8/6/2019 Eco Letter_ May 13, 2011

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economiclettera weekly publication oThe Institute of Bankers Pakistan

Volume 6, Issue No. 18 | May 13, 2011

Markets at a glance

Weekly KIBOR (6months) Foreign Exchange Rates KSE Gold Rate

Review Bid % Offer % GBP () Euro () USD ($) 100 Index (10gm)

Beginning 13.34 13.59 Rs 138.79 Rs 123.19 Rs 84.70 11978 Rs 40,917

Ending 13.31 13.56 Rs 138.02 Rs 119.93 Rs 84.76 11967 Rs 41,100

Change -0.03 -0.03 -0.77 -3.26 +0.06 -11 +183

>>

Pakistan

The SBP Governor has launched a 10 mn Financial

Innovation Challenge Fund which aims at automatinggovernment to person payments, (G2P) resulting insaving of money and would accelerate disbursementand expand the reach of financial services. Withthe rise of branchless banking models, there arenew technology-based payment options which areconvenient, safe and durable.

The SBP has raised the maximum cap on aggregateforeign exchange exposure limit (FEEL) of authorizeddealers by Rs 500 mn to Rs 2.5 bn. The FEEL is

calculated at 20% of the paid-up capital, free of losses. According to SBP, home remittance in the first tenmonths of the current fiscal (July-April 2010-11) roseby 23.8% over the same period last fiscal to $ 9.046bn aided by record inflows of $ 1.052 bn in Marchand $ 1.030 bn in April. With two months inflows stillremaining, the remittance has already surpassed thefull fiscal target of realizing $ 9.0 bn.

According to SBP, Pakistans external debt servicing

liability in the first nine months of the current fiscalstood at $ 6.946 bn of which $ 6.19 bn was repaymentof principal amount and $ 756 mn was on account ofinterest payment. In the full fiscal of 2009-10 externaldebt servicing liability totaled $ 5.787 bn of which $4.772 bn was capital repayment and $ 1.015 bn wasinterest payment.

According to SBP, outstanding debt of public sectorenterprises (PSEs) at the end of the third quarter stoodat Rs 565.5 bn or at 3.4% of GDP.

According to Federal Bureau of Statistics, the large-scalemanufacturing (LSM) sector registered a growth of1.71% in the first nine months of the current fiscalagainst 4.4% in the same period last fiscal. The LSMhad contracted by 7.7% during July-March 2008-09.

According to the Ministry of Finance, GDP growth in

the current fiscal ending June 30, 2011 would be 2.4%against the revised target of 2.5% and original target of4.5% set at the beginning of the fiscal. The anticipatedlower growth would be mainly due to floods which hitthe country last September. The Ministry expects theeconomy to pickup momentum to register a growthof 4% in 2011-12. The fiscal deficit as a proportion ofGDP is expected to be 5.3% as agreed to with the IMF.

Food group export earnings in the first nine months ofthe current fiscal rose by 28% to $ 3.083 bn against

$ 2.455 bn in the same period last fiscal.

Pakistan and Kuwait have agreed in principle tosetup a high-powered committee to identify areas ofinvestment and joint ventures in Pakistan by Kuwaitientrepreneurs.

According to Federal Bureau of Statistics, exportearnings in the first ten months of the current fiscaltotaled $ 20.154 bn against $ 15.773 bn in the sameperiod last fiscal, a rise of 27.78%. Import payments

during July-April 2010-11 were higher by 14.73% to$ 32.263 bn against $ 28.122 bn in the same periodlast fiscal. Trade deficit during July-April 2010-11 waslower by 1.49% at $ 12.109 bn against $ 12.349 bnduring July-April 2009-10.

The government has imposed a surcharge of2% (Rs 0.18 0.30) for six months on everyunit of electricity except for life-line consumersconsuming 50 units or less a month. The PrivatePower & Infrastructure Board (PPIB) has achieved

financial closing of its largest gas-based independentpower producer (IPP), capable of generating404 MWs of power. The Uch-II power project nearDera Murad Jamali, in Balochistan would be basedon indigenous low BTU gas from Uch gas field. Theproject is expected to be completed by 2013 and wouldcost $ 500 mn.

8/6/2019 Eco Letter_ May 13, 2011

2/2Volume 6, Issue No. 18 | May 13, 2011

a weekly publication oThe Institute of Bankers Pakistan

Editor: Syed Mahdi MustaaPublished by: The Institute o Bankers Pakistan, M.T. Khan Road, Karachi 74200, PakistanPhone: (021) 35689718, 35680783 | Fax: (021) 35683805 | Email: ibp@ibp.org.pk | Website: www.ibp.org.pk

General Disclaimer: IBP Weekly Economic Letter is based on inormation obtained rom local and international print and electronicmedia. IBP has not verifed this inormation and no warranty, expressed or implied, is made that such inormation is accurate, completeor should be relied upon as such. In no circumstance IBP and its team members would be liable or any incidental or consequentialdamage that may incur rom the use o inormation contained in IBP publication(s).

The National Electric Power Regulatory Authority(NEPRA) has allowed an increase of 53 paisa per unitto the KESC for February 2011. The raise is by way offuel cost adjustment in the wake of r ising internationaloil prices leading to higher furnace oil cost, the keyinput in KESCs electric generation.

The Sensitive Price Indicator (SPI) registered anincrease of 16.13% in the week ending May 5, 2011over the same week of 2010. The weekly SPI monitorschanges in prices of 53 essential commodities, mostlykitchen items, data for which is collected form 17 urbancentres.

International

The Bank of England, the central bank of Britain, has

forecast that CPI inflation would average about 5% in2011 well above the Banks target of keeping it at 2% orless. The level of inflation is expected to be above 2% in2012 and is then projected to come down progressivelyto the target envisaged.

The U.S. trade deficit rose to $ 48.2 bn in March,highest since June 2010, against $ 45.4 bn inFebruary. Exports grew by 4.6% in March overFebruary to $ 172.7 bn while imports were higher by4.9% to $ 220.8 bn during the above periods.

Canada posted a trade surplus of $ 657 mn in March,about twice higher than in February. Exports grew by3.5% to $ 37.4 bn while imports rose by 2.8% to $ 36.7bn during the above periods.

The Indian cabinet has approved foreign directinvestment (FDI) in limited liability partnership (LLP)firms with a view to attract greater FDI which would notonly result in employment creation but would also helpthe countrys economy through state of art technology

and international best practices.Latest estimates suggest that the Indian economywould grow by 8.5% in the fiscal ending June 30, 2011against the government target of 9%. The governmenthopes to recoup lost ground and is to target a growthof 9.0% in the 2011-12 fiscal.

China posted a trade surplus of $ 11.4 bn in April thisyear. Exports rose by 29.9% year-on-year to $ 155.7bn while imports were higher by 21.8% year-on-yearto $ 144.3 bn. As a consequence of the rise in exportsin April, the trade balance swing to a surplus of $ 10.3bn in the f irst four months of 2011 against the deficit of

$ 1.02 bn during the January-March 2011 period. TheJanuary-March trade deficit was the first in the lastseven years.

China is targeting to increase its solar-poweredenergy generation to 50 gigawatts by 2020 rising from 10gigawatts by 2015. If the target for 2020 is achieved,entailing investment of hundreds of billion dollars, itwould result in meeting the countrys energy needs tothe extent of 15% of its total energy requirements bythen and that too t hrough a renewable source.

China has allowed easier access to U.S. companiesto invest in key sectors of its economy by removingbarriers for bidding in government contracts as alsofor investing in mutual funds in the public sector of thecountry.

Inflation in China measured by the consumer priceindex (CPI) moderated to 5.3% in April against the32-month high of 5.4% in March. Food prices in Aprilfell by 0.4% over March but food inflation in April was

still higher by 11.5% over April 2010.

Iran has launched a $ 484 bn federal budget for thefiscal ending March 2012 on the back of rising oilprices aimed at augmenting growth and cuttingsubsidies by between $ 50-60 bn during the year.

Bangladesh has raised the prices of variouspetroleum products with a view to lower state-subsidybeing provided to the sector. The price of a litre ofpetrol has been revised upwards to 76 taka (104 U.S.cents), of octane at 79 taka, of diesel at 46 taka andof kerosene at 42 taka. The increases are of 2 taka ofthe above products. Of the total population of 140 mnpeople of the country, nearly 40% live on $ 1.25 or lessa day.