Jails not new for PPP ‘Jialas’, says Firdous
While addressing the inauguration ceremony of NADRA office and the passport office at a village Kobey in the suburb of Sialkot, Minister for Information Firdous Ashiq Awan said that accountability, penalty and prize are the rights of the masses. The PPP stands first among giving sacrifices for the sake of democracy, she said.
She expressed that the government is taking concrete steps to overcome energy and gas crisis. She also has had a meeting with delegation comprising members from Chamber of Commerce, Dry Port Association and Surgical Association of Sialkot who called on Information Minister and Governor Punjab Sardar Muhammad Latif Khosa today.
The delegation was led by Chairman Chamber of Commerce Naeem Anwaar Qureshi and Chairman Dry Port Association Saddique Ishaq Butt.She announced that one more gas pipeline is being laid down from Wazirabad to Sialkot to resolve the problem of gas shortage in the city.
“We are focusing to generate electricity from hydel power which is cheaper and also directed provinces to initiate small projects to overcome the energy crisis”, she said.
Around 2000 megawatt electricity would be produced through the factories’ wastes which would also help resolve the issue.
Keeping in view the energy crisis, she informed that an energy conference would be arranged in Lahore soon.
Governor Punjab Sardar Latif Ahmad Khosa said that some people were hatching conspiracies to derail the system of democracy but such tactics would be foiled.
He said that the people claiming for change were actually committing forgery and fraud in the name of rule of law.
Commenting on next budget, he said the delegation that the upcoming budget would be people and business friendly.
The suggestions would be sought from Chamber of Commerce, Dry Port Association and Surgical Association in this regard which would be incorporated while planning the budget.
Latif Khosa said the country cannot progress until the government extend the tax net.
The government is taking concrete steps to overcome prevailing energy crisis in the country.
The delegation said 251 million dollars export is being made from Sialkot annually while the local industry is providing job opportunities to 0.4 million people.
PPP’s real court is masses and some elements are trying to halt the Senate polls with their threats, she said.
SBP keeps policy rate unchanged at 12 %
Governor State Bank of Pakistan (SBP) Yasin Anwar while unveiling the Monetary Policy Statement at a press conference held at SBP, Karachi said that further decrease in basic interest rate is not possible in the current situation.
Earlier, the Central Board of Directors of the SBP has decided to keep the policy rate unchanged at 12 percent
Following is the text of SBP Governor’s press statement on Monetary Policy:-
‘The basic challenge faced by Pakistan’s economy is financing its fiscal and external current account deficits. The size of these deficits may not be considered large given the current state of falling private sector investment demand in the economy. A reflection of overall low aggregate demand can be seen in the declining inflation trend, contraction in the real private sector credit, and falling volume of imports. The SBP’s monetary policy stance in FY12 so far, a cumulative reduction of 200 basis points, has been largely framed in this context.
The lack of diversified and sustainable financing sources has resulted in substantial borrowings from the banking system by the government and declining foreign exchange reserves. This has squeezed the availability of credit for the private sector and increased the pressure on rupee liquidity. The SBP has been providing substantial liquidity on almost permanent basis, on average Rs230 billion during 1st July – 9th February 2012, to ensure smooth functioning of the payment system and avoid financial instability. The continuation of this trend, however, carries risks for effectively anchoring inflation expectations in the medium term.
The uncertain market liquidity flows have lead to excess volatility in short term interest rates and increased the challenges of monetary management. The main reasons for this uncertainty include: a sharper deterioration in the external current account deficit, a declining trend of foreign inflows, and a higher currency to deposit ratio. However, other market interest rates, such as KIBOR and Weighted Average Lending Rate (WALR), have largely followed the policy rate reductions.
A declining interest rate environment together with a relatively better growth in Large-scale Manufacturing (LSM) is expected to help the pickup in private sector credit. The LSM sector grew by 1.5 percent during July-November, FY12, which is in contrast to an average contraction of 3.1 percent during the same period of last three years. Moreover, credit to the private sector has expanded by Rs238 billion during 1st July – 3rd February, FY12. However, to assess its likely path few points need to be kept in mind.
First, given the continuing energy shortages, unfavorable law and order conditions, and an uncertain political environment, the desired boost in business confidence and thus private sector credit may not take place. Second, profitability of the textile sector, a major user of private sector credit, was better in FY11 due to higher cotton prices. This would facilitate repayments or keep the demand for fresh credit to a minimum in FY12. Third, the utilization of installed industrial capacity is considerably low and continues to decline, which is inhibiting credit demand for fixed investment. Fourth, all of the fresh credit disbursement in H1-FY12 was utilized to meet the working capital requirements, which implies that a significant part of this credit will be retired in H2-FY12.
Thus, the full year expansion in credit to the private sector is expected to remain weak for yet another year in FY12 despite interest rate reductions. Its year-on-year growth is already negative in real terms and indicates depressed private investment demand in the economy. In addition, given substantial government borrowings from the scheduled banks together with rising NPLs, banks are likely to continue to avoid lending to the relatively risky private sector.
According to provisional data, the government has borrowed Rs444 billion from the banking system, during 1st July – 3rd February, FY12 to finance its current year’s fiscal deficit. This includes Rs197 billion borrowed from the SBP and show a year-on-year growth of 25.8 percent. Moreover, these borrowings are significantly higher than the yearly financing requirements of Rs293 billion envisaged in the FY12 budget.
The provisional estimate of fiscal deficit for H1-FY12, from the financing side, shows a deficit of Rs532 billion or 2.5 percent of GDP. Given that the fiscal deficit is always higher in the second half of a fiscal year, by at least 0.5 percent of GDP during the last ten years, containing the FY12 fiscal deficit close to the government’s revised target of 4.7 percent of GDP would be difficult. Encouragingly, the tax collection by the Federal Board of Revenue during H1-FY12, at Rs840 billion, has shown a strong growth of 27.1 percent. Similarly, the announcement of auction of 3G licenses in the telecommunication sector is a positive development and could help in containing the potential fiscal slippage.
However, based on the seasonal pattern of tax collections, the full year target of Rs1952 billion still seems ambitious. At the same time, there are indications that the issue of circular debt in the energy sector remains and losses of major Public Sector Enterprises (PSEs) continue to increase. Thus, the likelihood of slippages on the expenditure side on account of subsidies, over and above the budgeted amount, cannot be ruled out. The delay in these subsidy payments may have implications for resolving the circular debt issue.
The risks to external position have also increased due to worsening terms of trade, fragile global economic conditions, and continued paucity of financial inflows. In addition, $1.1 billion are scheduled to be repaid to the IMF in H2-FY12. The SBP’s foreign exchange reserves have already declined to $12.2 billion as on 9th February 2012 from $14.8 billion at end-June 2011. Similarly, the rupee-dollar exchange rate has depreciated by 5.2 percent in FY12 so far.
Led by 33.7 percent growth in imports of petroleum products on the back of elevated international oil prices, total imports have increased to $19.7 billion in H1-FY12. The volume of imports remained muted, which indicates moderation in domestic demand pressures. Given the rising tensions in the US-Iran relations and political uncertainty in the Middle East region, the oil prices are unlikely to fall significantly in the near future and may even increase. Therefore, despite low volumes, imports are projected to grow in the range of 12.5 to 14.5 percent for FY12.
Similarly, while the falling cotton prices played their part in sharper than expected slowdown in export receipts, $12 billion in H1-FY12, the volume of exports have also declined considerably. Assuming that these trends would continue in H2-FY12 export receipts are projected to show a decline of 3 to 5 percent in FY12. Incorporating a steady flow of workers’ remittances, the external current account deficit is expected to remain in the range of $3.5 billion to $5.5 billion or 1.5 to 2.4 percent of GDP. The possibility of limiting the deficit to the lower bound of the range is mainly contingent upon the realization of Coalition Support Fund, $800 million, and the proceeds from the auction of 3G licenses, estimated to be around $850 million.
The real challenge is to finance this projected external current account deficit. The actual net capital and financial inflows during H1-FY12 was only $167 million due to decline in both the direct and portfolio investments and shortfalls in official flows. Assuming that all the official flows contemplated by the government are realized – $500 million from the issuance of euro bonds, $800 million from the privatization proceeds of PTCL, and budgeted loans from international financial institutions – the net capital and financial inflows could increase to $3.8 billion by June 2012.
These fiscal and external developments have resulted in a skewed composition of monetary aggregates. In particular, the increase in the Net Domestic Asset (NDA) component of M2 is disproportionally large while the Net Foreign Assets (NFA) has contracted. Given its strong correlation with inflation, the resulting increase in the NDA to NFA ratio is not a welcome development. The year-on-year growth in M2 for FY12 is projected to be in the range of 12 to 13 percent.
The changing composition of M2 requires a careful interpretation. For instance, the deterioration in the external sector is mostly due to adverse terms of trade developments and uncertain official inflows and may not be a sign of rising aggregate demand. Similarly, the pressure on aggregate demand due to the government borrowings from the banking system is being partly offset by the weak private investment demand.
These conjectures are supported by the decline in year-on-year CPI inflation to 10.1 percent in January 2012. In addition to moderation in aggregate demand, this also reflects improvement in domestic supplies of food items. However, there are indications of underlying inflationary pressures. For instance, the number of CPI items showing year-on-year inflation of more than 10 percent is significant and mostly belong to the non-food category.
The SBP expects the average inflation in FY12 to remain in the range of 11 to 12 percent, which implies an uptick in inflation in H2-FY12. The main reasons for this assessment include: increases in electricity and gas prices, high international oil prices, impact of exchange rate pass-through, increase in support price for the upcoming wheat procurement season, and substantial government borrowings from the banking system.
For inflation to come down further, the implementation of the Medium Term Budgetary Framework (MTBF) is imperative. The MTBF envisages a systematic reduction in the fiscal deficit to 3.0 percent of GDP in FY14 by increasing the tax to GDP ratio and stipulates inflation targets of 9.5 percent for FY13 and 8 percent for FY14. Decisive reforms in the energy sector can also go a long way in achieving the MTBF targets. These reforms not only will reduce the government’s reliance on banking system borrowings but also minimize the need to adjust the energy prices in a sporadic and unpredictable manner. Both these factors would help in improving the effectiveness of monetary policy and its contribution in keeping inflation low and stable.
In conclusion, despite moderate aggregate demand, pressure on rupee liquidity is likely to continue due to uncertain foreign inflows and substantial government borrowings to finance the fiscal deficit. Moreover, inflationary pressures have not eased significantly. It must be emphasized that sustainable economic recovery over the medium term would call for a sizeable increase in both the domestic and foreign private investment in the economy. For this to happen, the business confidence needs to be revived by reducing uncertainties due to energy shortages. Against this backdrop, the Central Board of Directors of SBP considers the 200 bps reduction in the policy rate, already introduced in FY12, to be appropriate and has decided to keep the policy rate unchanged at 12 percent’.
Interference on Balochistan unbearable, US told
Washington and the US Embassy have been informed about our reservations.
While giving weekly briefing in Islamabad, FO spokesman Abdul Basit said, “Balochistan is our internal matter; all the countries should respect the sovereignty of one another.”
He said that the Washington and the US embassy have been informed of our reservations about the US discussing the Balochistan issue.
He said that national policy on done attacks in clear and candid, adding that such attacks are a challenge for our sovereignty which is unacceptable for us at any cost.
Commenting on Pak-Iran Gas Pipeline Project, he said that it is very important for us. Construction work on the project is underway which would be completed till 2014, he said.
The Foreign Office also said that no meeting between Prime Minister Yusuf Raza Gilani and representatives of Afghan Taliban were held in Qatar as no such meeting was in schedule.
Spokesman said that a misconception was created that the Prime Minister had a plan to hold meetings with Taliban.
He said that Gilani visit to Doha was exclusively focused on bilateral relations with Qatar, though, regional situation and peace in Afghanistan also came under discussion in the meetings between the Prime Minister and Qatari officials.
About the initial talks between Taliban and the US, the spokesman said the American diplomatic sources had briefed Pakistani officials over their contacts and talks with them. However, he declined to comment on meeting between Taliban and the US Special Envoy for Pakistan and Afghanistan Ambassador Marc Grossman in Qatar.
“Better this question be asked US State Department instead of me, they can confirm or reject such question,” he added.
Responding to a question about different approaches of China and Pakistan over support to the UN resolution against Syria, he said, “Some amendment in the resolution enabled us to support it. Every country, that either voted for or against the resolution had their own valid reason. Our friendship with China is time-tested and everlasting.” But Pakistan always stands for respecting independence, territorial integrity and sovereignty of all the countries including Syria, he further said.
On the ongoing row over the US drone attacks, he said that such actions are unacceptable but after completion of the parliamentary process, Pakistani officials would have clear policy in this connection.
Regarding the issue of Afghan refugees, the spokesman reiterated that Pakistan is engaged with the UN agencies for their return but with honor and dignity.
Over the US pressure around the world against trade with Iran, he said that as far as the IP gas project is concerned there is no change in the position of Pakistan.
Basit said that trilateral summit of Pakistan, Afghanistan and Iran in Islamabad next week will focus on counter-terrorism and drug trafficking.
He said that Pakistan was quite busy on diplomatic front this week. Prime Minister Gilani visited Qatar and held negotiation on energy and bilateral relations. The foreign minister visited Russian Federation for improving bilateral relations, “Pakistan is facing energy crises and it also hold talks on this issue with Moscow”. “Russia also has interest in Pak-Iran gas project.” The Lankan President is also visiting Pakistan and so on, he said.
Amid the rumors of Pakistani officials meeting during the prime minister visit with Taliban in Qatar, a reaction was noticed in Kabul.
Oil prices rise after US supply report
Benchmark crude rose by 18 cents to $98.59 per barrel in New York. Brent crude, which is used to price foreign oil varieties, rose by 29 cents to $116.52 per barrel in London.
The Energy Information Administration reported that the United States crude supplies increased by 300,000 barrels last week, much less than the increase of 2.25 million barrels analysts expected.
Analysts were betting that refineries would continue to replenish stockpiles as they usually do in the first few months of the year. But last week they also cut back on imports as oil and gasoline demand dropped.
The EIA said that U.S. petroleum demand fell by 4.8 percent to a four-week average of 18.1 million barrels per day. That s the weakest four-week average since April 1997, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Oil prices had risen earlier in the day, to above $100 per barrel, following an industry survey that predicted supplies would move in the opposite direction, dropping by 4.5 million barrels. The EIA report countered that.
“That took the wind out of the sails” of energy commodities, said Gene McGillian, a broker and oil analyst at Tradition Energy.
Meanwhile, doubts about Greece s ability to follow through with spending cuts and other austerity measures necessary to avoid bankruptcy pushed the dollar higher. Oil, which is priced in dollars, tends to drop in value as the dollar rises and makes crude more expensive for investors holding foreign money.
In other energy trading, heating oil fell by a penny to $3.18 per gallon, while gasoline futures rose by about 1 cent to $2.94 per gallon. Natural gas futures rose by a penny to $2.48 per 1,000 cubic feet.
IHC rejects plea to reinstate ex-Defence Secretary
The hearing of the plea to reinstate former Secretary Defence Lt Gen (r) Naeem Lkalid Lodhi was conducted in Islamabad High Court on Wednesday.
The court said that Nargis Sethi will hold the office of Secretary Defence and ordered not to appoint any other secretary Defence till the decision of the case.
The court directed that current setup will continue to work till the final decision in this case.
Pakistan eyes political solution to Afghan problem: Hina
Addressing a joint news conference in Moscow after a meeting with her Russian counterpart, Foreign Minister Hina Rabbani Khar said that Pakistan wants to foster strong relations with Russia in different fields.
She said there is an intensive collaborative road map for cooperation and inter actions between the two countries. She said we are looking forward for the energy group to be meeting within the first half of this year.
The Foreign Minister described her meeting as very good and said it would give way to have clarity in the inter actions and institutional framework that we have been able to develop. Hina said that Pakistan takes pride in developing good relations with Russian.
She said Pakistan has been working to find solution to Afghanistan s problems having Afghan owned‚ Afghan led dialogue and what the Afghan people decide.
The Foreign Minister said Pakistan will welcome Russian investment in the Pakistan Steel Mills.
Fuel prices up in China
China on Tuesday raised its ceilings on gasoline and diesel prices in response to rising prices in international markets.
The move, disclosed on Tuesday by China s top economic planning body, comes as Beijing continues to balance its efforts to protect consumers from the rising cost of oil with its desire to tame growth in energy consumption and make its booming economy more energy efficient.
The National Development and Reform Commission said it would raise gasoline and diesel prices by 300 yuan ($47.50) per metric ton, effective midnight Wednesday. This represents an increase of 3.3% and 3.6% over the current average gasoline and diesel retail ceiling benchmarks of 9,080 yuan and 8,230 yuan, respectively, according to Dow Jones Newswires calculations. The exact price ceiling varies by geographic location throughout China.
The move may indicate that authorities are growing less concerned about inflation. Beijing sometimes delays fuel price adjustments when it fears that increases could add to inflationary pressures.
The National Bureau of Statistics will release data for January s consumerprice index on Thursday. Economists expect that the CPI rose by 4.1% from a year earlier, unchanged from December s rise, according to the median forecast in a survey of 15 analysts. That would be down from a peak rate of 6.5% in July of last year.
Beijing faces competing priorities as it considers energy prices. Inflation has slowed but remains a key concern for the nation s leaders because it can lead to political unrest. At the same time, China has begun to take further measures to curb its pollution problems, including improved monitoring and incentives for more fuel-efficient cars, and last year said it could accept binding global emissions reductions after 2020.
In November, China raised electricity prices for businesses nationwide and unveiled a system for raising prices for the heaviest residential users, part of efforts to wean the economy off over-dependence on energy-intensive industry.
In December, the government launched a test reform in two provinces that would link natural gas prices more closely to market prices rather than keeping them artificially low.
The NDRC last changed gasoline and diesel prices on Oct. 9, cutting them by 300 yuan per ton, in response to declining international oil prices.
Under China s oil product pricing system, domestic fuel prices may be adjusted when the moving average of a basket of international crudes changes more than 4% over a period of 22 working days. The government hasn t always rigidly followed the formula, which was introduced in 2009.
Pakistan, Iran boost economic ties with 3 MoUs
The MoUs were signed by Iran’s Vice President for International Affairs Ali Seedlou and Pakistani advisor to the Prime Minister on finance Abdul Hafeez Sheikh, at the conclusion of bilateral consultations in Islamabad.
Abdul Hafeez Sheikh on the occasion said that the MoUs related to timely completion of Iran-Pakistan gas pipeline project, import of electricity from Iran and encouraging private sector of the two countries.
“Both sides also agreed to explore more avenues to increase bilateral trade to $ 5 billion mark,” the adviser said.
Iranian delegation was led by Iran’s Vice President for International Affairs Ali Seedlou while Pakistani side was led by Dr Abdul Hafeez Shaikh.
A number of Deputy Ministers from different sectors represented the Iranian side.
Abdul Hafeez Sheikh said that Iran and Pakistan have expressed the resolve to remove obstacles impeding trade.
He added that the two sides reviewed bilateral economic relations including commerce, transport and communication, energy, railways and oil and gas sectors.
Abdul Hafeez Sheikh said that President Asif Ali Zardari and Prime Minister Yousaf Raza Gillani are committed to bringing Iran and Pakistan closer. “Our trade volume will cross 5 billion dollars benchmark in times to come,” said the advisor.
Iran’s Vice President for International Affairs Ali Seedlou expressed gratitude for the hospitality of Pakistan.
He stressed the need for enhancing the cooperation between Iran and Pakistan in the fields of economy and development.
He said that Iran and Pakistan are bonded in the eternal ties of religion, culture and history. Two great nations are capable and have the capacity to work for the well being of the region.
Ali Seedlou added that Iran has already completed its portion of gas pipeline project and is also ready to assist Pakistan in building Pakistani part of the project.
“The project will bring prosperity in the region and would further strengthen Iran-Pakistan ties,” he noted.
He said Iran had extended 100-million-dollar assistance to Pakistan’s flood-stricken people and is ready to start more projects for the welfare of the Pakistan people.
Pointing to the upcoming visit to Pakistan of the Iranian President Mahmoud Ahmadinejad, he said Tehran has no restrictions for expansion of ties with Islamabad.–Online
IAEA wraps up talks in Iran
There were no sign of any breakthrough on tensions over Tehran s nuclear programme, media reported.
Both sides “agreed on continuing the talks,” the Fars and ISNA news agencies reported, saying a date had been set but not divulging it.
Fars said the talks “were held in a positive and constructive atmosphere.”
ISNA said that the six-person International Atomic Energy Agency team “did not visit any of the nuclear centres and facilities in our country during their trip.”
Neither Iranian media nor the UN watchdog s team itself has revealed the substance of the talks, or which Iranian officials were involved.
The IAEA officials, lead by chief inspector Herman Nackaerts, were expected to return to the agency s headquarters in Vienna early on Wednesday.
Its visit was seen as a rare opportunity to defuse an international showdown over Iran s nuclear programme that has been building since the IAEA published a report in November strongly suggesting Tehran had been researching atomic weapons.
The United States and the European Union have been piling severe economic sanctions on Iran in the past three months to pressure it to halt its nuclear activities.
Iran, which maintains its programme is for peaceful purposes, has refused and reacted by starting new uranium enrichment in a fortified bunker at Fordo, near the holy city of Qom.
It has also threatened to retaliate, possibly by closing the strategic Strait of Hormuz at the entrance to the Persian Gulf, if sanctions cripple its vital oil exports or if it is attacked.
The United States and its allies have deployed warships to the Gulf region. There is also increased speculation that Israel is planning military strikes against Iranian nuclear facilities. –AFP
State of emergency lifted in Kazakh city
Kazakhstan on Tuesday lifted a state of emergency in its riot-torn Caspian Sea town of Zhanaozen, where clashes between striking oil workers and police left at least 16 dead last month.
Kazakh President Nursultan Nazarbayev ordered the state of emergency to last until 7 a.m. local time Tuesday. He announced Friday it would not be extended because the “situation had taken a normal course.”
The violence in Zhanaozen and the wider Mangistau region on the Caspian Sea, where the Central Asian country pumps much of its oil, was the bloodiest in Kazakhstan s post-Soviet history.
Strongman Nazarbayev initially blamed the bloodshed on militants, but he later sacked several energy executives and even his son-in-law Timur Kulibayev, who headed a state holding firm with stakes in the companies hit by strikes.
