Iranian Nuclear Program has Threats of External Attack: Ali Asghar

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Six world powers will attempt to persuade Iran to rein in its nuclear programme as talks take place in Turkey, but there is little expectation of tangible results beyond an agreement on a framework for further negotiations. A cyber-attack that targeted Iranian nuclear centrifuges producing enriched uranium in November did not affect the country’s nuclear programme, Iranian ambassador Ali Asghar said in Moscow on Thursday.

The viruses could not do anything to the Iranian centrifuges and did not affect the functioning of the Bushehr nuclear power plant either, Ali Asghar told. Iran’s nuclear standoff with the West has escalated in the past year, with the United Nations imposing new sanctions and Western states rejecting a revised proposal for Iran to swap some of its fuel abroad as too little, too late. European Union foreign policy chief Catherine Ashton heads the delegations representing six big powers, Britain, China, France,Germany, Russia and the United States. They will meet with Iran’s nuclear negotiator Saeed Jalili. The West says Iran has failed to comply with UN resolutions demanding it curb enrichment and grant unfettered access to its nuclear sites. The prospect of an Iranian nuclear weapon feeds fears of a Middle East conflict should the United States or Israel opt to attack it.

Story contribute by A TrendPK ( www.trendpk.com )

India refuses to share Samjhauta probe details with Pakistan

NEW DELHI: India has refused to share details of the Samjhauhta bombing probe with Pakistan, TrendPK reported on Tuesday.

According to media reports, India’s Ministry of Home Affairs (MHA) has asked the External Affairs Ministry to tell Pakistan that it cannot share details of the Samjhauta blast investigations right now, as investigations are at a preliminary stage and it would be premature.

This comes a day after Pakistan asked India to provide an early update to it on the investigations into the 2007 Samjhauta Express train bombing in the wake of RSS leader Swami Aseemanand’s confession about the involvement of Sangh activists in the attack.

India’s acting Deputy High Commissioner G V Srinivas was called to the Foreign Office by Director General (South Asia) Afrasiab Mehdi Hashmi, who said information on progress in the investigations should be provided by New Delhi “at the earliest”.

Aseemanand, 59, recently confessed to the involvement of Sangh activists in several terrorist attacks, including the bombing of the Samjhauta Express that killed as many as 68 people, including 42 Pakistan nationals.

India agree for talks over Kashmir issue

NEW YORK: Despite increasingly fiery statements from Pakistan on Kashmir, External Affairs Minister S.M. Krishna has clarified India won’t allow such rhetoric to derail talks between the two nations and said he was open to talking about Kashmir.

“We are willing to talk on Kashmir also with Pakistan,” he said in an interview.

Asked what the contours of discussions on Kashmir could be, he said, “It’s going to be a free-wheeling discussion. There are not going to be any parameters.”

He said if Pakistan was attempting to impose conditions in advance, it would result in “injecting an element of distrust” within the process of talks. Monitoring Desk

Qureshi invited to India: Krishna

KABUL: Indian Minister for External Affairs SM Krishna has said he has invited Pakistani counterpart Shah Mehmood Qureshi to visit India for talks on bilateral issues.

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Qureshi invited to India: Krishna

Indian FM calls on Zardari, Gilani

ISLAMABAD: External Affairs Minister S M Krishna called on President Asif Ali Zardari and Prime Minister Syed Yousuf Raza Gilani here Thursday and discussed ways to deescalate the tension and re-track the dialogue process between the two countries, ARY NEWS reported.

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Indian FM calls on Zardari, Gilani

Aus wicketkeeper Haddin to miss Pak Tests

MELBOURNE: Australia wicketkeeper Brad Haddin has been ruled out of next month’s test series against Pakistan after losing his race to recover from an elbow injury, Cricket Australia said on Wednesday.

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Aus wicketkeeper Haddin to miss Pak Tests

No expectations from Indo-Pak talks: Krishna

MUMBAI: Dampening expectations ahead of the Indo-Pak talks scheduled to begin on Thursday, Jun 24, External Affairs Minister S M Krishna said nothing spectacular or dramatic can be expected from the upcoming foreign secretary level talks.

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No expectations from Indo-Pak talks: Krishna

India hands over another Mumbai dossier to Pak

ISLAMABAD: Pakistan on Friday said the Indian Ministry of External Affairs has handed it over more material in response to its dossiers extended to the Indian side on April 25, 2010, ARY NEWS reported.

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India hands over another Mumbai dossier to Pak

Monetary Policy: Discount rate kept unchanged at 12.5%

KARACHI: State Bank of Pakistan has decided to keep its policy discount rate unchanged at 12.5 percent.

This decision was taken at a meeting of the Central Board of Directorsof State Bank held under the Chairmanship of SBP Governor, Syed Salim Raza here on Monday.

The policy statement said the economy is recovering but it lacks the necessary infrastructure and sufficient macroeconomic stability to build on the momentum.

Stabilization efforts over the last one and a half year have brought dividends in the shape of contraction in the external current account deficit, containment of excessive money growth, and reduction in inflation.

However, it said, the worsening power crisis, which has severely hampered economic activity in the economy, and fiscal weaknesses, continue to impede sustainable recovery and comprehensive macroeconomic stability.

At the same time, inflation has started to increase gradually. In this scenario, monetary policy, being a stabilization tool, has to remain focused on its ultimate target of monetary and financial stability. Encouraged by an increase in exports, over dollars 1.8 billion in each of the last two months, supported by steady workers remittances, and helped by the realization of $656 million from the Coalition Support Fund (CSF) in May 2010, the external current account deficit will be close to 2.5 percent of GDP for FY10.

The variables of concern, however, are uncertain official foreign flows and declining Foreign Direct Investments (FDI). Thus, despite a significant contraction in the external current account deficit, dollars 3.1 billion during July-April FY10, SBP s foreign exchange reserves have largely remained unchanged, around $11.5 billion on average, during the course of the current fiscal year.

With an expected export and import to GDP ratios of 10.5 and 17 percent for FY11, keeping SBP s foreign exchange reserves stable in the medium term without a discernable increase in financial inflows would be challenging. Moreover, since the financial inflows are, and expected to remain, heavily skewed in favour of borrowings, sustainability of external debt would require a manageable current account deficit and dependable financial inflows.

A positive implication of the strengthened balance of payment position is a gradual build-up in the Net Foreign Asset (NFA) component of broad money. After experiencing an outflow of Rs150 billion in FY09, NFA now shows an inflow of Rs90 billion during July 1 May 14, FY10. This has facilitated market liquidity; although most of the increase in NFA took place in Q1-FY10. SBPs” Open Market Operations provided the necessary support to adequately manage the market liquidity from September 2009 onwards. More importantly, this correction in the components of M2, in favour of NFA, has helped purchasing power of the rupee in the domestic economy and in the foreign exchange market. For instance, the ratio of outstanding stocks of Net Domestic Assets (NDA) to NFA has come down from a high of 14 in November 2008, when inflation peaked at 25 percent, to around 8.4 by end-April 2010.

The NDA continues to be driven by governments” borrowings for budgetary support. In fact, for Q3-FY10, government breached its quarterly borrowing limits from SBP by about Rs30 billion. Since the beginning of Q4-FY10, government borrowing has increased by another Rs150 billion, reaching Rs1310 billion (on cash basis) on 14 May 2010 against the end-June target of Rs1130 billion. Similarly, government borrowing (net of deposits) of Rs206 billion from scheduled banks during July 1 May 14, FY10 is also substantial.

This persistent borrowing from the banking system for budgetary support coupled with expected borrowings for commodity operations in Q4-FY10 is jeopardizing the space for private sector credit, causing inertia in market interest rates, running the risk of excess domestic credit creation, and increasing the debt burden of future generations.

The need for heavy government borrowings for budgetary support from the banking system emanates from the unsustainable equation of revenues and expenditures and uncertain external borrowings of the fiscal authority. The Federal Bureau of Revenue s (FBR) provisional tax collection figures, during the first ten months of the current fiscal year, were Rs1026 billion. This implies that, to meet the yearly target of Rs1380 billion, a collection of another Rs354 billion is required in the next two months.

This would be quite challenging given a monthly average of Rs 102 billion in the last ten months. Even if the target is met, the FBR tax-GDP ratio is likely to be less than 10 percent, which is one of the lowest in the world. There is a risk that the government may miss the revised fiscal deficit target of 5.1 percent of GDP, which will be inconsistent with the objectives of macroeconomic stability. Moreover, further deterioration of the fiscal account will have consequences for debt sustainability and the external balances.

For medium term fiscal sustainability, necessary for overall macroeconomic stability, it is of utmost importance that effective measures are taken to increase the tax-GDP ratio and reduce the current expenditures of the government. Revenue deficit, the difference between total revenues and current expenditure, must be brought down to zero as stipulated in the Fiscal Responsibility and Debt Limitation (FRDL) Act of 2005.

It was 1.5 percent of GDP in FY09 and may cross 2 percent of the expected GDP in FY10. Cutting development expenditures may provide immediate relief but damages the prospects of much needed investment in infrastructure such as electricity generation and human capital. This, in turn, limits the future productive capacity of the economy and adversely affects the inflation outlook as the gap between aggregate demand and aggregate supply widens.

All inflation indicators, whether it is Consumer Price Index (CPI), Wholesale Price Index (WPI), Sensitive Price Index (SPI), or Non-food Non-energy (NFNE) and trimmed measures of core inflation, have shown an upward movement in recent months. The year-on-year CPI inflation, for instance, was recorded at 13.3 percent for the month of April with a month-on-month growth of 1.7 percent.

While adjustments in electricity prices, increase in domestic prices of petroleum products, and volatile movements in various food items have given a spurt to inflation, its persistence at a high level indicates that a fall in productivity has played a role as well. This signifies an entrenchment of expectations of double digit inflation, which must be checked to improve the prospects of sustainable economic growth. The cumulative growth of 4.4 percent in Large Scale Manufacturing (LSM) during July-March, FY10 is encouraging. However, its sustainability would require supportive growth in private sector credit and improvement in the availability of electricity. The former would be difficult to achieve without reduction in the scale of fiscal and public sector borrowings from the banking system and the latter requires forward looking infrastructure investment and resolution of energy sector circular debt.

In these circumstances, with inflation on the rise and the fiscal position not responding to the current monetary policy stance, SBP will closely monitor developments to ensure stability of aggregate prices and support nascent recovery of private economic activity. Therefore, SBP has decided to maintain the policy discount rate at 12.5 percent, the SBP policy statement said.

Indian leaders pay homage to Rajiv Gandhi

NEW DEHLI: Indian President Pratibha Patil on Friday led the nation to pay homage to former prime minister Rajiv Gandhi on the 19th anniversary of his killing by a Tamil Tiger suicide bomber.

The president, Vice President Hamid Ansari, Prime Minister Manmohan Singh, Rajiv Gandhi”s widow and Congress president Sonia Gandhi visited Veer Bhumi, the late prime minister”s memorial here, and placed flowers.

Rajiv Gandhi”s son and Congress general secretary Rahul Gandhi, daughter Priyanka and other members of the family also visited Veer Bhumi besides Home Minister P. Chidambaram, Defence Minister A.K. Antony, Congress MPs and other leaders.

Gandhi, son of former prime minister Indira Gandhi, was assassinated by the Liberation Tigers of Tamil Eelam (LTTE) in Sriperumbudur near Chennai during an election rally May 21, 1991.

He became the youngest prime minister of the country at the age of 40 in 1984, soon after his mother was assassinated by her Sikh bodyguards.

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