Bharat Rakshak

La-Whore—The former Chairman of Pakistan Poultry Association (PPA) and former LCCI Senior Vice President Abdul Basit Friday expressed grave concern over eight percent decline in Foreign Direct Investment (FDI) and Portfolio Investment during the financial year 2011. Abdul Basit said that according to the State Bank of Pakistan, out of total investment, FDI stood at $1.573 billion at the end of FY11 as compared to $2.15 billion in FY10, depicting a decrease of $577 million.

He said that it was eye opener that even those countries are reluctant to invest in Pakistan who pushed Pakistan in to the fire of “War against terrorism”. He said that in the financial year 2009-10 the volume of US investment in Pakistan was $468.3 million but in the financial year 2010-11 it declined to $ 238.9. Likewise, in the same period UK investment has also declined from $294.6 million to $208.1. He said that many other countries are also squeezing their investment in Pakistan. While citing the example he said that Japan’s investment in Pakistan has reduced from $26.8 million to $3.2 million, Switzerland’s investment has reduced from $170.6 million to $47.2 and German investment has reduced from $53 to $21.2 in the period from FY2009-10 to FY2010-11. He said that overall 26.8% decrease in the Foreign Direct Investment (FDI) has been recorded including Privatization Proceeds as compared to FY 2009-10.

He said that ongoing energy crisis and worst law and order situation are the main factors spoiling the investment scenario but political blame-game, unstable economic policies, poor infrastructure situation and high input cost are equally responsible.

“We are forced to keep our shops and businesses shut every second or third day.” Traders and industrialists say that a business closure for a day in Karachi wipes out an estimated Rs4 billion.

Businessmen concerned over decline in FDI

He said that it was eye opener that even those countries are reluctant to invest in Pakistan who pushed Pakistan in to the fire of “War against terrorism”.

Islamabad: The Pakistan Economy Watch (PEW) on Sunday said economy of the country is going down by the passage of every day which calls for urgent and decisive actions by the government.

Incompetent leadership and policies without logical or meaningful connection have left country astray while preserving credibility has become a big challenge for the government, it said.

Doubts, uncertainty, panic and pain has become part of the life for commoners as well as business community, said Dr. Murtaza Mughal, President PEW.

Loss of confidence is a very serious issue taken lightly by the politicians while the experience shows that it is impossible for a country to regain the faith of market once lost.

To avoid such an outcome, our leaders must act boldly and swiftly through parliament to boost anaemic growth rate, said Dr. Murtaza Mughal.

Islamabad urgently needs to send a clear message to convince international community and investors that government is now serious to introduce radical structural reforms.

Dr. Murtaza Mughal said that unpopular reforms will take time to produce results but will restore the market’s confidence which is dwindling due to impression that rulers are willing to risk everything to prolong rule and protect personal wealth.

Dr. Mughal said that current circumstances are leading country towards unsustainability raising serious challenges to our independence.

In this scenario, economic sustainability should be on the top of the government’s agenda as plunging into political and economic insignificance may leave Pakistan with no option but to accept Indian dominance, he warned.

ISLAMABAD (NNI) - The Ministry of Finance is set to release Rs3.5 billion in next few days to overcome ongoing financial crisis of Pakistan Railways.
According to the Railways Ministry, proposals for cooperation with the private sector to rescue PR from the crisis have been prepared and very soon the Finance Ministry will issue Rs3.5 billion for repairing of faulty engines and supply of diesel. At the other side, Pakistan Railways' four cheques worth Rs29.17 million issued to Pakistan State Oil (PSO) have bounced while stock of lubricant oil and diesel is near to end.It is feared that if PSO's dues will not be cleared soon then Pakistan Railways' wheel will halt any time.

...
Sources said that the Pakistan Railways had purchased 150 new locomotives from China for Rs8 billion about six years back, but they proved to be substandard. The Chinese locomotives proved to be useless and the amount went wasted incurring a huge loss to the Pakistan Railways. Despite facing heavy losses, the concerned railway authorities are once again in touch with China to procure another 150 locomotives, they said. ...

Jo baar baar maaf kare woh Hindustan..aur jo baar baar bhool kare woh Pakistan

At the other side, Pakistan Railways' four cheques worth Rs29.17 million issued to Pakistan State Oil (PSO) have bounced while stock of lubricant oil and diesel is near to end.It is feared that if PSO's dues will not be cleared soon then Pakistan Railways' wheel will halt any time.

Jo baar baar maaf kare woh Hindustan..aur jo baar baar bhool kare woh Pakistan.

Why do they need railways, when the preferred way of transport would be the camel.

ISLAMABAD:
In what appears to be a setback to the efforts to limit the military’s footprint in the economy, the government on Thursday allowed the National Logistics Cell (NLC) – the army’s commercial logistics arm – to bid for a state-owned construction company, in violation of the NLC charter.The decision was taken at a meeting of the NLC’s board of directors, chaired by Finance Minister Abdul Hafeez Shaikh, who has been actively involved for the last several months in narrowing the scope of the NLC’s activities and bring them in line with the company’s legal mandate.

The move comes less than three weeks after the NLC management was found to have been illegally engaged in trading on the Karachi Stock Exchange, an activity which resulted in the company losing Rs1.8 billion between 2004 and 2008. The parliamentary Public Accounts Committee (PAC) has directed the National Accountability Bureau to begin legal proceedings against three retired generals and two civilians for their alleged involvement in the case.

The NLC had requested permission to buy the overseas assets of the National Power Construction Company, a state-owned company that is currently being privatised. The government is seeking to sell 88% of its stake in the firm, currently wholly state-owned, as well as management control.

A participant of the meeting told The Express Tribune that some members of the board raised concerns that the NLC was already violating its core mission and was even engaged in the construction business.

The board also approved the NLC budget for the financial year 2012. For 2011, the NLC’s net income was Rs3.9 billion.

NLC was set up in 1978 to ease congestion at the Karachi Port and soon evolved into one of the most critical logistics companies in the country. The company is responsible for transporting half of the nation’s oil, up to 76,000 barrels per day.

Yet in recent years, the company has begun expanding its operations. NLC is now engaged in construction activities across Pakistan, typically for the military but sometimes also for civilian infrastructure, such as roads and bridges.

I read a news article in WSJ (deaed tree version) that the Governor of Pakistan Reserve Bank has resigned over policy differences. Apparently he was getting blue in the face warning about the unsustainable deficit but was not heeded in this years budget. Article went on to talk about how the rich in Pak have a very light tax burden that has not been reformed.

Pakistan's chief economist, Jaffer Qamar, has resigned less than a year after taking office and less than a week after the central bank governor, Shahid Kardar, stepped down.

Qamar reportedly quit on Wednesday to return to the United States, where he has taught in two major universities, and to lead technical consultants at the Asian Development Bank. Sources however claim that he was frustrated by government interference in his attempts to secure independence in formulating policy at the Planning Commission.

His departure may further hamper talks with the International Monetary Fund (IMF) for revival of a US$11.3 billion loan program, which was suspended last year over the government's failure to implement fiscal reforms.

[...]
Outgoing State Bank of Pakistan governor Kardar had developed differences with the government mainly over the issue of the bank's autonomy, while his predecessor, Salim Raza, who quit last June, had difficulty in persuading the government over taking in hand the finances of state-owned enterprises and implementing economic reforms agreed to with the IMF.

"How can the economy be stable when the economic team is not stable?" The Express Tribune reported renowned Pakistani economist Ashfaque Hasan Khan as saying. Since the present government came to power in September 2008, it has gone through four finance ministers, five finance secretaries, four Planning Commission deputy chairmen and three central bank governors.

International ratings agencies have warned that the resignations of the central bank chiefs send out a negative signal and reflect badly on the government's management of the economy.

Resignation "reflects the difficulties of the central bank governor to do his job: to maintain price stability in the backdrop of the dominance of the fiscal side in the form of large borrowings,” The News reported Agost Benard, S&P credit analyst, as saying. "Given Pakistan's unstable domestic political situation, the resignation does not come as a surprise."

As its bankers and leading economists walk away, the government is increasing its borrowing from the central and local bank, with critics saying most of the borrowed money is used for unproductive purposes, like current expenses and to feed poorly performing public-sector companies.

"The government again requires huge amounts of money as large public sector giants, PIA, Steel Mills, Wapda and Pakistan Railway, are facing shortages that cannot be provided from the expected revenue generation for the 2012 budget," Dawn reported Mohammad Imran, an investment researcher, as saying. "The credit summary of the State Bank might include some more horrible figures at the end of this fiscal year." Pakistan's fiscal year runs from July 1 to June 30.

The country's outstanding domestic debt has doubled in four years to 32% of gross domestic product.

The IMF and Pakistani officials are due to meet this month. Last year, the IMF held back the sixth tranche of its $11 billion loan program over patchy implementation of fiscal reforms, including the imposition of a reformed general sales tax.

The central bank recently suggested broadening the tax base, gradually eliminating untargeted subsidies and improving debt management as demanded by IMF.

Before Qamar quit as Planning Commission chairman, Finance Minister Hafeez Sheikh and Planning Commission deputy chairman Nadeem ul-Haque had reportedly tried to persuade Kardar to stay on at the central bank. Sheikh was reportedly conscious of the negative impact the central bank governor's resignation would have internationally, including the way it might affect some IMF programs aimed at assisting the country financially. Qamar's departure can only make matters worse.

Allama Iqbal Express, scheduled to arrive at 11:40 am on Friday, was expected to arrive at 12am on Saturday (today). Fareed Express was scheduled to arrive at 9:40 pm on Friday, but was expected to arrive at 5:00 am on Saturday (today). Khyber Mail, originally was to arrive at the Lahore Railway Station at 8:45 pm was expected to arrive close to 1am. Quetta Express with the scheduled time of 2:40 pm arrived at 9 pm. Korakoram Express, scheduled to leave at 3:30 pm from Lahore was planned to leave at 9pm.

If conditions seem especially risky, Ali slips two wallets into his pocket—one real and the other filled with expired credit cards and loose change, ready to hand over if bandits hold him up. He’s been held up once. He checks to make sure he isn’t riding in the same car as the day before, usually shunning his company-provided Toyota Corolla (a favorite vehicle for Pakistan’s upper-middle class) for his own less conspicuous Suzuki Cultus hatchback.

Karachi’s residents have taken to the streets this summer, burning tires and disrupting traffic to protest outages lasting days at a time. “In the morning I assess my workers,” says Sajjad Farooqi, who supervises National Foods’ weighing department. “If I find someone is stressed out because he hasn’t slept all night without electricity or that inflationary pressures are causing strain in his family, I have to change his shift and give him easier work.” Inflation averaged 15.5 percent over the last three years because of rising food and energy prices as well as record government borrowing

Tax collection fell short of target by 38 billion rupees (US$440 million), the government said last week, contrary to a June 30 Federal Board of Revenue (FBR) claim that it had exceeded the target by 2.46 billion rupees. Net revenue was 1.55 trillion rupees against the annual target of 1.59 trillion, with most of the shortfall appearing in June.

The government was earlier expecting the disbursement of half of the outstanding amount from the IMF soon after the completion of the fifth macroeconomic review this month on the basis of achieving its revenue target and a fiscal deficit of 5.3%. Local analysts believe the country may face penalties for fudging figures and a halt to disbursement of about $3.6 billion out of the $11.3 billion IMF standby program.

"Had these [latest] figures been reported to the IMF, it would have led to the imposition of penalties on Pakistan," the Express Tribune reported, citing a senior Finance Ministry official. "The country may have lost any chance of reviving the current bailout program."

"The only option left is to obtain a new [bailout] program and that will come wrapped in the toughest conditions," the report said, also citing an unnamed official.

By Imaad Ud Din
Published: July 25, 2011
Pakistan’s GDP growth has been the lowest in the South Asian region since 2008. The core cause of the crippled economic growth has been the massive financial indiscipline of the current financial managers. The fiscal deficit (as a % of GDP) has been constantly above 6% since 2008. The government has been funding the ever growing deficit by Debt and printing money.

The increasing demand of the government to fund its deficits have resulted in a total debt of Rs10 trillion (up from Rs5 trillion in 2007). The data released by the State Bank of Pakistan indicates that broad money supply growth (M2) has averaged 11.5% over the past three years.

The recently released “Quarterly Performance Review of the banking system 2010” by the State Bank of Pakistan indicates that there has been growing evidence of banks’ flight for the government securities which now constitute around 30.4 per cent of banks’ assets compared with 19.3 per cent in Dec-08. Share of advances has witnessed a concomitant drop, from 60.8 to 52.0 percent during the past two years. Unsurprisingly, return on government paper now accounts for 34.5 percent of banks’ gross mark-up/interest income, compared to 28.8 percent in Dec-08.

Consequences

The currently prevailing interest rates are significantly beyond the comfort zone of the business community. As a result, the business community looks to consolidate and defer their projects that require significant capital deployment. It is very important to note that despite high interest rates prevailing in the country, the inflation rate has been soaring and no respite is expected in the short term as the government continues to borrow from the State Bank to plug their funding gap. It is very safe to assume that currently our economy is in the state of stagflation and it is expected to remain so in the short run.

The long-term consequences of ongoing budget deficits are drastic and will be felt in times to come. Firstly, the current budget deficits are not as a result of deficit spending towards Public Sector Development, instead only Rs300bn out of the budgeted Rs610bn were spent by the government in the previous year (as opposed to the case in India where the budget deficit is a result of massive Public Sector Development Spending). As a result, the infrastructure development necessary to promote economic growth remains ignored in toto. It is a matter of grave concern that the government has not been able to fully utilise the allocated PSDP fund over the last three years.

On the other hand the crowding out of private sector lending has impacted the private sector investment in infrastructure projects severely. A classic example is the delay in a number of power projects undertaken by the private sector. Data from various banks suggest that there has been on average 2-3 years of delay from the scheduled timeline for such projects to get commissioned. The result is the prolonged power outages and expensive electricity. If the current scenario prevails, Wapda expects that the power suffering could continue beyond 2018, not to mention the economic loss associated.

Bottom line

The bottom line is that unless the government takes strict measures towards spending cuts, seize additional borrowings, and utilize the deficit spending towards the infrastructure development, our economic nightmares will continue.

The writer is an Investment Banker by profession

Published in The Express Tribune, July 25th, 2011.

The PM said though India, Nepal and Sri Lanka were also facing energy crises, no hue and cry was raised there since people realised that electricity shortfall could not be overcome overnight.

Pakistan Railway has also curtailed its freight service, hurting the cross-border trade with Afghanistan, which earns potentially billions of rupees annually for the organization. The company is not able to allocate wagons for the Afghan transit trade, as it has run out of locomotives and fuel to take the transit goods to Quetta in southwestern Balochistan province or Peshawar in northwestern Khyber Pakhtoonkhwa province.

Some relief is expected in September, when China's Changchun Railway Co is due to deliver the first batch of around 50 bogies as part of a deal to provide 202 coaches to Pakistan Railways. A separate agreement for a $110 million contract to supply 75 diesel-electric locomotives to Pakistan Railways from another Chinese company is the subject of a judicial review after 69 locomotives delivered under a previous contract were found to be substandard.

The products of CNR CRC have been exported to North Korea, Iran, Iraq, Pakistan, Sri Lanka, Bengal, etc.. In recent years, the products even step into high level markets such as Hong Kong, Thailand, New Zealand, Australia, Saudi Arabia, Brazil, etc..

ISLAMABAD: Pakistan recorded $2.14 billion services trade deficit in 2010-11, up by 25.88 percent from $1.7 billion shortfall recorded in the previous year.
Experts say that it is hard for Pakistan to reverse the trend in services trade given its relatively underdeveloped services sector. It would not break even in service trade in the short term, they say. Services import (money outflow) stood at $7.59 billion, while exports (inflows) stood at $5.45 billion.

Reuters via Dawn reports today that the Pakistan Rupee is plumbing a new bottom:

Pakistani rupee hits record low of 86.58 due to oil payments

The Economic Times on the other hand today reports that the Indian Rupee is close to a three year high:

Rupee hits near 3 year high on weak dollar and US debt fears, exports to gain

Pakistan’s GDP growth has been the lowest in the South Asian region since 2008. The core cause of the crippled economic growth has been the massive financial indiscipline of the current financial managers. The fiscal deficit (as a % of GDP) has been constantly above 6% since 2008. The government has been funding the ever growing deficit by Debt and printing money.

The increasing demand of the government to fund its deficits have resulted in a total debt of Rs10 trillion (up from Rs5 trillion in 2007). The data released by the State Bank of Pakistan indicates that broad money supply growth (M2) has averaged 11.5% over the past three years.

The recently released “Quarterly Performance Review of the banking system 2010” by the State Bank of Pakistan indicates that there has been growing evidence of banks’ flight for the government securities which now constitute around 30.4 per cent of banks’ assets compared with 19.3 per cent in Dec-08. Share of advances has witnessed a concomitant drop, from 60.8 to 52.0 percent during the past two years. Unsurprisingly, return on government paper now accounts for 34.5 percent of banks’ gross mark-up/interest income, compared to 28.8 percent in Dec-08.

The long-term consequences of ongoing budget deficits are drastic and will be felt in times to come. Firstly, the current budget deficits are not as a result of deficit spending towards Public Sector Development, instead only Rs300bn out of the budgeted Rs610bn were spent by the government in the previous year (as opposed to the case in India where the budget deficit is a result of massive Public Sector Development Spending). As a result, the infrastructure development necessary to promote economic growth remains ignored in toto. It is a matter of grave concern that the government has not been able to fully utilise the allocated PSDP fund over the last three years.

"@Sadiq Samin With an inflation rate of 76% over 4 years a rupee depreciation against the dollar of 9.3% is nothing. It is actually a net appreciation of the rupee against the dollar! The same goes for major currencies which are depreciating in value because their governments are printing money to stimulate economic activity and pay off their huge debts. You get your facts straight!"

^^
Actually guys, their rupee going down the tube and our rupee going up unfortunately helps Pakis. Their main exports being textiles (nearly 65% of their total) it gives them great price advantage and that will cut into our exports of textiles.

^^
Actually guys, their rupee going down the tube and our rupee going up unfortunately helps Pakis. Their main exports being textiles (nearly 65% of their total) it gives them great price advantage and that will cut into our exports of textiles.

^^
Actually guys, their rupee going down the tube and our rupee going up unfortunately helps Pakis. Their main exports being textiles (nearly 65% of their total) it gives them great price advantage and that will cut into our exports of textiles.

Figure fudging: Government postpones 2012 tax collection planning

By Shahbaz Rana
July 28, 2011

ISLAMABAD:

Even as it vows to get to the bottom of the ‘figure fudging’ controversy – where the government admitted to providing incorrect revenue collection numbers for fiscal year 2011 – the finance ministry has postponed a meeting of senior tax collection officials that was meant to formulate a strategy to meet next year’s target.

A senior finance ministry official told a small group of journalists that the government is taking the matter of “incorrect tax figures” very seriously and is determined to find out what happened over the next two to three days before making a final decision, presumably to hold at least some officials accountable.

The ministry appears keen to attempt to restore the government’s tarnished credibility in the eyes of international financial institutions, who have started raising questions about the veracity of official data. The finance ministry’s assertions come just one day after a parliamentary panel cancelled its planned investigation into the matter, allegedly after facing pressure from the chairman of the Federal Board of Revenue (FBR).

FBR Chairman Salman Siddiqui had stunned the nation with a late-night press conference on June 30 where he announced that the government had achieved its revised tax collection target of Rs1,588 billion. Last Friday, however, Siddiqui was forced to admit that the real number was in fact Rs1,550 billion.

The FBR chairman blamed the Inland Revenue Service – the division that deals with income and sales taxes – for misreporting gross sales tax data (which does not include the amount of refunds the government owes taxpayers) as net sales tax data (which subtracts that amount out).

Meanwhile, the distraction from the controversy surrounding last year’s tax numbers appears to be affecting the planning for tax collection in fiscal year 2012. On Wednesday, the FBR postponed the Fourth Chief Commissioners’ Conference that had originally been scheduled for Thursday (today).

This is the second time the conference has been delayed. FBR officials say that the tax collection body’s chairman was too busy dealing with the political fallout of the ‘figure fudging’ controversy to spare time for the conference.

The conference is a meeting of the heads of all regional tax collection offices around the country and was convened to finalise a roadmap for achieving the 2012 tax collection target of Rs1,952 billion. The government was supposed to assign monthly and quarterly targets during the conference.

Officials appear to be falling behind on their revenue collection efforts. The FBR has not yet compiled any preliminary estimates for revenue collection in July. The target for July 2010 had been set at Rs90 billion, just 5.6% of the initial target of Rs1,667 billion for fiscal 2011. The target for July 2011 is expected to fall between the range of Rs110 billion and Rs115 billion.

A history of figure fudging

Dr Pervez Tahir
July 28, 2011

The fudging of figures is making news again. Fudging occurs when there is pressure to perform. A bureaucrat nearing retirement and eyeing an important post-retirement assignment wanted results, which were duly produced. Neither the finance minister nor the political leadership seem to have anything to do with it. The pressure to perform becomes acute when an illegitimate political set-up seeks legitimacy by way of improved economic performance. Fudging began in late 1999 in the Federal Board of Revenue (then the Central Board of Revenue) when the IMF pointed towards discrepancies in the fiscal accounts. The coup-makers, who had just seized power, were quick to blame it on the ousted government of Nawaz Sharif, in particular its finance minister Ishaq Dar. Ironically, key finance bureaucrats before and after the discovery of fudging remained the same. The newly-imported finance minister, Shaukat Aziz, was too eager to pay the penalty to the IMF and bill himself as the country’s maiden Mr Clean. There is no evidence that Mr Dar personally supervised or ordered any creative accounting. The discrepancies were the result of bureaucratic incompetence and lack of professionalism.

It is no surprise that Mr Clean, first as finance minister and then prime minister, presided over a most elaborate fudging operation. With an IMF programme under operation, budgetary data was not touched. As the IMF now wanted the State Bank to verify the tax collection figures, the data produced by the State Bank itself was also left alone. Specially targeted was the Federal Bureau of Statistics (FBS), a marginalised attached department of the ministry of finance. Thus, figures of poverty, growth, prices and employment were all micromanaged through phone calls by the then economic adviser and by creating obstacles in the career progression of those not falling in line. For almost the entire period of the rule, the post of the director-general of the FBS was kept vacant. Instead of appointing full-time secretaries of the statistics division, the mantle was assigned to additional secretaries in charge who had no shame in acting as director-general of the FBS, a junior position. In effect, the then economic adviser ran the organisation with direct access to Mr Clean, who kept the finance portfolio with him even after becoming prime minister. Publication of the Economic Survey on the day before the budget used to be a routine exercise managed by low-key economic advisers. As finance minister, Mr Clean took it upon himself to announce progress on key indicators in televised press conferences. Even as prime minister, he ordered the Annual Plan Coordination Committee to avoid a discussion on the economy and chose to announce the 2004-05 growth rate himself. The number was way above the one indicated in the working papers and the highest in the country’s history. In 2006-07, the fiscal year before the elections that former president Pervez Musharraf wanted won at all cost, Mr Clean announced a bumper wheat crop — calculated by his economic adviser against all sane advice — to show that the targeted GDP growth rate of seven per cent had been achieved.

When the FBS data indicated a poverty ratio of 32.1 per cent for 2001, the ‘Clean Team’ ordered an illegitimate recall survey to contest it. Nothing much came out of it. The next survey for 2005 was, however, targeted with a lot of preparation. ‘Midnight Jackals’ attacked the computer centre of the FBS. Poverty has been falling ever since. Mr Clean’s gift of the gab and killer PR skills acquired as a private banker were employed to maximum effect. As a smokescreen, a draft law kept doing the rounds to make the FBS autonomous. Exactly what happened can only be unearthed by a commission of inquiry, not standard verification exercises by the World Bank or individuals. This is not unusual. The Indian Supreme Court has recently questioned the government’s poverty data.

The writer is a former chief economist of the Planning Commission and is based in Lahore

This is not unusual. The Indian Supreme Court has recently questioned the government’s poverty data.

You missed this bit. Crazy Paki.