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Pakistan In Focus

Microfinance recoveries stall

The microfinance sector of Pakistan is currently undergoing a recovery from the dent endured during the Covid-19 lockdown. The sector, which had posted a steady growth over the past few years, recorded a decline in 2020.

The Covid-19 pandemic was the primary reason behind the downturn because business activities came to a standstill in the first couple of months following the virus outbreak in the country.

Industry experts claim that the sector is currently in hot water as a majority of borrowers have not been able to repay loans due to little or no functioning of their businesses.

“Different banking and nonbanking institutions are able to recover their loans but the pace is slow since this sector caters to the low-income segment, which normally repays its loans on time,” said senior microfinance practitioner Mubashar Bashir said.

The industry was forced to defer the recovery of loans keeping in view the financial health of its borrowers and to recoup its own losses, it sought help from regulators to meet the liquidity shortfall, he said.

However, he said that the industry should expect a behavioural change from the borrowers as there still existed several challenges to making recoveries.

Government removes age restriction for hiring CEOs

The government has removed the restriction on upper age limit for appointment of chief executive officers (CEOs) of power distribution companies. Previously, the age limit for appointing the CEO of a power distribution company was 62 years.

The cabinet had taken up the issue of advertisements for the position of CEOs in its meeting.

The Power Division informed the meeting that there were 10 distribution companies under its administrative control, which were public sector firms.

It stated that these companies were being headed by general managers/ chief engineers on a look-after charge basis as a stopgap arrangement on a temporary basis.

It was then proposed that the appointment of CEOs may be carried out on a regular basis.

According to the Companies Act 2017, the board of directors shall carry out the recruitment process, including advertisement and shortlisting on the fit-and-proper criteria, and furnish a panel of at least three candidates to the line ministry for submission of the case to the federal government after due deliberations at the level of line ministry.

The Power Division said that it intended to get the recruitment process initiated in accordance with the uniform guidelines for the company boards.

Business of beverages recovers as preferences shift

The business of beverages and bottled water has bounced back after the devastation caused by the Covid-19 pandemic and subsequent lockdown imposed to contain it.

Lately, sales of the two items have started picking up in 2020 and changes in consumer preferences have also been observed as well.

Now that Covid-19 vaccines have been developed, they are expected to neutralise the impact of the virus on the global economy as well as on Pakistan’s economy.

Owing to the damaging impact of the virus on the national economy, Pakistan recorded a negative growth in its gross domestic product (GDP) for the first time since 1952.

Although Pakistan is yet to receive the vaccine, just news of availability of the remedy has brought optimism to Pakistan’s business environment.

Even before the cure was invented, Pakistani companies had come up with solutions to serve their customers in order to sustain their businesses and achieve growth. “Sales of branded soft drinks have picked up as their demand becomes stable among consumers despite multiple challenges related to Covid19,” said The Coca-Cola Export Corporation General Manager Pakistan and Afghanistan Region Fahad Ashraf.

Talking to a group of journalists on Friday, he said sales of various products of the company recorded a drop in the first quarter of 2020 but turned around in the next quarter and sustained the uptrend for the rest of the year after consumption turned stable.

Government taking steps to support industrialists

The government under the leadership of Prime Minister Imran Khan has taken effective measures for industrial development, said Punjab Minister for Industry and Commerce Mian Aslam Iqbal.

During a meeting with industrialists and traders at the Gujranwala Chamber of Commerce and Industry (GCCI), he said vocational training programmes had been launched as per requirements of the industry in the Technical Education and Vocational Training Authority (Tevta).

He said the Punjab Employment Scheme costing Rs30 billion had been launched to boost trade and economic activities.

The minister announced the construction of a 16km link road to connect Gujranwala with Sialkot Motorway besides the construction of a new industrial estate on the Lahore-Sialkot Motorway.

He alleged that the leaders previously did not pay attention to problems of the industry and industrialists, adding that the Pakistan Tehreek-e-Insaf (PTI) government had taken practical steps to resolve problems of the industrialists.

Import of smuggling-prone products halves under ATT

Imports of top five smuggling-prone items under the Afghan transit trade (ATT) have dropped by more than half in the current fiscal year, which increased tax collection besides protecting domestic industries from the injurious effects of illegal trade.

Imports of black and green tea, tyres, textile and electronic goods under ATT fell by Rs86 billion or 51 percent during first five months of the current fiscal year, according to a presentation recently given to Prime Minister Imran Khan by the Federal Board of Revenue (FBR).

During July-November 2020, Afghanistan imported Rs82.5 billion worth of five types of goods as against Rs168 billion in the same period of last year. Stringent enforcement measures played a role in reducing the smuggling of these items from Afghanistan to Pakistan.

However, it was not clear how much of the reduction was on account of exchange rate depreciation as the value was given in rupee terms.

Benefits of the adverse impact of Covid-19 on global trade were also not known.

SBP reserves fall $83mn to $13.2bn

The foreign exchange reserves held by the central bank declined 0.62 percent on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.

On December 18, the foreign currency reserves held by the SBP were recorded at $13,216.2 million, down $83 million compared with $13,298.8 million in the previous week.

According to the central bank, the fall came on the back of external debt repayments. Overall, liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $20,313.1 million. Net reserves held by banks amounted to $7,096.9 million.

Pakistan received the first loan tranche of $991.4 million from the International Monetary Fund (IMF) on July 9 last year, which helped bolster the reserves. In late December, the IMF released the second loan tranche of around $454 million.

Previously, the reserves had jumped on account of $2.5 billion in inflows from China. A few months ago, the SBP successfully made foreign debt repayment of over $1 billion on the maturity of Sukuk.

In December 2019, the foreign exchange reserves surpassed the $10 billion mark.

Should Pakistan raise minimum pay?

Believe it– and believe it – Pakistan is a nuclear-armed but a low-income country. It doesn’t befit the geopolitical stature we aspire to command.

The fact that the readers have smartphones, 4G and are able to read English qualifies you to the middle to upper class. However, swamps of Pakistanis live near or slightly above poverty levels. With a 200 million-plus population, unreliable unemployment numbers are easy to doubt.

What’s known, nonetheless, is that wage rates are very low, unemployment is very high and private sector jobs are hard to find. In such a gloomy scenario, imagine being stuck in “make ends meet” trap. That too, with low salaries and quick replacements.

Where is the government? Imran Khan’s government – and the masses at large – saw a very tough two years marred by economic derailment stemming from rupee devaluation and ensuing higher food inflation.

Without dwelling into factual faults of the previous government in terms of a historic high current account deficit at $20 billion, the policymakers should

– and are – now focus on rejuvenating the economy or purchasing power of people. Is it getting better? With focus on industrialisation, cheaper tariff, export-led growth, housing-led revival and cushioned by low international oil prices, the stage is set for the private sector.

Post-Covid, Pakistan’s foreign currency reserves have crossed $20 billion – and are rising – and currency stability and low interest rates are also to stay. Large-scale manufacturing is on the rise. Yes, the needle has moved. But, has the “Aam Aadmi” benefited yet? Not yet.

What matters to an Aam Aadmi is salary/ wages; monthly expenses; cost of health and education; fuel, gas and electricity prices; annual increments; and a stable economic environment.

It is the very private sector that creates jobs and finds the right skill set for the right jobs. With excess supply (people) of top quality graduates amid low demand (new jobs), the equation is simple – lower salaries.

Inflation, jobs opportunities worry Pakistanis

Increasing inflation, unemployment and poverty remained the biggest concerns for Pakistanis with a majority of the population viewing economy going in the wrong direction but the overall perception has gradually started improving, a new opinion poll reveals.

About 70 percent of the most worrying issues for Pakistanis relate to their financial miseries, according to an Ipsos opinion survey released on Wednesday.

Survey results showed that a majority of the people were not happy with the way things were handled. But the number of people viewing things adversely has started declining.

People were somewhat not seeing any improvement in the local economy. About 57 percent said that they were expecting either weaker or much weaker economy in the next six months.

People were questioned about their confidence in the economy, their opinion on the current situation compared to a year earlier, investment decisions, job prospects and the most worrying issues for them.

Increasing inflation was the biggest concern for 34 percent of the respondents, according to the survey. A year ago, 29 percent people had said that increasing inflation was the most worrying issue.

Increasing inflation was also the most worrying issue in provinces. In Sindh, 32 percent of respondents were worried by the inflation while in Khyber-Pakhtunkhwa 40 percent of respondents said that inflation was the biggest concern for them – the highest ratio in any province.

About 22 percent of respondents said unemployment was the biggest concern for them – a level that was better than a year ago. Increasing poverty was the third biggest concern for 14 percent of respondents – a ratio that was just 6 percent a year ago.

Unemployment also remained the second most worrying issue in three provinces, except for Balochistan where it was the third big concern.

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