Logistic firms struggle to attain economic growth
Logistic companies in Pakistan are grappling with low margins, high taxes, and an unfavourable business environment, hindering their ability to contribute to the overall economic growth of the country.
Seagold, CEO, Ayaz Admani highlighted the concerning decrease in average gross margins for Pakistani companies. In recent years, margins have plummeted from 3 percent to 3.5 percent to a mere 1 percent to 1.25 percent due to the economic meltdown. This significant drop coupled with high expenses, poses considerable difficulties for companies, especially when competing with global counterparts.
Nepra agrees Rs1.25 tariff hike
The National Electric Power Regulatory Authority (Nepra) has approved an increase of Rs1.25 per unit on account of third quarter adjustments of the financial year 2022-23 for power distribution companies (Discos).
The Power regulator has burdened the consumers with Rs46.5 billion on account of variation in capacity charges, variable operation and maintenance costs, additional recovery on incremental sales, use of system charges, market operator fees and FCA impact on transmission and distribution losses for the three quarters of the fiscal year 2022-23.
This Amount will be recovered from the consumers in a period of three months – July, August and September 2023.
SBP against imposition of Islamic banking
State Bank of Pakistan Governor Jameel Ahmad on Tuesday said that the principles of Shariah would not be forcibly applied to the country’s banking system.
He added that the business interests of banks would also be taken into consideration in this case.
Addressing a function organised on the completion of 75 years of establishment of the SBP, Ahmad said developing banking on Shariah basis was at the top of the central bank’s priorities.
He continued that the move would be implemented with business attractiveness, and not through coercion.
Trade deficit fruitfully slashed by 43pc in fy2023
In a remarkable achievement, Pakistan has successfully slashed its trade deficit by a staggering 43 percent to $27.55 billion in the fiscal year 2023. The government’s stringent control over imports played a vital role in this significant reduction, as it aimed to stabilise the country’s critically low foreign exchange reserves and mitigate the risk of default.
In the previous fiscal year 2022, the trade deficit had widened to a daunting $48.35 billion, causing concern about the country’s economic stability. However, the government’s strict administrative measures on imports and the impact of floods in 2022 negatively affected the domestic economy, resulting in a provisional growth rate of only 0.3 percent in FY23, compared to 6.1 percent in FY22.
Moody’s, fitch warn of risks despite IMF agreement
Two Leading global rating agencies have warned that Pakistan will require significantly more funds than what it’s receiving from the International Monetary Fund (IMF) to meet its debt maturities and to finance its economic recovery, reported Bloomberg on Monday.
Moody’s Investors Service and Fitch Ratings that issued the warning are two of the big three credit rating agencies, recognised by the US Securities and Exchange Commission.
The Two agencies noted that Pakistan has to repay $25 billion in the current fiscal year to meet its debt obligations. The repayments include both principal and interest, and are about seven times Pakistan’s foreign exchange reserves, according to Moody’s.
Liquidity crunch triggers $ sell-off
The Shortage of cash rupee due to the bank holidays provided an opportunity to several money changers to buy the dollar on their own available rates, which was in the range of Rs275 to Rs285 on Monday, currency traders said.
The First day trading of the open market after Pakistan’s Standby Agreement (SBA) with IMF for $3 billion created sense of economic stability with better price of the rupee. Due to bank holidays, only a few exchange companies had cash rupees, and even that was limited. Most of the companies were unable to buy dollars despite the rush for sale.
“The Long holidays of the banks kept the exchange companies out of cash. Only few branches have some cash and they bought dollars at their own available rates which was in the range of Rs275 to Rs285,” said Malik Bostan, Chairman of Exchange Companies Association of Pakistan.
On Saturday, when only a few branches of exchange companies were operating at the country’s airports, the dollar was traded in the range of Rs280-283.
Circular debt swells Pkr 393 bn in 11-month
The Power sector’s circular debt jumped to Rs2.65 trillion by the end of May from Rs2.25tr at the beginning of the previous fiscal year — a jump of Rs393 billion, or 18 percent, in 11 months.
It was in stark contrast with figures of FY22, when the debt fell by Rs27bn, from Rs2.28tr at the start of the year to Rs2.25tr by the close, data from the energy ministry’s Power Division showed.
According to a document, the total payables to the power sector stood at 1.35tr, followed by Rs101bn to generation companies (Gencos) and Rs800bn as Pakistan Holding Limited (PHL) debt in the fiscal year 2021-22.
However, fiscal 2023 saw a massive surge in the payables to power producers, as it jumped to Rs1.77tr, whereas payables to Gencos increased to Rs110bn. However, the PHL debt dropped to Rs765bn.
In FY22, the budgeted but unreleased subsidies were reduced by Rs12bn, but they were increased to Rs72bn in the first 11 months (July to May) of 2022-23. Similarly, the unbudgeted or unclaimed subsidies were reduced by Rs133bn in the fiscal year 2022 but were raised by Rs34bn in July-May.
The Independent power producers’ (IPPs) interest charges on delayed payment increased to Rs105bn in 2021-22 but dropped to Rs87bn by the end of May.