Trade deficit widens 24pc in Pakistan
Pakistan exports have plunged for the successive second month to slightly over $2 billion in February, proving once again that a recent peak in exports was the result of some external factors and policy measures, including 30 percent currency devaluation, did not help.
Contrary to over 4 percent contraction in exports, the imports increased one-tenth to $4.6 billion last month on an annualised basis, the Pakistan Bureau of Statistics (PBS) reported on Wednesday. Resultantly, Pakistan’s trade deficit widened nearly 24 percent in February 2021 on a year-on-year basis.
The gap between imports and exports increased to $2.5 billion in February over a year ago, a jump of $486 million or 24 percent, the PBS said.
It was the second consecutive month that Pakistan’s exports dropped from their previous levels. The $2.04 billion worth of export receipts were the lowest in five months. The exports had started picking up early this fiscal year and peaked to $2.4 billion in December, prompting celebrations on twitter – the micro blogging website – by the government.
But this proved to be a short-term achievement, as the exports again started sliding towards historical band of around $2 billion. Pakistan’s exports have long remained around $2 billion a month and the trend did not significantly change despite 30 percent currency depreciation during the Pakistan Tehreek-e-Insaf (PTI) government’s tenure in the past two and a half years. During the Pakistan Muslim League-Nawaz (PML-N) tenure, the exports had peaked to $2.3 billion and then again settled below $2 billion.
Government notified 25pc ad-hoc allowance
The federal government has notified 25 percent ad-hoc allowance for civil employees of up to grade-19 but excluded about five-dozen departments that are already availing higher than standard pay packages.
The superior courts and the armed forces will not be entitled to the ad-hoc allowance, as these departments along with nearly five-dozen more departments are already availing higher salaries.
The officers serving in grade-20 to -22 are also not entitled for the ad-hoc allowance, as if they are not affected by the double-digit inflation. But the Ministry of Finance has kept the doors open for the 58 excluded departments and constituted a committee that will review the requests for the raise.
The Ministry of Finance on Wednesday notified the increase in salaries on an ad-hoc basis with effect from March 1, in line with an agreement reached between the protesting government servants and members of the federal cabinet last month.
According to the notification, the federal government approved“grant of disparity reduction allowance at the rate of 25 percent on the basic pay of Basic Pay Scales 2017 with effect from 1st March 2021.”
Scores of the employees and labour unions had been demanding increase in the salaries after the government did not raise their pays in the last budget as part of the International Monetary Fund (IMF) conditions to cut expenditures.
The employees protested discrepancies in the salaries of various government departments. The Ministry of Finance has estimated the cost of the ad-hoc allowance at around Rs10 billion for this fiscal year.
Government likely to permit cotton import via land route
As the country has become a net importer of cotton for the past three years due to lower domestic production, the government is set to allow cotton import from Afghanistan and Central Asian States via Torkham land route.
Pakistan’s cotton harvest has shrunk significantly as farmers are switching over to other lucrative crops. Different countries have given agriculture the status of industry but Pakistan’s agriculture sector is being neglected constantly because of increased focus on textile barons.
Owing to the low cotton production, the Ministry of Commerce is pressing the Economic Coordination Committee (ECC) to permit imports from Afghanistan and Central Asian States.
However, the ministry has not recommended cotton import from India due to tense ties between the two neighbours for decades.
Pakistan’s textile sector consumes around 12 million bales (170,000 kg) of cotton per annum but production has fallen short of the requirement over the past one and a half decade.
For the current fiscal year, the cotton harvest target has been set at 10.89 million bales, but in meetings of the Cotton Crop Assessment Committee, the output has been estimated at only 7.7 million bales.
It is the lowest production level in decades. During 2013-18 tenure of the Pakistan Muslim League-Nawaz (PML-N) government, the output had dropped to nine million bales.
With low production, the country needs to import cotton in an effort to bridge the demand-supply gap.
Profit rates on saving schemes increased
The federal government has increased the rate of profit on two national saving certificates to attract investors to park their savings in the national schemes, as net investment in saving certificates and prize bonds turned negative in the first six months of current fiscal year.
People pulled out a significant amount of investment mainly during December 2020. Accordingly, the net investment became negative at Rs8.98 billion in July-December 2020, according to the State Bank of Pakistan (SBP).
The Central Directorate of National Savings (CDNS), which offers saving schemes to the general public, announced that it had increased the rate of profit on Defence Saving Certificates (DSC) by 27 basis points to 9.51percent.
Besides, the rate of profit on Special Saving Certificates (SSC) was revised upwards by 60 basis points to 8.40 percent. The new profit rates came into effect on Wednesday, March 3.
Recommendations for new LPG policy
A sub-committee constituted to make recommendations for a new liquefied petroleum gas (LPG) policy has turned down major demands of state-run LPG producers that called for imposing regulatory duty on LPG imports and maintaining advance income tax to end price distortion.
Oil and Gas Development Company (OGDC), Pak Arab Refinery Limited (Parco) and Pakistan Petroleum Limited (PPL) are the state-run companies that are producing LPG.
They said that the government should maintain the prevailing advance income tax on LPG imports as this is an advance tax and is adjustable against final tax liability.
In final draft of the new LPG policy, the sub-committee, formed by the Cabinet Committee on Energy (CCOE), rejected the two proposals and called for removing the advance tax, which would increase price disparity between local and imported LPG.
The sub-body also did not propose imposition of regulatory duty on LPG imports.
Ogra increases LPG price by Rs2 per kg
The Oil and Gas Regulatory Authority (Ogra) on Monday hiked the price of liquefied petroleum gas (LPG) by Rs2 per kg for March 2021.
According to a notification issued by the authority, LPG will now be available at Rs160 per kg instead of Rs158 per kg. In line with the increase, the price of domestic cylinder has risen by Rs22 to Rs1,885 and that of commercial cylinder by Rs84 to Rs7,252.
The LPG production price has soared by Rs1,576 per ton. In 2020, domestic production of the commodity stood at about 735,460 tons while 473,900 tons were imported by sea and 660,000 tons via land routes.
At present, according to market players, the LPG policy is in favour of importers because the government has offered incentives and reduced the general sales tax.
Domestic LPG producers are paying petroleum levy, but the government has waived the regulatory duty on LPG imports. There is distortion in taxes imposed on locally produced and imported LPG, they say.
The domestic industry pays 17 percent general sales tax while importers pay only 10 percent tax. According to rough estimates, the importers have got a benefit of around Rs15 billion over the last two and a half years due to the tax disparity, market players say.
Pakistan produces 1.21m cellphones in Jan-Feb
With a significant drop in cellphone smuggling, Pakistan’s mobile phone assembly segment grew by leaps and bounds and produced 1.21 million mobile phones in just two months (January and February) of 2021.
The output was significantly higher than just 119,639 mobile phones assembled in the entire 2019.
According to a statement issued by the Pakistan Telecommunication Authority (PTA) on Wednesday, the implementation of Device Identification, Registration and Blocking System (DIRBS) in 2019 led to a notable increase in legal imports of mobile devices.
It also helped to establish over 33 assembly plants of mobile devices in Pakistan, it said.
“These plants have produced over 25 million mobile devices including 4G smartphones after the introduction of DIRBS,” the PTA revealed. “Following successful execution of the system, the local assembly segment evolved from infancy to maturity stage with a significant growth in local assembly of smartphones.”
In light of the tremendous impact of DIRBS, the government introduced a comprehensive mobile manufacturing policy to attract international manufacturers to set up their plants in the country.
Pakistan: low-cost housing picking up pace
Pakistan’s efforts to offer low-cost housing finance to people having slim resources are gradually gaining momentum.
A scheme in this regard is expected to facilitate hundreds of thousands of people and protect banks from the risk of default by loan-seekers.
More people are now approaching banks and other financial institutions to acquire low-cost housing finance being offered at subsidised rates under the prime minister’s housing scheme. People can acquire loans of up to Rs3 million under the low-cost housing scheme.
“Around 10,000 applications have been received so far under the housing scheme,” State Bank of Pakistan (SBP) Deputy Governor Sima Kamil said while talking to sources on the sidelines of an event organised by Pakistan Mortgage Refinance Company (PMRC) for signing risk-sharing agreements with banks on Monday.
PMRC has inked risk-sharing agreements with around a dozen banks over the past couple of months to cover their risk against default by the borrowers taking low-cost housing finance.
Pakistan: textile industry short review
Covid-19 has turned out to be a blessing in disguise for the textile industry as global buyers are increasingly turning towards Pakistan by cutting orders to regional players, resulting in 100 percent utilisation of available production capacity.
Almost all the major players in the country are in the process of expanding their capacity in a bid to create room for the growing number of export orders, especially for home textile.
“Conditions for Pakistan’s textile industry are very favourable and it is working at full capacity,” remarked Taurus Securities’ textile sector analyst Hania Nabeel while talking to source.
Textile orders were pre-booked till December 2020 and for some companies till June 2021. However, it remains to be seen whether the industry will continue to receive such orders in future as well.