Pak Foreign exchange reserves stand at $17.47b

According to the State Bank of Pakistan, the reserves showed a decreased of $52.5 million as compared to the last week. Reserves held by the SBP fell to $14.02 billion from $14.11 billion a week ago, while those held by commercial banks rose to $3.45 billion from $3.41 billion.

Pakistan foreign reserves have surged by $4.51 during the fiscal year 2011.

Australia to levy $1.8b flood tax

Australian Prime Minister Julia Gillard announced a new 1.8 billion Australian dollar (US$1.79 billion) income tax to help fund reconstruction in flood-devastated Queensland state without tipping the government budget further into deficit. With a slender grip on power after last year’s election left neither of Australia’s two major political forces with enough seats to govern alone, Ms. Gillard’s handling of the flood recovery will be pivotal for the Labor government.

It comes as Canberra begins counting the clean-up cost of its worst natural disaster in decades, estimated by officials Thursday to trim about A$5.6 billion from the government budget and cut economic growth by half a percentage point in the fiscal year ending June 30.

The proposed year-long temporary tax hit the Australian dollar Thursday, sending it down to US$0.9964 from US$0.9997 during the Asian trading day, on the belief that it could have a dampening effect on consumer spending and take pressure off Australia’s central bank to raise rates. Australian stocks ended flat.The temporary tax, to apply to the fiscal year beginning July 1 to Australians earning over A$50,000 a year, will cost around A$1 a week for someone on an annual income of A$60,000, rising to A$5 a week for someone earning A$100,000 a year. In announcing the tax, Ms. Gillard is judging that the political cost of not delivering on a promise to restore the budget to surplus by the year ending June 30, 2013, would be greater than any voter backlash against higher taxes. The great majority of Australians are ready to contribute, I have no doubt about that, Ms. Gillard said. But Tony Windsor, one of a handful of independent lawmakers keeping the Labor government in power, warned: Don’t count on my vote for the new tax. Mr. Windsor is calling for a permanent National Natural Disaster Levy to fund future crises including floods, wild fires, hail storms or cyclones. Another key independent, Robert Oakeshott, is undecided. Meanwhile, the increasingly influential Greens Party said it supports the idea of a flood tax. But it added it opposes Ms. Gillard’s proposed spending cuts to other government programsincluding solar hot water rebates and energy efficiency measuresto help fund the recovery costs. That raises the prospect the tax legislation could be voted down when introduced into Parliament next month. It beggars belief that the government would choose to cut climate change programs…to fund disaster relief when such disasters will be made worse by climate change, acting Greens leader Christine Milne said. Joe Hockey, shadow Treasurer for the main conservative Liberal-National opposition coalition, said a tax to fund the flood recovery effort is too much on top of an anticipated rise in food prices as a result of the damage to agricultural land. On top of the recent Labor party increases in the cigarette tax and also alcohol taxes and car taxes and given that electricity prices are rising, it is too much at this point in the economic cycle, Mr. Hockey said. Rick Kuhn, a political expert at Australian National University, described the tax as an incredible act of hypocrisy on the part of the government. It is placing the burden for the flood relief onto ordinary working class taxpayers at a time when the government is going to be cutting the corporate tax rate, he said, referring to plans to cut the company tax rate to 29% from 30% from July 1, 2013. Devastating floods have washed out thousands of homes, roads and rail lines and killed more than 30 people across resource-rich Queensland state since December, disrupting exports and destroying agricultural crops. Australia is the world’s largest exporter of coal used for steelmaking and the second largest supplier of coal for power plants. Separate floods spreading across Victoria state over the past two weeks have affected 60 towns in an area larger than Denmark. Ms. Gillard pledged Thursday an immediate government payment of A$2 billion toward the Queensland reconstruction effort, to be funded by cutting spending in other areas and delaying non-urgent infrastructure projects in other states. Australia & New Zealand Banking Group Ltd. economists warned the flood tax will act as another constraint on household spending, reinforcing market expectations that the country’s central bank will hold interest rates steady for some time. This federal government flood tax will cost jobs, slow the economy and destroy households that are just hanging on, said Scott O’Driscoll, National President of the United Retail Federation. Woolworths Ltd., one of the country’s largest grocery and general-merchandise retailers, this week downgraded guidance for earnings growth this year, partly citing disruptions from the floods. Given the economy already is taking a big hit from higher food prices, rents and insurance premiums, it seems strange that the government wants to take the chance of damaging it further, Macquarie Research Economics director Brian Redican said. These policies increase the risks to the economy recovering in a quick and timely fashion from the flood impact. Economist and Reserve Bank of Australia board member Warwick McKibbin panned the tax proposal as politically motivated, saying that relaxing the government’s goal of restoring the budget to surplus in fiscal 2013 is a better option. (WSJ)

Foreign investment declines by 28 percent

Volume of foreign investment in Pakistan continued to decline. The country recorded 28 percent decrease in the foreign investment in the first quarter of the fiscal year.
According to data of the State Bank of Pakistan, 45.51 crore dollars were invested by foreign investors in the country which was 28.5 percent lower than last years investment in the first quarter.

Pak deficit to rise to 6-7pc due to floods: PM

ISLAMABAD: Pakistan’s budget deficit is expected to climb to 6-7 percent of gross domestic product in the fiscal year 2010/2011 as a result of floods, the prime minister said on Wednesday.

“The budget deficit before the flood crisis was estimated to reach 4.5 percent of GDP. Now it is estimated to be as much as 6-7 percent of the GDP,” Prime Minister Yusuf Raza Gilani told the cabinet.

Gilani said the disaster would hit the economy hard.

“The floods have inflicted damage to the economy which may by some estimates reach $43 billion, while affecting 30 percent of all agricultural land,” he said.

Pakistan’s budget deficit for the fiscal year 2009/10 (July-June) was 6.3 percent of GDP, the Finance Ministry said on its website on Tuesday.

This compared with a deficit of 5.2 percent in fiscal year 2008/09.

The monsoon floods have affected

KSE dull lacklustre new tax weighs on sentiment

KARACHI: Local stocks remained dull on Thursday with turnover at its lowest level in 18 months, as a new capital gains tax introduced in the market kept investors away from the market, dealers said.

The Karachi Stock Exchange”s (KSE) benchmark 100-shareindex, however, ended a marginal 0.09 percent, or 9.08points, higher at 9,730.99.

Turnover was only 20.83 million shares, compared with 71.29million shares traded on Wednesday, and lowest since December 2008.

In its budget for the 2010/11 fiscal year, the government imposed a capital gains tax of 10 percent on stocks held for six months or less and 7.5 percent on stocks held between 6months and a year.

The tax is applicable from Thursday, the start of the new fiscal year.

Some dealers said that trade volumes are likely to improve once margin buying is reintroduced in the market.

The KSE authorities and the Securities and Exchange Commission of Pakistan (SECP) met last week to discuss margin buying and other leveraged products, and decided to form a committee, which is required to submit its recommendations within 15 working days.

The interbank currency and money markets were closed on Thursday for a bank holiday.

SBP receives $710 mln from world donors

KARACHI: The State Bank of Pakistan (SBP) has received 710 million dollars from international donors during the last few days of the fiscal year 2009-10.

SBP spokesman, Syed Wasimuddin told Geo News that 470 million dollars have been received from the World Bank and 175 million dollars from Asian Development Bank as latest installments of loans while USAID has provided grant of 65 million dollars.

According to experts, the international financial assistance will help Pakistan meet its budget deficit.

Stocks edge up in cautious, year-end trade

KARACHI: Pakistani stocks remained range-bound on Wednesday, but ended higher on the last trading day of the fiscal year, while dealers said trade was likely topick in coming days.

The Karachi Stock Exchange”s (KSE) benchmark 100-share index ended 0.20 percent, or 19.88 points, higher at 9,721.91.

Turnover was 71.29 million shares, compared with 62.85million shares traded on Tuesday.

Volumes were soon likely to pick up after the expected reintroduction of margin buying. The KSE authorities and the Securities and Exchange Commission of Pakistan (SECP) met last week to discuss margin buying and other leveraged products, and decided to form a committee, which is required to submit its recommendations within 15 working days.

Dealers said trade has also been affected in recent days by uncertainties over the implementation of a new capital gains tax on July 1.

However, they said that the market was slowly factoring in the new tax, as it was inevitable.

In its budget for the 2010/11 fiscal year, the government announced that a capital gains tax of 10 percent would be imposed on stocks held for six months or less and 7.5 percent on stocks held between 6 months to a year from July 1.

Dealers said the government had previously agreed with the exchange that the capital gains tax would be levied only on profits made from the start of the 2010/11 fiscal year.

But now there are concerns the government may seek to tax gains made before that date and demand quarterly tax returns instead of the annual filing preferred by brokers, they said.

In the currency market, the rupee ended at 85.47/54to the dollar, down from Tuesday”s close of 85.38/45, but dealers said they expected the rupee to remain steady in coming weeks.

In the money market, overnight rates jumped to 11.5-12.4percent from 9.5 percent a day earlier, amid outflows on the last trading session of the fiscal year.

The interbank money and currency markets will remain closed on Thursday for a bank holiday, though the stock market will remain open.

Balochistan unveils Rs152 bn provincial budget

QUETTA: Balochistan government presented Monday its third budget for the fiscal year 2010-11 in the provincial assembly, ARY NEWS reported.

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Balochistan unveils Rs152 bn provincial budget

Rs47.332bn AJK deficit budget presented

MUZAFFARABAD: Azad Jammu and Kashmir (AJK) government Friday announced an overall consolidated budget of Rs 47.332 billion for fiscal year 2010-11 with a record deficit of over Rs 17.6050 billion, allocating Rs 11.1749 billion for Annual Development Programme (ADP).

AJK Minister for Finance Raja Nisar Ahmad Khan presented the budget in the AJK Legislative Assembly, which was presided over by Speaker of the Assembly Shah Ghulam Qadir.

The opposition boycotted the budget speech of the Finance Minister after a short protest in the house against non-provision of their development funds during the outgoing fiscal year.

The budget sets aside Rs 11.174965 billion for development, up by 10 per cent over the outgoing fiscal year”s original allocation of Rs 9.555 billion as compared to original spending of Rs 7.13 billion.

The finance minister hoped that the federal government would provide grant in aid to meet the development expenditures deficit.

The total revenue receipts were estimated as Rs 22.9 billion including share from the taxes of Kashmir council income from local resources of Rs 9.92 billion, Mangla Dam water usage charges Rs750 million, share from AJK council taxes Rs 4.5 billion, and share from federal taxes Rs 6.68 billion.

The finance minister announced 50 per cent ad hoc increase in the salaries of the government employees, police officials, pensions and medical allowance following the federal government”s initiative.

However, he did not announce any cut in the salaries of ministers and government functionaries as the federal and provincial governments did by cutting down their expenditures.

It is pertinent to mention that AJK has the biggest cabinet of its history with all treasury members except one having the portfolio.

The finance minister in his budget speech said the share of the federal government in the new National Finance Commission (NFC) award was reduced, which had also affected the AJK share putting his government in financial crunch.

“If we are provided net profit over the hydro-electric projects, complete share from the federal taxes and Kashmir property, we might not need any grant in aid to bridge the gap between income and expenditures,” he informed the house.

The minister said the government need extra seven billion rupees in the current expenditures head to raise the salaries of government employees, Judiciary, police and 100 percent increase in the medical allowance of grade 1 to 15 employees and 15 percent of higher grade officials.

In the development budget, priority has been given to transport and communication sector by allocating a sum of Rs 4.18 billion for the construction and maintenance of roads and bridges, besides fixing Rs 1.5 billion for development projects in the power sector.

Local government departments would be provided Rs one billion during the next fiscal year while Rs 916 million have been allocated for foreign funded projects. The education sector would get Rs 800 million for its development schemes.

The minister announced to regularize 1100 contractual employees during the fiscal year starting from July 1, but no new post has been announced in the budget.

In the non-development expenditures head, a junk amount of Rs 7.594 billion have been allocated for the education sector, Rs 5.30 billion for electricity department, Rs 3.31 billion in the head of miscellaneous expenditures, Rs 2.5 billion for state trading, Rs1.82 billion for health, Rs 1.17 billion for general administration, Rs 1.6 billion for the payment pension and Rs 1.58 billion for police department.

The minister also presented the revised budget estimates of Rs 32.78 billion for the outgoing fiscal year 2009-10 in the house, out of which Rs 25.65 were for non-development expenditures and Rs 7.13 for the development expenditures. The revised budget shows a deficit of Rs 5.5 billion.

The house will debate the budget for the fiscal year 2010-11 and revised budget for the outgoing fiscal year from Monday after a two days pause.

China says euro zone woes will hit export growth

BEIJING: Debt strains in the euro zone will take a toll on Chinese exports in the coming months, the Ministry of Commerce said on Saturday.

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