domestic product was 10.3%. In
the last year of the Pakistan Muslim League-Nawaz (PML-N) government in
2017-18, the LSM grew 5.1% and its share in the total national output was
10.7%.
6.
Signs
of recovery: Aug., 22, 2019: Pakistan’s current account deficit narrowed
a significant 73% to $579 million in July, the first month of the current
fiscal year, following the government’s agreement with the International
Monetary Fund (IMF) on implementing tough measures for a bailout of $6 billion.
The current account deficit stood at $2.13 billion in the same month of last
year, the State Bank of Pakistan (SBP) reported on Tuesday.“The colossal
contraction in the deficit came on the back of…26% drop in imports and 11%
improvement in exports,” The remittances sent home by overseas Pakistanis came
in at $2.03 billion in July compared to $1.98 billion in the same month of last
year due to Eidul Azha. The inflows played a very important role in financing
the trade deficit and making a foreign debt repayment
7.
IPPs: Aug., 23, 2019: Five
independent power producers (IPPs) have made an exorbitant profit of over Rs40
billion in the past seven years. . The National Electric Power Regulatory
Authority (Nepra) acknowledged that the five IPPs registered windfall gains of
Rs40.175 billion over the past seven years. These power plants got profit in
the range of 35-40% compared to the permitted return on investment of 15%. The
committee chairman revealed that Atlas Power recorded a profit of Rs9 billion,
Nishat Power earned Rs7 billion, Attock Gen Limited Rs11 billion, Nishat
Chunian Power Rs7 billion and Liberty Power Rs5 billion. Only Hub Power faced
loss and its return was 12%. The committee chairman, however, emphasised that
the IPPs would be given the right of being heard.
8.
Gas:
Aug., 23, 2019: Power Division and Sui Northern Gas
Pipelines Limited (SNGPL) have been locked in a tug of war over liquefied
natural gas (LNG) supply to power plants. Pakistan has a firm LNG supply
agreement with Qatar and SNGPL wants LNG-based power plants to run smoothly in
order to fully consume the available LNG. However, the Power Division has
refused to allow these plants to operate because of the economic merit
order.“We will operate plants on merit,” remarked Power Division Secretary
Irfan Ali while speaking at a meeting of the sub-committee of Public Accounts
Committee (PAC). SNGPL representative Jawad Naseem said these power plants
should be operated on a “must-run basis”. Owing to that, three gas fields have
been shut down to ensure a smooth flow of imported gas and avoid damages.
9. Circular debt: Aug., 23, 2019:
The government is working on a plan that can empower NEPRA to pass on tariffs
to the consumers without involving the federal government in order to avoid delay.
The delay in determining and notifying the tariffs had caused a build-up of
circular debt. The debt was swelling Rs380 billion to Rs450 billion annually.
However, the pace has slowed down now. The circular debt stood at Rs829 billion
at the end of June 2019 compared to Rs570 billion a year ago, with an increase
of Rs259 billion an additional recovery
of Rs122 billion had been made from electricity consumers over the past six
months. Of that, the impact of tariff increase was 20-30% whereas the remaining
recovery was due to better efficiency and loss reduction by the power
distribution companies. efficiency,” he
added. The committee was informed that a surcharge of Rs0.43 per unit was
imposed on power consumers. The collection in that regard was being deposited
in an escrow account and was also being used to pay off Rs82 billion worth of
loans of Oil and Gas Development Company (OGDC).
10.
New ARE
policy: Aug. 24, 2019:
The private sector and lending agencies on Friday pointed out critical
deficiencies in proposed Alternative and Renewable Energy (ARE) Policy 2019 and
called for incentives to localize renewable energy technologies for lower
projects costs, consumer tariff s foreign exchange outflows and greater job
creation. The representatives of the lending
agencies and private think tanks pointed out to the federal government that
most of the ARE resources were mostly owned by and located in the provinces,
AJK and Gilgit-Baltistan, but the proposed policy appeared to be centre-centric
and proposed to be driven by a federal agency Alternative Energy Development
Board. Therefore, the provinces, AJK and GB would be least receptive to federal
wishes and implementation priorities to have 30pc contribution in over all
electricity supply to renewable sources by 2030 as opposed to the 2006 policy
that provided the provinces a greater role in projects awards. Secondly, the
previous policy had greater clarity in terms of 9700MW target for renewable
energy as opposed to new policy that set targets as percentage of existing
generation capacity that was a moving number and hence sent confusing signals
to investors. A representative from a donor agency questioned the `wisdom
behind killing investors of 8 gigawatt capacity (of 2006 policy) with one
bullet and offering equivalent capacity to new investors under the new policy`
and wondered how the government would attract fresh investors when previous
investors cry foul. The participants suggested that annual targets for each
(wind, solar, biomass etc) technology should be set and followed up with
implementation schedules.
He said the previous policy appeared to
be wiser but was approved by the Economic Coordination Committee of the Cabinet
instead of Council of Common Interests (CCI). He believed the same policy
should have been improved and got approved by the CCI. As a way out, it was
argued that a tripartite arrangement between among the federal and provincial
governments and investors should be put in place so that none of the
stakeholders had overwhelming discretion in decision-making.The participants
also proposed that 145 projects under the 2006 policy involving 8,900MW
capacity should be given first right in
case of fresh competitive bidding under clear terms and conditions because
majority of them had created significant rights so far and should be given a
transition period. For example, 19 projects of 513MW capacity had been given
letters of support, 22 projects of 1,200MW were tariff approval stages and 109
projects of 6,500MW had letters of interest. It was also pointed out that
thermal power plants under 2002 policy were covered by the 2015 policy that was
approved by the CCI while similar treatment to ARE projects was being denied
that was creating an impression of anti ARE bias. The private sector representatives
also highlighted that government was envisaging bidding for solicited projects
without feasibility studies which could lead to cartelisation. Therefore,
reverse competitive bidding should be considered under reference tariffs to be
announced by the power regulator. Participants also proposed incentives to
encourage localisation of cost factors like concrete poles, transformers,
motors and generators etc to bring back manufacturers who had left the market
or promote local job creation and least cost energy sources. Under the existing
arrangement, the foreign investors would be utilizing indigenous resources like
wind, solar, land, steel poles, batteries etc and taking out foreign exchange
in profits.
11. Fiscal deficit: Aug., 30,2019: data from the latest quarter that has just
been released, covering the period April to June 2019 — which completes the
full year’s picture — shows that the growth in the government’s expenditures
accelerated throughout and revenue growth stagnated. Not only that, in rupee terms,
the FBR actually collected slightly less revenue in FY2019 than in the previous
year, despite a raft of regulatory duties, two mini budgets, and a massive
devaluation which usually boosts recoveries under custom duties. But none of
that helped, and perhaps for the first time ever, we had slower revenue
collection in rupee terms than in the preceding year almost Rs1.5tr of that was accumulated in
the last quarter.This shows the massive pressure that had built up in the
economy throughout the year was released in one go towards the end of the
fiscal year. at the end of the fiscal
year, the blame for the dismal outturn lies in one place only: with the
government in power.There was a lack of focus on economic priorities
throughout, repeated entreaties for more time, repeated reminders that tough
choices lie ahead followed by repeated U-turns on whether or not to approach
the IMF, and even rhetoric of some sort of revival underway from February
onwards.All that now lies in ruins. The record setting fiscal deficit is the
cost of losing focus on the economy. It results in higher borrowing, higher
debt service costs, and further crowding out of the private sector from the
country’s debt markets.In short, it has cascading consequences that can take
years to pay off.
Pakistan: Economy, Energy/Power Sector Update, July 2019:
1.
IMF:
July,4,2019: The International Monetary Fund's (IMF)
executive board has approved a three-year, $6 billion loan "to support
Pakistan’s economic plan, which aims to return sustainable growth to the
country’s economy and improve the standards of living," spokesperson Gerry
Rice tweeted on Wednesday evening.IMF Executive Board
approved today a three-year US$6 billion loan to support #Pakistan’s economic plan, which
aims to return sustainable growth to the country’s economy and improve the
standards of living. According to AFP, the IMF board has released $1bn to
Pakistan immediately. The fund will review Pakistan's performance quarterly
over 39 months, phasing release of the additional aid over time. This is Pakistan's
13th IMF program.
2.
Third LNG
terminal: July, 8, 2019: The project to set up a third LNG terminal
may be running out of steam as investor interest wanes and the deadline for
commencement of work draws near. The government originally
wanted the project up and running in time to meet the demand projected for
winter of 2020, but that timeline is now looking difficult. Informed
sources told Dawn that some public sector players in the LNG market were
leading the PTI government to a situation where it is compelled to strike a
negotiated deal with an existing operator or let the industry and domestic
consumers face major shortages.“In both cases, the PTI government would face
controversies and public criticism like the previous two governments of PML-N
and PPP”, said an official. The
official who has attended recent Cabinet meetings and its Economic Coordination
Committee (ECC) said some of the leading international LNG investors have
started complaining to the government that they were being road blocked to participate
in an expanding market because of unfair environment. Another official
said some members of the ECC also protested that the Port Qasim Authority (PQA)
had placed a long and confusing summary before the ECC through the Ministry of
Maritime Affairs (MOMA) just before the meeting, constraining their ability to
make any constructive stance At least
five major international firms including Shell, Engro, ExxonMobil, Energas,
Gasport, Trifugura, Mitsubishi and Global and local firms are lobbying to set
up next terminal in the private sector. In given conditions, no investor would
be able to complete the floating terminal within 13-14 month-deadline before
winter next year and the government would be forced to facilitate a choice
investor to expand existing Floating Storage Regassification Unit (FSRU) for
short-term supplies. “There appeared a move to maintain monopoly and the
political government is being taken for a ride”, one of the prospective bidders
told Dawn. Under these circumstances, no new developer will sign up
to the terms as recommended and discourage competition in the LNG sector. The
situation is because the new operators would not be given government guarantees
which currently stand at $200 million per annum for the two terminal operators
and yet the new bidders are being asked for concession fees, penalties and
damages. Meanwhile, PQA’s own consultant
— HR Wallingford conclusively advised that “all sites — including existing
channel, Charra Creek and Chan Wadoo Creek Area — are feasible with each site
having both advantages and disadvantages” and linked it with QRAs from the site
sponsors covering safety, security and operability aspects of each site”.It
added that “all sites are considered to be accessible by up to QMax LNG carrier
sizes”. The fresh condition also required that, except in case of international
embargo, if the FSRU operations intend to sail off the FSRU before the expiry
of the contractual period, the PNSC shall have the first right to buy the
vessel at 10pc less than the market price.
3.
IMF
Forecast: July, 11, 2019: The International Monetary Fund’s (IMF)
underline assumptions suggest that the average exchange rate at the end of this
fiscal year could be Rs172.53 to a dollar – a
depreciation of over 27%, due to weak macroeconomic fundamentals, reveals a
latest report of the global lender. In its staff level report, the IMF has not
explicitly stated the exchange rate of Rs172.53 to a dollar. But a backward
working on the basis of current account deficit projections show that rupee
would keep losing its value under the IMF programme and beyond it. The
average exchange rate of Rs172.53 to a dollar by June 2020 means that the
year-end rupee-dollar parity would be over Rs188 to a dollar, said an
independent economist who wished to remain anonymous. The Rs172.53 to a dollar
average exchange rate would stoke the inflation that the IMF has estimated at
13%. The means that the annual inflation rate in this fiscal year is expected to soar to
18%. The average exchange
rate that at the end of the fiscal year 2018-19 was Rs135.4 to a dollar has
been assumed at Rs198.8 in fiscal year 2022-23 by the IMF. Against the average
annual Rs135.4 rupee-dollar parity, the actual rate was Rs157 to a dollar by
end of June. IMF’s assumptions show a depreciation of Rs63.4 to a dollar or 47%
in four years (2019-2023). The total loss in the value of the rupee in five
years would be Rs78 or 64%, if the IMF assumptions are correct. The maximum
depreciation is assumed in this fiscal year. Due to steep currency devaluation,
the size of Pakistan’s economy will be $312 billion at the end of Prime
Minister Imran Khan’s term – a threshold that the country had once achieved in
2017. However, the devaluation has pulled the size down to $284.4 billion at
the end of the first year of the PTI government
4.
Economic
challenges: July, 12, 2019: the first thing to be revealed is
a massive IMF program taking centre stage. Around that, a commotion is under
way, with threats of strikes, desperate calls for removal of confusion and anomalies from
the new tax plan that sits like a crown atop that IMF program, and large supply
lines and factories grinding to a halt. First the business leaders tallied up
the new costs they were facing. With interest rates having more than doubled in
just over a year, and the rupee having lost nearly 50 per cent of its value
(from 105 to 157), they were now poring over the details of the finance bill to
figure out how their business would be impacted by the new tax plan. There was little clarity as many of
the details simply were not adding up. In some cases, the new tax plan had made
it more profitable to be an importer of a product rather than its manufacturer.
In other cases, it made it impossible for certain categories of business to
claim input adjustment since an excise duty would now be implemented in sales
tax mode, without actually being a sales tax. In another case the government
claimed a ‘typo’ had been made, and quickly reversed some of the language. Once
clarity began to dawn, it became evident that not only were tax rates going up
in just about all cases, but in many other cases the documentation requirements
laid down were so stringent that manufacturers were about to find themselves
estranged from their own distributors and retailers. One by one the realization
spread that nobody has been spared. Then the traders
issued a strike call in Karachi, followed shortly by trader bodies in Lahore and
Faisalabad as well. In all cases, they were given a tough message by the
government. ‘You have come this far without paying your fair share in taxes,
but today that journey ends’, they were told. Register yourselves with the tax
authorities, and start filing returns and documenting your transactions.
Everybody has been asked to retain a copy of the CNIC of those they buy from or
sell to. This applies to manufacturers as well as traders. Payments for which
an input or output adjustment is sought must be made through a bank account,
they’ve been told, so the details can be tallied up. It’s no more Mr Nice Guy,
the new FBR chairman wants to tell all these undocumented businesses. ‘We will
find you, because there are more registered industrial consumers of gas and
electricity than there are registered with the tax authorities.’ Notices will
be sent, raiding teams will visit your premises, neighborhood police will be
used to gather information in their areas. Alarmed at all this, some
delegations went to the army chief himself. As per their own telling, the
message they were sent away with was the same. ‘Pay up, the country is going
through a difficult time, all must shoulder their burden, we all know how much
money you have made in years past’ and so on.
Needed to achieve program objectives.”
5.
Traders strike; July, 14, 2019:
as traders all over the country answered a
nationwide call to strike in protest against a drive by revenue authorities to
document commercial activity in the country. The
call for the shutter-down strike was given by various traders' bodies around
the country, who want the government to revoke documentation requirements
introduced to better assess their tax liability and roll back taxes. There are
hundreds of trader associations in Pakistan, and millions of traders who
participate in the retail sector. However, while some groups rallied hard
around the strike call, there was no clarity about how big the scope of the
strike actually was as the main chambers of commerce and industry, from Karachi
to Lahore and other cities of Punjab, did not support the call.
6.
Car sales: July, 14, 2019:
Honda Atlas Cars Pakistan (HACP) shut down its plant for 10 days on Friday as
its inventories piled up to 2,000 units on plummeting car sales amid rising
prices due to imposition of new, higher taxes in the budget and steep currency
devaluation in the recent weeks. Similarly, Indus Motor
Company (IMC), which produces Toyota models in Pakistan, has also decided to
stop car production for eight days, two days every week, during this month,
company sources told Dawn. Honda
had kept its plant closed for two days earlier last week. However, a Pakistan
Suzuki Motor Company will take decision whether or not to cut down production
in the next few days after analyzing sales trend and flow of booking orders
during the present month .The decision to scale down production during July was
taken due to extremely lackluster sales in the first 10 days of the current
month. HACP expect sales to drop to less than 30,000
units this business year (April 2019-March 2020) from over 48,000 units last
year
7.
Stability: July, 15, 2019: The tabdeeli they promised has only been
manifest in the form of greater inflation, a shattered rupee, draconian laws on
the expression of freedom, and even signs of incompetence at the diplomatic
level, the PTI government and its desperate supporters are suggesting that we
have finally reached a state of ‘stability’. The extensive public use of the notion of ‘stability’
is of very recent vintage. Clearly, tabdeeli had to take its natural course of
time to settle in before any stability could emerge; and perhaps it took about
a year. If one does a ‘forensic analysis’ — another invention of Naya Pakistan
— of the frequent use of the term ‘stability’, one would probably find it being
used in the media regularly, since the last few weeks. While the agreement
between the hurriedly put together new Pakistani economics team with the IMF
was first announced on May 12, followed by the federal budget which was clearly
a blueprint from the IMF agreement announced exactly a month later, and with
the executive board of the IMF finally giving their approval after much
apprehension in official circles, stability is said to have finally arrived on
July 3 this year. While so-called
independent commentators on the economy have lapped up this term, perhaps it
was the new governor of the State Bank of Pakistan, rushed in from the IMF, who
was the first to give the term ‘stability’ official sanction. Due to his ample
and laudatory services for the IMF, as well as much foresight learnt from his
colleagues, he must have been the first to know that Pakistan was well on its
way to stability and growth long before the July 3 official approval of the IMF
program. As early as June 17, he had announced that the worst was over, and
that ‘the country is moving towards stability’. Let us see exactly what all has
led to claims of this stability over the last few weeks. A good example, one which is clearly in the
domain of the governor of the State Bank, is the dollar-rupee exchange rates.
After his declaration of stability, in the last week of June the Pakistani
rupee lost Rs5.50 in value against the dollar in a single day, to miraculously
recover Rs6.60 in the week after on July 2. Most economists would call this
mayhem, or excessive volatility, but perhaps such events simply imply that the
economy was fast ‘moving towards stability’.
Perhaps the State Bank governor could be forgiven his claim, and one
could suggest that the particular event was just a one-off episode, yet, the
fact that the rupee has cumulatively dropped in value by 1.22 per cent, or
Rs1.92, just in the last five days, suggests that we are nowhere close to any
form of ‘stability’. One could also add other indicators, such as the price of
gold, which increased by 2.11pc in just a single day this week to its highest
level ever of
Rs82,000, but perhaps we are just beginning to move to some stability in terms
of its price. If the price of the dollar or of gold is subject to volatility
and fluctuation at frequent levels, perhaps it would be advisable to examine,
supposedly more stable, indicators to counter the stability claims. On the same
day, that gold rose to its so far highest all-time price this week, the
governor of the State Bank stated that ‘things are getting better’. Now that
the IMF agreement has been made very public, let us examine just how much
better things are going to get and how much more stable Pakistan is about to
become. Probably the most striking aspect of the calculations from the IMF
having ramifications on revenue, jobs and investment is that Pakistan’s GDP
this financial year is going to be a mere 2.4pc, the lowest in a decade. If the
just-concluded fiscal year ended with a dismal 3.3pc growth rate, the lowest in
five years, this year of stability promises much more. Moreover, in the last
fiscal year, inflation was a mere 9pc, the highest in five years. This
financial year of stability till next July promises an inflation rate of
anywhere between 13pc and 16pc, probably even higher as the year proceeds.
Every single indicator, from tax collection to the elimination of poverty, to
investment rates in industry to achieving an extraordinary 8pc increase in
exports, is going to appear in a state of shambles this time next year. The
only possible improvement will come to the current account deficit, even as
Pakistan’s debt burden, both domestic and international, will increase
manifold. One can safely predict that this financial year will have far higher
inflation; the rupee will lose substantially more value, and with fewer jobs
and increasing poverty, will be the worst in over a decade in terms of how it
affects the working people of Pakistan. The only ‘stability’ and consistency one
can expect is that things are going to get considerably worse.
8. State Bank of Pakistan: July, 16,2019: The country`s
gross domestic product (GDP) moderated to 3.3 per cent in FY19 amid
deteriorating fiscal deficit and relatively improved current account deficit
despite doubts regarding its sustainability, said State Bank`s third quarterly
report for FY19 issued on Monday. The pace of economic growth slowed down
considerably during FY19. This was mainly in response to the policy measures
taken to curb the twin deficits. These measures affected the performance of the
industrial sector and dampened manufacturing activities in the country,` it
added. Large Scale Manufacturing (LSM) posted a broad-based 2.9pc decline during
Jul-Mar FY19, with nearly all leading sectors reporting contraction. livestocl( segment, which maintained its
growth momentum from last year and ultimately pushed the agriculture sector`s
overall growth marginally into the positive territory. `The services sector
lost some of its growth momentum from last year, registering a growth of 4.7pc
during FY19as compared to 6.2pc in FYl8,` said the report. Adverse developments
such as water shortages and high input costs undermined the agriculture
sector`s performance, whereas the less tangible factors such as uncertainty regarding decision on the
International Monetary Fund program for balance of payments support hampered
the overall business sentiment. During Jul-Mar FY19, fiscal deficit further
deteriorated while the current account gap relatively improved, its
sustainability remained a concern, said the SBP report. The cumulative fiscal
deficit during Jul-Mar stood at 5pc of the GDP, much higher than the deficit of
4.3pc recorded in the same period last year. On the expenditure front,
cumulative growth stood at 8pc during Jul-Mar FY19, against 16pc last year. The
report said the consumer price index (CPI) inflation averaging at 6.8pc in the
first nine months of the last fiscal year was well above 6pc-target set by the
government. The higher-than-expected inflation ensured broad-based economic
pressures as 72pc of the items within the CPI basket recorded inflation of more
than the 6pc, whereas 31.5pc posted double-digit inflation. `While the realized bilateral inflows from
friendly countries did provide some support to foreign exchange reserves, its
adequacy is still below the three month of import coverage and the overall
balance of payments position remained weal(,` said the report. Fiscal
indicators have continued to deteriorate during the period under review despite
steep cuts in development expenditures by 34pc, said the report. The interest
rate hikes and exchange rate depreciations accentuated the rigidities in the
current expenditures. Making things worse, revenue mobilization remained weak
due to stagnant tax revenues and steep fall in non-tax revenues.
9. CPEC go slow:
July, 16,2019: The next phase of CPEC was supposed to
have been under way by now, with large Special Economic Zones being opened up
and Chinese investors invited to acquire stakes, either via joint ventures,
public-private partnerships or direct foreign investment, in various sectors of
the economy. All the movement on CPEC that has been seen thus far — power
plants, the Gwadar port and some road projects — were only the ‘early harvest’
phase. The real game in CPEC was always about preparing the landscape in
Pakistan to absorb large quantities of Chinese investments in diverse sectors,
ranging from electronic appliances to cement, automobiles, metals and mining —
with a special focus on agriculture. The sweeping vision laid down in the
Long-Term Plan was an indication of what is to come. But it
seems that at least two years have been wasted — there has been a prolonged
period of political uncertainty, and failure on the part of the PTI government
to find a decisive path forward regarding CPEC. Construction of the SEZs is
only a part of what needs to be done to move ahead with the project. Arranging
infrastructure within these zones, together with ensuring connectivity to the
ports and cities, the supply of gas, water and power, labor and a residential
environment for those who are supposed to live and work within these SEZs is a
sprawling task. The latter requires a concerted effort by the federal
government and effective coordination with provincial authorities. In
agricultural investment, the policy environment needs equally decisive reforms
to facilitate the entry of foreign investment. The state of limbo that the
entire enterprise is mired in was underscored at a recent meeting between the
highest levels of the Pakistani government and a large delegation of Chinese
investors, led by the Chinese ambassador to Pakistan, in which they spoke of a
possible $5bn investment in Pakistan under the CPEC framework. Much work
remains to be done before that potential can be realized, though, and it seems
that one of the purposes of the meeting is to build upon the interactions that
Prime Minister Imran Khan had during his last visit to Beijing. It is time for
the PTI government to make up its mind, and resolve whatever tensions it has
with the proposed CPEC investments; it should either move the enterprise
forward in a clear direction, or scrap it altogether. The state of limbo needs
to end.
10. Dasu land acquisition: July, 16, 2019: The federal government on Monday conditionally approved
an upward revision of the cost of Dasu hydropower project to Rs511 billion
aimed at removing bottlenecks in the land acquisition process that has delayed
the construction of 2,160 megawatts power project. The upward revision has
primarily been made in the land acquisition component, where the cost is
conditionally approved to increase from Rs12 billion to Rs39.6 billion –a jump
of Rs27.6 billion or 230 The locals
have demanded semi-urban property rates as against approved rural category
rates. The Commissioner of the Hazara division had recommended that either the
locals’ demands be met or the land may be acquired through use of force. The
Ecnec also approved the project for the evacuation of Power from 2,160 MW Dasu
hydropower to Islamabad via Mansehra at a revised cost of 90.8 billion. The
meeting was informed that the changes in the cost of the project occurred due
to changes in the exchange rate.
11. Balakot Hydropower plant: July, 16, 2019: The Ecnec
approved the engineering procurement and construction of the Balakot Hydropower
project, Manshera, Khyber Pakhtunkhwa at the updated cost of 85.9 billion. The
project will be sponsored and executed by Energy and Power Department of the
Khyber Pakhtunkhwa government. The financing for the project will be obtained
from the Asian Development Bank (80%) and the rest (20%) from Annual
Development Plan (ADP) of the provincial government. The chair directed for
forming a committee to look into the matter of filing a petition to the
National Electric Power Regulatory Authority (Nepra) for reference tariff for
public sector power projects at EPC as well as COD stage.
12. Economy: July, 19,
2019: Just before this
agreement, the government was taking the line that they have put in place some
measures to stimulate investment through the mini budget of January 2019, and
encourage exports, through depreciation, subsidised lending, and most
importantly, a large subsidy on gas pricing. The message continued that due to
these steps, the economy was now recovering, and evidence of this was the
modest growth seen in an indicator known as private sector credit (PSC) off
take. But then came a State Bank report saying that the rising PSC is largely
due to a hike in prices and depreciation Today, the State Bank has once again said
what it was saying back then, that the PSC was elevated earlier because “the
increase in PSC was largely driven by higher input prices, which in turn
increased the working capital needs of the businesses”. And to top it off, the
PSC is now decelerating, so even if we use it as “a leading indicator of
greater economic activity”, in the words of the finance ministry, (which it
cannot be if it is rising due to “higher input costs” of firms), it would imply
that the moment of revival of business confidence that the finance ministry
sought to celebrate back in March had fizzled out by July. Today, the PSC is
falling in a rising cost environment, which indicates that business activity is
slowing down sharply. Since July 1, several sectors have seen shutdowns and
announced deceleration in output. If the currency markets had stabilised back
in March, how do we explain the devaluations that came subsequently? If stock
market performance was a sign of renewed business confidence, what do we say
today, when the market has fallen to near 2015 levels? If participation in
long-term paper is a sign of “renewed business confidence”, what do we make of
the inversion in the yield curve that came in the May auctions? As of writing
this, the government has lifted Rs2.3 trillion in short-term Treasury bills, at
cut-off yields of 13.75pc, 13.95pc and 14.1pc in three-month, six-month and
one-year paper respectively. These are stupendous yields, up by more than 2pc
since March in three-month paper. This is what it has taken to activate the
government debt markets that had lain dormant for more than a year. This is the
highest participation in a long time, and the banks’ long wait for rates to
come up to their liking has paid off. “The sizable decline in machinery imports
following the conclusion of early phase of CPEC, lower quantum energy imports
(excluding LNG) amid lower power generation in Q2 and Q3, and a temporary
softening in global oil prices, all contributed significantly to improvement in
the CAD by lowering of import payments.” Translation: the current account
deficit decline has very little to do with the government’s policies.
13.
Power
sector: July, 24, 2019: The Senate committee was
informed that hydropower stations were currently producing about 7,602MW
against an installed capacity of about 9,77MW, including about 382MW in the
private sector. The average daily generation is estimated to be 5,191MW of
WAPDA and 252MW of independent power producers. Some tunnels at Tarbela Dam
faced problems about a year ago and hence some of its additional units were
turned off for maintenance work, resulting in decreased capacity from some
units. Tarbela`s fourth extension had been repaired now. one of the major
transformers of the Mangla Power Generation System had been out of order for
six months and the country was losing around 400-500MW of cheap electricity
14.
Theft: July, 24, 2019: public sector distribution companies (Discos)
were now following the KE model in the rest of the country and slowly the
system was changing to ABC transformers. AMI system was not a practical
solution in areas where theft was taking place through kundas, rather it was
effective in areas with theft through meters. AMI was a successful model
against electricity theft in Punjab while ABC cabling was a better idea for
Discos of Hyderabad, Sukkur and Quetta . Most of the electricity theft in the
country was taking place not through meters but through direct cables bypassing
meters and it could be addressed with the help of ABC system.
15. Industrial decline:
July, 26, 2019: The large-scale manufacturing (LSM)
sector shrank 3.78 per cent during May from a year ago, the Pakistan Bureau of
Statistics (PBS) reported on Wednesday. The contraction came amid dismal performance in the fertiliser,
leather, pharmaceutical, and chemical sectors raising fears of large-scale
layoffs in the industrial sector. On
a year-on-year basis, the LSM dipped by 3.5pc during the first 11 months
(July-May) of this fiscal year — falling far behind the 8.1pc target set for
the government for FY2018-19. The lacklustre performance in the industrial
sector shows the economy is likely to slow down further despite government
expectations for the GDP growth to clock in at 3.3pc in FY2018-19
1.
Economic
Survey Of Pakistan: Jun, 9,2019: Pakistan`s economic growth in
the financial year ending in June is expected to hit 3.3 per cent, well below
the target of 6.3pc set by the previous government It indicates that livestock is the only
sector whose growth went slightly above the official target while all other
sectors performed below expectation. A sharp decline was witnessed in the
industrial sector that registered a growth of 1.4pc against the target of 7.6pc
despite the fact that power generation witnessed an increase as several power plants
and other power sector projects were completed. Also, the manufacturing sector
slid by 0.3pc and the large scale manufacturing (LSM) showed a negative growth
of 2pc against the target 8.1pc.The service sector grew by 4.7pc against the
target of 6.5pc, while the construction sector achieved the growth of 7.6pc
against a 10pc target. Delays in making key policy decisions by the government,
including the one about going to the International Monetary Fund (IMF) for a
bailout package and those related to the construction and industrial sectors,
created confusions among investors, experts believed As the agriculture sector
grew by only 0.8pc against a 3.8pc target, the massive decline was mainly
attributed to unfavorable weather conditions. Pakistan will miss the target of
25.8 million tonnes of wheat produce this year because of untimely rains and
storms. Similarly, the drought-like situation in some areas of Sindh and
Balochistan,too, had an impact on the overall agriculture sector, the official
added. Cotton output dropped by 12.7pc against 9.86 million bales in 2018-19
due to shortage of irrigation water, use of low quality inputs such as inferior
seed and fertilizers at the early stage of the crop and reduction of 12pc in
sown area. Rice crop, too, decreased by 3.3pc, sugarcane by 19.4pc against the
last year`s production, while low water availability led to 3.1pc and 17.9pc
reduction in the sown area for rice and sugarcane, respectively
2.
CPEC Phase II: June, 10,2019: Chinese Ambassador Yao Jing says that inconsistent trade policies, high
ratio of taxes and some other issues are reasons for the presence of fewer
Chinese investors in Pakistan.“The main reasons behind fewer Chinese investors in Pakistan are
poor trade policies, high taxes, no tax incentives and lack of
business-friendly environment,” a local news channel quoted the ambassador as
having said while speaking to businessmen at the Lahore Chamber of Commerce and
Industry (LCCI) on Wednesday.“Your policies lack consistency, keeping investors
from China and elsewhere at bay,” he responded when the business community
asked why Chinese companies, after relocating their businesses from the United
States, were preferring investment in other countries, including Cambodia and
India, instead of Pakistan that was already executing several projects under
the China-Pakistan Economic Corridor The Chinese envoy said Pakistan was
required to make its trade policies better, besides bringing down ratio of
taxes and duties and making its products competitive. “Improvement of
competitiveness will help your country make trade balanced.”
3.
Former
NEPRA Chief arrested: June, 11, 2019: The National Accountability Bureau (NAB),
Lahore on Monday arrested former National Electric Power Regulatory Authority
(Nepra) Director General (DG) Syed Insaf Ahmed over allegations of misuse of
authority and corruption the accused misused his authority by facilitating the
grant of undue benefits through corrupt and dishonest means to Nishat Chunian
Power Limited (NCPL) to the tune of Rs8.3 billion. As per details, the accused
was designated by NEPRA for determination of electricity tariff proposed by
NCPL in 2007. Moreover, the accused had also worked as director tariff, NEPRA
and later as NEPRA director general tariff during the same period. The accused
willfully facilitated the false cost estimates submitted by NCPL as the same
did not check the veracity of proposal given by NCPL. It has also been
transpired that the accused did not highlight the exorbitant rates requested by
NCPL at the required forums. Thus, the accused in connivance with other
co-accused persons caused a collateral loss worth Rs 8.3 billion to the
government kitty in the wake of electricity tariff adjustment.
4.
Dollar Rupee parity: June, 15, 2019: The value of the US dollar against
the rupee touched another all-time high for the second consecutive day,
reaching Rs156.80 in the interbank market after an increase of Rs2.80 on Friday.
5.
ADB: June, 18, 2019: Asian Development Bank (ADB) on Sunday
distanced itself from a Pakistan government announcement about provision of
$3.4 billion budgetary support by the Manila-based lending agency. On Saturday, two senior
members of the government had announced that the ADB would provide $3.4bn
budgetary support to Pakistan to help the latter implement its economic reforms
and stabilisation. Dr Shaikh had said the ADB would provide $3.4bn in budgetary
support to Pakistan after he had a meeting with Werner Liepach, the ADB
director general. He said the meeting had agreed on an ADB program. “The ADB
will provide $3.4bn in budgetary support to help with reforms and stabilisation
of the economy.” However, the ADB’s country office in issued a statement distancing itself from the
government’s pronouncement .In its statement, the ADB confirmed the meetings
with the government members and discussions on loans. “These discussions are
ongoing and details of the plans as well as the volume of ADB’s financial
support, once finalised, will be contingent upon the approval of ADB management
and its Board of Directors,” said ADB’s Country Director for Pakistan Xiaohong
Yang in the statement.
6.
Ethanol: June, 21, 2019: The introduction of compressed natural gas
(CNG) for vehicles during the early 1980s and subsequent commercialization of
CNG as an alternative motor fuel in 1992 is a prime example of what can be
achieved with perseverance. In addition to the economical advantages of using
CNG, we also managed to reduce the carbon footprint by using a more
environment-friendly fuel mix. The Brazilian model to produce ethanol from
sugarcane is very close to what can be easily adopted in Pakistan on a national
scale and is more economical than the one used in the US. In this Brazilian
model, there is an option to either produce ethanol directly from sugarcane
juice or convert it into sugar and molasses and then further distillate
molasses into ethanol. However, the success of the Brazilian model is not just
based on government incentives to farmers and better ethanol yield but also on
the establishment of a whole ecosystem of efficient supply chain that brings
sustainable growth Pakistan, which is the fifth largest sugarcane producer in
the world with production levels of around 70-80 million tons. Sugarcane is
mostly utilised by 90 sugar mills spread across the country to produce sugar as
the main product while selling molasses and bagasse as byproducts. Few of the
mills have installed distillation facility either integrated with the main
plant or associated with it with the added advantage to convert molasses into
ethanol and industrial alcohol. As far as the raw material to produce bio-fuel
is concerned, the government has already set the sugarcane support price at
Rs180 per 40kg, which incentivizes the farmers to grow the crop. However, there
are some issues of lower yield due to loss of sucrose content as a result of
delay in the start of crushing season. The main reason for this delay is
usually the tussle between the politically influential mill owners and the
farmers to get a better deal. These issues must be resolved to ensure timely
commencement of crushing season to optimize the recovery of ethanol. Currently, the ethanol is mostly exported but the
government can roll out a favorable policy to bring a green revolution by
introducing the hybrid fuel. At first, a minimum of 10% ethanol blending
(normally referred to as E10 globally) can be introduced at the filling station.
Although most cars on road these days can handle E10 easily, strict quality
control is needed to minimise water content as ethanol is prone to absorb
water, which may lead to internal corrosion. The establishment of a sustainable
blended fuel ecosystem requires all stakeholders from distilleries, to
refineries to oil marketing companies to be on board and the Petroleum Division
has to take the lead to re-create the success story of CNG revolution.
7. IMF conditions: June, 22, 2019: Umar said there were five main conditions of the IMF deal. These were electricity prices, gas prices, tax rates, policy rate of the State Bank and rupee valuation.
8.
9.
Industrial decline and IMF: June, 22, 2019: Low and low-
middle-income countries (L/LMICs), like Pakistan, seek IMF assistance due to
balance-of-payment deficits and declining foreign currency reserves. Trade
deficits are often the result of aggressive import
liberalization pushed by the World Trade Organization agreements. The IMF is an
enforcer of this liberalization on countries unfortunate enough to need a
bailout. It has pushed import liberalization far in excess of the commitments
Pakistan made to the WTO. Pakistan was turned into a consumer society before it
learnt to truly produce. Production has been hampered by the crony capitalism
introduced in the 1960s, a problem that still needs to be addressed. The IMF
insists on market-determined interest rates. No interest rate in any country is
entirely market-determined; the central bank plays a major role in determining
it. One prior action for Pakistan’s current bailout package is a much higher
interest rate. This guarantees that the debt crisis will worsen since the
government will borrow domestically at high interest rates to address the
fiscal deficit problem. As the debt mounts the interest cost will make IMF
fiscal targets difficult to meet. Another reason fiscal targets are difficult
to meet is because import liberalisation means lower tariff revenue. As one
might expect, in Pakistan’s case, there has been a steady decline in tariff
revenue as a percentage of total government revenue. High interest rates in
LICs, however, create opportunities for global finance. The balance-of-payment deficits resulting from import
liberalization also results in a vulnerable currency. Governments think the
public will correctly regard currency devaluation as economic failure so they
use up foreign currency reserves to bolster it. An overvalued currency is subject
to speculative attacks, partly in the form of capital outflows (another IMF
condition though recently somewhat relaxed). The IMF has required a large
devaluation as a prior action to address the overvaluation. The ostensible
justification for the devaluation is that it will encourage exports because it
will be cheaper for the rest of the world to buy from Pakistan. However, many
factors, other than domestic prices (such as world income, business networking,
and political alliances) determine exports. While import liberalization results
in increased imports, higher local business costs due to higher interest rates,
utility, taxes, and other input costs impede exports. The devaluation causes
import costs of machinery and intermediate goods to rise in local currency
terms. The devaluation is also potentially inflationary (undermining IMF’s
inflation target) due to a rise in import costs. Finally, the devaluation
increases the costs of repaying the foreign debt. The devaluation does,
however, create an opportunity for MNCs to buy local assets, which are now
cheaper in foreign currency terms. The net effect for the local economy of IMF
prior actions and conditions is setting the stage for another
balance-of-payment, fiscal and monetary crisis, another bailout package, and a
continued IMF straitjacket. A more important reason to be wary of IMF and its
partner organizations (like the World Bank and Asian Development Bank) is that
they serve the interests of their high-income country paymasters. In turn, HIC
governments are captured by global capital. Another priority for the IMF is
repayment, which is why it has pushed for privatising even public utilities,
such as Wapda, if it deems they are a drain on the budget. Economists view
public utilities as natural monopolies and hence part of public provision
because the market power that accompanies monopolies results in higher prices
for the consumer. Efficiency reforms and finding better ways to subsidise
low-income consumers is the standard recommendation. Privatisation, however,
creates opportunities for MNCs. Another focus of the IMF and its partner
organisations are reforms of tax administration. There is little doubt that
efficient tax administration and broadening the tax base serve the national
interest. However, higher tax rates, even while Pakistan is reeling from a
declining per capita income in dollar terms, ensures repayment to the IMF and
partner organisations. After decades of social criticism, the very
sophisticated IMF public relations campaign has tried to persuade critics that
they have changed and that, in particular, they are poverty sensitive. A
comparison of prior actions and conditions from three decades ago and recent
programmes for Pakistan indicates no intrinsic change. There is no real
diagnosis since the conditions are based on ideology. Handouts for poverty
alleviation will not make up for the decline in living standards, resulting
from higher indirect taxes and inflation, which will follow Pakistan’s current
IMF bailout. IMF programmes negate authentic development based on undoing crony
capitalism, equity reforms and ecologically sensitive economic diversification.
Smart industrial policies can be part of this mix and they have been
successfully used by countries like South Korea and Taiwan. Indeed, they are
being used by the US and the EU. That notwithstanding, Pakistan has been warned
against using industrial policies in past IMF bailouts. Thus, Pakistan’s only
course to initiate development is building foreign currency reserves to avoid
the IMF. The IMF has been structurally adjusting Pakistan’s economy with 22
programs since 1959 and will continue to do so if given the opportunity.
10. Rupee fall continues: June,
28, 2019:
The value of the dollar on
Thursday slightly increased in the open market and the interbank market by
Re0.50 and Re0.20 respectively. The surprise
big devaluation of the local currency took place after declaration by the State
Bank of Pakistan governor that the exchange rate would be market-based and that
the free float was not suitable for the country’s economy.
Pakistan: Economy, Energy/Power Sector Update, May 2019:
1.
Mohmand Dam: May, 6,2019: Mohmand Dam is a promising project that will not only
generate electricity but will also store water to irrigate land .For the past
several years, Pakistan has been witnessing a series of floods which not only
resulted in loss of lives but also proved to be detrimental to the country’s
economy. At present, the total water storage capacity of the country is 14
million acre feet (MAF), whereas its annual consumption requirement stands at
117 MAF. Due to a lack of storage, as much as over 10 MAF of water goes into the
sea every year. The gross water-storage capacity of the project is 1.2 million
acre feet (MAF), and besides supplementing 160,000 acres of existing land, more
than 16,700 acres (6, 773 hectares) of new land will also be irrigated with the
help of the dam. In addition, the dam will provide 300 million gallons of
drinking water per day to Peshawar. And not only that, the Mohmand Dam is also
of immense importance as it is the only project that can save Peshawar,
Charsadda and Naushehra from devastating floods. The power-generation capacity
of the project stands at 800 megawatt (MW), and it will provide 2.86 billion
units of cheap
2. Growth potential; May,5,2019: At the end of the
five-year election period (of the PTI government), we may look at 5-6% or even
7% growth (in GDP),” said Asian Development Bank (ADB) Director General for
Central and West Asia Department Werner Liepach on the sidelines of the 52nd
ADB Annual Meeting “I see no reason why
Pakistan should not grow at the same pace as its neighbours as it is a very
dynamic region.” Pakistan posted a growth rate of 5.8% in the previous fiscal
year, which although was later officially revised downward to 5.2%, was the
highest growth rate in 13 years. Considering this, it is not far-fetched to
think that Pakistan may achieve growth of over 6%, but the challenge is in
maintaining that . The former country director said the business environment of
Pakistan is not really that conducive, considering the energy shortages,
unskilled labour issues, international agreements that give preferential access
to markets, at least at par with other countries. “A well-functioning export
finance system would be helpful, so there are a couple of things that need to
be addressed,” he remarked. Even after a massive devaluation of the Pakistani
rupee against the greenback by 33% since December 2017, exports have seen only
a flat growth so far, which does not even make up 0.1% of the export growth.
Liepach said, “You have to pay a lot
of taxes on your imports, which of course hampers the export competitiveness as
well. It is naïve to say exports will go up because of the exchange rate, as it
is not one dimensional
3.
Circular Debt; May, 7, 2019:
Circular debt, which increased by Rs450 billion during 2017-18, would be
eliminated by next year; Prime Minister was informed on Monday. Circular debt,
caused by debt piled up due to electricity leakages, theft and low recovery of
bills from many state-owned offices, schools, police stations, mosques,
monuments and others, has crossed the Rs1.4 trillion mark. The meeting was
informed that circular debt would be brought down to Rs293 billion during the
current year and to Rs96 billion by 2019-20. It was told that the ministry’s
drive to curb power theft and recovery of dues had brought in positive
outcomes. Within four months, the additional power dues worth Rs48 billion had
been recovered that would touch Rs80 billion mark by year end and Rs190 billion
till June 2020. The prime minister was told that the special focus given to
handling the losses caused by theft, technical and transmission issues was
coming to fruition. As a step to curb power theft, 27,000 first information
reports (FIR) had been registered against those involved, while 4,225 people
had been arrested including 433 officials of the power sector. Moreover,
another 1,467 officials had been charge-sheeted.
4.
Deep sea drilling: May , 9,2019: At last the drilling at Kekra-1 well in G-bloc, Pakistan’s ultra-deep
sea has begun after a long pause of over almost 23 days and entered the final
phase by reaching the depth of 5,148 meters and will reach at the required
depth of 5,460 meters within days The joint venture headed by
ENI is operator comprising Exxon Mobile, OGDCL and PPL started the drilling on
January 13, 2019 at the cost of sunk money of $75 million, which has increased
to $90 million so far. When the drilling reaches the depth of 5,460 meters, the
official said, the operator will likely do wire line logging which could take
another three or four days. This will likely be followed by another casing and
cementing exercise that can take four to six days. At this stage a substantial
amount of information regarding the well prospects will be known, however, the
results (discovery or dry well) will require completion of proper testing.
Spokesman for the Petroleum Division Additional Secretary Sher Afgan confirmed
that the drilling has entered the final phase and reached the depth of 5,148
meters and only 312 meter is left to be spudded as it has to reach almost 5,500
meters. He said after reaching the required depth the operator will get the
specimen that will be sent to Italy for information if there is a reservoir of
oil and gas in the well or not. The last snag hit the drilling when the blowout
preventer (BOP) that prevents from any blow out or any kick pressure that can
result into eruption of fire, had gone out of order and its repair took some
days and then its testing took the reasonable time. Before it, the drilling
stopped on April 8 because of the cementation and casing continued owing to
which the drilling could not start. The
drilling was initiated with 19 percent probabilities, which, according to the
experts, get reduced when side tracking starts taking place. In Kekra-1 well
case, second side tracking was underway. Officials said when side tracking
process is initiated, this means that first plan of drilling was not well
worked out.
5.
Market
woes: May, 9, 2019: Bears returned to the stock market in a big
way on Wednesday as the KSE-100 index plunged over 700 points in intra-day
trading and slipped below the 35,000-point mark before recovering partially by
the day’s end. A likely tough International Monetary Fund (IMF) bailout sparked
uncertainty at the bourse and investors resorted to panic selling and offloaded
stocks, which pushed the market deep in the red. Besides, there was also talk
of the possibility of delay in budget presentation as authorities were undecided
about finalizing the name for the Federal Board of Revenue (FBR) chairman
Moreover, there were rumors of making the currency market free from state
control, which may not suit Pakistan as it had low foreign exchange reserves,
he said.“We foresee the market bottoming out near 34,000 points,” he added.
“The market may see renewed buying around the current low levels.”
6. Tube well
solar conversion: May, 10, 2019: KP government on Saturday signed a
memorandum of understanding (MoU) with a Chinese engineering company; the
Chinese engineering company would convert at least 800 tube wells to solar
power and would assist in seven other projects in the province. The projects
were part of the multi billion dollars China Pakistan Economic Corridor’s
(CPEC) social economic development sector
7.
Economy
forecast :May , 10, 2019: Pakistan`s economy suffered a major setback
with all key sectors failing to perform according to expectations resulting in
just 3.3 per cent economic growth rate, significantly short of 6.2pc growth
target for the year 2018-19. Growth of agricultural, industrial and services
sectors is 0.85pc, 1.4pc and 4.7pc respectively the provisional growth of GDP
for the year 201819 has been estimated at 3.3 pc`. Agriculture sector. As per the available data, the crop sector
faced the consequences of acute water shortages during the first half of the
2018 and thus only wheat depicted positive growth of 0.5pc and cotton, rice and
sugarcane witnessed negative growth at -17.5pc, -3.3pc, and -19.4pc,
respectively. Other crops (such as onion, tomatoes and fruits) showed growth of
1.95pc mainly because of increase in production of pulses and oil seeds.
Livestock sector registered a growth of 4pc whereas forestry has grown at 6.5pc
due to increase in production of timber. Agriculture sector is targeted to grow
by 3.8 percent on the basis of expected contributions of Important Crops (3pc),
other crops(3.5pc), cotton ginned (8.9pc), livestock(3.8 pc), fisheries(1.8
pc)and forestry (8.5 pc). All these targets were missed except the one related
to livestock. The overall industrial sector
on the other hand showed an increase of 1.4pc. The mining and quarrying sector
declined by 1.96pc. The large scale manufacturing (LSM) sector, which is driven
primarily by QIM data (from July 2018 to February 2019), showed a contraction
of 2.1pc. Electricity and gas sub-sector has grown by 40.5pc mainly due to
better performance of Wapda and distribution companies and IPPs. The
construction activity has decreased by 7.6pc. Services sector remained major
contributor to economic growth as its value added increased by 4.7pc. Within services sector, wholesale and retail
trade sector grew by 3.1pc whereas transport, storage and communication sector
has registered a growth of 3.3pc. Finance and insurance sector shows an overall
increase of 5.1pc on account of positive contributions from scheduled banks
(5.3pc), non-schedule banks (24.6pc) and insurance activities (12.8pc) despite
decline in central banking by 12.5pc. General
government services has grown by 7.99pc and other private services, a set
of computer related activities, education, health and social work, NGOs etc.
has contributed positively at 7.1pc.
8. Circular Debt: Tube well conversion to Solar: May, 10,
2019: The Baluchistan government has decided to switch tube-wells
installed in the fields in the province to the solar system. There are around
29,000 agriculture tube-wells running on electricity across the province. It
was decided that the geo-testing mechanism will be adopted for the verification
of tube-wells.
9.
Remittances:
May, 12, 2019: Remittances sent home by overseas
Pakistanis touched a six-month high at $1.78 billion in April 2019 ahead of the
start of the fasting month of Ramazan in early May and Eid festival. The
remittance inflows should have been around $1.85-1.9 billion in April Overseas
Pakistanis may have withheld the remittances anticipating that further rupee
depreciation was around the corner.”
Remittances in May
should come close to $2 billion because if there was any possibility of the
rupee depreciation, it would take place next month. Remittances have remained a
big source of foreign earnings for the government because these inflows assist
it in meeting foreign expenditures mainly on two important fronts – imports and
foreign debt repayment.
10.
Declining
industrial output: May, 13, 2019: The manufacturing sector`s
share in the annual national output or gross domestic product has been on the
decline since 2008 onwards. It dropped from a high of 14.8 per cent in 2008 to
12.1pc in 2018, implying a reduction in the relative significance of this
sector in the economy. The share of large-scale manufacturing during the same
period has dropped from 12.8pc to 9.7pc. The growth in the manufacturing sector
has slowed down since 2015 to an annualised average of 4.9pc compared with
10.5pc in Bangladesh and 8.1pc in India. Little wonder then that our share in
global exports has come down to 0.12pc from 0.16pc in 2003.On the other hand,
Bangladesh has increased its exports to 0.2pc from less than 0.1pc and Vietnam
to 1.2pc from 0.17pc. Investment as a percentage of GDP has also stagnated at
around 14pc compared with 31pc in rival India and Bangladesh, and 37pc in
Vietnam. The major factors are said to be the cost and tax frameworks for the
industry, which are not competitive regionally with countries having a similar
economic and industrial structure. The cost of energy for industry in Pakistan
remains one of the highest globally. The manufacturing sector that forms 12.1pc
of the economy pays 58pc of the total tax revenues collected. However,
many agree that one of the most
crucial reason behind premature de-industrialisation has been the
implementation of extremely liberal import policies and free trade agreements
(FTAs), especially with China that have led to the influx of cheaper finished
goods. Furthermore, the failure to secure the country`s
borders with Iran and Afghanistan has led to smuggling. These
factors indicate that Pakistan has become a net importer and a financier of
jobs for other countries. The local tyre industry, for example, meets only a
fifth of the total domestic demand with the remaining market dominated by
imported (45pc of the markets) and smuggled (35pc of the market) tyres. The
demand is increasing by 7-9pc a year, showing a huge potential for new
investment and jobs in this industry alone. Nevertheless, no foreign or local
investor is ready to venture into this segment because of the uneven playing
field that gives a massive advantage to smuggled and cheaper imported tyres.`Many
industries have shut down or moved out. The remaining struggle forsurvival in
the face of cheap imports and unchecked smuggling Unless demand for the locally manufactured
goods is enhanced through a cascading tariff structure that discourages
imported finished goods, and borders are secured, we do not see new investments
being made. Liberal imports and unchecked smuggling not only damages the
ability of the local industry to grow, develop and compete internationally, but
also causes massive dents to government revenue and leads to an outflow of hard
earned foreign exchange. A similar story is told by ceramic tile
manufacturers. `The government has failed to protect this industry against the
onslaught of smuggled tiles from Iran and dumping by China . China
continues to dump tiles into Pakistan despite imposition of antidumping duties
in October 2017 as the importers got a stay order from the Lahore High Court.
The Ministry of Commerce hasn`t even pursued the case at the expense of local
manufacturers and foreign exchange reserves.
11.
IMF bailout : May17,2019: Pakistan sealed a $6
billion bailout deal with the International Monetary Fund (IMF) last week .This
will be the IMF’s 13th structural adjustment program for Pakistan since 1988. A
key condition of the latest IMF program was to reduce the budget deficit by
meeting tax collection targets, which seemed to be difficult to achieve for
various political reasons. To bridge this gap, he observed, the cash-strapped
government would go for indirect taxes and raising utility tariffs, which would
directly impact the general public. Under the agreement, the government will no
longer control the value of the dollar against the rupee. Instead, it will be
dealt with by the open market. Also, the government will start
withdrawing exemptions
offered on various taxes amounting to around Rs350 billion in the 2019-20
budget Grappling with a colossal $18 billion current account deficit,
Islamabad’s current external debt stands at nearly $100 billion — the bulk of
it borrowed from the World Bank, IMF, Asian Development Bank, Islamic
Development Bank, the US, China, France and other
12.
Rupee falls,
economy falters : May,18,2019: The rupee, which lost 3.6
per cent on Thursday to close at 146.2 against the US dollar in the interbank
market, dropped further on Friday, dealers said, selling at Rs149.50 in the
interbank market and Rs150 in the open market. The fall reflects the IMF's condition
for a “market-based exchange rate mechanism, which will see limited
intervention by the central bank now,”
The stock market also declined on Friday, with the benchmark KSE-100
index shedding 804.5 points to close at 33,166.6, down 2.4 per cent. That pointed to less support from the State
Bank of Pakistan, which at present underpins the rupee in a de facto managed
float system. Late on Thursday, the SBP issued a statement saying the sharp
fall in the rupee “reflects demand and supply conditions in the foreign
exchange market” and would help in correcting market imbalances. The SBP, which
is due to announce its latest interest rate decision on Monday, said late on
Thursday that its foreign exchange reserves fell $138 million in the week
ending May 10 to $8.846 billion, less than needed to cover three months of
imports.
13. Offshore
drilling: May, 19.2019: Offshore drilling at
the Kekra-1 site near Karachi has found no reserves of oil and gas,"ExxonMobil,
ENI, PPL and OGDC were conducting the drill at Kekra-1. More than
5,500-metre-deep drilling was conducted but oil and gas reserves were not
found. The drilling work has now been abandoned. The cost of the drill was
estimated at Rs15 billion
14.
Fiscal deficit:
May,23,2019: The details of fiscal operations released by the ministry of
finance on Tuesday put the country’s nine-month total fiscal deficit at Rs1.922
trillion — the highest 3rd quarter deficit recorded in a decade, which is the
time period for which data is maintained on the ministry’s website. It was
Rs1.48tr in the same period last year. All major fiscal indicators — both on
expenditure and revenue side — showed a marked deterioration across the board.
There appeared to be no control on runaway expenditures as revenue collection turned
flat. The dismal outturn in the data will put more pressure on the government
to show a strengthened revenue mobilization effort, as well as a stronger will
to contain expenditures in the budget that is expected to be announced in early
June. The highest full year fiscal deficit since 2000 was recorded at 8pc in
fiscal year 2012-13 and even that year, nine-month gap between revenue and
expenditure had amounted to 4.4pc of GDP, according to the ministry of finance
data
15.
BoI Chairman: May, 23, 2019:
Board of Investment (BoI) chairman Haroon Sharif, tendered his resignation on Wednesday. Later
in the day reports emerged that Secretary Finance Younus Dagha is also likely
to be replaced within days. Mr Dagha
had developed differences with Adviser to PM on Finance Hafeez Shaikh over the
negotiations with the IMF. “Dagha felt that the adviser had negotiated a bad
deal for Pakistan,” the source says. The differences emerged in the last round
of meetings with the IMF. “The
team led by former finance minister Asad Umar, of which Dagha was an important
part, had softened the IMF program in
significant ways,” the source claims. Shaikh wanted the program to be “front
loaded”, meaning most of the difficult reforms to be done upfront rather than
lagged out over a period of time. This is what created differences between
them, reaching to a point where Dagha did not participate in the last few
rounds with the IMF before the programme was finalised. Asad Umer did make mistakes, he
dithered, but he was only partly to blame for the mistake, but replacing him
when he was replaced was a much bigger mistake. Asad Umer has promised to point
out the differences between the deal he had almost finalized and the deal
presently being executed. We now went for a "shock' this is a mistake.
16.
State Bank of Pakistan: Available economic
indicators suggest that macroeconomic adjustments have started moderating
aggregate demand in the country. The slowdown has been driven largely by
consumer durables and construction allied industries. Consequently, large scale
manufacturing (LSM) has contracted by 1.5 percent during H1-FY19 compared to
YoY growth of 6.6 percent in H1-FY18. Furthermore, the contraction is more
pronounced in Q2-FY19 (2.4 percent) as compared to Q1-FY19 (0.6 percent).The agriculture
sector continued to face issues regarding shortage of water, higher fertilizer
prices and decline in output of major kharif crops. These developments in the
industrial and agriculture sectors are impacting the services sector as well;
however, the actual position would be available towards the end of FY19 as
relevant data becomes available. Several factors contributed to the slowdown in
LSM during H1-FY19. Last year, (i) CPEC related activities, (ii) higher PSDP
expenditure, (iii) private sector construction activities and (iv) consumer
spending had strengthened the industrial performance. However, during H1-FY19,
a contraction in the former two and slowdown in the latter two resulted in
lower output. 1 This was more noticeable in case of construction-allied
industries. Demand for housing moderated as the price of building materials and
cost of financing increased. Moreover, additional tax measures further
constricted the real estate market. Certain sector-specific issues also
contributed to the decline in LSM. Automobile prices witnessed multiple upward
revisions during H1-FY19 due to PKR depreciation. As the induced economic
slowdown to curtail domestic demand started to take effect, price-sensitive
potential buyers refrained from making purchases, especially those of durables.
In addition, certain restrictions on income tax non-filers with respect to
purchase of cars further dampened the automobile demand. Pharmaceuticals is
another industry that suffered due to a considerable lag in regulatory adjustments
in prices. This pricing issue was in addition to weakening of the local
currency, which added to the distress of an import dependent sector (see Box
2.2). Similarly, lower sugarcane production and previous year’s inventories
dampened the prospects of the sugar industry. 1 PSDP, an important indicator of
construction activities, dipped sharply to Rs 328.2 billion in H1- FY19 from Rs
519.8 billion in H1-FY18. The State of Pakistan’s Economy 10 In the agriculture
sector, the production of crops posted a decline during this kharif season.
More specifically, compared to last year, there has been a reduction of 1.1
million bales for cotton, 13 million tons for sugarcane, and 0.3 million tons
for rice respectively. While demand management policies affected manufacturing
activities, agriculture was faced with sector specific issues. Scarcity of
water remained the main challenge, resulting in decline in area under
cultivation of major crops.2 In addition to water shortages, higher fertilizer
and other input prices further complicated the situation during Q2-FY19. As a
result, the sowing of wheat (the only major crop of rabi season and the largest
crop of the year) has been constrained. The performance of livestock and minor
crops will be critical in determining the overall growth in the agriculture
sector for FY19. Historical data substantiates better growth in production of
minor crops when major crops are in distress. If this holds true, minor crops,
including fodder, are expected to perform better. This can be traced to
availability of more vacant area for cultivation and the conducive nature of
many minor crops to adapt well to water conservation practices. With
anticipation of better fodder production, lagged impact of initiatives by the
government3 and good credit off-take during H1-FY19, livestock is expected to
maintain its growth momentum during FY19. Weak performance of
commodity-producing sectors also tends to have a negative impact on the
services sector. On this note, the performance of segments like wholesale and
retail trade may suffer due to decline in production of kharif crops, and
slowdown in imports. Moreover, flagging economic activity has adverse
implications for segments like transport, storage and communication. During H1-
FY19, lower demand for commercial vehicles and lower POL sales to the transport
sector substantiates this case as well. 2.2 Agriculture Second estimates of
major kharif crops reinforce earlier assessment
17. Economic Crisis: May, 11, 2019: The Pakistani currency
suddenly weakened over one-rupee to Rs142.7 to the US dollar in the open market
on Friday as speculation mounted that Pakistan had agreed to let the rupee
depreciate further under a stringent International Monetary Fund (IMF) bailout
program . “There is
speculation the rupee will depreciate to 165-170 against the US dollar in the
inter-bank market as per IMF’s conditions,”
Exchange Companies Association of Pakistan (ECAP) Secretary General Zafar
Paracha said .Topline Research reported a couple of days ago that there were
chances that the rupee would weaken 13-17% to 160-165 to the greenback by
December 2019. The speculation has led people in need of dollars to buy the US
currency before it appreciates further. “Pilgrims who are about to perform
Umrah or going for Haj later seem to be major buyers of the foreign currency
these days,” Paracha said. . The All Sindh Saraf and Jewellers Association
announced on Friday an increase of Rs1,200 per tola (11.66 grammes) in the
price of gold that stood at Rs69,200. The increase in the gold price came in
the wake of rupee depreciation in the open market, an office-bearer of the
association stated. The KSE-100 index
extended its losses on Friday and shed 171 points as investors were wary of the
conditions in the new IMF loan program. Weak
investor sentiments coupled with expectations of a tough IMF bailout pushed the
market to trade below the 35,000-point level throughout the day. The bearish activity was also caused by economic
uncertainty after the National Accounts Committee anticipated a sharp slowdown
in economic growth to 3.3% in FY19 – the slowest pace in the past nine years.
18.
Renewable energy policy: May 14,
2019: the PTI government has come up with its
own renewable energy policy. Unarguably,
one of the most important ones has been the failure to come up with a
competitive bidding framework for renewable projects The National Electric
and Power Regulatory Authority requires the framework for auctioning rounds to
be developed in alignment with the NEPRA Competitive Bidding (Approval and
Procedures) Regulations 2014
Pakistan: Economy, Energy/Power Sector Update, April 2019:
1.
Increasing unemployment: Apr., 2, 2109: Distributing petty cash is not a solution. The country
needs to put its people back to work so that they may sustain their families
and deal with the rising cost of living. Some economists warn of the risks to
social order if rising unemployment fails to get the attention it deserves. To
signal to its constituents that it is cognisant of the growing economic
pressure on the public, the PTI government launched a poverty alleviation
program called ‘Ehsas’ (compassion) last week. It seeks to extend social
cover for the poor by marginally increasing monthly cash grants.It is clear
that as growth falters, the rupee loses value and inflation rises, the
readjustment and restructuring of the economy will entail economic pain.
The expected 2pc loss to the targeted GDP growth rate in the first
year of the PTI government is likely to increase the official unemployment rate
by the same proportion to contain it? The State Bank of Pakistan has, in its
second quarterly report for FY19, scaled down GDP growth expectations. Against
the original target of GDP growth at 6.2pc, the economy may now expand around
3.5pc. The population growth rate is 2.4pc.
To absorb the rising cost of business (more expensive raw material
imports because of rupee devaluation and a higher energy cost) and adjust to a
shrinking market (higher inflation, falling incomes and low family spend) they
have cut on their wage bill. New hiring has almost halted and people are
actually being laid-off in both manufacturing units and service-providing
companies. The MNCs have not touched their regular staff but chopped
contractual positions drastically, in some cases by as much as 80pc. Taking
advantage of serious stress in the job market the unaffected employers have
also resorted to enforcing pay cuts to build up their margins.
2.
Inflation:
Apr.,4,2019:
Inflation skyrocketed to a five-year high of 9.41% in March, throwing the
country into an era of stagflation that Pakistan’s top economist said would
throw four million more people into poverty and will leave one million more
people without jobs this year. The
Pakistan Bureau of Statistics (PBS) reported on Monday that the pace of increase
in prices of goods and services surged to 9.41% in March over a year ago. It
was the highest level since April 2014 when the Consumer Price Index based
inflation indicator had been recorded at 9.2%. Only in the month of March, the pace of inflation increased by 1.42% over
last month. With
inflation approaching double digits and economic growth rate slowing down to
below 3%, the country is trapped into stagflation the International Monetary
Fund (IMF) had predicted that inflation in Pakistan would hit 14%, asking
Islamabad to keep the real interest rates positive. The government is already
on that path, which is further complicating its problems. due to labour force expansion, this year 1.8
million more people would come in the market but at close to 3% economic growth
rate, one million people will be left without jobs. resultantly unemployment rate would surge to
7.5% to 8% by end of June.
3.
4. MONETARY
POLICY: Apr., 4,
2019: THE State Bank of Pakistan raised the key
policy discount rate by 50 basis points on Friday, citing
persistent inflationary pressures on the back of a high fiscal deficit, as well as continuing weaknesses on the external front
despite a narrowing of the current account deficit and billions of dollars of
bilateral inflows to shore up the reserves. The rate hike will undoubtedly serve as a drag on the economy,
which is already reeling under the weight of a severe contraction in the GDP
growth rate, as well as adversely hit the fiscal framework by raising the cost
of debt servicing for the government.
the pressures weighing on the economy, far from abating, are only
growing. With the current account deficit coming in at $8.8bn in the
eight-month period from July to February, it means foreign exchange reserves
are eroding at a rate of just above $1bn per month on average. Meanwhile, the
fiscal deficit has grown faster as revenue shortfalls multiply each month and
expenditures — particularly those that are security related — grow at the
fastest pace in many years. And the current account deficit has narrowed, while
exports have “remained flat” in dollar terms, as per the central bank.
Businesses are now choking on the fumes of the aggravated slowdown in the
economy that these vulnerabilities have brought about. They are borrowing more
but investing less. Serious maturity is needed at this time, and a completely
unsentimental view of the economy must be taken. Slogans and rhetoric will not
carry the country through; the tough choices that are looming ahead will
require deft politics to manage. It is time to buck up.
5.
ADB
Report: Apr., 3, 2019: The Asian Development Bank has forecast
Pakistan’s economic growth to decelerate to 3.9% in fiscal year 2019 following
a pronounced widening of the country’s balance of payments deficit in 2018 as “macroeconomic challenges continue and
despite steps to tighten fiscal and monetary policies to rein in high and
unsustainable twin deficits.” “For FY2018, ended 30 June 2018, the estimated
GDP growth rate [was] revised downward from earlier 5.8% to 5.2%. Growth
therefore slowed from 5.4% a year earlier. The growth decelerated despite
revived agriculture. The expansionary fiscal policy markedly widened the budget
and current account deficits and drained foreign exchange,” the report
observed.“Until macroeconomic imbalances are alleviated, the outlook is for slower
growth, higher inflation, pressure on the currency, and heavy external
financing needed to maintain even a minimal cushion of foreign exchange
reserves. Recurrent crises in the balance of payments require that firms become
more export competitive,” it added.The ADB report said inflation is expected to
rise sharply to average 7.5% in FY2019, driven up by continued heavy government
borrowing from the central bank, hikes to domestic gas and electricity tariffs,
further increases in regulatory duties on luxury imports, and the lagged impact
of currency depreciation by more than 10.7% since July 2018. Inflation will
remain elevated at 7.0% in FY2020, it added.The current account deficit is
expected to ease in FY2019 but will remain high at the equivalent of 5.0% of
GDP because of the large trade deficit. It will narrow further to 3.0% in
FY2020 with easing macroeconomic pressures on the external accounts.“Foreign
exchange reserves, under pressure, declined by $6.3 billion to $9.9 billion at
the end of FY2018, sufficient to finance less than 2 months of imports of goods
and services. These external pressures caused the Pakistan rupee to depreciate
by 11.7% against the US dollar from December 2017 to the end of June 2018, when
the exchange rate was PRs121 per $1,” the report continued.“Growth in tax
collection weakened from a robust 16.4% in the first half of FY2018 to only
2.7% a year later. The Federal Board of Revenue targets tax collection equal to
only 11.6% of GDP in FY2019, taking into account reduced sales taxes on major
petroleum products, drag on the collection of withholding tax from contracts,
contraction in general sales tax revenue as imports slow, and the overall
slowdown in the economy,” the bank stated.“Lower growth in industry mirrored
weaker growth in large-scale manufacturing, which is almost half of the sector,
from 5.4% in FY2017 to 5.0%, as well as a slowdown in construction despite a
strong revival in mining and quarrying.“Growth in services decelerated from
6.5% in FY2017 to 5.8% last year. Growth in agriculture accelerated, by
contrast, from 2.1% in FY2017 to 3.7% on an uptick in minor crops and cotton
ginning. On the demand side, growth in private consumption— which provides on
average 81% of GDP and was the largest contributor to growth in FY2018—found
support in low inflation and interest rates. The report added, “Remittances are
expected to revive—having already risen by 10% in the first 7 months of FY2019
over the same period of FY2018—as the Pakistan rupee depreciate further,
economic activity in the Middle-eastern oil exporting countries (major
destination of Pakistani migrants) holds broadly steady, and the government
takes measures to facilitate remittances through official channels.”
6. Growth
stunted: Apr., 8, 2019: Pakistan's economic
growth, after reaching an 11-year high of 5.8 per cent in FY18, is expected to
see a decline over the next two years, the World Bank has predicted. GDP
growth will decelerate to 3.4pc in fiscal year 2018-19 and further drop to
2.7pc in FY20 as fiscal and monetary policies are tightened to address
macroeconomic imbalances .while domestic demand is expected to contract as a
result of the policies, net exports will see a gradual increase. On the supply side, growth in the services
sector, which has been leading growth in the past, is projected to decline to
4.4pc in FY19 compared with 6.4pc in FY18. The agriculture and industrial
sectors will also experience a decline in growth in FY19 and FY20. It further
stated that inflation is "expected to rise to 7.1 per cent (average) in
FY19 and projected to reach 13.5 per cent in FY20 as a result of
further exchange rate depreciation pass-through". The report notes that
the country's trade deficit is forecasted to "remain elevated during FY19
but to narrow in FY20 and FY21 as the impacts of currency depreciation,
domestic demand compression, and other regulatory measures to curb imports set
in".It further states that the flow of remittances is likely to support
the current account balance next year. A more stable external environment will
also support a pick-up in economic activity starting from FY21."Pakistan's
growth must be driven by investment and productivity, which will put an end to
the boom and bust cycles that affect the country every few years “It is
entirely possible for Pakistan to transform its regulatory environment and
reduce the cost of doing business. On the revenue front, reforms to improve tax
administration and widen the tax base are critical,"
7.
State of Pakistani Economy: Apr., 11,
2019: Punjab Once
described as relatively better governed than the rest of Pakistan, the
country’s biggest and most powerful province has now
gone down the ladder.
Multilateral and donor agencies find it much harder to deal with a provincial
administration lacking leadership. Being under the constant scrutiny of the
National Accountability Bureau, the bureaucracy is not willing to put its neck
out and take responsibility for any decision that may land it in trouble. It’s
not much different in KP. The PTI government, which is serving its second term
in the province, is implicated in a deplorable
scandal involving
the metro bus project that was launched in 2017. The cost of the project that
is yet to be completed is nearly Rs70 billion. A recent report by an inspection
team has revealed massive mismanagement of funds and other flaws in the
project. To the anti-corruption crusaders, the scandal in their backyard does
not seem to bother them very much. That also reinforces allegations of a
politically driven accountability exercise against the opposition leaders.
Nothing quite puts into perspective the la-la land in which the Khan government
operates than the latest claim by the finance minister that the economy is out
of “intensive care” and on the path to recovery. “The crisis is over,” Asad
Umar declared before his departure to Washington for the final rounds
of talks with the IMF for a bailout package. This wildly
optimistic declaration came as inflation approached double digits, the rupee
plunged to a record
low against the dollar, and the stock market appeared in a state
of free fall. Revenue
collection has
shown a record shortfall of more than Rs300 billion in the last nine months.
And the economic growth rate is likely to decelerate
to 3.4 per cent
this financial year, and further down to 2.7pc next year, according to a World
Bank report. Given this state of affairs, the economy is certainly not out of
the woods as the finance minister has indicated.Part of the problem may be
attributed to the ‘pain of stabilisation’, but it is mostly to do with the
voodoo economics practised by the government and the state of uncertainty that
has been fuelled by its inaction. Domestic investment remains low for that
reason. There are few signs of any reforms being undertaken or incentive being
provided by the government that could spur investment. Massive cuts in the
development budget have also been a cause of slow economic growth. A high
inflation rate
combined with low economic growth could lead to stagflation with dire
consequences. Surely, the borrowing from friendly countries has helped avoid
default on the repayment of foreign loans, but it is short-term relief as new
debts continue to accumulate. The current account deficit will remain a major
problem, despite the finance minister’s claim of plugging the gap. Pakistan’s
external debt has crossed $100bn and is predicted to grow further. More
worrisome is the worsening unemployment problem because of the sluggish economy
and high population growth rate. The PTI’s promise to create five
million new jobs
seems far-fetched in this situation. Yet Faisal Vawda, the federal minister for
water resources, has announced that there will be such a spurt of employment
opportunities in the next couple of weeks that there will be more jobs than
people needing them.
8.
Assessment
of the economy: Apr.,12,2109: there
have recently been a slew of forecasts that say the economy is likely to slow
to less than 3.5 per cent GDP growth this year (from 5.8pc
last year), and next year will be even more difficult as it is expected to
contract further to 2.5pc or thereabouts. The World Bank has put these
projections out most recently, but the State Bank agrees (though they have not
put out any projection for next year at this stage), and the data that the
government and the IMF are dealing with during their talks says more or less the
same thing. Meanwhile,
inflation
is set to rise further for a few months, crossing 13pc, as per the World Bank,
before it stabilizes. The IMF and government projections show inflation to be
elevated all through next year as the period average (the sum of monthly CPI
readings for the year divided by 12) is expected to be higher than 13pc. The
period average for the current year is just above 8pc, so we’re looking at a
steep and sustained climb. . The State Bank said the process of
adjustment would continue, inflation data came in at a five-year high and the
revenue shortfall marched on. The government tried to tell us that the current
account deficit had narrowed (which it had from February onward), and more
recent trade data showed imports being constricted further. The external
picture has been stabilised, they are now trying to say. But it has not.
Exports are flat, and despite a massive devaluation, Rs26 billion worth of a
gas subsidy was given in January to “export-oriented sectors”, and much more.
In an emergency, you can choke imports and expenditures to preserve
foreign exchange reserves and cut the fiscal deficit. But these steps also choke growth. These measures are a little like
trying to lose weight by eating less. You will probably lose weight, but is
that really a healthy way to go? In the
next year, the IMF is asking the government to increase its
reserve assets by almost 50pc, and increase FBR tax collection by around Rs1.4
trillion, where the government is proposing Rs1.16tr. The current account
deficit, which the government has managed to reduce by around 1.5pc of GDP this
year, needs to be contracted by another 2.8pc of GDP (or thereabouts) next
year. These are the projections they were working with in the February
meetings. Asking the government to
raise additional tax revenue of almost Rs657bn in the first year of the program
, when growth is set to plummet further and the tax base has not been broadened
an iota and the business community is already reeling from an aggressive
‘recovery drive’ sounds next to
impossible. We are only at the
beginning of the adjustment, and it will take every ounce of our strength,
patience and skill to navigate through the days to come.
9.
IMF Package: Apr., 13, 2019: IMF on Friday
demanded the government to give State Bank authority of decisions regarding
dollar rate and make NEPRA, Oil and OGRA independent. The IMF while demanding
Pakistan for strict measures to increase tax income said that the target of tax
should be fixed at Rs5000 billion and
IMF further demanded the government to withdraw tax relaxation for the
working class. The tax relaxation should be brought down to Rs400,000 from
Rs1.2 million. The Fund further demanded to decrease electricity and gas
losses. About Rs140 billion outstanding
of the electricity and gas should be recovered from masses.
10. New FTA: Apr., 17, 2019: Advisor to Prime Minister on Commerce and Textile on Tuesday said that China has agreed to
offer Pakistan its market access similar to that offered to countries of
Association of South East Asian Nations (Asean) on Islamabad’s demand. The
Chinese government has also agreed to immediately reduce duties to zero percent
on 313 tariff lines. Pakistan and China
would sign the second phase of Free Trade Agreement (FTA) during the upcoming
visit of Prime Minister to Beijing
later this month He said that the second
phase of FTA fell into internal politics of China, as some of their Ministers
were not in favor to revise the trade agreement with Pakistan. However, Chinese
Prime Minister and Foreign Minister were in favor. However, the Chinese government
had accepted our main demand of giving market access similar to that offered to
countries of ASEAN .
11. Stock market: Apr., 18, 2019:
Bears dominated the stock market on Wednesday as the benchmark index nosedived
over 600 points in the wake of multiple negative triggers that encircled many
index-heavy sectors. Investor sentiments weakened in the market following
reports that approval of a new tax amnesty plan had been delayed amid
reservations by some cabinet members who believed that the scheme would spark
political and constitutional challenges for the government. At the end of
trading, the benchmark KSE 100-share Index recorded a decrease of 629.38
points, or 1.68%, to settle at 36,752.57. Arif Habib Limited, in its report,
stated that profit-booking at the bourse turned into panic selling, thanks to
the banking sector.
12.
Rain damage: Apr., 18,
2019:
Stormy weather prevailed in the province, claiming the life of a minor in
Lahore night. Meanwhile, standing wheat and gram crops were flattened to the
ground in the wake of torrential rain and hail storms.Standing wheat and gram crops, sown on millions of acres
in the district, have been flattened to the ground by the wind and rain while
in other areas, the ears of the wheat crops have broken away. As a result,
farmers are worried about the remaining crops that managed to survive the
tumultuous weather. They fear that the remaining crops will also be damaged as
the harvesting process has not yet begun. Typically around this time of year,
growers have harvested and packaged the crop to sell it onwards. Several
landlords stated that according to their estimates, the recent rains have
caused a significant financial loss while the wheat and gram crops have also
suffered irreparable damage. Further, mango and date orchards were also not
spared. Farmers say that the government should provide relief to growers from
the affected area. These damages with impact upon the projected economic growth rate for
the country.
13.
FM resignation: Apr., 19,
2019:
FMs resignation brings to an end a chaotic eight months during which the
Pakistan Tehreek-i-Insaf (PTI) government fuelled uncertainty at home and
abroad. Umar had his own faults and failures during this period, but the bigger
issue lay with the fact that he never seemed to have the trust of the prime
minister, whose backing is essential if a finance minister is to succeed in
pushing structural economic reforms. He inherited an economy facing an imminent
downturn. This had been predicted months before the elections. However, Umar’s
likelihood to succeed was low given that neither he nor Imran seemed to fully
grasp the seriousness of the issues until they came to power. The main
challenge was to stabilise the economy and bring certainty to the market, while
pushing through tough decisions during the first 100 days. The PTI failed
there, and every passing day meant that they owned more of the problem than
they should have had. Umar inherited a
difficult situation, but one cannot say it was an impossible one. Basically,
there was no direction as far as the economy is concerned, so even if it was a
difficult situation, it was mishandled. Umar, being finance minister, should
take the blame, but it would not be correct to put the entire blame on one
person. Imran
Khan should also accept responsibility because it’s the prime minister who
should have given him guidance. . When he established the
so-called Economic Advisory Council, there were some good people on it
initially, but under pressure, Imran removed some of them, for example Atif
Mian, who is one of the best-known economists in the world. I think after that,
nobody was prepared to work with Imran and his government. It says a lot about
the way Imran is running this government. He had ample opportunity to improve
not just the performance of the finance ministry but also other ministries. Everybody’s now criticizing Umar, but it is the
prime minister who should be questioned about his decisions and vision; he does
not have any. , it is
clear that he and PTI generally, have failed on a key task: controlling the
narrative. When you need the sort of deep-cutting economic reform we are
facing, resistance and outcry are a given. The government needs to articulate
for the public precisely what is needed, present a plan and sequence of
actions, and inform us of the misdirection of the past.
14.
RE: Apr., 22,
2019: Sindh and Khyber Pakhtunkhwa
have protested and asked to reverse the CCoE decisions negatively
affecting development of renewable energy sources an over $3 billion
investments. The protest is based on the CCoE decisions conveyed to the
provinces on March 29 to discontinue with the Renewable Energy Policy of 2006
and its replacement with the yet-to-be approved RE Policy 2019. “Sindh would
suffer the most from this decision as its 53 projects of 3,425MW — 28 wind
projects of 1,875MW and 25 solar projects of 1,550MW — have been axed from the
active list, depriving the province and the country of foreign direct
investment of $2.3bn and loss of investors’ time of three years The government of KP is concerned that the
2019 CCoE decision will, albeit inadvertently, not only jeopardise existing
committed investment but also discourage further investment in the province,
including the merged districts,” he wrote.
The Sindh chief minister explained that the CCoE decided that all the renewable
energy projects that had already been issued letter of intent (LoI) but had not
received a tariff from the power regulator would be dealt with the RE Policy
2019 and shall be allowed to proceed ahead through competitive bidding. He said
the Centre had neither issued any new RE policy nor any such draft was shared
with the provinces and there existed no legal framework for competitive
bidding. “The controversial decision would not only ruin the efforts of the
provincial government for the development of renewable energy in the country but
also shatter the confidence of sponsors of those projects who, after lengthy
and cumbersome process, achieved several interconnected critical milestones and
were hopeful of grant of tariff from Nepra and issuance of letters of support
(LoS) from Alternative Energy Development Board (AEDB). Practically, the
affected sponsors are back to square one.”
The CCoE’s revised policy directives required that all future RE
investments will have to be dealt with under the RE Policy 2019 which will
clearly enunciate a framework consistent with current international market
norms and greater consumer benefits. Also, any resource risk linked to RE
projects currently in pipeline under the RE Policy 2006 and which conform to
Nepra’s decisions taken in various tariff determinations dealing with such
projects (resource risk for wind, solar and hydel) will be henceforth borne by
the seller. It also held that all processing of the subject projects would be
linked with the date of grid interconnectivity as provided and confirmed by the
National Transmission and Dispatch Company (NTDC) while projects given LoS by
the AEDB would be permitted to proceed towards the achievement of their
requisite milestones as per the RE Policy 2006. However, if more than one year
has elapsed since determination of tariff by Nepra, the said tariff would be
reviewed by Nepra to bring them in line with the prevailing market conditions
and rationalisation of cost keeping in view the consumer interest. All projects
that have been issued LoIs and granted tariff by Nepra and issued a generation
licence will be allowed to proceed towards the achievement of their requisite
milestones as per the RE Policy 2006. However, if the tariff validity period
has elapsed, Nepra will be requested for review of the same to make it
consistent with the current market environment and consumer interest. In all
these projects, grid connectivity date will have to be approved by the NTDC. (MY COMMEMTS: COMPEPETIVE BIDDING IS THE CORRECT
DECESIONS).
15.
China facility: Apr., 25 , 2019: Pakistan has so far exported 150,000
tons of sugar to China while export of 200,000 tons of rice will be completed
by June under the $1-billion duty-free incentive package offered by Beijing,
revealed Adviser to Prime Minister on Commerce, Textile and Industry
16. Oil Prices: Apr., 26 , 2019: Crude oil prices are expected to average $66 a barrel in
2019 and $65 a barrel in 2020, a downward revision from the October forecast
due to the weaker-than-expected global growth outlook and
greater-than-anticipated U.S. production, the World Bank said
17. Off Shore Drilling: Apr., 28, 2019: Blowout
concerns have stopped offshore drilling in Pakistan yet again. It was underway
to confirm discovery of oil and gas in at Kekra-1 well in G-bloc with pre-drill
estimate of over 1.5 billion barrels of oil. It was scheduled to restart on
April 20, 2019 after pause of 12 days, according to Pakistani media reports.
Now it is delayed until the blowout preventer equipment is fixed and ready to
use again.
18.
State Bank of Pakistan: As the economy
moved into the second quarter of FY19, the effects of macroeconomic
stabilization measures taken since December 2017 have started to unfold.
Specifically, monetary policy tightening, exchange rate adjustments, reduction
in PSDP spending and regulatory measures have impacted domestic economic
activity. This is reflected in a contraction in LSM growth, decline in imports
and moderation in the fixed investment component of private sector credit. The underperformance of major kharif
crops added to this slowdown. Nonetheless, inflation continued to increase
mainly due to cost factors and some persistence in underlying demand
19.
Economic Indicators:
Table 1.1: Economic Indicators
|
|||
FY18
|
H1- FY18
|
H1- FY19
|
|
Growth rate (percent)
|
|||
LSM
|
5.0
|
6.6
|
-1.5
|
CPI (period average YoY)
|
3.9
|
3.8
|
6.0
|
Private credit (flow)
|
14.9
|
5.7
|
9.5
|
Money supply (flow)
|
9.7
|
2.3
|
3.6
|
Exports
|
13.7
|
10.9
|
1.9
|
Imports
|
14.9
|
18.0
|
-2.6
|
FBR tax revenue (billion Rs)
|
3,844.0
|
1,722
|
1,795
|
Exchange rate (+app/-
b
|
-13.7
|
-5.0
|
-12.5
|
million US dollars
|
|||
SBP’s liquid reserves (end-period)b
|
9,789
|
14,107
|
7,199
|
Workers’ remittances
|
19,623
|
9,745
|
11,030
|
FDI in Pakistan
|
3,092
|
1,633
|
1,319
|
Current account balance
|
-18,989
|
-8,353
|
-7,615
|
Fiscal balance (% of GDP)d
|
-6.6
|
-2.2
|
-2.7
|
20.
Overview:
Economic activities in H1-FY19 remained constrained. This is evidenced
by the decline in the performance of the industrial sector, as explained by contraction in LSM particularly in Q2-FY19,
and lower production of major crops in the agriculture sector. The slowdown in
both the commodity producing sectors is broad based and it is affecting the
services sector as well
21.
Industry: The industrial
sector is facing the brunt of the slowdown in both public and private
consumption. LSM contracted by 1.5 percent during H1-FY19 relative to a healthy growth of 6.6 percent in H1-FY18.
The slowdown in LSM became more pronounced in Q2-FY19 as it declined by 2.4
percent compared to a growth of 3.7 percent in Q2-FY18. Sharp decline in PSDP
spending and uncertainties in the property market are impacting the cement and
steel sectors, while lower sugar production amid inability in offloading
accumulated stocks has dampened the food sector’s growth. The lack lustre
performance of the textiles sector indicates some moderation in domestic
demand. The automobiles sector’s growth remained positive, but much lower than
the last year’s level during the first half. This trend is mainly attributed to
the sharp increase in car prices and borrowing costs along with the decline in
rural demand for tractors and motorcycles. However, a partial downside impact
cannot be ruled out due to the restriction on non-tax filers to buy a car that
has recently been reversed in the Finance Supplementary (Second Amendment) Act,
2019.
22.
Agriculture: In the agriculture sector, during the first
half of FY19 there
has been a broad based decline in production of major kharif crops mainly due
to water shortages. Cotton crop is affected the most as according
to official estimates2 its production has remained short by 25 percent from its
target. At the start of the rabi season, water shortages and weak fertilizer
off take due to its higher price has led to contraction in area sown under
wheat. With additional area available to them, farmers have been inclined to
utilize it for cultivation of minor crops, as per the historical trend.
Furthermore, predictive indicators such as credit disbursements show that
livestock sector’s growth is going to remain largely intact.
Pakistan: Economy, Energy/Power Sector Update, March 2019:
1.
LNG unavailability costs customers: Mar., 1,
2019: Unavailability of re-gasified liquefied natural gas (RLNG) and
non-utilisation of efficient plants in January resulted in electricity
generation from costlier fuels and that cost more than Rs24 billion to the
government, the power regulator said.
NEPRA took notice of electricity generation on costlier fuels during
January, and advised the National Power Control Center (NPCC) of Central Power
Purchasing Authority (CPPA) to raise the issue with the ministry of petroleum,
clearly explaining the consequences of generation of electricity on costlier
fuels. NEPRA, in a document, said around 1,734.33 gigawatt hours (GWh) were
generated using costlier fuels in January 2019: 1,722.064 GWh from furnace oil
and 12.262 GWh from high speed diesel with a total cost of Rs24.201 billion.
Efficient power plants, such as Sahiwal coal-fired power plant, re-gasified
liquefied natural gas-based plants in Balloki, Bhikki and Haveli Bahadur Shah,
were not fully utilised, resultantly increasing the overall fuel cost in
January. The country currently has two RLNG terminals with re-gasification capacity
of 1.2 billion cubic feet/day. NEPRA
estimated an increase of Rs1.8056/ kilowatt/hour in the applicable tariff for
ex-Water and Power and Development Authority distribution companies on account
of variations in the fuel charges for January.
2.
Inflation: Mar.,3,2019: In
line with expectations, the pace of inflation shot up to a 56-month high at
8.21% in February 2019, driven up by a significant surge in the cost of living
on almost every front, including higher utility bills, increased cost of
education and health care as well as rise in transportation and communication
expenses.The Pakistan Bureau of Statistics (PBS) reported on Friday that
inflation measured by the Consumer Price Index (CPI) accelerated to 8.21% in
February 2019 compared to 3.8% in the same month of previous year. PBS reported that transportation services
became expensive by 13.32% in February 2019 compared to a drop of 0.43% in
prices in the same month of previous year. Alcoholic beverages and tobacco
became expensive by 13.21% compared to just 0.46% in the corresponding month of
previous year. Similarly, housing, water, electricity, gas and other fuels
became costlier by 11.55% against just 0.01% earlier; education cost 10.21%
more versus increase of 0.16% earlier; cost of furnishing and household
equipment maintenance rose 9.24% compared to 1.21%; communication became
expensive by 7.77% compared to 0.05% and health care cost 7.76% more compared
to 0.46% in February 2018.Other goods including clothing and footwear, food and
non-alcoholic beverages and miscellaneous goods and services became expensive
in the range of 4.52-9.87%. prices of tomato, ginger, beef, sugar, tea
(Lipton), mutton, gur, ghee (loose), fish, moong pulse, eggs, cooking oil,
rice, gram pulse, gram whole (black), fresh milk and wheat increased in the
range of 3.21-179.40%. Average rate of inflation for first eight months
(July-February) of current fiscal year came in at 6.46% where transportation
(up 16.81%) and education (up 11.61%) were the two largest categories, the PBS
reported.
3.
Circular Debt: Mar., 6, 2019: The government has cleared Rs200 billion of the
circular debt that had swelled to well over Rs1.64 trillion to slightly improve
cash flows of the entire energy sector including oil, gas and electricity
companies. The largest chunk, of Rs60bn, flowed to Pakistan State Oil (PSO)
followed by Rs54bn to all the independent power producers (IPPs) put together
and Rs25bn to Pakistan LNG Ltd (PLL) for onward payments to fuel suppliers. The
amount of Rs200bn was raised by a consortium of Islamic banks through a sukuk
issue last week. Rs23bn were paid to WAPDA Hydro, Rs22bn to coal suppliers,
Rs12bn to nuclear power plants and Rs3bn to gas companies. The principal debt
against the Power Holding (Pvt) Limited (PHPL) fell by Rs200bn and its debt
servicing cost reduced significantly to Kibor plus 0.8 per cent from previous
rate of Kibor plus 4.5pc. The PSO separately confirmed in a notice
to the Pakistan Stock Exchange that it had received Rs60bn as partial
settlement of receivables from power sector companies. “Consequently, the PSO’s
principal receivables balance from these power sector companies has reduced
accordingly. The amount received by the company has been used for partial
repayment of its bank borrowing,” the company said.
4.
New LNG Terminal: Mar., 5, 2019: Without a study, the government on Tuesday ordered
setting up of a third LNG processing terminal on a fast-track basis for
completion before next winter at a new location Jharri Creek/Chann Wadoo The ECC was given a detailed briefing by
Ministry of Maritime Affairs on challenges being faced in the movement of LNG
ships in the existing channel at Port Qasim that repeatedly hampered normal
cargo traffic sometimes for weeks. It was reported that serious traffic congestion
was being witnessed at Port Qasim, due to issues arising out of incoming LNG
vessels. The ECC was informed that ideally the process of setting up of an
additional LNG terminal should begin after the scientific study but given the
projected growth in LNG demand in the future, the committee had ordered last
month to expeditiously finalise the proposal for establishing an additional
terminal on fast-track basis. The maritime affairs minister said because of the
urgency, Jharri Creek/ Chann Wadoo appeared to be the most appropriate area for
setting up the new terminal as it will have no adverse impact on normal port
traffic, since the site was on an alternate channel, away from the main port,
which would be connected through pipeline network of about 25km. Also, the
drought/depth at the location was feasible to accommodate large LNG carriers
(Q-Flex vessels), thus reducing some charges. Moreover, the proposed site
should be developed as a future LNG zone and PQA should be authorised to invite
applications for development of one LNG Terminal within twenty months of award
of contract. PQA board should also be advised to work out the modalities to
ensure safeguarding the interest and with proposed terms and conditions.The
meeting was also explained that existing two LNG terminals at PQA were
contracted on take-or-leave basis costing the government more than $0.5m per
day, having additional undue financial burden. There was also the need to
ensure that the supply of LNG was not interrupted due to war or any other contingency
and this should be in the contract that FSRU is not withdrawn by the owner on
any pretext whatsoever.
5. LNG Imports: Mar., 9, 2019: At present, Pakistan is importing 500 million
cubic feet of LNG per day (mmcfd) from Qatar and has planned to step up imports
to 700 mmcfd in order to run the second LNG terminal at Port Qasim at maximum
capacity. Total capacity of the second LNG terminal is 750 mmcfd, but the
government has allocated a capacity of 600 mmcfd. Pakistan LNG Limited (PLL)
has secured dedicated supply of 200 mmcfd of LNG and the remaining 400 mmcfd is
being imported through spot purchases. “The government is of the view that spot
purchase of LNG is not a solution and it needs long-term supplies to run the
terminal at full capacity,” the official said, adding that the private sector
had been seeking the allocation of idle capacity of 150 mmcfd at the second LNG
terminal. However, “now the government seems to be planning to utilize the
entire terminal capacity as it is going to seek additional volume of 200 mmcfd
of LNG from Qatar Last year, the second LNG terminal was running at a low
capacity in the wake of failure of state-run enterprises to import more LNG and
refusal by power producers to place firm demand orders for LNG supply. Consumers
paid an additional cost of $45 million for the unutilized capacity of the
second LNG terminal in 2018. “They are also likely to pay an extra $40 million
in the ongoing calendar year if the tussle between the LNG supplier and
consumers continues,”
6.
Private borrowing: Mar., 9, 2019: private sector borrowing has jumped over 92 per cent to Rs600.5 billion
during July-Feb22 compared to Rs312bn in the same period last year, according
to latest data released by the State Bank of Pakistan (SBP) on Thursday. The jump in borrowing
comes at a time when SBP has raised interest rates to 10.25pc from 5.75pc in
January 2018. Conventional
banks’ lending doubled from Rs204.4bn to Rs409.8bn during the eight months
whereas lending at Islamic banks also jumped to Rs90bn compared to Rs23.8bn
last year. Islamic banking arms of the commercial banks also increased their
lending to the private sector reaching to Rs100bn compared to Rs84bn last
year. With increase in inflation, the
interest rates have been rising but the private sector borrowing has continued
unabated. The high rates could be counterproductive for growth and expansion of
economy but the borrowing trend could likely result in higher economic growth
for fiscal FY19.
7.
Rural household energy: Update: Mar., 11, 2019: Only 20% of Pakistan’s population has access to clean
piped natural gas (PNG) while the rest use biomass in the form of uplahs and
shrubs or even trees, which causes deforestation. Most of the biomass, in the
manner it is used, causes health issues as smoke and carbon dioxide create lung
and eye syndromes and uplas involve bad hygiene. A smaller percentage uses
expensive liquefied petroleum gas (LPG) or kerosene. If rural migration is to
be discouraged, lives in these areas have to be improved. The PNG network
cannot be extended to these areas. LPG, biogas and kerosene are the alternative
clean fuel options. Already, small and poor consumers in urban centres are
being offered PNG at highly subsidised rates. However, the poor in rural areas
are without any subsidy in this respect. According to the Oil and Gas
Regulatory Authority (Ogra) report (2016-17), annual LPG consumption stood at
1.2 million tons, with share of domestic, industrial and commercial sectors at
37%, 36% and 27% respectively. The LPG’s share in gas market stands at less
than 8% and 58% of LPG demand is met through local production and the rest is
imported. LPG is almost as expensive as petrol. LPG in February 2019 was sold
for Rs121 per kg at Ogra-controlled rates and Rs150 per kg in the black actual
market. In terms of British thermal units, which enable us to compare prices
across fuels, this boils down to Rs2,669 per million British thermal units
(mmbtu) at controlled rates and Rs3,309 in the actual market. Compare it with
the PNG tariff of Rs142, LPG prices are 19 times higher and comparing with the
highest PNG tariff, which is being contested, LPG prices are 83% higher. Only
20% of people have access to the PNG network while the rest are consuming
biomass and the wealthier ones use LPG. Clearly, some reforms are required in
LPG prices. LPG is subsidised in India for the poor and the subsidy is
transferred directly to the accounts of LPG consumers to avoid misuse. On
February 8, the subsidised LPG price was INR493.53 per cylinder of 14.2 kg.
There is a subsidy of around INR200 per cylinder. In Pakistan, the Ogra
controlled/suggested price is Rs1,427 per cylinder of 14.2 kg, which is 30%
higher than the corresponding price in India. However, India is trying to
substitute LPG with PNG. Possible motivation could be convenience, safety and
price. In Pakistan, the retail LPG price of Rs2,669 ($19.34) includes 23.3% of
GST and other taxes per mmbtu as opposed to the highest gas tariff of Rs1,460
against which there is a lot of hue and cry.LPG prices are almost equal to
gasoline prices and twice those of compressed natural gas (CNG). Thus, it
appears that, there is practically no advantage in using LPG as a substitute of
gasoline. However, CNG prices are almost 50% of LPG and gasoline prices, a clear
substitution case. Kerosene at Rs82 per litre is 77% of high-speed diesel (HSD)
price and 91% of gasoline price. The incentive for adulteration is there by
mixing cheaper kerosene with expensive HSD and is reportedly being done. In
India, kerosene is sold for PKR56 per litre as opposed to Rs82 per litre in
Pakistan. In some states like Chennai, it is sold at 50% of the price
elsewhere. India is moving towards PNG and LPG and kerosene demand is going
down there. There has been and continues to be a major adulteration problem in
India of mixing cheaper kerosene with expensive gasoline and HSD. Kerosene
subsidies are going down in India. Kerosene and LPG rates are almost equal
there in terms of mmbtu. There is a general case of subsidies on LPG, if LPG
prices are compared with PNG prices. At a minimum, exemption from all taxes may
be considered – after all largesse and support should not be restricted to the
areas on PNG network. LPG-air mix plants have been set up keeping this in view.
However, these plants benefit the rich who live in the developed network areas.
Poor invariably lives in remote and least developed areas. As a reference, the
gas tariff of LPG-air mix plants of Rs600 per mmbtu may be kept in mind.
However, it may be too much of a subsidy, if extended to the LPG cylinder.
LPG-air mix and LPG cylinder should have some comparability, if not equality.
In northern areas, there is a humanitarian case as well as environmental one to
provide cheaper alternative fuel. Poverty is widespread there and trees are cut
for household fuel needs. LPG is sold in the black market at much higher prices
than in lower areas. There is a strong case for providing subsidies both for
kerosene and LPG in these areas. The minimum subsidy is the waiver of petroleum
levy and GST. This subsidy can be a general one and additional subsidies out of
the budget should be provided to the poor. Although reference to India is not
liked, one is prone to suggest Indian subsidised LPG pricing. On the same argument, there is a case for subsidy
on kerosene. So long as poverty and inequality persists, there will be a strong
argument for subsidies to the poor, be it in fuel or elsewhere. Subsidies are
always misused and opposed by the International Monetary Fund (IMF). Cheaper
LPG meant for northern areas may be sold in lower areas or for commercial
vehicles. No perfect safeguard is available against malpractices. However,
solutions can be explored and implemented. Involvement of public-sector
companies in distribution, special cylinders, etc can be adopted as a
safeguard. Eighty per cent of the population is using LPG, kerosene or biomass.
Biogas can be cheaper and competitive in agricultural rural areas, requiring
attention of the policymakers. LPG-air mix plants have been installed and the present
government has not cancelled those scheme. Biogas may substitute LPG in
agricultural areas. Biogas-based small distribution networks are feasible.
Provincial governments and local bodies may be encouraged and facilitated in
establishing these plants. Biogas is not a new concept. It has not acquired a
market share as it could have. Most of the biogas schemes have been for small
family-sized production for individuals. There has not been much of a movement
for community-based production and distribution. Public-sector companies like
SSGC and SNGPL are in best position to play a facilitating role. A policy is
required to encourage and finalise such systems. Technical assistance,
demonstration projects, cheaper credit and loans can go a long way in increasing
the role of biogas and improving living conditions in rural areas. Punjab and
Sindh are adequately positioned in this respect. Community solar and biogas is
the name of the new order.
8.
Disbursement
delayed: Mar., 11. 2109: More than $2.3 billion disbursement by the
World Bank committed for the current fiscal year has been held up due to
bureaucratic hurdles as the government banks on short-term loans from friendly
countries to meet its foreign exchange needs. Such delays are not only
affecting flow of funds from the World Bank but also from other lending
agencies and most of these development loans are relatively cheaper and involve
decades of repayment schedules, including grace periods. Twelve projects worth
$1.2bn are currently not getting the World Bank funding due to procurement
issues, sometimes because of conflicting guidelines of the bank and Pakistan`s
Public Procurement Regulatory Authority. Another 10 projects worth $1bn are not
getting the planned WB funding due to staffing issues as the authorities have
not appointed project directors and project-specific technical experts, while
about $160m worth of five projects remain without scheduled funding because of
delays in opening of bank accounts. During one of the recent meetings at the
Planning Commission, it was noted that only $45m held-up funds could be
disbursed immediately out of the $1bn WB-funded approved loans with the
commission. Regarding another $1.5bn portfolio, it was noted that seven of the
nine projects in the pipeline were awaiting a formal request by the EAD as
project preparations consumed more than 16 months due to PC-I processing and
approval process which should be expedited. A total of $2.8bn new projects have
been approved during the fiscal year 2018-19, including $1.724bn (six projects)
under the federal government and $1.102bn (eight projects) under the four
provincial governments.
9.
Car
sales decline: Mar., 12, 2019: Sale of locally assembled cars in
the eight months of current fiscal year declined by 1.3pc to 140,462 units from
142,383 units during the same period last year according to data released by
the Pakistan Automotive Manufacturers Association (PAMA) on Monday. Rising
vehicle prices on rupee-dollar parity, soaring petrol and diesel prices and
higher interest rates are likely to affect auto sales in the coming months as
in a month on month comparison, sales in February dropped to 17,071 units from
19,353 units in January. During the period under review, in the 1,300cc and
above category, total sales clocked in at 70,232 units as against 64,143 last
year. Suzuki Mehran and Bolan sales plunged to 22,460 and 11,385 units from
30,903 and 14,704 taking the total drop in 800cc and below 1,000cc segment to
33,845 in the eight months from 45,607 units in same period last year. The last
eight months proved a disappointment for light commercial vehicles, vans and
jeeps segments. Toyota Fortuner, Honda BRV, Suzuki Ravi and Toyota Hilux sales
fell to 1,843, 3,317, 12,300 and 4,318from 2,287, 6,260, 14,690 and 4,734 units
respectively. Truck sales during July-Feb plummeted to 4,289 units from 5,859
units in which Hinopak, Master and Isuzu sales stood at 1,458, 842 and 1,989 as
against 2,584, 907 and 2,350 units respectively. Tractor sales continued its
downward trajectory as Fiat and Massey Ferguson sales came down to 11,243 and
20,472 from 17,686 and 26,772 units in 8MFY18. Pakistan`s auto sector to
struggle: Fitch According to Fitch Solutions, Pakistan`s auto sector is likely
to struggle in FY19 and FY20 as the sector`s over-reliance on Chinese
investment comes to fruition. Foreign investment in the country, of which 30pc
comes from China, has decreased by 74.8pc YoY over the first seven months of
current fiscal year, says the report. Chinese investment, primarily as part of
China-Pakistan Economic Corridor, has slowed down by 28.4pc YoY. The research
agency believes that this slowdown in investment would have a detrimental
impact on the country`s commercial vehicle segment especially in HCV segment.
The report forecasts total commercial sales to grow by only 4.9pc in FY19,
while light commercial vehicle sales to remain relatively unscathed and expand
by 11.8pc while HCV sales to contract by 18.1pc over the same period. The
change in government`s policy would only offer marginal support to the demand
for passenger vehicle sales as the majority of non-filers remain poor and
unable to afford new vehicles, adds the report. New passenger vehicle sales
would contract by 3.6pc in FY19 and remain stable in FY20, growing only 0.6pc,
Fitch said. Toyota raises prices Indus Motor Company jacked up price of Toyota
Corolla 1.8 variants and Fortuner on March 11 owing to 10pc federal excise duty
on vehicles above 1,700cc.
10. Remittances: Mar., 12, 2109: The
country received $14.35 billion in foreign remittances during the first eight
months of the current year, reported the State Bank of Pakistan on Monday. This
represented an increase of 11.8 per cent in inflows from $12.83bn in same
period last year. Since the beginning of 2018-19, remittances have been on an
upward trajectory which is an encouraging sign for the economy struggling with
external deficit.
11.
CPEC:
Mar., 12, 2019: Government has
released only 3.84 percent of the budgeted amount CPEC projects for the current year so far. The
CPEC was budgeted to receive a total of Rs 64.7 billion for 24 projects under
the Public Sector Development Program (PSDP) 2018-19 but so far it has received
only Rs 2.49 billion with no disbursement for 5 projects. Administration has disbursed Rs 500 million for
construction of KKH Phase-II Havelian-Thakot (118.057 KM) Road, out of the
budgeted allocation of Rs 19.5 billion. An amount of Rs 600 million has been
released for Land Acquisition and Resettlement Islamabad-Raikot Section
(Phase-I), Havelian-Thakot (120.12 km), out of Rs 1.5 billion budgeted
allocation. The Pakistan Tehreek-e-Insaf (PTI) government has released Rs 4
million for improvement and widening of Chitral-Booni-Mastuj-Shandur (CPEC)
projects out of Rs 10 million budgeted allocation, Rs 15.495 million for
construction / black topping of access road from Makran Coastal Highway to New
Gwadar International Airport (CPEC) against Rs 22.15 million he Pakistan
Tehreek-e-Insaf (PTI) government has released Rs 4 million for improvement and
widening of Chitral-Booni-Mastuj-Shandur (CPEC) projects out of Rs 10 million
budgeted allocation, Rs 15.495 million for construction / black topping of
access road from Makran Coastal Highway to New Gwadar International Airport
(CPEC) against Rs 22.15 million budgeted allocation for the current fiscal
year. A total of Rs 400 million have been
released for necessary facilities of fresh water treatment, water supply and
distribution Gwadar (CPEC) out of Rs 1.2 billion budgeted allocation and Rs 60
million for 5-MGD RO seawater desalination plant at Gwadar (CPEC) out of Rs 150
million budgeted allocation. The federal
government has released entire amount of Rs 250 million for strengthening of
core network & expansion of PERN footprints through CPEC Optical Fiber
(PERNIII) - HEC and Rs 83.6 million for construction of offices for
Intelligence Bureau along with CPEC out of Rs 209 million budgeted allocation.
The ministry has released a total of Rs 140 million for expansion and up-gradation
of NGMS (3G/4G) services and seamless coverage along KKH (in support of CPEC)
in Gilgit-Baltistan out of Rs 200 million budgeted allocation and Rs 140
million for construction of Eastbay Expressway (CPEC) Road against Rs 6.035
billion budgeted allocation. An amount of Rs 8.58 million has been released for
establishment of CPEC Support Unit (CSU) for projects and activities in GPA out
of Rs 13.5 million budgeted allocation for the financial year 2018-19.
12. TAPI pipeline: Mar., 14, 2019: Pakistan and Turkmenistan inked the
finalized version of the Host Government Agreement to facilitate the execution
of $10 billion Turkmenistan, Afghanistan, and Pakistan India (TAPI) Gas
Pipeline network. The total
cost of the project has been estimated at $25 billion. Turkmenistan will spend
85 per cent of total cost of the project including investing $15 billion to
develop gas fields and $10 billion to build gas pipeline whereas participating
countries would contribute 5 per cent each.
13. World Bank Appraisal:
Mar., 20, 2019: Pakistan could become a $2 trillion economy
in the next 28 years if it remains steadfast in its reforms and manages to
reduce its population growth rate to 1.2%. The $2 trillion economy means an
upper middle-income country where per capita income will be $5,702 but it will
have to halve its population growth rate to 1.2% by 2047 .According to the report, Pakistan’s economy
right now is captured by four influential groups that have frustrated efforts
to bring reforms but the country now stands at a crossroad and it has to decide
whether it wants to become an upper middle-income nation or stay poor. Elite capture continues to constrain economic
policymaking. Since the 1980s, the share of industrialists in the National
Assembly and parliament has doubled, blurring the barrier between politicians
and businessmen. Elite capture in Pakistan has affected policymaking, as in
certain circumstances political leaders lack incentives to formulate policies
in response to citizens’ demands, or to work toward effective policy
implementation. The WB report states that a unique feature of Pakistan’s
history is that economic, social and security policies gave rise to various
elite factions that sustain economic and political power until today. There
exist at least four influential groups that gained power through historic
events and continue to leverage their influence on the political system for
personal gain. These are civil servants, landowners, industrialists, and the
military. The WB states that there was evidence that Pakistan’s elites have
used this power in the past to undermine reforms that would have reduced their
influence. For instance, landowners and industrialists have leveraged their
political representation to oppose reforms that would have enhanced tax-revenue
collection from agriculture and the private sector. The influential military
class favors a security-centric policy framework to maintain its influence and
access to state resources, which reduces the scope for regional cooperation.
While each group affects development differently, they share the common trait
of having gained and retained influence throughout Pakistan’s history. The
shortcomings of Pakistan’s institutional framework that have enabled elites to
retain power persist today and are precisely those factors that prevent
effective reform implementation. It argues that instability in the political
system has reduced accountability and skewed leaders’ incentives away from
long-term reforms. The characteristics of Pakistan’s political system have weakened
the link between citizens and political leaders that is so crucial to
sustaining the triangular relationship. First, frequent regime changes from
civilian to military governments have highlighted the power of the military to
sanction political leaders, competing with the sanctioning power of voters.
Second, Pakistan’s political system is characterized by an incumbency
disadvantage, which means that incumbent politicians have a reduced likelihood
of being re-elected. As a result, the direct accountability between citizens
and political leaders is undermined, as politicians face the risk of being
sanctioned even if they implement citizens’ demands, simply because they are
incumbents. This shortens leaders’ incentives and time horizon, leading them to
prioritize short-term projects and making them more likely to engage in
extractive behaviour. The WB also highlights the role of industrialists in
financing political campaigns. It says campaign financing regulations in
Pakistan provide a key channel for elites to gain political influence. Pakistan
can boost its growth by investing in people, improving productivity, reforming
institutions and protecting the natural environment,” said The decisions over the next decade will
determine Pakistan’s future where it will stand in 2047. Will Pakistan rise to
the challenges ahead and transform its economy or will Pakistan continue with
the mixed record of reform implementation, failing to address the key
constraints to growth, while another generation of Pakistanis sees limited
welfare improvements, says the WB. .The
economic growth has declined because the country is not investing enough in
either physical or human capital, and because misguided economic policies mean
that limited resources are not used in the most productive way. The limited
fiscal space, the result of rigid current expenditures and low revenue
mobilization, has given rise to low public investment levels. The low tax
revenues and high current expenditures leave limited space for public
investments. The WB says the current expenditures exhibit structural rigidities
due to high debt-servicing costs, high defence expenditures, and significant
subsidies, salaries, and wages. The WB recommends broadening the tax net by
including the agriculture sector, which accounts for over 20 per cent of the
GDP but generates a meager 0.22 per cent of total direct tax revenue. The tax
system is also riddled with legal loopholes that facilitate tax evasion and
need to be rectified. Productivity is also affected by weak public services
provision whether it be energy, livable cities, a healthy and educated
population, or security
14. Thar
Coal: Mar., 20, 2019: Engro Powergen Thar Limited's (EPTL)
lignite coal power plant in Thar has started pumping 330MW of electricity
generated by domestic coal into the national grid. The first
of two 330MW units of the 660MW project located in Thar Block II was tested and
energized on Monday The second 330MW unit will be connected to the national
grid in April. The project is financed
under CPEC. The EPTL power plant will utilize 3.8MTPA of coal supplied by Sindh
Engro Coal Mining Company (SECMC) as both projects achieve their commercial
operations date by June 2019. Post-COD,
the plant is expected to transmit 660MW of electricity through a 282-km long
500 kV double circuit quad-bundle transmission line from EPTL plant to Matiari.
15. Off Shore drilling: Mar., 22, 2019: PM on Thursday
indicated that Pakistan was on the verge of hitting a kind of jackpot in the
form of discovering a huge reserve of oil and gas. the indications we are
getting from the companies are anything to go by, there`s a strong possibility
that we may discover a very big reserve in our waters there has been no
official word from ExxonMobil and the international oil exploration company ENI
which have been involved since January in drilling an ultra-deep well (230km
inside the sea) for oil in what is known as Kekra-1 area. ExxonMobil returned
to Pakistan after nearly a decade after surveys were carried out last year
suggesting the possibility of big oil reserves within the Pakistani waters.
16. Export to China: Mar., 23, 2019: The Chinese government has offered Pakistan market access for three
commodities — rice, sugar and yarn — worth $1 billion for the current calendar
year. Rice shipments to China have already begun as part of the deal which was
agreed during Prime Minister‘s day visit to Beijing and Shanghai in the first
week of November last year. Under the agreement, exporters have been allowed to
ship 200,000 tonnes of rice and 300,000 tonnes of sugar — total value of $300
million — to China in the ongoing calendar year. Moreover, the agreement also
includes preferential market access for around $700m worth of yarn but it seems
highly unlikely that Pakistan will have adequate surplus quantity of yarn to
export to China as cotton production remains lacklustre. Another Commerce Division official said
exporters will only have nine months to avail the facility as it will expire by
Dec 31, adding that the government is working to get access for wheat and other
agriculture commodities as well. Moreover, this agreement will also be extended
to calendar 2020. Pakistan’s exports to China are expected to reach $2.2bn in
the ongoing calendar year and $3.2bn in the next.
17. Furnace Oil: Mar., 24, 2019: The shift in government’s
policy which discourages the use of furnace oil in power plants is going to
cost over Rs1 billion to the national exchequer.The money will go to Asia
Petroleum Limited (APL), which was incorporated in Pakistan on July 17, 1994 as
it developed energy infrastructure for transporting furnace oil through its oil
terminal and an underground oil pipeline connected to the 1,292-megawatt Hubco
power plant in Balochistan. APL signed a fuel transportation agreement with
Pakistan State Oil (PSO) on May 13, 2004 for the supply of furnace oil to Hubco
with annual guaranteed output of 1.5 million tons at an agreed tariff of $12.13
per ton for the first 19 years and $8.49 per ton till 2027. The agreement
provides sovereign guarantee to pay for any shortfall in the guaranteed
output. APL through PSO had lodged an
audited claim for the shortfall in guaranteed output with a cumulative value of
Rs998 million for the period July 1, 2017 to December 31, 2018 besides expected
claim of Rs884 million for the current financial year at the prevailing
exchange rate. The claimed amount may further increase due to the applicable exchange
rate at the time of actual payment to APL. The main reason behind the shortfall
was reduced furnace oil demand from the Power Division for the Hubco plant due
to the shift in government’s policy towards increased consumption of
cost-efficient fuels and other alternative sources rather than furnace oil.
Therefore, the shortfall will be paid by the government till the expiry of the
agreement amounting to about $12.73 million per annum through budgetary
allocation. In case of delay in making payment to APL, the late payment
surcharge and exchange rate difference will also be payable by the government.
Therefore, the Petroleum Division took up the matter with the Ministry of
Finance. Q: WHERE IS THE INTEGERATED
ENERGY PLANNAND PLANNING TOOL?
18. Export of Tyres: Mar., 24, 2019:
The tyre manufacturers and exporters based in Pakistan have developed a
strategy to introduce their products in high-end markets in Turkey, Europe and
the Middle East as they are confident of competing with traditional
counterparts. The three well-established tyre-makers have already been
exporting to African, Bangladesh and Afghanistan markets. However, UN sanctions
on some of the export markets like Sudan, Syria and Yemen have compelled the
tyre manufacturers to find new markets. .“We are already supplying tyres for
bikes, tubes for light trucks and tractors in the Turkish market,” he said. The
three Pakistan-based tyre manufacturers are going to showcase their products on
one of the biggest auto shows “Automechanika Istanbul” which will be held in
April 2019.General Tyre, Panther Tyres and Diamond Tyres are among the 11
Pakistani auto parts manufacturing firms going to participate in the show. The
Trade Development Authority of Pakistan (TDAP) is establishing national
pavilion at the fair to support Pakistani firms willing to export. they are
already exporting to Bangladesh, Afghanistan, Sudan, Yemen, Syria, UAE and
other Middle Eastern countries but India has an advantage over Pakistan as it
is the fourth largest rubber producer in the world. It also has a strong base
of steel industry, which is a major raw material for tyres, These advantages give an edge to India over
Pakistan in the African market.General Tyre’s official said that despite barriers,
the company plans to increase export of tyres. “We are in talks with some
Middle Eastern and African markets and are focusing on high-end markets
including Turkey.”
19.
LNG
Imports: Mar., 24, 2019: Last week, rates of liquefied natural gas (LNG) in the fixed spot market
for deliveries in May dropped to $4.7 per million British thermal units
(mmBtu). This coincided with Pakistan`s public-sector entities finalising the
bidding for six cargos with deliveries due between May1and June30.The lowest
evaluated bids ranged between 9.278 per cent and 9.938pc of the Brent price. At
the Brent price of around $69 a barrel, the effective bids work out to be
between $6.4 and $6.85 per mmBtu, way above spot rates.That means Pakistan will
be paying roughly $4m extra on every cargo. A raw extrapolation based on more
than 70 cargoes under normal circumstances, even though terms and conditions
vary for different import arrangements currently in place would take the annual
loss to around $300m. The cost then trickles down to the consumers through
electricity rates, fertiliser price and cost of production.That apparently
shows a flaw in Pakistan`s import mechanism that is based on the Brent price
besides the inherent inflexibility in the public sector and the procurement
rules and procedures. Thanks to oil politics involving big players like Saudi
Arabia, Russia and the United States, crude prices have been on the rise of
late. For long-term secured supplies, a Brent-based arrangement might be averse
affected by a cost loading (Rs6.2bn) in 2018 only: the sub-optimal utilisation
of two terminals. It forecasts 3pc capacity of the second terminal will remain
idle with an additional cost of $40m.
In 2018, the government had to .get tariff at the rate of $0.784 1stead of
$0.417 per mmBtu, because of 47pc idle
capacity. The private sector could
import LNG and bridge the idle gap of the terminals. Framework for such private
imports is already in place.
20.
JF17 Thunder: Mar., 24, 2019: Before the departure, the Malaysian
prime minister was given a briefing about the light weight, all-weather and
multi-role JF-17 Thunder fighter aircraft at the Nur Khan Airbase. He evinced
keen interest in its various qualities.
21.
Gas price
increases: Mar.,24,2019: Up to 145 per cent increase in prescribed gas
prices with effect from July 1, 2019 has been sought to meet revenue
requirements of the gas utilities for the next financial year The Sui Northern
Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL)
have filed their petitions for tariff increase at a time when the Pakistan
Tehreek-iInsaf (PTI) government was still grappling with the political fallout
of the 35pc increase it had allowed in October 2018. The Lahore-based SNGPL
that serves Punjab and KP has demanded
an average increase of Rs723 to Rs1,224 per MMBTU (Million British Thermal
Unit), suggesting a rise of almost 144pc with ef fect from July 1 for the
Financial year 2019-20 .The regulator said the SNGPL had submitted the revised
petition on March 19 with the request for an `increase of Rs722.51 per MMBTU in
its normal business of natural gas w.e.f July 1, 2019`. As such, the SNGPL`s
average prescribed price per unit would rise to Rs1,224 from its existing rate
of Rs501.19. On top of this, the company has also demanded about Rs111.32 per
MMBTU under the head of diversion of RLNG to domestic consumers and Rs6,086 per
MMBTU on account of LPG business. The cost of SNGPL`s gas has increased by Rs66
per unit to reach Rs566.97 per unit or about 14pc when compared to its existing
average prescribed price of Rs501 per unit but it was trying to recover
shortfalls in revenue requirements of two years, including that of the current
fiscal year. The gas prices are changed
twice a year on the first of July and January.
22. Circular Debt: Tariff: Mar., 27, 2019: The government has
decided to transfer the onus of Rs200 billion on accounts of capacity payments
to power producers which will increase the power tariff by Rs2 per unit. The National Electric Power Tariff Regulatory
Authority (Nepra) held public hearing during the ongoing month to increase
tariff on account of capacity payment to the power producers which was pending
for the last one-and-a-half-year, The circular debt has surpassed Rs1400 billion and currently stands at
Rs1410 billion. The banks’ loan stands at Rs603 billion parked into Power
Holding. Government had released Rs200 billion to energy companies to reduce
circular debt and also planned to issue bonds to raise another Rs200 billion.
The government was paying off expensive loans first and the circular debt would
be reduced to Rs225 billion by December 31, 2019, the minister claimed.
23. Interest Rate hike: Mar., 30, 2019: The State
Bank of Pakistan (SBP) raised its key interest rate by 50 basis points to 10.75
per cent on Friday, citing continuing inflationary pressures and a high fiscal
and current account deficit. Despite narrowing, the current account deficit
remains high, fiscal consolidation is slower than anticipated, and core inflation continues to rise The
move, just days after the SBP cut its 2019 growth forecast to between 3.5 and 4pc, underlines
the pressure the managers of the cash-strapped economy face to tighten monetary
policy as the government seeks a bailout from the International Monetary Fund.
The economy has faced increasing headwinds, with ratings agency Standard and
Poor's cutting its sovereign rating to 'B-' from 'B' last month, citing diminished growth prospects as well as
external and fiscal stresses. The SBP noted that consumer price inflation,
which reached 6.5pc in the July-February period, hit 8.2pc in February, the
highest annual increase since June 2014.
The fiscal deficit, which IMF
projections forecast will approach 7pc of gross domestic product this year,
widened further and the central bank said the fiscal deficit target for the
current year would be breached.
24. Rupee falls:
Mar.,31,2019: The State Bank of Pakistan has let the rupee depreciate by Rs0.49 to a
new all-time low at Rs140.78 (Rupee at
142.5 in open market) to the US dollar in the
inter-bank market on Friday ahead of an expected agreement with the
International Monetary Fund (IMF) for a long-term loan program .With this, the
rupee has cumulatively dropped Rs2.25, or 1.6%, in the past three weeks in a
fresh round of depreciation .The IMF has asked Pakistan to end state control
over the rupee and let the currency move freely to find its equilibrium against
the US dollar and other major world currencies. Also, the World Bank, has supported the idea of leaving the
rupee free from state control in a bid to give much-needed boost to exports and
fix a faltering economy. “It seems that Pakistan has agreed with the IMF
condition (of leaving the rupee free),” renowned businessman Arif Habib said in
comments to The Express Tribune. “The
situation has mounted pressure on the rupee and has forced the authorities to
agree to further depreciation,” he said. “This coincides with the IMF condition
of allowing the rupee to move on its own fundamentals.” “There is a possibility
that Pakistan and the IMF may sign a deal at the end of IMF’s staff-level
mission, which will arrive in the third week of April,” he said. Discussions
would also take place during spring meetings of the IMF and World Bank in
Washington next month, he added. Habib, however, criticized the government for
letting the rupee depreciate, saying such measures had never delivered the
desired result of reviving exports and trimming imports, but increased the cost
of doing business and badly damaged investment climate in the country. He said
authorities had let the rupee depreciate by a cumulative 33.4% in the past 15
months. However, exports have remained sluggish and a drop in imports came
mainly due to a decrease in import of machinery and services for projects of the
China-Pakistan Economic Corridor (CPEC). Early harvest projects of CPEC, funded
by the Chinese, are close to completion. The depreciation has, however,
contributed a lot to the rising inflation in Pakistan. “The government should
make policy decisions keeping in view the ground realities instead of
implementing book formulas,” he suggested
25.
Pakistan: Economy, Energy/Power Sector Update, February 2019:
1.
SBP: Jan., 30, 2019: The
State Bank of Pakistan on Thursday
hiked the key interest rate by 25 basis points to 10.25% and further cut growth
forecast, warning that the economy still faced elevated budget and current
account deficits, and inflation would also spike due to record government
borrowings. The Monetary Policy Committee (MPC) has decided to raise the policy
rate by 25 basis points to 10.25%, effective February 1, 2019, for the next two
months, announced SBP Governor Tariq Bajwa while addressing a press conference.
The 10.25% rate is the highest in the past almost seven years. The governor
also lowered the economic growth projection for the current fiscal year to
around 4% from his two-month-old estimate of over 4%. In the last fiscal year,
the economy had expanded 5.8%, the highest rate in more than a decade.
2.
State
Bank of Pakistan: Feb., 3, 2019: There are “visible signs
of deceleration in domestic demand”, the crucial plank upon which the
government’s economic policy must be built, given the growing deficits on the fiscal
and external accounts. this deceleration
owes itself to “stabilisation measures implemented during the last twelve
months”, meaning if the government inherited an economy drifting towards
crisis, it also inherited the policy direction through which it has sought to
arrest this drift. It notes that the external deficit is narrowing, but still
remains high despite the nearly $4bn worth of support from “friendly
countries”, so much remains to be done and victory remains a far-off goal.
Beyond this, the fiscal deficit “remains elevated” and core inflation is
“persistently high” despite a near doubling of interest rates since January of
2018.The result is that the economy continues to slow drastically, and the
government is financing itself through massive printing of money, where
borrowing from the State Bank jumped to Rs3.775tr between July 1 and Jan 18,
“which is 4.3 times the amount borrowed during the same period last year”. The
fiscal deficit will remain elevated, the State Bank says, and “fiscal policy
will have to be proactive” in the remaining months of the fiscal year. This
means an emphasis on greater revenue mobilization, something the government is
shying away from. The crisis
Pakistan: Economy, Energy/Power Sector Update, January 2019:
1.
Power: Hub Coal
Plant, Jan., 1, 2109:
The China Power Hub Generation Company (CPHGC) has successfully synchronized
one of its two 660MW coal fired power plants with the national grid, the
company announced on Monday. The project will run on imported coal and will
operate with super-critical technology at a total installed capacity of
1,320MW. The 2x660MW plant is a priority project under the China-Pakistan
Economic Corridor. The CPHGC project, located in Hub, Baluchistan, is a joint
venture between China Pakistan International Holding a state owned entity and
the Hub Power Company Ltd (Hubco) with 74 per cent and 26pc ownership
respectively. Recently, Hubco announced that it plans to increase its
shareholding the project to 47.5pc through its wholly owned subsidiary, Hubco
Power Holdings.
2.
Power: Patrind hydropower project: which has now completed its first year of commissioning,
is facing issues to evacuate electricity to the national grid, as the National
Transmission Distribution Company (NTDC) is yet to lay transmission from power
house to the main grid station in Mansehra?
The 147MW Patrind hydropower project, located on the boundary of
Azad Jammu and Kashmir and Khyber-Pakhtunkhwa, could produce only 480GWh
against the annual target of 632GWh since it went into commercial operation in
November last year. Due to the
lack of direct transmission circuit, the national exchequer is facing loss of
millions of rupees The Patrind project was completed in four years, starting in 2012, at
a cost of $436 million. The ADB provided assistance of $97m and it was
constructed on build-own-operate-transfer (BOOT) basis. The Patrind hydropower
station is currently under-performing due to weak transmission network through
Muzaffarabad-Hattian-Mangla-Jhelum-Rawat — a long circuit that trips frequently
due to weak circuit. To evacuate electricity, NTDC intends to lay 132kV
transmission line, using rail conductor of 45km from Patrind project to
Mansehra new 132kV grid station in the first phase. One of these circuits would
be direct while the other would be looped in and out at Balakot 132kV
substation, with Patrind-Balakot 32km long and Balakot-Mansehra 23km.
3.
Economy: How to wreck an
economy by S. Akbar Zaidi, Jan, 1, 2019: LESS than two
years ago, Pakistan’s economy was being celebrated for being dynamic,
resilient, and on a path to high, sustainable, growth. Numerous international
journals and newspapers — always critical of Pakistan’s economic management and
governance — were waxing lyrical about the prospects for Pakistan’s economy
after almost a decade of struggling. The last fiscal year, which ended in
June 2018, saw Pakistan’s highest GDP growth in 13 years. Moreover, from 2013
to 2018, the growth rate increased every year. Today, the story is very
different. The expected growth rate for the current fiscal year has been lowered to near three per cent, the lowest in
nine years, and is expected to be lower still in the subsequent two years.
Inflation has started rising again, to levels not seen for the last five years,
and the rupee is worth a third less in the international market compared to
what it was just a year or so ago. With lower development expenditure and lower
projections for manufacturing growth, all accounts suggest that Pakistan’s
economy is facing a serious crisis. However, this crisis has not been caused as
much by fundamentals, as by complacency, incompetence, and utter mismanagement
by the incumbent government. The PTI government inherited an economy with the
highest growth rate in 13 years, albeit strains were more than evident,
especially regarding the current account and fiscal deficits Moreover, it was also fairly clear that if
the previous government of the PML-N was re-elected, it would most certainly
have gone to the IMF within days of taking office. The hallmark of PTI’s
economic program in the last five months has been continued uncertainty and
ambiguity. As anyone familiar with understanding how economies work would know,
the core of all ills regarding economic planning and thinking is a government
which has no clue about what to do about the economy, and hence, its chronic
uncertainty. By saying that we may go to the IMF, or that we may not, or that
we no longer need the IMF, the finance minister is stoking the already raging
fires of uncertainty regarding Pakistan’s economy. He is fully entitled to opt
out of an IMF straitjacket but needs to present a viable option of how he is
going to address the growing strains in the economy. His double- or
triple-speak, is clearly a reflection of his confusion and inability to find
alternatives to bridge the foreign finance gap. The more he procrastinates, the
more the damage done. And if by chance, he has found a magic wand which will
rescue Pakistan from an inhospitable IMF program, the sooner he waves it to end
this uncertainty, the better.
4.
Power Sector: Jan.,
2, 2019: The Ministry of Power Division on
Tuesday informed the Public Accounts Committee (PAC) that the amount of
circular debt had reached Rs755 billion. The ministry’s secretary
said presently the country’s installed capacity for electricity production was
33,836 megawatts (MW), while the de-rated capacity was about 31,000MW. In 2008 the installed capacity was
17,796MW which has now reached 33,836MW,” he said. The secretary said currently the country was generating about 27
per cent electricity from hydel, 26 per cent from RLNG, 16 per cent from
furnace oil, 20 per cent from gas, five per cent from nuclear and the remaining
five per cent from renewable sources. The committee was further informed that
seven energy projects built under China Pakistan Economic Corridor had been
contributing 3,340MW energy to the national grid. The power ministry official
further said that new renewable energy policy would likely be in operation by
March 2019 following due consultation with the provinces. The new policy would
be focused on generating at least 20 per cent of the total energy mix from
renewable energy by 2025 and 30 per cent by 2030. The up gradation of the
national grid, as well as the introduction of regional grids, would be an
important element of the policy per
capita electricity usage in Pakistan was less as compared to India and
Bangladesh. 23 per cent of the total population was currently living without
electricity.
5.
Energy: Mining Accidents Jan., 3, 2019,: An explosion took place in a coal mine in the Chamalang
area of Dukki district on Wednesday, killing four coal miners and critically
injuring one. The explosion took place as a result of a poisonous gas, which had
filled in the mine. This is the third such incident taking place in a coal mine
in the last two weeks. This is a recurring
happening precious loss of life occurs with sickening frequency
6.
INFLATION:
Jan., 3, 2019: Inflation has varying effects on different categories of households.
Rising inflation amidst lower-than-before economic growth means a fall in
income for most categories of households. Inflation measured by the wholesale price index (WPI) that takes into account
ex-factory or ex-farm prices of food and non-food commodities is also rising
too fast: year-on-year increase in WPI that stood at just 2.9pc in November
2017 shot up to 13.5pc in November this year.
7.
Foreign
Exchange Reserves: Jan., 3, 2019: The PTI-led government has
bought more time in which to conduct the difficult negotiations with the
International Monetary Fund (IMF) by securing cumulative $6 billion deposits
which will help shore up foreign reserves in the shot-term. The PTI government will be put to a critical test
in 2019 in setting the policy direction while the IMF stability program is
likely to influence the course of the economy for better or for worse during
PTI’s term in office.
8.
Load shedding
Jan.,4,2019:
: Consumers in many urban and rural areas of Punjab faced a
terrible situation for a second consecutive day on Thursday after different
power plants, transmission lines and grid stations tripped again either due to
dense fog or technical fault, forcing major power distribution companies
(Discos) to resort to shutdowns and load management for several hours. The
fault occurred in the switch yard of this plant in the morning, leading to
suspension of power generation and tripping of the 500kV transmission lines
connected with this plant,` a NTDC spokesman told Dawn. The plants that tripped
owing to fog included 1,200MW Balloki (Kasur), 124MW KEL, 195MW Nishat Chunian,
185MW Nishat Power, 125MW Saif Power and 200MW Orient Power. The urban and
rural areas affected due to power breakdown included Lahore, Kasur,
Sheikhupura, Nankana and Okara of the Lahore Electric Supply Company,
Faisalabad, Toba Tek Singh, Chiniot and Jhang of the Faisalabad Electric Supply
Company and Multan, Dera Ghazi Khan, Bahawalpur,Khanewal,Lodhran,
RahimyarKhan,Sahiwal,Vehari, Pakpattan, Muzaffargarh, Layyah, Rajanpur, Alipur,
Taunsa, Khanpur, Sadigabad, Mian Channu and Chichawatni of the Multan Electric
Power Company. Some areas falling under service jurisdiction of the Gujaranwala
Electric Power Company and the Islamabad Electric Supply Company also faced
power distribution issues due to breakdown. Since power generation by various
plants went out of the system and there was already zero generation by 1,200MW
Havaili Bahadur Shah (Jhang) and 1,200MW Bhikki plant (Sheikhupura) due to suspension of re-gasified liquefied
natural gas supply, the Discos` power allocation quota considerably
squeezed. `We have no option but to observe load management in the prevailing
situation as there is no supply according to our demand,` said a spokesperson
for Lesco. He said the situation would start improving once power supply to the
company was ensured according to its demand.
9.
Load Shedding Jan.,
6, 2019: Residents of Punjab continued to suffer
the menace of load shedding for the third consecutive day. The country
witnessed the tripping of its main transmission and power plants over the last
72 hours. The Federal Minister for Power Umar Ayub, in a message, said
authorities have to conduct temporary load shedding as main transmission lines
tripped in the dense fog. “We will have to conduct load shedding in future too
if necessary,” he added. As per the MoWP spokesperson, the 747MW Guddu power
plant was partially restored. However, other power plants, which tripped as
part of a cascading effect on Wednesday morning, are back online. Two Punjab-based power plants, Haveli
Bahdur Shah and Bhikki, are not generating electricity due to the lack of RLNG.
Meanwhile, power outages and tripping issues have increased load shedding in
Multan. The Multan Electric Power Company (MEPCO) is facing a 500 megawatt
shortfall due to thick fog in the country.
10. Fitch Solutions: Jan.,,
2109: the macro research arm of
the global credit rating agency in a report issued on Friday. The government
will struggle to deliver results given growing downside risks to policymaking `
said the report. Pakistan`s economy is faced with growing challenges that will
adversely hit the lives of the common citizens. As one example, the CPI-based
inflation has reached a four-year high at 6.78 per cent in Oct, 2018 before
easing to 6.2pc in December. The rising inflation has come on the back of
around25pc depreciation in the Rupee against the greenback during last year
coupled with high international oil prices during the first half of 2018. Moreover,
investor confidence has declined significantly in the past six months mainly
due to the economic mismanagement of the government visible in the ad hoc
mini-budgets, energy cri-sis affecting the industry, exchange rate volatility
and high interest rates. The report maintains Pakistan`s short-term political
risk index score at 48.2 out of 100, described by the authors as `poor`. The
report notes that the government `led by Khan also appears to be struggling
with the rising influence of Islamic hardliners, having to give in to their
demands on several occasions.` It cites the cases of Aasia Bibi and the
government`s decision to drop Atif Mian from the Economic Advisory Council as
examples.
11. 18th.
Amendment: Jan., 6, 2019: Sindh Chief Minister has
said that any decision regarding electricity generation or distribution by any
committee or ministry other than the Council of Common Interests (CCI) is
illegal and unconstitutional; therefore all the letters issued by the Cabinet
Committee on Energy (CCoE) on power issues must be withdrawn. He added that electricity appears at Entry
No4, Part-II, Schedule IV, in the federal legislative list of the Constitution
and the CCI was the only constitutional forum authorised to decide such policy
issues. Shah said that CCoE has
unilaterally directed to reduce the life of solar and wind projects from 20 to
15 years. The CCoE has also imposed selective embargoes on processing of
ongoing small hydro, wind and solar projects. He urged Qasim to continue all
the renewable energy (RE) projects possessing letters of intent (LOIs), under
the RE with policy of 2006. Elaborating on the RE policy 2006, Shah said that
it provided lucrative fiscal and monetary incentives to investors. “It [the
policy] offers attractive returns on equity of 17% (in USD) and the power
purchaser is responsible for providing interconnection to the transmission
lines,” he said. “Wheeling of electricity is allowed and the policy allows net
metering and billing and facilitates the projects to obtain carbon credits,”
added Shah, suggesting that CCoE and Economic Coordination Committee Pakistan
(ECC) should not take decisions regarding electricity in the future because CCI
is the right forum. Shah said that if RE projects and tariffs as low as under
five cents were not allowed to develop, the public exchequer would continue to
bleed by expensive energy and forex [foreign exchange market] outflows on fuel
purchase. At this, Qasim, an energy expert, said that if 1,000 megawatt (MW) RE
power projects were installed the government would be able to save Rs14 billion
in forex every year. “Therefore, we have to focus on the production of RE projects,”
said Qasim. According to the CM, the province of Sindh has a 60 kilometre long
and 80km wide wind corridor coastal belt. Shah said that the province of Sindh
was known as the ‘energy hub’ of Pakistan because it has the capacity to
produce 55,000MW wind energy in Thatta, 10 gigawatt (GW) solar energy, 130MW hydero [low head and Run of the River], 1,000MW
bagasse cogeneration, 500MW water energy – Karachi produces 11,000MT garbage
daily, and 550MW geothermal energy. “The federal government is requested to
approve the stuck RE projects at its end so that work could be started on the
projects and in this more private companies would be attracted,” he added.
12. Gas Sector Inefficiency: Jan., 9, 2019: The
domestic sector consumed 6.8 million tonnes of oil equivalent (MTOE) of natural
gas in 2016-17 compared to 3.9MTOE of electricity. Assuming the average leakage
across all sectors is 15pc, like the leakage on the supply side, that comes to
209 million British thermal units (MMBTU) wasted, costing $2.25 billion yearly
in LNG imports. In 2016-17, Pakistan produced and imported 34.6MTOE of natural
gas. Only 29.3MTOE was delivered to consumers. If the current unaccounted-for
gas (UFG) and leakage on the supply side of 5.35MTOE (roughly 15.4pc loss) is reduced
to 1.4pc, then we can save $2.5bn in LNG imports yearly. Boiler efficiencies
exceed 80pc globally. However, geyser efficiencies in Pakistan are in the range
of 25-30pc. . Increasing geyser efficiencies from 25pc to 80pc would save
$1.9bn in LNG imports yearly. The industry consumed 7.99MTOE of natural gas
last year. It can reduce gas consumption by installing high-efficiency combined
heat and power (CHP) plants. Some factories in Pakistan are achieving
efficiencies in their energy supply of between 70-80pc. If most factories adopt
CHP and improve efficiencies to 80pc, savings would be substantial.
13. Furnace Oil: Jan., 9, 2019: The government has notified an immediate ban on the
import of furnace oil and has directed all the refineries to utilise billions
of rupees worth of deemed duty, which they collect on the sale of petroleum
products, for the upgrade of their plants. The government also instructed the
refineries to immediately reduce the production of furnace oil to the minimum
level and ink commercial agreements with power producers for the utilization of
their furnace oil storage capacity. Power production: Despite stock at refineries,
furnace oil imports surge. The government told the refineries to undertake work on
building additional storage facilities as well as utilize the proceeds of
deemed duty for upgrade and modernization of their plants. Earlier, top functionaries of the government were surprised to know
that though the country had stocks of 200,000 tons of furnace oil, still it was
being imported for consumption in power plants. On the other hand, furnace oil
was not being lifted from local refineries which were on the brink of shutdown
14. Indus Water Treaty:
Jan.,12,2019:In what is dubbed a ‘major breakthrough’,
New Delhi has finally accepted Islamabad’s demand for inspection of Indian
hydropower projects on Chenab basin and a Pakistani team will start a visit to
these sites from January 27. Pakistan had demanded that India allow it to
inspect various hydroelectric projects, particularly 1,000MW Pakal Dul and 48MW
Lower Kalnai projects on the River Chenab. Pakistan had raised serious concerns
over the designs Pakal Dul and Lower Kalnai projects and argued that India could
use these reservoirs to create artificial water shortage or flooding in
Pakistan. According to Islamabad, these projects have been designed in
violation of the IWT. It appreciated the gesture by India for implementation of
the IWT and expected that the same spirit would be shown for resolution of
other outstanding issues according to the provisions of the treaty.
15.
Offshore
Drilling: Jan., 13, 2019: after a gap of nine years, offshore
drilling to find estimated huge oil and gas deposits in ultra-deep waters at an
estimated cost of over $100 million begins. The US firm ExxonMobil, in
collaboration with Italian firm Eni Pakistan Limited, is drilling in ultra-deep
waters some 280 kilometers away from Karachi coast.“Eni Pakistan has estimated
nine trillion cubic feet gas deposits ExxonMobil expects oil deposits there.”
They are drilling Kekra-1 well in Indus-G block, which is located some 280
kilometers away from the Karachi coast. Pakistan meets around 15-20% of its
energy needs through local oil and gas exploration and production, while the
rest is met through expensive imports. The oil and gas imports cost Pakistan
around one-fourth of the total import bills per year. The country has emerged
as one of the largest gas (liquefied natural gas) importers in the last couple
of years at the world level.
16.
Oil
Price: Jan., 17, 2019:
There has been an increase in oil exports from OPEC and Russia, as well
as a decline in global oil consumption. The global oil market was comfortably
supplied in the first week of 2019, reinforcing concerns that oil prices will
remain under downward pressure this year. Overall, OPEC's seaborne exports of
crude oil increased week on week, by a modest 0.7%, building on growth of 3.3%
in the w/e December 28th. Exports from Saudi Arabia rose by a relatively modest
3.6% week on week; nonetheless, this builds on gradual increases over the
course of December. Russia contributed one of the largest jumps in the w/e
January 4th, with its seaborne crude exports rising by 15% week on week.
17.
Trade
Deficit: Jan., 19, 2019: the country’s trade deficit has shrunk in
December 2018, But here’s the kick: the fall in the trade numbers is once
again coming in the midst of an epic contraction of the economy. The growth
rate peaked last fiscal year, breaching 6pc for the first time in a decade.
This year’s target was set at 6.2pc, but it has steadily been downgraded to
4.2pc, and now we are hearing reports that the government is working off 3.7pc
as the real number. If history is any guide, then we could be
headed for the dismal zone of 2pc or below GDP growth by next year. A rising
trade deficit kills our growth story every time, but that doesn’t necessarily
mean that a collapsing deficit by itself is to be celebrated.
18.
Economic
Crisis: Jan., 18, 2019: A
country with 220 million people is undoubtedly facing a grave economic crisis
because its foreign exchange reserves are only capable of meeting less than two
months of imports; its trade gap is around $25 billion a year and its economic
growth rate will shrink to 4% in 2018-19. Pakistan will have to arrange more
than $12 billion to repay just interest on loans during the current financial
year. The circular debt has reached an alarming Rs1.5 trillion and according to
the Economic Survey of Pakistan, the country’s tax-to-GDP ratio is a meager
11.2%.
19. Dasu Hydropower Plant:
Jan.,21,2019: The World Bank has
lowered the 2,160-megawatt Dasu hydropower project’s rating to ‘moderately
unsatisfactory’ after Pakistan could not resolve outstanding issues in the past
over two years, which will now push the completion period beyond 2021. “The
implementation progress of the DHP-I has remained slower than expected,” said
the latest implementation status report of the World Bank-funded project,
released in the outgoing week. The
report noted that land acquisition has only reached 742 acres, out of the 1,987
acres required for construction areas. The accrued delay during the
last two years in acquiring land has now reached a stage where it directly
affects the pace of the main works construction, and implementation progress
has, therefore, been set to be moderately unsatisfactory, stated the report. The progress report stated that the preparatory work is only 24% finished compared to expected
100% and main civil works have reached less than 1% of the completion compared
to expected 20% by this time. Furthermore, poor safety management has
resulted in accidents and fatalities associated with the construction work,
according to the report.
20. Smart Metering,
Jan.,23,2019: Federal Minister for Power has directed
electricity distribution companies to immediately undertake GIS (geographic
information system) mapping of all 11-kilovolt feeders and replace 100,000
electromagnetic meters with digital meters by the end of February 2019 in order
to reduce line losses. The minister told the meeting that the Power Division
was in the process of initiating the smart metering infrastructure project in
all areas covered by the distribution companies. He particularly mentioned
Peshawar and Multan electricity companies, which were the next in line, as
Lahore and Islamabad companies had already initiated the process.
21. Mobile
Phone based energy theft detection, Jan., 23, 2019: A mobile company has launched a pilot project to
track and curb electricity theft in one of the most difficult areas of the
country. The project will be implemented on the electricity feeder of
Karkhano area in Peshawar that has a theft ratio of more than 54 per cent. UK’s
GSMA is sponsoring the project by funding 200,000 pounds sterling, while
digital solutions will be presented to the cellular company, JAZZ. This pilot
project would be implemented in the area that has 25,000 consumers, but the
cost of monitoring electricity theft under this solution is far less than the
smart metering solution presented .The new solution presented by the CISNR
works on the basis of installation of ‘smart electronic’ devices at various
stages of electricity supply chain and the monitoring offices would detect the
quantity of electricity consumption from meters and electricity supplied to
that area. With the detection of
imbalance in supply and consumption, the relevant electricity company would
further narrow down to catch power thieves.
22. Salient features of Finance Supplementary (Second
Amendment) Bill of 2019: Jan,24,2019: Tax on income generated from loans to small businesses,
agriculture sector and low-income housing to be reduced from 39pc at present to
20pc;Introduction of interest-free revolving credit of Rs5 billion (qarz-i-husna);Withholding tax on bank transactions waived
off for tax filers; Ban on purchase of vehicles for non-filers lifted for new
locally manufactured cars up till 1300CC capacity, but higher taxes will apply;
Small businesses exempted from submitting withholding tax returns every month;
will do so only twice every year;Rs20,000 fixed tax on marriage halls reduced to
Rs5,000;Pilot scheme to be introduced in Islamabad to facilitate traders in
filing and paying taxes; Duty on newsprint abolished completely; Investment in
solar panels and wind turbines to be exempt from duties and taxation for five
years; Reduction and abolishment (in some cases) of duties on raw materials to support
export industries; Super tax on non-banking companies to be abolished from July
1, 2019;Continuation of 1pc per annum reduction in corporate income tax;
Capital loss carry-over to be allowed for 3 years (stock trading);0.02 per cent
withholding tax on trading to be abolished; Import duties on cars with engine
capacity of 1800CC and above to be increased; Taxes and duties on mobile phones
rationalized: taxes on budget sets to be reduced, high-end sets to become more
expensive; Machinery for green field projects (including renewables) to be
exempt of customs duty, sales tax and income tax (for five years);Tax refunds
to be worked out; promissory notes to be issued by mid-February; Gas
Infrastructure Development Cess to be removed from fertilizer production; Duty
on diesel engines for agricultural applications to be reduced to 5pc from
current 17pc. The net overall drop in revenue would be Rs6.8bn; the mini budget does not
address the fiscal deficit issues. Circular debt, trade -deficit and narrow tax base also has been ignored.
Measures to broaden the export goods have also not been included in the
business friendly steps.
23. Dasu
Hydropower Project Jan.,26,2019: A crucial meeting of the
Dasu Hydropower Project`s Steering Committee was postponed again for a second
time, delaying discussion and finalization of the already tardy land
acquisition and compensation to people to be affected by the project under a
recent and jointly agreed formula. , the meeting couldn`t be held due to
engagements of top officials including the federal minister for water resources
and the KP chief minister. special committee was all set to submit its
preliminary report to the steering committee in the scheduled meeting on
Thursday, but it was postponed again the
report had been prepared after holding a series of meetings with the
landowners, local MNAs, MPAs, notables etc. The report, suggested to the government to accept the
landowners/affectees` demand of award of compensation to them according to the
formula applied for compensating landowners/affectees of Diamer-Bhasha Dam. the
financial impact arising in the wake of accepting the affected people`s demands
is approximately three per cent (Rs18 billion or so) of the total project`s
cost (over Rs600bn) for two stages of this mega project.
24.
State Bank of Pakistan: Government Borrowings: Jan., 26, 2019: The
government borrowing from the central bank jumped by almost four times during
the first seven months of the fiscal year (up to Jan 18) compared to the same
period last fiscal year. The State Bank of Pakistan (SBP) on Friday reported
that the federal government borrowed Rs3.98 trillion during the period under
review up from Rs1.05tr during the same period last fiscal year. The borrowing
from State Bank usually means more printing of notes and is considered highly
inflationary. Other factors that need attention is Dollar parity rate and
discount rate.
25. Indus Water Treaty: Jan., 28, 2019: A
Pakistani delegation arrived in India on January 27 to visit the Chenab river
basin in Jammu and Kashmir for inspection, as mandated under the Indus Water
Treaty .Pakistan’s Indus Commissioner Syed Mohammad Mehar Ali Shah arrived in
Amritsar along with his two advisers .This tour is an obligation imposed on
both the countries by the Indus Waters Treaty 1960 between India and Pakistan.
Under the treaty, both the commissioners are mandated to inspect sites and
works on both the sides of Indus basin in a block of five years
26.
Distribution
losses 2018: Jan., 28, 2019: The overall line losses of
distribution companies (Discos) in the public sector remained unchanged at 18.3
per cent during the current financial year.The Sukkur Electric Power Company is
the most inefficient distribution firm with 41.3pc line losses this year
against 36.7pc of the last financial year. The line losses of the Peshawar
Electric Supply Company dropped by almost 2pc in a year, but it continues to be
the second most inefficient company with line losses of 36.2pc in 2018-19. Its
line losses stood at 38.1pc during the last financial year.The Hyderabad
Electric Supply Company came number three as its line losses jumped to 33.6pc
in 2018-19 from 29.9pc last fiscal year.The Quetta Electric Supply Company`s
line losses dropped to 21.8pc this yearfrom 22.4pc in 2017-18.The Multan
Electric Power Company`s line losses jumped to 17.5pc this year from 16.6pc the
previous financial year.The line losses of the Lahore Electric Supply Company
soared to 14.5pc in 201819 as compared to 13.8pc in 2017-18.The Tribal Electric
Supply Company`s line losses went up to 13.3pc this year from the previous
year`s 12.5pc.The line losses of the Gujranwala Electric Power Company jumped
to 11.1pc in 2018-19 from 10pc last year.The Faisalabad Electric Supply
Company`s line losses dropped to 9.8pc this year from 10.5pc last year.The
Islamabad Electricity Supply Company continues to be the most efficient firm as
it reduced its line losses to 7.9pc this year from 9.1pc in 2017-18.
27.
Mining
Deaths:Jan.,28,019:Two workers were killed after a trolley full of coal fell on them
when they were working inside a coalmine in Duki tehsil of Loralai district on
Sunday. Mines in Baluchistan are notorious for their poor safety standards. As
many as 19 miners have so far lost their lives in incidents in Duki this
month., said that lack of safety precautions at mines in Duki caused incidents
on a daily basis.On Jan 21, six miners were killed after an explosion inside a
coalmine in Duki.
28. World Bank Report: `Pakistan Getting More from
Water`.:Jan.,28,2019: says Pakistan gets a poor economic return from its significant
water resources, observing that the best use of water endowment is not made in
the country. The economic costs from poor water and sanitation, floods and
droughts are conservatively estimated to
be four per cent of the GDP, or around $12 billion per year. The biggest challenges, however, are ones
of governance, especially regarding irrigation and urban water. The governance
challenges relate to inadequate legal frameworks for water at federal and
provincial levels, and the incompleteness of policy frameworks and the
inadequacy of policy implementation. The policy deficiencies stem from
institutional problems, including unclear, incomplete, or overlapping
institutional mandates, and a lack of capacity in water institutions at all
levels.
29.
30.
Selected
Indictors: State Bank of Pakistan
I T E M S
|
2017
|
2018
|
2018
|
Growth
|
|||||||||||
Unit / Base
|
Nov
|
Dec
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
Jul
|
Aug
|
Sep
|
Oct
|
Nov
|
%
|
|
Currency in Circulation
|
B Rs.
|
3927
|
3927
|
3994
|
4053
|
4099
|
4190
|
4368
|
4388
|
4414
|
4619
|
4379
|
4442
|
4548
|
16
|
Broad Money (M2)
|
B Rs.
|
14504
|
14917
|
14669
|
14724
|
15283
|
15183
|
15403
|
###
|
15626
|
15928
|
16020
|
15791
|
16219
|
12
|
Ratio of Scheduled
Banks' Advances to Deposits
|
%
|
49
|
49
|
51
|
52
|
51
|
52
|
54
|
53
|
55
|
55
|
54
|
56
|
56
|
15
|
Ratio of Scheduled
Banks' Investment to Deposits
|
%
|
71
|
69
|
64
|
68
|
55
|
63
|
55
|
63
|
62
|
54
|
51
|
44
|
42
|
-41
|
Weighted Average
Deposits Rate – Fresh Deposits
|
%
|
3
|
4
|
3
|
4
|
4
|
3
|
3
|
4
|
4
|
5
|
4
|
5
|
5
|
34
|
Weighted Average
Deposits Rate – Outstanding Deposit
|
%
|
3
|
3
|
3
|
3
|
3
|
3
|
3
|
3
|
3
|
3
|
4
|
4
|
4
|
35
|
Weighted Average
Lending Rate – Gross Disbursement *
|
%
|
7
|
7
|
7
|
7
|
7
|
7
|
7
|
7
|
8
|
8
|
8
|
9
|
9
|
29
|
Weighted Average
Lending Rate – Outstanding Loans *
|
%
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
8
|
9
|
9
|
16
|
KIBOR – End Month (1
Month)**
|
%
|
6
|
6
|
6
|
6
|
6
|
6
|
7
|
7
|
8
|
8
|
8
|
9
|
9
|
53
|
KIBOR – Month Average
(1 Month)**
|
%
|
6
|
6
|
6
|
6
|
6
|
6
|
6
|
7
|
7
|
8
|
8
|
9
|
9
|
44
|
Exports (BOP)
|
M US $
|
2172
|
2007
|
2100
|
2056
|
2315
|
2248
|
2260
|
2014
|
2009
|
2087
|
1801
|
2059
|
1895
|
-13
|
Imports ( BOP)
|
M US $
|
4662
|
4479
|
4930
|
4307
|
4939
|
4949
|
5165
|
5123
|
5493
|
4460
|
3792
|
4722
|
4276
|
-8
|
Foreign Direct
Investment (Net)
|
M US $
|
207
|
197
|
106
|
341
|
153
|
144
|
238
|
292
|
128
|
160
|
151
|
161
|
280
|
35
|
Foreign Portfolio
Investment (Net)
|
M US $
|
-43
|
2468
|
95
|
-55
|
-1
|
-18
|
-51
|
-54
|
-42
|
-87
|
-56
|
-84
|
-61
|
42
|
Foreign Exchange
Reserves
|
M US $
|
18774
|
20177
|
18956
|
18317
|
17813
|
17520
|
15913
|
###
|
16891
|
16390
|
14921
|
14016
|
14022
|
-25
|
Workers’ Remittances
|
M US $
|
1577
|
1724
|
1639
|
1450
|
1773
|
1651
|
1771
|
1594
|
1930
|
2037
|
1452
|
2000
|
1609
|
2
|
Real Effective
Exchange Rate (REER)–Month Average
|
(2010 = 100)
|
124
|
119
|
115
|
113
|
112
|
111
|
114
|
111
|
108
|
112
|
111
|
108
|
106
|
-14
|
Nominal Effective
Exchange Rate (NEER)–Month Average
|
"
|
90
|
87
|
84
|
83
|
82
|
80
|
82
|
80
|
77
|
79
|
79
|
75
|
73
|
-19
|
Exchange Rate (End
month)
|
Rs./US $
|
105
|
110
|
110
|
110
|
115
|
115
|
115
|
121
|
123
|
124
|
124
|
132
|
138
|
31
|
Exchange Rate (Month
average)
|
"
|
105
|
109
|
110
|
110
|
112
|
115
|
115
|
119
|
124
|
124
|
124
|
130
|
134
|
27
|
KSE 100 Index (Month
end)
|
(1991=1,000)
|
40010
|
40472
|
44049
|
43240
|
45560
|
45489
|
42847
|
41911
|
42712
|
41742
|
40999
|
41649
|
40496
|
1
|
Consumer Price Index
(Overall)
|
(2007-08=100)
|
220
|
220
|
220
|
220
|
220
|
224
|
225
|
227
|
229
|
229
|
229
|
235
|
235
|
7
|
Consumer Price Index
(Food)
|
"
|
241
|
239
|
237
|
234
|
234
|
237
|
239
|
241
|
243
|
243
|
242
|
246
|
245
|
2
|
CPI Inflation
(Overall)***
|
%
|
4
|
5
|
4
|
4
|
3
|
4
|
4
|
5
|
6
|
6
|
5
|
7
|
7
|
63
|
CPI Inflation (Food)
|
"
|
2
|
4
|
4
|
2
|
0
|
0
|
1
|
3
|
4
|
3
|
1
|
3
|
2
|
-25
|
CPI Inflation (Non
Food)
|
"
|
5
|
5
|
5
|
5
|
5
|
6
|
6
|
7
|
7
|
8
|
8
|
10
|
10
|
92
|
Core Inflation (Non
Food, Non Energy)
|
"
|
6
|
6
|
5
|
5
|
6
|
7
|
7
|
7
|
8
|
8
|
8
|
8
|
8
|
51
|
Core Inflation (20%
Trimmed Mean)
|
"
|
4
|
5
|
5
|
4
|
4
|
5
|
5
|
5
|
6
|
6
|
6
|
7
|
7
|
60
|
National Saving
Schemes – Outstanding Amount
|
B n Rs.
|
3446
|
3470
|
3473
|
3483
|
3495
|
3498
|
3561
|
3581
|
3607
|
3598
|
3633
|
3649
|
…
|
|
FBR Tax Collection
|
"
|
271
|
416
|
274
|
262
|
370
|
295
|
353
|
567
|
251
|
247
|
334
|
…
|
…
|
Pakistan: Economy, Energy/Power Sector Update, December 2018:
1. Rating Agencies: Two separate credit rating agencies have released
their assessments of Pakistan’s economy in back-to-back releases, and they are
both saying more or less the same thing: despite some steps taken by the
government, the economy continues to drift towards crisis. Contrary to the
assertion of the finance minister that Pakistan is now in the clear regarding
its external financing requirements, both agencies point to rising external
debt and falling foreign exchange reserves as the key threats to the economy. Both
agencies see the growth rate falling between 4.2pc and 4.7pc this year, and
both agree that an improved security environment and infrastructure investments
made by the previous governments will support growth in the medium term. They
also praise the government’s ambitious reform agenda, but point to significant
“implementation challenges”, effectively saying that making good on promises
will be a lot more difficult. Moody’s reaffirmed the country’s rating but Fitch
actually downgraded it by one notch. Fitch also explicitly says an IMF program
will help the government’s chances of improving its rating, because it would
help unlock financial inflows from multilateral lenders and global capital
markets. The ratings agencies, the debt markets and the State Bank all
seem to be pointing towards the need for further stabilization and all seem to
be asking about some sort of policy direction or a transformative vision for
the economy. Friendly countries can pull the economy from the brink for the
moment, but they cannot advance reforms in a way that would ensure it does not
fall back into the abyss. Only the government can do that. Unfortunately for
the latter, there is no painless and easy road towards achieving this
objective. The road of reform is hard, but it must be walked if the PTI is to
deliver on any of its commitments.
2. ADB: said on Wednesday that it finance
the bilateral China-Pakistan Economic Corridor (CPEC) projects ( ADB has
already funded CPEC projects)and also linked its budgetary support to Islamabad
with good economic health certificate from the International Monetary Fund
(IMF). Yang advised Pakistan to be watchful in handling the mega mainline-I
project of the CPEC, which has an estimated cost of $8.2 billion.“The ML-I is a
very expensive mega project and the government needs to explore all possible
ways to make sure that the project is financially sustainable,” ADB was ready to provide policy loans to
Pakistan but it needed the IMF assessment letter to dispatch these loans. The
ADB and the World Bank suspended Pakistan’s budgetary support due to
deterioration in macroeconomic conditions. For the next three years, the Manila-based
lender has proposed to provide $2.4 billion or 32% of the total loans for
budgetary support to Pakistan. The DG backed the Pakistan Tehreek-e-Insaf (PTI)
government’s stance on the privatization of loss-making power distribution
companies. She added that the power
distribution companies have to be financially viable before these can be
privatised. She further highlighted that the ADB was working on an integrated
energy policy to address Pakistan’s energy sector problems. A timeline is also
being developed to address the issue of circular debt in the power sector. “ADB
supports Pakistan’s agenda of diversifying exports to revitalise the economy
and generate jobs,” he emphasized. “The country needs to continue to improve
key infrastructure, energy supply, domestic resource mobilization and the cost
of doing business to ensure higher levels of competitiveness and productivity,
and to link up with the global production networks and value chains.” He
encouraged Pakistan to resolve structural impediments to economic development
through reforms that revive and diversify exports for job creation. “Pakistan
needs to improve skills and labor market efficiency, enhance financial
inclusion and deepening, and promote greater infrastructure, investment,
private sector, foreign direct investment, and trade integration,” he quoted. Under
Strategy 2030, the ADB will focus on seven operational priorities aimed at
addressing remaining poverty and reducing inequalities. The other pillars are
accelerating progress in gender equality, tackling climate change, building
climate and disaster resilience and enhancing environmental sustainability,
making cities more livable, promoting rural development and food security Strengthening
governance and institutional capacity and fostering regional cooperation and
integration are also pillars of the new strategy.
3.
Foreign Exchange Reserves: The United Arab Emirates has
announced its intention to deposit US$3 billion (equivalent to AED11 billion)
in the State Bank of Pakistan "to support the financial and monetary
policy of the country", reported WAM, the official news agency of the Emirates. The Abu Dhabi Fund for Development has financed eight
development projects in Pakistan with a total value of AED1.5 billion,
including AED931 million in grants, added WAM. The funds covered projects in
sectors such as energy, health, education and roads. Earlier Saudi and Chinese
assistance to bridge the balance of payments gap was pledges. Saudi assistance amounts to b$ including
deferred oil payment facility. Chinese assistance has not been categorized but
seems it also amounts to6 b$ including 1b$ Chinese import of Pakistani goods.
4.
Dec., 24, 2018 IMF negotiations: The
scale of the adjustment being demanded by IMF is too large and accession to the program is
likely to be delayed, a senior official involved in the negotiations tells
Dawn. `There is no chance that the adjustments as proposed by the Fund can be
made,` one of them says. `The demands in their current shape are too steep to
be implemented. This has put the government in a quandary, since an IMF program
is essential to unlock access to
resources from other multilateral lenders like the World Bank and the Asian
Development Bank, as well as from global financial markets. Officials at the
finance ministry tell Dawn that these bilateral inflows can tide the country
over for one year, at the very best. Eventually, an IMF program becomes necessary no matter what, and the
government is hoping that something can be done in the intervening period to
bring about some flexibility in the Fund`s position. One central issue in the
talks is the size of the adjustment between revenues and expenditures that the
Fund is asking the government to implement. Another issue is a continuing hike
in interest rates, which will raise the cost of bor-rowing for both the
government and business. The discount rate has already been raised by 4.75 per
cent since January, a near doubling in one year since it has gone from 5.75pc
to 10.5pc in the time period, with the latest jump of 1.5pc being the sharpest
one yet. In addition, there is a demand for complete free float of the exchange
rate, as has been widely reported already, to allow the market to fully
determine the value of the rupee. The
IMF is asking for an adjustment of around Rs1,600bn to Rs2,000bn over three to
four years. What`s more, the Fund wants the burden of any expenditure cuts to fall
on current expenditures that include debt service, defence and subsidies,
according to a senior official who has been a part of the process. On the
interest rates, the Fund is asking for the rate hikes of 2018 to continue well
into the next year. `We have conveyed to the Fund that we have already
increased the rate by more than 400 basis points`, but the Fund is asking for
further increase, according to the official
5.
: Dec., 25, 2018: Industrial
Policy: Adviser to Prime Minister on Commerce, Textile, Industry
Production and Investment Abdul Razak Dawood said industrialization through
import substitution coupled with export growth through diversification was
imperative to put the country on road to progress and prosperity. , many
industrial units had been closed down due to which Pakistan`s export dwindled
from $25-20 billion, we are planning to give a comprehensive industrialization
policy, wherein, focus will be on engineering, chemical, IT and agriculture
sectors instead of the textile sector alone. That signing Free Trade Agreements
(FTAs) with multiple countries has proved counterproductive for the Pakistan`s
industrial sector and the government is currently renegotiating China-Pakistan
agreement. FTAs with Indonesia, Malaysia, Turkey and even China. Mr Dawood said that Indonesia
currently provides duty-free access to 20 items including denim and urged
exporters to take advantage of this opportunity. Regarding the FTA with
Malaysia, he said that Federal Secretary Commerce Younus Dagha would visit
Kuala Lumpur to renegotiate the agreement. Dec.,
27, 2018: The government on Wednesday reiterated its plan to revise the
existing free trade agreements (FTAs) with China, on the plea that these had
proved counterproductive for the country`s industrial sector. As part of
revising the existing FTAs, Mr Dawood said the PTI government would sign the
revised free trade agreement with China
He said the government would soon announce broad contour of the proposed
industrial policy. The focus of the policy will be on promoting investment in
the export sectors. The adviser said
that new sectors like engineering, chemicals, information technology and
agriculture would be encouraged through incentives to enhance the country`s
export proceeds. Under the proposed tariff policy, he said, duty on raw
materials would be reduced
6.
Energy/Power: Refineries: The recent energy crisis, which cut off gas supply to the
industry and compressed natural gas (CNG) filling stations, has exposed poor
management on the part of government and other stakeholders. The previous PML-N
government had replaced furnace oil with liquefied natural gas (LNG) but the
second LNG terminal is running at half the capacity and at the same time
furnace oil is being imported in huge quantities. Furnace oil-based electricity
costs Rs13 per unit compared to the cost of Rs9 per unit for LNG-based
electricity. LNG consumption should be given preference as per the merit order
in order to avoid burdening consumers with an additional cost of billions of
rupees. At present, Pakistan’s storages have 560,000 tons of furnace oil and
over 800,000 tons of storage capacity of independent power producers (IPPs) has
remained unutilised. The only viable option is the conversion of locally
produced furnace oil into higher-value products such as gasoline and middle
distillates. These conversion facilities will, however, require a minimum of
two to three years before starting production and one plant will cost around
$500 million. So, the refineries can be given a time frame and till such time,
the government can make local furnace oil a ‘must-consume’ product in the
energy mix. If this is not done, the supply of other products could be
disrupted. There is also need to revert to integrated energy planning so that
decisions related to the energy and power sector are in the best interest of
the country.
7.
Energy/Power: Gas
equalization: The
government has transferred a sum of Rs25.7 billion into the accounts of Sui
Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Co (SSGC) to pay for
the promised subsidy in gas to equalize prices across the country, Export
sectors in Punjab were promised an equalization of gas prices versus their
competitors in Karachi, who enjoy priority access to domestic gas since Sindh
is a gas producing region. As a result, Punjab exporters are provided a mix of
28 per cent domestic gas and 72pc imported RLNG. As a result, they were paying
close to double of what industry in Karachi pays for the vital fuel. In the
January bills, export sectors will receive a rebate for all imported gas
consumed between Oct 15 and Jan 15, the official said. From Oct 16 onwards, the
export sectors of Punjab have been provided RLNG exclusively according to the
official, and they will be reimbursed the amount they have paid on their bills
beyond $6.5 per mmBtu since then.
8.
Energy/Power: LNG: SNGPLhas
been unable to ink an agreement with Pakistan LNG Limited (PLL) for the
purchase of imported liquefied natural gas (LNG) as power producers are
reluctant to give firm gas supply orders because they are mainly running on
imported furnace oil. The reduction in gas demand from the power producers has
led to increase in re-gasification rates at LNG terminals as consumers have to
pay full capacity cost of the infrastructure as well as rise in transmission
cost. The high gas cost has put an additional burden of millions of dollars on
end-consumers of imported gas. LNG is a cheaper fuel which produces electricity
at Rs9 per unit against the cost of Rs12 per unit for furnace oil-based
electricity. Heavy furnace oil imports also caused the recent gas crisis after
domestic oil refineries pushed down their production levels and reduced the
receipt of crude oil from oil and gas fields which forced gas producers to cut
output. In this situation, the oil mafia has forced the government to use
furnace oil in power plants instead of cheaper LNG, which is a violation of the
merit order.
9.
Energy/Power : Dec.,29,2018: The state of affairs in the energy sector — highlighted
by severe shortfall in demand and supply of both electricity and gas, heavy
system losses, a daunting circular debt of Rs1,200 billion, receding share of
indigenous supplies and deteriorating fuel mix — demand urgent and meaningful
measures by the new government. World
Bank’s report on South Asia’s power sector ‘In the Dark’ that provides a
damning picture of Pakistan’s energy sector. The wastes in the energy sector
are rated at a staggering $18 billion equivalent to almost 7% of the national
GDP. Delay in raising timely order for LNG import and even cancelling some of
the orders — to create the need for power generation from expensive furnace
oil. . A couple of local gas fields are also reported to have been shut down
for maintenance during this high demand period. This reportedly man-made
shortfall is being projected to cost the national exchequer hundreds of
millions of dollars, besides making life further difficult for the helpless
ordinary Pakistanis. The situation poses serious question marks on the
performance of the many stakeholders in the energy sector. In some cases rate
of return of over 90% has been reported. Mismanagement appears to have been
institutionalized
10. KSE: Dec., 31, 2018: : KSE 100-share
Index lost 1,084 points or 2.8%, finishing below the 38,000 mark at 37,167
points during the week ended on December 28. Political instability following
former prime minister Nawaz Sharif’s arrest in the Al-Azizia case and money
laundering investigation against former president Asif Ali Zardari impacted the
investment climate.
11.
State Bank of
Pakistan
Selected Economic Indicators
1
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