Comment by Riaz Haq on April 25, 2017 at 7:55am

China bails out Pakistan with over $1bn in loans

Rising imports and falling exports and remittances pose threat of new forex crisis

https://www.ft.com/content/3ae64c9a-ffd8-11e6-96f8-3700c5664d30


China has provided Pakistan with over $1bn in bailout loans since June last year, as the south Asian country looks to stave off a foreign currency crisis that could yet lead to another multinational rescue package. 


State-backed Chinese banks have come to Pakistan’s rescue on two separate occasions, officials have told the Financial Times, with $900m coming in 2016, followed by another $300m in the first three months of this year.

The loans demonstrate the perilous fragility of Pakistan’s stocks of foreign currency, which have been depleted in the past few months as imports have risen while both exports and inbound remittances from Pakistanis abroad have fallen. 

China’s financial help also underlines the increasingly close, if complex, relationship between the two Asian neighbours. 

In 2013, Pakistan secured a $6.6bn loan from the International Monetary Fund after being faced with a similar balance of payments crisis. In the same year, it quietly took advantage of a currency swap line with the People’s Bank of China, the central bank, to shore up its reserves. 

Islamabad made the final repayment on the IMF loan last year, prompting optimism from policymakers in Pakistan and abroad that the country was finally on the path to economic stability. Christine Lagarde, the head of the IMF, called it a “moment of opportunity” for the country.

In recent months however, the country’s trade deficit has widened, depleting its foreign reserves once more.

Figures from the State Bank of Pakistan show the country had $17.1bn of net reserves at the end of February, down from $18.9bn at the end of October and a peak of $25bn several years ago. A burgeoning trade deficit with China — which has doubled in recent years, according to data from the Pakistan Business Council — is a big part of the problem.



This has forced the country to seek emergency loans from outside sources to keep being able to repay older loans made in foreign currencies.

Of the $1.2bn from the Chinese institutions, $600m came from the government-run China Development Bank and another $600m from the state-owned Industrial and Commercial Bank of China, the only mainland bank to have a branch in Pakistan. Policy banks such as CDB often act on behalf of the central bank. 

One Pakistani official said: “China keeps a very close eye on our economic trends and they're happy to come to our help wherever needed.”

The recent deterioration is expected to continue, however, with China’s investment plans prompting a surge of imports from that country. As a result, experts are now warning Pakistan is likely to have to return to international institutions such as the IMF for further support. 

“Technically speaking we should have gone back to the IMF in January, but ministers are likely to try and wait until after the election [which is planned for 2018],” said Vaqar Ahmed, deputy executive director of the Islamabad-based Sustainable Development Policy Institute. 

One member of the ruling PML-N party confirmed to the Financial Times that ministers were loath to return to the IMF until after the election in an effort to limit the political fallout.

“The IMF is a politically volatile issue in our country. If we go to the IMF to deal with our needs, that will send a very negative political signal and the opposition [parties] will use that against the government,” the person said.

Comment by Riaz Haq on April 26, 2017 at 10:28pm

#Pakistan to set up #infrastructure bank with $1 billion capital to finance private sector development. #IMF #IFC

https://tribune.com.pk/story/1394404/pakistan-set-1b-infrastructure...

Finance Minister Ishaq Dar has announced that the government will set up Pakistan Infrastructure Bank with a paid-up capital of $1 billion, which will give financing to private investors for development projects.

Pakistan government and the International Monetary Fund (IMF) would have 20% shares each in the bank and the rest would be held by global organisations such as the International Finance Corporation, he said.

AJK plans tourism corridor along CPEC
He was speaking at a briefing held for the Pakistani media towards the end of his visit to Washington DC during which he attended spring meetings of the IMF and the World Bank.

Dar also revealed that the government would soon be launching Pakistan Development Fund (PDF) and its shares worth Rs100 billion would be offered to Pakistani diaspora in order to channelise their remittances effectively.

Later, these shares will be listed on the Pakistan Stock Exchange. “After the success of Sukuk (Islamic bonds), the PDF will be another attractive investment for overseas Pakistanis,” he remarked.

Giving a detailed round-up on the plenary sessions with the IMF and World Bank, the minister said there was positive sentiment about the tremendous economic rebound experienced by Pakistan over the last four years.

“Pakistan was on the verge of bankruptcy in 2014 and today it is likely to achieve approximately 5% growth during the current financial year,” he said. “Both IMF and World Bank are on the same page with the Pakistani government in these projections.”

Promotion of it: Work on innovation centres begins

Global credit rating agencies have upgraded the rating of Pakistan from negative to stable and from stable to positive in the last four years to an extent that the country is likely to be included in G-20 countries by 2030.

Comment by Riaz Haq on May 2, 2017 at 9:25pm

Excerpt from State Bank of Pakistan Report 1H/2017

http://www.sbp.org.pk/reports/quarterly/fy17/Second/qtr-index-eng.htm

http://www.sbp.org.pk/reports/quarterly/fy17/Second/Chap-1.pdf


Preliminary data on crops indicates that agriculture growth will rebound in FY17.
The production of major kharif crops, including cotton, sugarcane, and maize is
estimated to increase significantly this year. The output of major rabi crop, i.e.,
wheat is also expected to remain close to the last year’s bumper crop of 25.4
million tons on the back of timely and widespread rains.
7
Besides improved
water situation (from January 2017 onwards), an increase in fertilizer off take (33
percent higher), and higher credit disbursement (up 32 percent) during Rabi
season also point to a better performance of the crops subsector.
Encouragingly, LSM growth has picked up momentum in Q2-FY17 (rising by 5.8
percent YoY). This partly compensated the sluggish Q1-FY17 growth of 2.1
percent. As a result, the cumulative growth during H1-FY17 increased to 3.9
percent, same as the last year. The major contribution to LSM growth during H1-
FY17 came from food, steel, cement and pharmaceutical industries. 

These industries largely benefited from accommodative monetary and fiscal
policies; improved energy supplies; better availability of raw materials (e.g.,
sugarcane); rising domestic demand (particularly for cement and steel, owing to
ongoing CPEC-related power and infrastructure projects); and clarity on drug
pricing mechanism. In addition, the recently announced export package would
also provide much needed support to export industries, especially textile – the
historical mainstay of LSM growth.
On the other hand, the available information on services sector indicators points
to a mixed performance. Healthy trends in transport (given the surge in sales of
trucks, buses, and POL products); increased (external) trade volumes along with
better output of agriculture and industry (having positive spillover for wholesale
and retail trade); significant increase in bank credit; and a rise in 3G/4G
subscription base (27 percent) during H1-FY17, all indicate towards an uptick in
the services sector’s performance. At the same time, losses of Public Sector
Enterprises (PSEs), and a decrease in banks’ profitability, act as potential drags.
On balance, however, the services sector is expected to keep up last year’s growth
momentum (see Chapter 2 for details).
Meanwhile, ongoing investments in energy and infrastructure sectors (and strong
transport sector activity) resulted in a sharp increase in import demand, especially
for capital goods and raw materials. Led by higher imports of machinery (power
and construction) and petroleum (including LNG), the total import bill grew by
6.0 percent during H1-FY17, compared to 8.9 percent decline in the
corresponding period last year.8

This surge in imports was partly a result of rising commodity prices, especially
crude and palm oil. This, combined with the non-receipt of CSF in H1-FY17 and
decline in exports and remittances, resulted in the almost doubling of the current
account deficit to US$ 3.5 billion during first half of the year. (Here, it is worth
mentioning that the receipt of CSF in Q3-FY17, and recently announced package
for exports may help balance of payments going forward.)
Encouragingly, available financial inflows were more than sufficient to finance
the higher current account deficit. Major foreign exchange inflows included US$
1 billion from a Sukuk and net loans of US$ 1.4 billion (including US$ 900 
million of commercial borrowings). In addition, net FDI increased by 10.5
percent to US$ 1.1 billion during H1-FY17, from US$ 978 million last year.

Comment by Riaz Haq on May 3, 2017 at 9:09pm

PCB’s Rs 4.5bn ( $43 million) annual budget approved by Board of Governors

http://dailytimes.com.pk/sports/13-Jun-16/pcbs-rs-45bn-annual-budge...


LAHORE: The Pakistan Cricket Board’s (PCB) annual budget to the tune of Rs 4.5 billion (US$ 43 million) has been approved by its Board of Governors (BoG). Talking to reporters after the BoG meeting, PCB chairman Shaharyar Khan claimed that almost all short-term and long-term plans envisaged by the PCB in the wake of poor performance of the Pakistan team during the last World T20 and Asia Cup T20 had been implemented in order to resurrect the game of cricket in the country. Shaharyar said though the budget amounting to Rs 4.5 billion was approved, the PCB would try its level best to reduce its expenditure. “There was extensive debate on the budget but finally it was approved,” he said. Shaharyar said that after the disappointing performances in the last Asia Cup T20 and World T20, the PCB had taken several decisions to bring back Pakistan cricket on the right track. “We informed the BoG that short-term plans have fully been implemented, since a new selection committee has been formed by appointing Inzamamul Haq as the new chief selector, apart from replacing Shahid Afridi with Sarfraz Ahmad as T20 captain and relieving Waqar Younis to hire Mickey Arthur as head coach,” added the PCB chief. “And to bring improvement in fitness, a boot camp was held successfully in Kakul recently. Also, we have received reports that the camp in Abbottabad was very successful due to which it has now been decided that such camps will be held every year to promote fitness culture,” Shaharyar further said.

Talking about the PCB long-term plans, the chairman said: “Under the long-term plans 95 percent work has been completed with Mudassar Nazar being appointed as director academies. He will join the academy from Tuesday (tomorrow). Mudassar, the chairman said, was a very experienced and suitable person to run the academies, adding that the director academies would also set up new academies across the country. He said that separate school, club and university cricket programmes had almost been finalized, adding that around 1,000 schools both from private and government sectors would be competing which would help enhance the base of players to 10,000. “The PCB is trying to get sponsors for the regional bodies too.” The BoG also welcomed newly appointed head coach Mickey Arthur and had asked the PCB to fully support him.

Shaharyar also said the BoG decided that coaches, trainers, players and other support staff of the national team would be given reasonable targets to achieve in the six-month time period. “After every six months, the target will be reviewed in order to analyze the performances. However, there will be no action against anyone if the targets are not achieved,” he pointed out. Nonetheless, fresh targets will be given as part of a review course. Similarly, head coach Arthur will also be given targets.

He said the BoG admitted that the standard of pitches and grounds in Pakistan was not matching up to the international standard. “The BoG has vowed to give special attention to bringing improvements in pitches and grounds. Our pitches are dull and not up to the mark. All over the world the ball carries to the chest level of the wicketkeeper at fast tracks but we hardly observe such things in Pakistan,” he lamented.

Talking about changes in the domestic structure which could not be put on the right track even after many decades, the chairman said that now it was decided that eight teams each of regions and departments would play separately in the National One-day Championship. “In the four-day format, there won’t be any change. T20 tournaments will only be held on regional level.” The decisions, said the chairman, aimed at improving the quality of the domestic cricket.

Comment by Riaz Haq on May 3, 2017 at 9:13pm

PSL profit of $2.6 million ‘beyond expectations’: Sethi

https://www.dawn.com/news/1256049

Pakistan Super league (PSL) chairman Najam Sethi on Tuesday disclosed that a profit of US$2.6 million was made on the first edition of the league and termed it as “a great achievement for the Pakistan Cricket Board (PCB)”.
While the PCB BoG was reluctant to give Sethi the green light as they feared huge losses on a heavy investment, the profit earned now means Sethi has cemented his place as PSL chairman.

“I promised I will disclose details of the PSL funds,” he said. “We were successful in every aspect — the ratings were high, thanks to our state-of-the-art production, while our upcoming players got an opportunity to rub shoulders with the top players in the world.

“Furthermore, we sold our franchises for US$9.3 million, US$3 million more than we’d earlier predicted.”

He said while the league wasn’t able to meet the targets of gate money (US$6 million to US$7.5 million), they made good money through the broadcast of the event after buying the airtime of three television channels. “We expected broadcasting rights to sell to the tune of US$15 million but it all went wrong after Ten Sports offered just US$2 million, which persuaded the PSL to make their own production arrangements.

“We earned US$9 million from the broadcast of the league,” he said.

SIXTH FRANCHISE

Sethi added that the PCB BoG had allowed the PSL to include a sixth franchise from the next edition even through there were “objections from the other five franchises” but “they could be convinced”.

“Although we had decided to include a sixth team from 2018, looking at the success of the inaugural edition, the BoG members have allowed us to induct a sixth team from 2017,” he said.

Comment by Riaz Haq on May 4, 2017 at 10:28pm

#UN survey sees higher GDP growth for #Pakistan from 5.2% in FY17 to 5.4% in FY18. #UNESCAP https://www.dawn.com/news/1330886 

The economic growth outlook for Pakistan is projected to trend up to 5.2 to 5.4 per cent in both 2017 and 2018, forecasts the latest Economic and Social Survey of Asia and the Pacific 2017.
Private consumption and public investment would drive the economy, supported by higher consumer credits, improved security conditions and ongoing infrastructure projects under the China-Pakistan Economic Corridor (CPEC), says the survey which focused on ‘Governance and Fiscal Management’.

Increased capital inflows from China to finance projects under CPEC have helped generate foreign exchange receipts, although imports of transport and construction-related items also increased, the survey by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) notes.

The survey says that private investment was stronger in Pakistan as CPEC helped attract more foreign investment.

On the supply side, the large-scale manufacturing sector should benefit from greater energy security and a notable cut in gas prices for industrial use. Similarly, the agricultural sector is likely to improve, with expanded production of cotton, sugarcane and maize, the survey notes.

Meanwhile, a rebound in global oil prices and an upward adjustment in domestic petrol prices would push up inflation during the fiscal year 2017-18 from 5pc to 5.5pc, which is still within the official target of 6pc.

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