Trade deficit widens by 45%

ISLAMABAD: In a worrisome development, Pakistan’s trade deficit widened by 45% to $6.5 billion in the first quarter of this fiscal year on back of significant contraction in exports and double digit growth in imports, bringing foreign currency reserves under pressure. 

The trade deficit gap between imports and exports, from July through September this year was $2 billion higher than the projections made by International Monetary Fund (IMF). The IMF had projected $4.48 billion trade deficit for July to September period.

Pakistan’s exports contracted by 10.1% in the first three months and stood at only $6 billion to $680 million lower than the exports made in the comparative period of the last fiscal year, according to figures released by Pakistan Bureau of Statistics on Tuesday.

The reduction witnessed despite much-trumpeted Vision 2025 of the Planning Commission that promises to take the exports to $150 billion in next ten years. To achieve this overambitious goal, the country has to increase the exports to $38 billion this year from the last year’s level of $25 billion.

Contrary to contraction in exports, Pakistan’s import bill increased to $12.5 billion in the first three months, showing an increase of $1.34 billion or 12% growth over last year’s first quarter imports. The IMF had projected that Pakistan’s imports would grow to $10.7 billion in first quarter –an assessment that went off the mark by $1.84 billion.

The result of contraction in exports and double-digit growth in imports was the trade deficit of $6.5 billion –showing an increase of 45.1% or $2.1 billion trade deficit in first quarter of the fiscal year.

The worrisome trend suggests that the current account deficit –the gap between external receipts and payments, would be far higher than the budgeted number of $2.8 billion or 1.1% of Gross Domestic Product, according to an economist working with a government agency.

He said the first quarter figures were not surprising as these were the outcome of exchange rate rigidity. The exchange rate rigidity results into higher demands for imported goods and fall in exports. The government has made its budget on the assumption of Rs100 to a dollar exchange rate parity, according to Finance Minister Ishaq Dar. However, the IMF’s projections show that the real value of rupee is at Rs114 to a dollar.

The independent analysts say that as the government has started facing difficulties in getting foreign loans, the result of the widening trade deficit would be erosion of foreign currency reserves held by the State Bank of Pakistan. By October 3, the official reserves stood at $8.8 billion as against the IMF’s projection of $10.9 billion for the first quarter of current fiscal.

The national planners have projected a 5.8% growth in exports and 6.2% growth in imports for the current fiscal year. The imports for the current fiscal year have been projected at $44.2 billion as against $26.99 billion exports, showing the trade deficit of $17.2 billion.

Yearly statistics

The yearly trade figures depict a gloomier scenario. In September alone the trade deficit widened 102.7% over the same month of the last year. As against a trade deficit of $1.17 billion in September last year, the deficit ballooned to $2.38 billion last month, according to the PBS.

As against $2.6 billion exports of September last year, the receipts from exports were $2.2 billion last month, showing contraction of 16.7%. However, the imports in last month grew to $4.6 billion –higher by about one-fifth over imports in the same month of last year.

Monthly statistics

On a monthly basis, the trade deficit in September contracted 15.2% over August due to contraction in imports and 14% growth in exports, data from PBS showed.

Endeavour: ‘Pak-Afghan transit agreement will help development’

ISLAMABAD: Islamabad Chamber of Commerce and Industry (ICCI) has welcomed the signing of an agreement between Pakistan and Afghanistan on the electricity transit fee, terming it an encouraging development as it will help the country cope with the prevailing energy shortage by importing electricity from Central Asia.

ICCI President Muzzamil Hussian Sabri said the crisis has taken a heavy toll on economic growth as it has negatively affected productivity. He said Pakistan has already suffered from a low gross domestic product (GDP) due to power shortage, and the government should endeavour to mitigate this major constraint.

He added that the electricity transit agreement was a major step towards realising the Central Asia and South Asia vision (CASA-1000 vision). He was hopeful that the energy import through CASA-1000 would contribute positively in reducing the power deficit and facilitate growth of business activities.

Sabri stressed upon the policymakers to focus on exploiting the indigenous hydropower potential, which is available in abundance in Pakistan. He said according to a Wapda study, the hydropower potential in Pakistan was over 100,000MW – with identified sites of 59,000MW – and it was unfortunate that no government took any tangible measure to exploit this potential despite the low cost and high benefit of hydroelectricity.

“During the 1980s, there was a 65% hydropower share in our total energy production,” said Sabri. “But due to lack of planning, the number has fallen to around 35%, which is costing Pakistan dearly.”

He said that the thermal power tariff in Pakistan was highest in the region due to which there is a high cost of doing business in the country, adding that hydropower would bring down production cost significantly as its Rs1.35 per unit compared to Rs16.99 per unit of thermal power.

The ICCI chief was of the view that focus on hydropower would generate multiple benefits for the country as it would bring down production cost, reduce inflation, facilitate growth of business, make exports competitive and accelerate the pace of economic growth.

Pakistan-Iran: Duo agrees to hold Joint Economic Commission

ISLAMABAD: Pakistan and Iran have agreed to hold a Joint Economic Commission in Islamabad to consolidate bilateral cooperation between the leaderships of the two countries.

The focus of this cooperation will be on development of gas pipeline and electricity.

Finance Minister Senator Mohammad Ishaq Dar met the Iranian Finance Minister Ali Tayyebnia while attending World Bank and International Monetary Fund (IMF) meetings in Washington. Both ministers discussed matters of mutual interest.

Senator Dar informed his Iranian counterpart that the government had approved the 700-kilometre section of the pipeline from Gwadar to Nawabshah and that Pakistan was considering various alternatives to meet the financial requirements.

According to a press statement issued by the finance ministry, the Iranian finance minister appreciated Pakistan’s resolve in completing 700km portion of Iran-Pakistan Gas pipeline and expressed hope that in future more pipeline projects between the two countries will materialise.

Di Maria one of the four best players in the world, says former Manchester United defender Heinze

The former Argentina international left-back believes the 26-year-old has reached an "amazing level" and insists it is easier to settle in quickly at Old Trafford

Former Manchester United and Real Madrid defender Gabriel Heinze believes Angel Di Maria is one of the four best players in world football.

The 26-year-old moved to Old Trafford in a €75 million deal in August and has made an impressive start to his Premier League career with three goals and three assists in five games.

Heinze, who played in the same Argentina side as Di Maria at the 2010 World Cup, also claims the midfielder will have an easy time settling at United.

“Anything I say about Angel Di Maria is not enough. For me, he’s one of the four best players in the world,” Heinze told reporters.

“He’s already reached an amazing level and arrived at an amazing club where they will look after him and he’ll perform really well for them.

“I think everyone needs time to adapt, especially in the English league.

“You need to adapt but the club can help you and Manchester United will make things easier for you.”

Rejection: US energy firms refuse to endorse shale gas estimates

ISLAMABAD: 

Reputed energy companies of the United States have dismissed the estimates of shale gas deposits given by the US Energy Information Administration (EIA), which put the reserves at 51 trillion cubic feet (tcf), close to the conventional gas reserves of 58 tcf.

“US companies did not agree with the estimates of EIA, arguing that a study to assess the deposits was conducted by a group of economists,” said an official of the Ministry of Petroleum and Natural Resources who was part of a ministry team that visited the US in August.

During the trip, the delegation members met officials of some well-known companies including Halliburton to discuss the study on shale gas reserves and get their endorsement. Company executives insisted that samples of shale gas would actually determine the size of the reserves.

The ministry team also held meetings with representatives of equipment manufacturing companies as their tools could be used for extracting shale gas.

“Already some samples have been sent to US laboratories and more will be shipped for examination,” the official said. “After the process is completed and results are known, we will draft a policy and share it with all stakeholders.”

According to the officials, shale gas extrusion needs a huge quantity of water, which will be difficult for Pakistan to provide. A similar plan for shale gas drilling was shelved in the UK because of challenges related to water supply.

Shale gas is natural gas that is found trapped in shale formations and since it has low permeability compared to conventional reserves, it does not come out easily and a significant amount of investment and specific pricing are required for its exploitation.

The government is conducting a study in association with the US Agency for International Development (USAID) to assess the shale gas reserves in the country. USAID has provided a technical assistance of $1.8 million for the study, which will be completed in a year.

Besides the samples sent to the US, Pakistan is also seeking US technology. However, the officials said this could not be useful in Pakistan as the difference in geographical conditions required different kinds of technology.

The petroleum ministry has sent a summary to the Economic Coordination Committee (ECC), seeking approval for initiating a pilot project to tap the country’s shale gas deposits in an effort to gradually bridge the yawning gap between demand and supply of energy.

At present, shale gas is not produced in the country and significant initial work is required to be undertaken to consume this potential energy resource.

With the discovery of massive shale gas reserves, the US has become a gas-exporting country. According to reports, Washington will also experience a boom in shale oil production in the future and will become the largest oil producer.

According to the officials, Pakistan will offer $12 per million British thermal units (mmbtu) to gas exploration and production companies under the pilot programme, a price that is close to the cost of gas to be imported from Iran under the Iran-Pakistan pipeline project.

“A policy framework has been prepared and its approval will be sought from the ECC,” the petroleum ministry official said.

Exploration companies have already found some traces of shale gas during the search for conventional gas as 10% to 12% shale gas appears on upper faces of conventional gas.

Flood impact: After brief stability, inflation starts rising again

ISLAMABAD: 

The slowdown in the pace of increase in prices of goods stopped last month as inflation rose 7.7% year-on-year, primarily due to disruption to the food supply chain following heavy rains and floods.

Inflation measured by the Consumer Price Index (CPI) – which tracks movements in prices of 481 commodities – increased 7.7% in September, according to data released by the Pakistan Bureau of Statistics – the national data collecting agency – on Wednesday.

It was for the first time since April this year that inflation rate was higher than the previous month. In April, the headline inflation was 9.2%, which gradually came down to 7% in August – a trend that has stopped, at least for the time being.

The rise in inflation is in line with the expectations of the Ministry of Finance and State Bank of Pakistan (SBP) as both have already warned of an increase in prices of edible and other commodities in the wake of damage caused by floods to crops planted over 2.4 million acres of land.

According to the Rapid Need Assessment Report, in five districts of Punjab hit the hardest by the floods, people have lost 43% of stored food stock.

Data suggests that the increase in headline inflation was solely the result of higher food prices. On a year-on-year basis, food inflation rose 7.2%, an increase of 1.6% in just one month.

The increase was in both perishable and non-perishable food items. The pace of increase in perishable items was recorded at 16% in September over a year ago while it was only 4.8% in case of non-perishable commodities, according to the PBS.

Potato prices doubled compared to September last year. Moong pulse rates increased about one-fifth while cigarette prices went up 22.6% due to higher taxes from July this year.

Fuel and food-adjusted inflation, known as core inflation, rose 8.1% year-on-year, an increase of 0.2% in a single month.

Anticipating the pressure on inflation due to the floods, the SBP has kept the key discount rate unchanged at 10%. In the past, the central bank used to target core inflation, but now it appears that the central bank has shifted from the core to headline inflation while arriving at a decision on the discount rate, according to independent analysts.

Monetary aggregates suggest that despite the rise in headline inflation, there is still room for the SBP to either keep interest rate unchanged or reduce it in the next policy announcement, they added.

According to the latest SBP data for the period July to September 19, money supply contracted by about 2% or Rs196 billion. The retirement of credit was more than the disbursement by the banking sector.

However, during this period, net government borrowings for budget financing increased by Rs59.4 billion. Gross borrowings remained at Rs76.6 billion.

Average inflation in the first quarter (July-September) of the current fiscal year stood at 7.52% compared to the same period of previous year, according to the PBS. For the current year, the government has set the inflation target at 8%.

Scottish referendum: Scotland votes 'No' to independence

• 
  Liv

With the results in from all 32 council areas, the "No" side won with 2,001,926 votes over 1,617,989 for "Yes".

Scotland's First Minister Alex Salmond called for unity and urged the unionist parties to deliver on more powers.

Prime Minister David Cameron said he was delighted the UK would remain together and that commitments on extra powers would be honoured "in full".

Mr Cameron said the three main unionist parties at Westminster would now follow through with their pledge of more powers for the Scottish Parliament.

He announced that Lord Smith of Kelvin, who led Glasgow's staging of the Commonwealth Games, would oversee the process to take forward the commitments, with new powers over tax, spending and welfare to be agreed by November, and draft legislation published by January.

Scottish referendum results in detail

The prime minister also acknowledged that the people of England, Wales and Northern Ireland must have a bigger say over their affairs.

And he promised a solution to the West Lothian question - the fact that Scottish MPs can vote on English issues at Westminster, and not the other way round.

In other developments:

• US President Barack Obama welcomed Scots' decision to stay in the UK. "Through debate, discussion, and passionate yet peaceful deliberations, they reminded the world of Scotland's enormous contributions to the UK and the world," he said.
• Police Scotland said Thursday's vote "passed off smoothly" with just six arrests across the country mainly for alleged breaches of the peace and assaults.
• Share prices rose as Scotland voted against independence.
• Polling officials said they were investigating 10 cases of suspected electoral fraud at polling stations in Glasgow.
• Royal Bank of Scotland said it would keep its headquarters in Scotland following the "No" vote.
• Wales's First Minister Carwyn Jones has called for more funding for his country after Scotland voted to stay in the Union.
• Northern Ireland First Minister Peter Robinson said a vote on the future of Northern Ireland's border was not necessary following Scotland's 'No' vote.
• Scotland rejected independence by 55% to 45%. For latest results and full coverage, go to bbc.co.uk/scotland-decides.

The result became a mathematical certainty at 06:08, as the returning officer in Fife announced a comfortable No vote.

Shortly afterwards, Mr Salmond said he accepted the defeat and called for national unity.

He told supporters: "The unionist parties made vows late in the campaign to devolve more powers to Scotland.

"Scotland will expect these to be honoured in rapid course - as a reminder, we have been promised a second reading of a Scotland Bill by March 27 next year.

Jump media player

Media player help

Out of media player. Press enter to return or tab to continueThe moment the No side won an unassailable lead over the Yes camp

And the first minister said: "Whatever else we can say about this referendum campaign, we have touched sections of the community who have never before been touched by politics, these sections of the community have touched us and touched the political process."

In a rallying call to his supporters, Mr Salmond urged the Yes voters to reflect on how far they had come."I don't think any of us, whenever we entered politics, would have thought such a thing to be either credible or possible," he said.

He also claimed the campaign had put "a scare and a fear of enormous proportions" at the heart of the Westminster establishment.

"Today of all days as we bring Scotland together, let us not dwell on the distance we have fallen short, let us dwell on the distance we have travelled and have confidence the movement is abroad in Scotland that will take this nation forward," he added.

Jump media player

Media player help

Out of media player. Press enter to return or tab to continue