Nationwide Updates

► ‘Clear policies must to stay in global markets’

Chairman of Senate Standing Committee on Commerce, Senator Muhammad Amin Dadabhoy has said that it is essential for the government to introduce clear-cut policies on provincial and zonal level for the country to progress; otherwise Pakistan will lose all its international markets. Speaking to members of the Karachi Chamber of Commerce and Industry (KCCI), he said that the country would be free of its various crisis such as wheat crisis and power crisis once proper policies are introduced. Dadabhoy said that the new government needs to look at “the larger picture” and do something for the entire industry otherwise “there will be no industrialisation and Pakistan will be left only as a trading house.” Dadabhoy stated that the fact that ministries of industries and commerce is separate in Pakistan.  (The News)

► Big blow to cement exports  

Recent changes in prices, demand and supply situation and governmental intervention into domestic market in UAE and India have effected the scope and demand of Pakistani cement. Further this has caused serious losses to cement companies. More than 700 containers, carrying Pakistani cement, are stranded at Jabel Ali Port in UAE where importers of the cement are not accepting the shipment documents to remit the payments to Pakistani cement exporters because prices of cement in UAE have come down from 24 AED per bag to 15 AED per bag since UAE government has fixed the price of cement at AED 16 per bag after a meeting with domestic cement manufacturers.  (Business Recorder)

► GDP is expected to drop below six percent for the first time in five years

All key macroeconomic indicators have presented a poor performance during the current fiscal year, mainly due to a combination of adverse domestic and international developments and low output of commodity producing sectors.  SBP. The State Bank of Pakistan (SBP) on Saturday also said that the country has to miss its chief economic targets including GDP growth, exports, imports, fiscal deficit, inflation, monetary growth and current account deficit due to local and international imbalances. "Real GDP growth is expected to drop below 6 percent for the first time in five years, while annual inflation is poised to return to double digits of 11-12 percent against the target of 6.5 percent by the end of current fiscal year.  (Business Recorder)

► Poverty line and our budget makers

The "Economist" weekly, in its issue dated May 24 has argued that "a dollar a day" definition of the World Bank is outdated as events have overtaken the results of the 2005 study when the global poverty line was drawn at a per capita "a dollar a day". In December 2007 the WB unveiled results of a fresh study covering 146 countries, and prices of more than 1,000 items. Taking into consideration the falling value of the dollar and relative purchasing power parities, it would need an average of $3.- per day (at its p.p.p. value of 2005) per head for a barest existence in the 15 poorest countries of the world (not counting Pakistan).  (Business Recorder)

► Budget: Anyone for equity?

Despite the claim of the previous government of reduction in rural poverty at the time of presentation of the Federal Budget 2007-08, the current economic situation calls for revising optimistic valuations of the effectiveness of basic policy assumptions. If both equity and efficiency matter in economic development, as argued by many economists, it is high time to reorient budgetary allocations. According to the Budget 2007-08, ending June 30, about 12,700,000 people have come out of the poverty trap in the last five years, while 23.9 percent of the population still lives below the poverty line (BPL). To reduce poverty further, the government allocated Rs520 billion under the Public Sector Development Programme.  (The News)

► Why is the budget important?

The annual national budget, in a narrow sense, provides forecasts of a country's revenue and expenditure in a given fiscal year. But, at the same time, it reflects various dimensions of national economic and non-economic policies, as well as serves as an instrument of economic restructuring, growth and stabilisation in the long-term perspective. The budget spells out the significant elements of fiscal and monetary policies to achieve the national economic growth and income redistribution objectives. Once approved by the legislature, the budget authorises the government to raise revenue, incur debt and effect expenditure for achieving its goals.  (The News)

► What will be the budget deficit?  

The Government will raise expenditure by 15 percent and revenue collection from Rs 1.874 trillion to Rs 2.25 trillion. These statistics were, reportedly, shared with experts from IMF as well as the World Bank on their recent visit to Pakistan. The Government has already indicated its reliance on $3 million assistance to be provided by the multilateral institutions for budgetary support by the end of June this year. If one adds the element of a routine IMF review of the economy, which forms a basis for interventions by other multilateral institutions including the World Bank, the views of the IMF mission are extremely relevant.  (Business Recorder)

► SBP counsels cut in expenditure: Slowdown in economy forecast 

The State Bank has advised the government to take “concrete steps” for resource generation and check expenditure in order to ensure that the economy retains the “high growth momentum” of recent years. The third quarterly report of the State Bank, released on Saturday, highlighted the depressing features of a challenging economic environment that would put the collective wisdom of the two-month-old coalition government to test. The report reaffirmed fears of a mild economic slowdown based on latest figures.  (Dawn)

► Fiscal stability must for sustained growth: State Bank’s third quarterly report

The State Bank of Pakistan does not seem to be enthusiastic supporter of providing subsidies and views fiscal stabilisation necessary for sustaining growth momentum that is threatened by worsening macro-economic indicators in Pakistan.It has suggested that the economic policy needs to be focussed on improving the productivity of lagging sectors of agriculture and large-scale manufacturing to contain the domestic inflation. Thus, policy focus, it advocates, needs to remain on addressing structural impediments to expansion in the base of agriculture and manufacturing sector to support growth in medium-to-long term.  (Dawn)

► Defending the tightening of monetary policy  

The tightening of monetary policy by the State Bank on 22nd May has, by and large, been criticised by the business community. This was expected because, whatever the arguments, borrowers don't want to pay a higher price for the use of funds obtained from the banks. In an interview with a TV channel, the State Bank Governor, Shamshad Akhtar again defended her decision to resort to strict monetary measures, by saying that government borrowings and inflation had reached a point where a sharp increase in interest rates was inevitable. "If we would not have done so (raising the rates on 22nd May, 2008), we might have been raising the interest rate by 300 basis points in future".  (Business Recorder)

► Economy showing increasing signs of stress  

Recent information points to an increased risk of a decline in aggregate value-addition by important major crops in FY08 relative to the previous year. It was hoped that a wheat harvest close to the annual target would offset much of the drag from the disappointing aggregate performance of the FY08 kharif harvest. But some reports suggest that wheat production in FY08 may also turn out to be substantially below the target. If these concerns prove correct then a weak performance by major crops would drag the annual growth substantially below the annual target.  (Business Recorder)

► Oil subsidy phase-out in 2 years proposed

Dr Hafiz Pasha, a well-known economist, has proposed that subsidy on oil prices be phased out in the next two years and a well thought out strong social security and relief package be put in place in the federal budget for 2008-09 for the poor and needy who now constitute almost 33 per cent of the population. Announcing for the first time a pre-budget package in the last seven years, Dr Pasha, who is the vice chairman of a leading private consultancy Social Policy and Development Centre (SPDC), presented at a press conference on Saturday the SPDC report on “Fiscal choices in budget 2008-09”.  (Dawn)

► The subsidy issue

THE mixed signals emanating from our economic managers on the issue of subsidies betray a lack of policy direction. Just about the time when the finance minister was assuring Praful Patel, the World Bank vice-president, of Pakistan’s intention to eliminate subsidies on imported oil in the upcoming budget, other powerful voices were heard suggesting possibilities of a 60 to 80 per cent increase in subsidies on oil, wheat, electricity and fertiliser. The government, quite clearly, is at its wits’ end in finding ways to mitigate the impact on the poor of soaring oil and food prices. Double-digit inflation is expected to boost subsidies for the current fiscal year to Rs320bn.  (Dawn)

► Investors may seek exit from Balochistan after attacks on industrialists

The rise in attacks on businessmen and industrialists in Lasbela district of Balochistan has raised fears about the future of investment in the province, a survey by The News has revealed. Local and multinational companies in the Hub Industrial and Trading Estate (HITE) are rethinking about their plans to expand or continue operations here after innocent lives were lost in attacks that took place in past month. Companies like Proctor & Gamble (P&G), which had bold plans for expansion have temporarily shut their operations, say local chamber officials. In the recent weeks attacks were carried out on P&G, Attock Cement, and the Pakistan Ship Breakers Association Chairman Azam Malik was killed. Although HITE offers some of the best infrastructure facilities in the region, the targeted killings are now forcing many to re-consider investment plans here.  (The News)

► Industrial sector: Senate body preparing report on potential, problems

Chairperson of Senate Standing Committee on Industries, Production and Special Initiatives Senator Anisa Zeb Tahirkheli has said that the committee is preparing a comprehensive report on potential and problems faced by the industrial sector. Speaking at a meeting with Karachi Chamber of Commerce and Industry (KCCI) on Saturday evening, she said that during first meeting of the committee it was decided that the committee members would visit various chambers and trade bodies in the country to know the ground realities, being faced by the industries.  (Business Recorder)

► Strategy for fisheries sector  

Punjab government has banned netting and selling of all kinds of scaled fish between June 1 and August 31 under the Fisheries Ordinance 1961 for preservation of fish varieties. Raiding teams have been constituted to curb illegal netting, as capture of even a single fish in the breeding season means loss of thousands of fish eggs, and ultimately a reduced catch. Construction of dams and barrages across rivers has, in fact, already reduced the number of natural breeding grounds of fish, and many varieties of fish which were once common have been pushed almost to the verge of extinction. This is a serious development indeed, as export of fish and fish products has been a major forex earner for the country.  (Business Recorder)