Pakistani Economic Stress Watch

[Peregrine]

Pakistan gets half of expected foreign economic aid

ISLAMABAD: Pakistan could receive only half of the $9.2 billion annual estimated foreign economic assistance during the last eight months largely because of less-than-anticipated inflows from China and the World Bank.

Disbursements by China were less than one-fifth of the annual estimate of $3.1 billion due to delay in finalisation of financing agreements for infrastructure projects under the China-Pakistan Economic Corridor (CPEC)

From July through February, the government received $4.6 billion in foreign economic assistance, of which almost 90% was in the shape of loans, according to the Economic Affairs Division. The receipts were half of the annual estimate of $9.2 billion.


Being a low middle-income country with unsatisfactory government revenues, Pakistan is heavily dependent on foreign loans to finance the budget and undertake infrastructure projects. However, the slow pace of work on these schemes, delay in getting approvals and problems in the award of contracts often lead to less-than-anticipated disbursements. This compels the government to tap unconventional expensive sources of financing.

In the current fiscal year, the government expects to receive $3.1 billion from China. However, so far, the disbursements stood at $576 million or roughly 19% of the estimate.

A major reason behind the slow pace of disbursements was the delay in finalisation of financing agreements for road projects of the eastern route of CPEC. Both countries have not yet been able to sign financing deals for Multan-Sukkur section of the Lahore-Karachi Motorway and the Thakot-Havelian road project. Pakistan had expected to receive $579 million from China for these two projects, but so far nothing has been released.

The Ministry of Communication lately objected to the interest rates that China wanted to impose on these loans, although the government had initially agreed to the rates offered by the Chinese, said sources in the Ministry of Finance.

China also did not disburse funds for the New Gwadar International Airport. On the other hand, a cross-border optical fibre project has made a significant headway.

In the last eight months, Beijing gave $175 million for the Karachi Nuclear Power Plant against annual estimate of $896 million. It also disbursed $106 million for the Neelum Jhelum hydropower project and $78 million for Chashma Nuclear Power Plants.

World Bank : The disbursements by the World Bank also remained below expectations. Against the annual estimate of $1.8 billion, the bank gave $713 million or 39% in the July-February period. This included $500 million in budget financing loan, suggesting that project lending was not picking up.

The release of another $500 million for budget financing is tied to the listing of State Life Insurance Corporation (SLIC) on the Pakistan Stock Exchange that requires amendments to the SLIC Act.

ADB : The Asian Development Bank (ADB), the other strategic financial partner, gave $676.6 million or two-thirds of the annual estimate of $1.1 billion.

Apart from these, the government also borrowed $973.5 million from a consortium of commercial banks and $500 million by floating Eurobonds in September last year. This is unconventional borrowing prompted by less-than-anticipated inflows from multilateral agencies.

The slowdown in the flow of project financing by the traditional lenders indicates serious problems the country is facing in managing development schemes. Implementation remains a problematic area.

The Islamic Development Bank, which is expected to give $1.3 billion this fiscal year, provided $592.5 million or 47% of the annual estimate.

Of the $4.6 billion the country received in eight months, $412 million was on account of grants. The United Kingdom has replaced the United States as the largest donor as it provided $251 million in grant for the social sector from July through February. The US gave $114.4 million during this period.

Cheers

[Peregrine]

Exports to EU fell 12pc in Jan-Nov

ISLAMABAD: Pakistan’s exports to the European Union (EU) fell 11.93 per cent to $6.13 billion in the first 11 months (January-November) of 2015 from $6.96bn in the same period last year, indicating that the preferential market access has failed to boost dwindling exports.

Cheers

[Peregrine]

Pace of fall in exports 3 times faster than imports

ISLAMABAD: Pakistan’s trade deficit worsened to $16.9 billion in the first nine months of the current fiscal year, which was $3.7 billion higher than the projection made by the International Monetary Fund (IMF), putting foreign currency reserves under some pressure.

The trade bulletin, released by the Pakistan Bureau of Statistics (PBS) on Tuesday, showed that both exports and imports contracted in July-March 2015-16, but the pace of decline in exports was three times faster than imports.

The trade deficit – gap between exports and imports – widened 5.5% to $16.9 billion, reported the national data collecting agency. It was $882 million higher than the gap in the corresponding period of previous fiscal year and was also more than the remittances the country received during the period.

The IMF had anticipated that the trade gap during nine months would stand at $13.7 billion, but the actual figure was way larger than that.

This may have implications for the country’s foreign currency reserves that are also taking a hit from the slower-than-anticipated growth in remittances. The State Bank of Pakistan on Tuesday released the remittances data for the first nine months, which showed only 4.1% growth.

In March, the inflow of worker remittances amounted to $1.5 billion, 3.14% lower than February 2016 and 8.7% lower than March 2015.

All international financial institutions are warning about the slow pace of growth in remittances and its implications for the external sector stability.

The trade deficit widened despite a $3.1-billion bonanza that the country got in shape of a sharp fall in the oil import bill due to a plunge in global prices from July to February. Oil imports during the eight months amounted to only $5.1 billion.

From July through March, exports dropped to $15.6 billion, which were $2.3 billion or 12.9% less than the receipts in the same period of previous fiscal year, reported the PBS.

A major reason behind the fall in exports, which were also $973 million less than the IMF projection, was the absence of an enabling environment for businesses.

Last week, IMF Director Masood Ahmad said Pakistan’s exports were hurt by multiple factors including competitiveness concerns and appreciation of the real exchange rate was not the sole factor affecting the growth in export shipments.

In the IMF’s view, Pakistan is losing competitiveness in the wake of a fall in cotton prices, appreciation of the real exchange rate, power outages and an unfavourable business climate.

Imports during July-March shrank 4.2% to $32.5 billion. These were $1.4 billion less than the comparable period of previous year, but roughly $3 billion higher than the IMF forecast.

Monthly reading

On an annualised basis, the trade deficit widened 20.5%, or $315 million, to $1.85 billion in March this year, according to the PBS. The deficit expanded on the back of around 10% fall in exports and 3.8% rise in imports.

Exports stood at $1.74 billion in March, $184 million lower than the receipts in the same month a year earlier. Imports, however, rose $131 million to $3.6 billion.

Cheers

[Peregrine]

The mysterious ways of consumers

The figures before us are stark. They tell us that more than 60 percent of people in the country live below the poverty line (according to the UNDP’s Human Development Index). The majority survive on under $2 a day. Two years ago, the finance minister of the country himself confirmed that at least 50 percent of the population lived in poverty.

[We have heard it said, again and again, that there is little or no real poverty in society. This is something we hear from people regularly, and it is true that poverty is not as visible in Pakistan as it is in, say, neighbouring India. Or then, perhaps, this is simply because we prefer not to look at the expanses of shanty towns that stretch out across all our major cities and towns, at the wasted or stunted children everywhere – in a nation where nearly half fail to reach the expected weight or height for their age – or at the emaciated mothers who give birth to and nurse child after child.

The challenge is one that we must take up. Multiple reports have come out over the past two years that indicate that at least one third of the Pakistani population lives in complete poverty and about half lives in severe hardship. We need to better understand what can be done to assist these people.

Cheers

[Peregrine]

Saudi Arabia bans shrimp imports from Pakistan

KARACHI: Saudi Arabia has banned shrimp imports from Pakistan, a worrying development for the Marine Fisheries Department (MFD) as other countries may follow suit.

Pakistan exported about 2,016 tonnes of seafood (valued at $7.494 million) to Saudi Arabia, including 189 tonnes of shrimp ($2.175m) in 2015.

Cheers

[Peregrine]

Steel imports to hit $2.2bn as local production rusts away

KARACHI: Steel imports could cost the country up to $2.2 billion at the end of this fiscal year as demand for the commodity is on the rise amid robust construction activity.

The Pakistan Steel Mills (PSM), which has the largest production capacity in the country, is using outdated technology and is far from self-reliant due to administrative and financial constraints. As a result, domestic iron and steel products struggle to compete with cheap imports from countries where manufacturers enjoy scale benefits and use advanced technology.

Cheers

[Peregrine]

Service exports slump 21pc

ISLAMABAD: Service exports dropped 21 per cent to $3.428 billion in the first eight months (July-February) of this fiscal year from $4.316bn a year earlier, mainly driven by a fall in exports of government services.

On a monthly basis, service exports fell 68pc in February 2016 compared to the same month of last year, according to data of the Pakistan Bureau of Statistics (PBS).

The service sector has emerged as a major driver of economic growth, with its share in GDP increasing from 56pc in FY06 to 57.7pc in FY15 Bravo! As musch as a 1.7% growth in Nine Years!.

On the other hand, service imports fell 15pc to $4.891bn in July-February FY16 from $5.769bn a year ago.

Experts attribute the low share in global trade to the fact that most services offered by Pakistan are non-tradable.

Cheers

[deejay]

Service exports slump 21pc

ISLAMABAD: Service exports dropped 21 per cent to $3.428 billion in the first eight months (July-February) of this fiscal year from $4.316bn a year earlier, mainly driven by a fall in exports of government services.

On a monthly basis, service exports fell 68pc in February 2016 compared to the same month of last year, according to data of the Pakistan Bureau of Statistics (PBS).

The service sector has emerged as a major driver of economic growth, with its share in GDP increasing from 56pc in FY06 to 57.7pc in FY15 Bravo! As musch as a 1.7% growth in Nine Years!.

On the other hand, service imports fell 15pc to $4.891bn in July-February FY16 from $5.769bn a year ago.

Experts attribute the low share in global trade to the fact that most services offered by Pakistan are non-tradable.

Cheers

Would loss of Axact business have contributed to this slump?

[Peregrine]

Service exports slump 21pc

ISLAMABAD: Service exports dropped 21 per cent to $3.428 billion in the first eight months (July-February) of this fiscal year from $4.316bn a year earlier, mainly driven by a fall in exports of government services.

On a monthly basis, service exports fell 68pc in February 2016 compared to the same month of last year, according to data of the Pakistan Bureau of Statistics (PBS).

The service sector has emerged as a major driver of economic growth, with its share in GDP increasing from 56pc in FY06 to 57.7pc in FY15 Bravo! As musch as a 1.7% growth in Nine Years!.

On the other hand, service imports fell 15pc to $4.891bn in July-February FY16 from $5.769bn a year ago.

Experts attribute the low share in global trade to the fact that most services offered by Pakistan are non-tradable.

Cheers

Would loss of Axact business have contributed to this slump?

deejay Ji :

Axact is not good enough to contribute to this slump.

It has been created by the the "Col. Cargills" of Cwapistan. No matter how great a system Cwapistanis inherit or have they will strive extremely hard to grind it into the dust.

[Rahul M]

>> Experts attribute the low share in global trade to the fact that most services offered by Pakistan are non-tradable.

what does this mean exactly ? asking as an economics ignoramus.

does it mean pak services are like IT and you cant put a price on blowing up people and property ?

[Pulikeshi]

^^^Typically - Non-Tradable Sector: domestic workforce - slave labor - construction, janitorial services, pindi comfort ladies, health care - docktors, nurses, goberment, restaurants - food suppliers, etc. These cannot be traded externally is all they are getting at...

[Peregrine]

More than half empty

The current fiscal year will end in about two months and we will be discussing the proposed balance sheet of income and expenditure for the 2016-17 fiscal by end June. Going by the claims of the government during the out-going year it had succeeded in producing an almost half full glass. But to the discerning eyes it still looks more than half empty.

The Federal Board of Revenue (FBR) is said to have provisionally collected Rs1800.50 billion during July-February against Rs1538 billion during the corresponding period of last fiscal year, reflecting a growth of 17.1 per cent. But going by the revenue collection target of Rs3,104 billion budgeted for the current financial year the government faces an uphill task of collecting another Rs1,300 billion in the remaining three months.

The GDP growth target fixed for the current fiscal year was 5.5 per cent but at best the achievement is not likely to go beyond 4.5 per cent if at all by the end of the year. Meanwhile, the IMF has estimated that the budgetary deficit might hike to 4.6 per cent of GDP against the target of 4.3 per cent. The IMF has assessed that the Public Sector Development Programme (PSDP) at the federal level was expected to be slashed down from Rs663 billion to Rs636 billion in order to achieve the desired budget deficit target.

The most disappointing performance during the year, however, has been that of foreign trade. Exports have plunged to a five-year low to $15.60 billion in the first nine months of the current fiscal year, a decline of 12.92 per cent from $17.92 per cent in the same period last year, bringing foreign currency reserves under pressure. Both exports and imports contracted in July-March 2015-16, but the pace of decline in exports was three times faster than imports.

The trade deficit has widened 5.5 per cent to $16.9 billion. It was $882 million higher than the gap in the corresponding period of previous fiscal year and was also more than the remittances the country received during the period. Trade deficit increased 20 per cent in March 2016, given the growth in imports and a drop in exports.

The declining trend in exports has been a recurring feature over the last few years. Last year exports were down to $23.9 billion missing the target by $3.1 billion.I n the last year of the PPP government, the exports had increased to $24.5 billon.

The decline in exports is being attributed to decrease in international prices of commodities and increase in cost of production due to increase in energy and other input costs. Also, since assuming office in June 2013, the incumbent government has slapped Rs830 billion additional taxes and most of these taxes are regressive, making exports uncompetitive in international markets.

The country’s foreign currency reserves are also taking a hit from the slower-than-anticipated growth in remittances which in the first nine months showed only 4.1 per cent growth. In March, the inflow of workers’ remittances amounted to $1.5 billion, 3.14 per cent lower than February 2016 and 8.7 per cent lower than March 2015.

The trade deficit widened despite a $3.1-billion bonanza that the country received in the shape of a sharp fall in the oil import bill due to a plunge in global prices from July to February. Oil imports during the eight months amounted to only $5.1 billion.

A major reason behind the fall in exports in the current fiscal is said to be the absence of an enabling environment for businesses, competitiveness concerns in the wake of a fall in cotton prices, appreciation of the real exchange rate, power outages and an unfavourable business climate. Weakening global commodity prices, shift in demand patterns in leading markets, exchange rate issues and slowdown in Chinese economic growth were also cited as factors that primarily contributed to the decline in exports. Besides textile products, exports of basmati rice, plastic materials, cement, machinery and jewellery also went down.

But so far there appears to be no move on the official front to stop the rot and take steps to revive exports by diversifying exportable surpluses and markets.
Cheers

[Prem]

Trade deficit is almost 12% more than the Paki export. With remittance from NRP/ Drug trade slowing down , soon Chinese uncle have to incorporate Pakistan as new bought territory and rename it Hanslavestan.

[Vipul]

China to set up 100 MW wind power project.

The price per MW comes to $2.26 Million ie Rs 15 Crore per MW. Compare this with India wind power cost per MW which is Rs 6.6 Crore.

In effect due to the inflated project cost the chinese by investing their share of 25% will own the plant while the host country will be on the hook for the debt/loan through the lifetime of the project

[abhijitm]

In a developing country like India car sales is an indicator of middleclass growing purchase power. Just wanted to check what is it like in a poor country like Pakistan.

It seems Suzuki is selling maruti 800 base version to pakis as Mehran for USD 6000+. That is 3 times costlier than its Indian counterpart before we phased it out!

The entire country buys about 100,000 cars in a year, more than half is Toyota.

Last year it saw surge in sale up to 150,000 mainly due to new cabs.

Meanwhile in 2014 Hyundai tried to sell (possibly refurbished) Santro to pakis and managed to fool about 150 of them.

[Gagan]

This whole dhaga is a big

[Yagnasri]

We all need entertainment from time to time.

[chetak]

In a developing country like India car sales is an indicator of middleclass growing purchase power. Just wanted to check what is it like in a poor country like Pakistan.

It seems Suzuki is selling maruti 800 base version to pakis as Mehran for USD 6000+. That is 3 times costlier than its Indian counterpart before we phased it out!

The entire country buys about 100,000 cars in a year, more than half is Toyota.

Last year it saw surge in sale up to 150,000 mainly due to new cabs.

Meanwhile in 2014 Hyundai tried to sell (possibly refurbished) Santro to pakis and managed to fool about 150 of them.

many countries don't have fixed "dealer" prices. They will charge whatever they think that the market will bear.

I saw a similar system in Mauritius.

the mehran may well be going from India via a circuitous route, who else makes it anyway??

[rudradeep]

China to set up 100 MW wind power project.

The price per MW comes to $2.26 Million ie Rs 15 Crore per MW. Compare this with India wind power cost per MW which is Rs 6.6 Crore.

This higher cost is due to baniya Indian wind mills already extracting Pakistani Electricity. I immediately demand $1,000,000,000 Trillions in damages.

[Peregrine]

Fearing dollar flight, govt looks for Chinese financing

ISLAMABAD: The federal government has asked coal-based power producers to arrange financing from China instead of domestic institutions and markets in an attempt to prevent the outflow of dollars for the purchase of equipment, officials say.

However, it is feared that this government move will delay the completion of power projects by 12 to 18 months.

It must be kept in view that several coal-power projects are facing default on debt repayment in the United States and other countries in the wake of refusal by banks to provide financing. Environmental concerns are among the major reasons behind the reluctance of banks to fund the projects.

Talking to media, a senior US official revealed that it had been established that many premature deaths of children around the world had been caused by environmental hazards and therefore some countries were switching from coal to other sources of power generation.

China is the only country that could extend loans for the coal-power projects and reports suggest that it also wants to shift some abandoned old coal plants to Pakistan.

According to officials aware of the development, the Ministry of Finance has asked new coal-based power producers, who have so far been unable to raise funds for their projects, to scout for Chinese financing.

“This way the government will be able to stave off pressure on the country’s dollar reserves,” an official commented.

Meanwhile, the Ministry of Water and Power has recommended to the energy committee of cabinet that it should block the announcement of new tariffs for the power projects based on imported coal except for the plants being set up under the China-Pakistan Economic Corridor (CPEC), the projects of Lucky, Siddiqsons and others for which letters of support have been issued and the projects being shifted from furnace oil to coal with estimated capacity of around 4,920 megawatts.

The Lucky and Siddiqsons’ projects are in the pipeline and they have been told to look for Chinese loans.

According to the officials, Siddiqsons is lobbying the government to include its project in the CPEC’s priority list, but this may hurt some other schemes. However, they believe the project may be made part of the economic corridor programme.

The government has already placed the Thar coal project, sponsored by Engro Corporation, in the CPEC’s priority list to ensure state guarantee and financing from China.
Cheers

[Peregrine]

China to set up 100 MW wind power project.

The price per MW comes to $2.26 Million ie Rs 15 Crore per MW. Compare this with India wind power cost per MW which is Rs 6.6 Crore.

This higher cost is due to baniya Indian wind mills already extracting Pakistani Electricity. I immediately demand $1,000,000,000 Trillions in damages.

rudradeep Ji :
Is the quoted figure in Zimbabwean Dollars!
Cheers

[Peregrine]

Textile, leather goods: FBR proposes hefty increase in sales tax

ISLAMABAD: The government may double sales tax on domestic sale of textile and leather products and could withdraw exemption from 5% withholding tax on electricity consumed by these sectors to raise roughly Rs13 billion in additional revenues from the next fiscal year.

The proposal to increase the sales tax on textile, leather, carpets, sports goods and surgical goods was part of the tax measures for new financial year 2016-17 that would be presented to Prime Minister Nawaz Sharif for approval, sources told The Express Tribune.

Currently, domestic sales of these five export-oriented sectors are taxed at reduced rates, but the textile lobby is seeking complete exemption from taxes on the grounds that the Federal Board of Revenue (FBR) is not timely paying their tax refunds.

The prime minister has already announced the grant of zero-rating tax status to the export sectors in the new budget and it is not clear whether he will endorse the FBR’s proposal.

However, any move to increase the sales tax on domestic sales could prove to be politically explosive, particularly at a time when the premier is already under pressure in the wake of Panama leaks.

According to the FBR’s proposal, the tax on yarn and fabrics may be increased from 3% to 5% from fiscal year 2016-17, sources in the finance ministry said.

It has also proposed that tax on garments should be doubled from 5% to 10% and estimated that it will receive an additional revenue of Rs10 billion from this single step.

The FBR had wanted to introduce the standard 17% sales tax on textile, leather, carpets, sports goods and surgical instruments. However, due to sensitivity of the issue and the influence of textile sector, the government decided not to completely withdraw the concessionary tax.

According to the second proposal for these export sectors, the withholding tax exemption on electricity bills may be withdrawn.

Under Clause 235 of the Income Tax Ordinance, the government collects 5% withholding tax from industrial consumers but the textile, leather, carpet, sports and surgical goods industries are not paying this tax.

The FBR’s proposal is aimed at raising about Rs3 billion in additional revenues on the grounds that these sectors are already paying taxes at reduced rates. However, it has proposed to keep the withholding tax exemption for exporters.

The FBR is of the view that there has been huge tax evasion and 90% of textile production is cleared at the yarn stage by paying only 3% tax, according to sources. The purpose of rationalising the tax is to check evasion at the domestic stage.

The proposal does not have the backing of the textile ministry, according to sources.

The concessionary tax is regulated under the Statutory Regulatory Order (SRO) 1,125 – a legal instrument used to amend the laws.

The FBR had wanted to withdraw the SRO, which would have led to the imposition of 17% sales tax. However, sources said the SRO would not be withdrawn but amended to the extent of increasing the tax rates.

The textile ministry is fiercely opposed to the FBR’s move. It recommended the finance minister to keep the tax rate at zero for the export sectors and collect a reduced levy on textile products at retail stage in the domestic market.

The textile ministry is also against the idea of keeping factories as the FBR’s collection agents.

Sources said if the government decided to increase the tax rates, the capital cost of exporters would go up. Apart from this, the nexus between corrupt FBR officials and the industry will remain in place and the payment of illegal refunds in return for bribes will continue.
Cheers

[Peregrine]

Pakistan yet to benefit from Russia’s pivot to Asia as trade falters: report

KARACHI: Russia is the largest country in the world by area and the 10th largest in terms of gross domestic product. But Pakistan’s bilateral trade with such a major regional economy has been minimal of late, averaging out at $420 million a year since 2004.

But the problem is more acute — the trade between the two countries in 2015 failed to meet even the modest standards, languishing at a mere $381m compared to $454m in 2014, according to a recent research report prepared by the Pakistan Business Council (PBC).

For Pakistan, the only bright spot is that the trade balance has been in its favour since 2010.

Russia imported goods worth $285m from Pakistan last year; the bulk of these imports comprised fruits, vegetables, cereals and apparel.

However, indicative potential for Pakistan’s exports to Russia stands at $24.5 billion, indicating the huge market that exists in Russia for commodities exported by Pakistan, the report said.

The commodities Pakistan can potentially export to Russia include women’s and men’s trousers and shorts (of cotton, not knitted), petroleum oils and preparations, instruments and appliances used in medical or veterinary sciences, and Portland cement with a potential of $758m, $422m, $315m and $311m, respectively.

In contrast, Pakistan’s imports from Russia were $95.7m in the preceding year, consisting mainly of paper and paperboard, vegetables, iron and steel, inorganic chemicals and machinery.

The top items that Pakistan can potentially import from Russia include ‘other’ petroleum oils and preparations ($6.2bn), petroleum oils and crude ($5.6bn), and light petroleum oils and preparations ($2.2bn). Some of the other products include iron and steel ($561m), residues and waste from the food industries ($316m), fertilisers ($287m) and pharmaceutical products ($280m). The overall import potential stands at $47.3bn, the PBC report said.

Islamabad’s trade with Moscow has shrunk despite Russian President Vladimir Putin’s “pivot-to-Asia” policy which, though dates back to 2011, has been bolstered by Western economic sanctions in the aftermath of Ukrainian crisis, and plunging oil prices.
Cheers

[Bhurishrava]

http://www.dawn.com/news/1263813/non-te ... -drop-20pc

Pakistan’s exports of non-textile products dropped by nearly 20 per cent to $6.93 billion in the first 10 months (July-April) of the current fiscal year from $8.64bn a year earlier, mainly due to a fall in commodity prices on the international market.

[abhijitm]

How Moody, S&P are rating pakistan? There is no single reliable source for their economic figures. Every quoted number is fudged. I just go round and round when I try to search what is going on. Finding fossils are easier than matching numbers of paki economy.

[Abhay_S]

Budget 2016-17: who’s unhappy?

http://www.thefridaytimes.com/tft/budge ... s-unhappy/

Finance Minister Ishaq Dar’s job is not enviable. He is a prisoner of several political, economic and national security constraints that severely circumscribe his ability to implement the deep structural reforms needed to put the economy on track for sustained long-term growth. Consider.

There is one fundamental issue that overhangs all others. That is each government’s inability or unwillingness to levy direct taxes on millions of income earning and rent seeking Pakistanis. Consequently, our Tax to GDP ratio at barely 13 per cent is insufficient – the global standard for emerging markets is above 20% — to meet our minimum necessary expenditures to uplift the economy, create jobs and alleviate poverty. Indeed, even when the FBR is able to meet its tax revenue targets – as it did this year – it does so by juggling with indirect taxes (direct tax target was short by nearly Rs 240 billion) whose burden is disproportionately felt by the poorer and lower income sections of the populace, thereby increasing real inequality. Unfortunately, there is no plan in Mr Dar’s budgetary proposals to effectively tax the income of millions of Pakistanis who operate in the black economy. Every government talks about it but doesn’t have the political will to crack down on tax evaders. Instead, existing taxpayers are pressurized to cough up more and more.

There is an allied structural issue. Nearly 60% of Pakistan’s GDP comes from the Services (entertainment???, professional fees, etc) sector. But this barely accounts for 30% of total tax revenue. Similarly, the agriculture sector contributes above 20% of GDP but pays next to nothing in taxes because it remains in a perennially “depressed” condition with low productivity, low output, high input costs and pre-capitalist social and economic relations of production. Without radical land reform, biotech applications(Djin Technology) and realistic support policies for inputs and output, there is no scope for higher incomes and resultant taxes in this sector. But reform is precluded by a host of political and economic vested interests that are milking the status quo.

These revenue “constraints” inevitably put a brake on expenditures and therefore growth. As matters stand, all the tax revenue is gobbled up by two poachers: defense and debt servicing. In other words, all development expenditures must come out from more local and foreign debt or foreign investment and aid. The latter sources have been progressively drying up – foreign investment was barely US $1 billion last year because of our “national security” policies that have led to regional alienation, international isolation and domestic political instability. Corruption and bad governance in every ruling party has exacerbated the problem. So every government has to plug the gap between actual revenues and projected expenditures by deficit financing, ie, borrowing from the banks that are happy to lend, thereby crowding out the private sector. But this is a vicious circle and national debt as a proportion of GDP (over 60%) has been progressively rising over the decades. But such deficit financing is limited by two factors: the political necessity of keeping inflation low and donor programs (like those of the IMF that are needed for international balance of payment and currency stabilization reasons) that require it to come down to manageable proportions.

Therefore a degree of “fudging”(Sialkot Statistics) to show an unduly healthy picture of the economy is to be expected. It begins even before the ink on the budget speech has dried in the form of supplementary budgetary grants for expenditure overruns and continues throughout the year. Defense expenditures and subsidies for loss making public sector enterprises or vested private sector entities like the sugar and fertilizer industry are the main beneficiaries (nearly Rs 240 billion this year). The government is also ever ready to manipulate GDP growth figures. Whenever there is a change of guard, the incoming regime deflates the growth figures of the outgoing government so that its own subsequent performance looks good in comparison. Independent think tanks claim GDP growth is about 3.1% over 2015-16 whereas the government is boasting 4.7%. The agriculture sector – whose cotton and rice output is the mainstay of our export regime — has actually declined by 2% but the government is putting a lid on its dismal performance for political reasons by claiming only stagnancy at minus 0.2 per cent! Is anyone unhappy with the budget?

The top export earners are relieved because their inputs and outputs remain out of the purview of duties and taxes. So too are government employees and pensioners because they have got a raise in emoluments above the rate of inflation. The military has got its usual pound of flesh. The bureaucracy’s perks and privileges are untouched. The subsidies of loss making public enterprises are intact, as are the profits of the fertilizer industry, automobile lobby and sugar barons. The retail trade sector that is a PMLN vote bank remains largely tax-immune. Only tens of millions of the poor, relatively powerless, impoverished and unemployed have been left to desperately fend for themselves on the margins of society.

[Bhurishrava]

http://www.dawn.com/news/1264060

Remittances growth slows to 5.6pc

Reports indicate that India has captured Gulf markets, particularly in the segments of high-tech and high-salaried jobs.
Media reports also suggest that most of low-level jobs would be abolished for foreigners in Saudi Arabia, which would hit Pakistanis.

[Bhurishrava]

http://www.dawn.com/news/1264158

Loadshedding woes: Mills warn of flour shortage, price spiral in days to come.

[ramana]

X-Post....

10 trillion paki rupees ~= 100 billion USD right? Or am I missing something.

10 trillion Pork rupees!!! There must be a mistake! Who on earth will loan the pigs ~$100B!!??

And all this to service existing debt. I see Pakistan's entry to the elite 'Failed Economies Club' being speeded up.. With their house in such a $h!tty shape, they want eishtrategic balance, regional balance, civil-military balance all the while their own bank balance is non-existent..

abhik Ji & sudhan Ji,

Pakistani Debt & Debt Repayment

Pakistan's Debt and Liabilities-Summary (In Billion Rupees)

A. Total Debt and Liabilities (Sum I to 9) : 21,619.5 i.e. Pak Rs. 21.6195 Trillion

B. Total Public Debt : 19,550.1 (Sum I to IV) i.e. Pak Rs. 19.5501 Trillion

C. Total Public Debt (sum I to III) MOF Definition3 : 19,167.9 i.e. Pak Rs 19.1679

D. Total External Debt & Liabilities (sum II to VI+IX) : 7,286.6 i.e. Pak Rs 7.2866 Trillion

E. Commodity Operation and PSEs Debt (sum VI to VIII) 1,229.4 i.e. Pak Rs. 1.2294 Trillion

So Gentlemen Cwapistani Debt IS ALWAYS IN TRILLION.

Cheers

[sudeepj]

Not directly about Pakistani economy, but relevant.

http://www.the-american-interest.com/20 ... -of-flesh/

China helped make Venezuela one of the unhappiest places in the world, aiding and abetting a suicidal government bent on wrecking the oil industry and destroying the country’s chances for peace and prosperity. Now that food has vanished from the grocery stores, violence stalks the streets, and the ruling ‘party’ is collapsing into an ugly nest of armed factions, China suddenly has a new worry: it lent billions of dollars to enable Venezuela’s despoilers. When they fall, will their successors honor China’s debts? The FT has more:

China is renegotiating billions of dollars of loans to Venezuela and has met with the country’s political opposition, marking a shift in its approach to a nation it once viewed as a US counterweight in the Americas. […]

Beijing has also sent unofficial envoys to hold talks with Venezuela’s opposition, in the hope that if President Nicolás Maduro falls his successors will honour Chinese debts, sources on both sides of the negotiations told the Financial Times. Its recognition of Mr Maduro’s fragile position and the rising clout of the opposition, led by Henrique Capriles, is another sign that the diplomatic noose is tightening around Caracas’s socialist government.

Venezuela is only one of the places where China’s lenders have held their noses and lent money to or bought concessions from some of the worst governments in the world. This strategy worked pretty well for a while, but the costs are mounting. Many of the debtors have bad credit and bad business plans so they can’t repay what they borrow (or they just choose not to). Moreover, concessions to Beijing made by a corrupt and hated regime will often be repudiated by angry nationalists when regime change comes. China is getting an ugly reputation both for extending loans to bad actors and then trying to claw them back from the people the dictators robbed and oppressed. That image won’t help Beijing’s cause.

[member_22872]

TSP says RAW finances TTP. Okay, fine. Can we also flood TSP with fake Paki rupee? just junk their economy. Lets see how long they will survive, guess this is faster than waiting for them to fall apart into 4-5 pieces. Their economy falls, they go USSR way. Also attacks their new jugular vein - CPEC

[Vipul]

Non-textile exports fall 19pc.

Exports of non-textile products dropped 19 per cent to $7.68 billion in the first 11 months (July to May) of the current fiscal year from $9.48bn a year earlier, the Pakistan Bureau of Statistics said on Wednesday.

Overall food exports fell 13pc year-on-year during the period. Exports of rice went down by 10pc in value despite a growth of 9pc in terms of quantity. Basmati rice exports dropped 27pc in value and 7pc in quantity. By contrast, other rice varieties witnessed a decline of 3pc in value but their quantity rose 12pc.

Exports of fish and its products edged lower by 6pc in value and 5pc in quantity compared to last year. Sugar exports declined 57pc in terms of quantity and 56pc in value, while that of spices rose 20pc in value and 11pc in quantity.

Fruit exports fell 4pc in value and 3pc in quantity, while that of vegetables decreased 8pc in value and 6pc in quantity.

Exports of petroleum and coal groups fell 75pc year-on-year on account of a 100pc decline in petroleum naphtha proceeds. However, the coal group witnessed a growth of 217pc in terms of value.

Petroleum crude also registered a negative growth of 65pc in value and 41pc in quantity during the period under review.

Exports of carpets, rugs and mats dropped both in value (19pc) and quantity (22pc). Proceeds from tanned leather exports fell 26pc in value and 26pc in quantity. On the other hand, exports of surgical goods and medical instruments grew 4pc in value.

Exports of sports goods dropped 4pc in value. However, exports of football inched up 4pc in value and 15pc in quantity.

Footwear exports dropped 18pc, while exports of leather products dropped 10pc during the 11-month period.

Exports of non-traditional items like plastic material and pharmaceutical products declined 29pc and 4pc in value and 27pc and 25pc in quantity. Exports of gems plunged 53pc in value and 38pc in quantity.

Cement exports dropped 27pc in value and 22pc in quantity. Exports of gur and its products dropped 57pc in value and 42pc in quantity. However, exports of jewellery edged up by 17pc in terms of value during the period under review.

[abhijitm]

TSP says RAW finances TTP. Okay, fine. Can we also flood TSP with fake Paki rupee? just junk their economy. Lets see how long they will survive, guess this is faster than waiting for them to fall apart into 4-5 pieces. Their economy falls, they go USSR way. Also attacks their new jugular vein - CPEC

I think fake currency is already a huge issue in pakistan.

[Gagan]

Their "real" currency is itself fake. It is a totally unregulated society. People who have the means are probably printing their own currency with photo of Mai baap of the day, in this case RAWheel sharif

[Vipul]

A 'anal'yst was recently alleging on a talk show in Shitland that India was pushing fake currency through the 24 consulates on the Afghan border.

[menon s]

I was in fact looking for parallels between Hambantota airport In Srilanka and the New Gwadar International airport.

The Chinese company, China Communication Construction Company Limited, CCCC limited was involved in both and has been debarred from,
world bank related development work due to corruption, until, 2017!

http://en.ccccltd.cn/newscentre/company ... 29747.html

http://web.worldbank.org/external/defau ... country=CN

[ Chinese companies built the Hambantota Port, Mahinda Rajapaksa International Airport (MRIA) and a cricket stadium in the former president Rajapaksa’s political constituency, Hambantota. These are now incurring losses because they are not commercially viable. In September 2013, the interest rate for MRIA, which cost US$209 million to build, was increased from 1.3 per cent to 6.3 per cent.*]

[SaraLax]

I was in fact looking for parallels between Hambantota airport In Srilanka and the New Gwadar International airport.

The Chinese company, China Communication Construction Company Limited, CCCC limited was involved in both and has been debarred from,
world bank related development work due to corruption, until, 2017!

http://en.ccccltd.cn/newscentre/company ... 29747.html

http://web.worldbank.org/external/defau ... country=CN

[ Chinese companies built the Hambantota Port, Mahinda Rajapaksa International Airport (MRIA) and a cricket stadium in the former president Rajapaksa’s political constituency, Hambantota. These are now incurring losses because they are not commercially viable. In September 2013, the interest rate for MRIA, which cost US$209 million to build, was increased from 1.3 per cent to 6.3 per cent.*]

Thanks for this info !.
It seems the Chinese are suffering in Venezuela too - where they have sunk in huge sums of money but with that country suffering from choas, the chinese are now sucking up to the opposition so as to ensure they get paid their loan interests & principal money back.

[Prem]

http://tribune.com.pk/story/1164170/sbp ... hina-slow/
FDI falls 14.6% as inflows from China slow down

KHARACHI: Foreign direct investment (FDI) in Pakistan clocked up at $64.3 million in July, down 14.6% from FDI received in the first month of the preceding fiscal year.Statistics released by the State Bank of Pakistan (SBP) on Tuesday show inflows from China slowed down substantially in the first month of 2016-17.China became the principal foreign direct investor in the last fiscal year, with a net inflow of almost $600 million in 2015-16. As a result, FDI in Pakistan surged 38.8% year on year to $1.28 billion in 2015-16, with China contributing almost half of the inflows under the much-celebrated China-Pakistan Economic Corridor (CPEC).But inflows from China hit a snag last month with net inflows amounting to $12.9 million, which constitutes about one-fifth of the total FDI received in July.FDI from China declined 75.8% in July on a year-on-year basis, SBP data shows.With the exception of the last fiscal year that witnessed increased inflows from China as part of the CPEC, Pakistan has faced low levels of foreign investment in recent years. The SBP has called an increase in FDI ‘imperative’ for the sustainability of the economy’s external sector.

[kancha]

http://tribune.com.pk/story/1164170/sbp ... hina-slow/
FDI falls 14.6% as inflows from China slow down

Just tweeted.

Link

Pakistan: FDI falls 14.6% as inflows from China slow down http://tribune.com.pk/story/1164170/sbp ... hina-slow/ … Just you wait till the CPEC 46Bn come in .. just wait

[nirav]

This CPEC is a wonderful opportunity for us to get the bakis go broke for good.

we must do all sorts of song and dance to delay the project but eventually allow it to proceed.
That gives the chinese a reason to hike up interest rates ..

Will eventually hit pak fauj the most when they realize the big financial mess they have created.

One could possibly see baki army kammandus standing on CPAC highways selling fauji corn flakes and what not to make money from the damn thing to repay the chinese ..

I have full faith and trust in the madrassa educated gernails of bakistan to convert this 46 billion CPAC into a 460 billion debt to the dragon over the coming few decades.