RECORDER REPORT

ISLAMABAD (March 03 2009)

The consolidated budget deficit of the federal and four provincial governments has accumulated to Rs 250.5 billion during first half (July-December) of 2008-09 fiscal year. According to a Fiscal Operations Report of Finance Ministry issued here on Monday?, total revenues of the government stood at Rs 834.47 billion and expenditures at Rs 1.085 trillion during first half of 2008-09.

Breakup of current expenditure shows that Defence expenditures stood at Rs 147.78 billion during the period under review. The federal government transferred Rs 250.58 billion to Punjab, Sindh, NWFP and Balochistan as provincial share in federal revenues under interim National Finance Commission (NFC) Award, during this period.

The summary of consolidated federal and provincial budgetary operations showed out of total revenues of federal and provincial tax collection stood at Rs 577.99 billion. In non-tax revenues Rs 69.128 billion were collected from petroleum and gas sector that include Rs 28.839 billion as petroleum development surcharge and Rs 8.510 from gas development surcharge, discount rate on crude oil Rs 5.967 billion and royalty on oil and gas stood at Rs 25.812 billion. Total non-tax revenues stood at Rs 256.48 billion during the July-December period of current fiscal year.

The details of the expenditures of the federal government during July-December period revealed that the government spent Rs 1.085 trillion, which included Rs 916.7 billion as non-development expenditures. The details of the current expenditures (Non-Development) in first half the government paid Rs 299.855 billion as interest on local and foreign loans, Rs 265.934 billion were spent on servicing of domestic debt and Rs 33.921 billion were spent on servicing of foreign debt. Total defence expenditures were Rs 147.7 billion, the development expenditure and net lending during the first half stood at Rs 132.979 billion.

The budget deficit stood at Rs 250.56 billion that was financed through Rs 36.991 billion from external resources and Rs 213.577 billion from domestic resources. Total non-bank borrowing amounted to Rs 31.309 billion, bank borrowing at Rs 180.97 billion and privatisation proceeds were Rs 1.290 billion.

Breakup showed that provincial revenues of Punjab amounted to Rs 159.769 billion against expenditures of Rs 148.9 billion during the first half of current fiscal leaving a surplus of Rs 10.844 billion. Punjab received Rs 123.962 billion as revenue share from federal taxes as NFC Award share. Punjab received grants worth Rs 2.156 billion and loan of Rs 3.063 billion from federal government. Development expenditures of the province stood at Rs 28.676 billion and non-development expenditures were 120.249 billion during this period.

Total revenues of Sindh Province stood at Rs 89.916 billion and total expenditures of the province remained at Rs 94.033 billion, resulting in budget deficit of Rs 4.117 billion. Sindh received Rs 76.722 billion as NFC award share of the federal taxes from the federal government. Non-development expenditures of the provincial government stood at Rs 83.079 billion and development spending remained at Rs 10.954 billion in said period.

Revenues of the NWFP amounted to Rs 44.035 billion and total expenditures of the province stood at Rs 29.090 billion during the first half leaving a budget surplus of Rs 14.945 billion. The NWFP government received Rs 31.364 billion as NFC Award shares from the federal government during the said period. Development expenditures were Rs 5.635 billion and non-development expenditures were Rs 23.455 billion.

Revenues of Balochistan stood at Rs 32.728 billion, whereas expenditures remained at Rs 22.319 billion, leaving a budget surplus of Rs 10.40 billion. The provincial government received a sum of Rs 18.532 billion as NFC Award share from the federal government during the period under review. Province received loans of Rs 1.078 billion, current grants at Rs 6.281 billion and Rs 5.547 billion as development grants.

Copyright Business Recorder, 2009

MUSHTAQ GHUMMAN

ISLAMABAD (March 03 2009)

The ministries are divided over opening of trade links with India through Wagha-Attari border, previously agreed between President Asif Zardari and Indian Prime Minister Manmohan Singh in New York in September last year, sources in Finance Ministry told Business Recorder here on Monday.

The Economic Co-ordination Committee (ECC) of the Cabinet, which is scheduled to meet on Tuesday, will discuss the pros and cons of a joint proposal of Commerce and Foreign Affairs Ministries. Interior Ministry is on top of the ministries which are opposing initiation of trade with New Delhi through land route, especially Wagha-Attari crossing points, saying that "under the prevailing circumstances, status quo should be maintained with India". Wagha-Attari border was opened for imports from India for the first time on May 4, 2005 with the approval of the Prime Minister for import of potatoes, tomatoes, garlic, halal meat and live bovine animals.

Subsequently, sugar, cement, cotton, maize, stainless steel, paddy harvesters and threshers and cotton yarn were also added to the list of items allowed to be imported through this route, with the approval of the ECC and, in certain cases, by the Federal Cabinet.

All other items currently importable from India can only be imported by sea, or through Wagha by rail. Presently, however, there is no restriction on exports to India through Wagha, either by rail or by road.

In order to facilitate trade across the Wagha-Attari road crossing, trucks of both countries are allowed to move within the respective territories of Pakistan and India for loading/unloading of cargo. This arrangement is operational since October 1, 2007.

As ascertained from the customs authorities of Pakistan at Wagha, statistics of trade with India via land since October, 2007 show that import from India amounted to Rs 3516.598 million, exports to India nil, and Afghan exports to India in transit from Pakistan amounted to Rs 2367.093 million.

These statistics show that although there is no restriction on exports to India, there has been no export through this route even after facilitation of movement of trucks across the border.

A major reason is lack of infrastructure on Indian side of the border. In the composite dialogue, India has shared a proposal with Pakistan about the future projects to be developed to operationalise this route for bilateral trade. The project is likely to be completed in the short term, sources said.

Simultaneously, on Pakistan side of the border, there is also a need to develop a road/highway network bypassing the city of Lahore to cater to substantial influx of imports from India by road.

Accordingly, the Commerce Ministry has proposed that (a) the decision communicated by Ministry of Foreign Affairs should be implemented in a phased manner, commensurate with the parallel development of infrastructure on either side of the border to cater for potential spurt in the bilateral trade, and (b) India should be conveyed during the next meeting of the composite dialogue under economic and commercial co-operation likely to be held at Islamabad, the concurrence in principle of Pakistan to open Wagha-Attari for permissible items of trade to be fully operationalised after necessary infrastructure is developed on both sides of the border.

Meanwhile, Commerce Ministry has also sought authorisation to allow import of goods from India by road on the request of stakeholders in Pakistan, sources said. "The Federal Board of Revenue (FBR) has also supported the proposal fully whereas Industries Ministry and Communication Ministry have agreed to support the proposal partially," sources added.

Copyright Business Recorder, 2009

LAHORE (March 03 2009)

Business leaders of Pakistan and Indonesia on Monday agreed to evolve a strategy to enhance bilateral trade and to bridge the trade gap between the two countries.

According to a message received here on Monday from Jakarta where a 10-member high level Pak traders delegation is currently attending fifth three-day World Islamic Economic Forum (WIEF), this was resolved during a meeting of Pakistan business group, led by Tariq Sayeed and Iftikhar Ali Malik, former Presidents of FPCCI and counterparts of Indonesian Chamber of Commerce and Industry (ICCI).

They were of the opinion that Indonesia and Pakistan being the World's sixth and seventh largest nations formed a combined market of 325 million people; however the volume of trade between these countries was negligibly less than 1% of their total with rest of the World.

Since both the markets provide a sizeable import market of $125 billion, there was an ample opportunity to make niche in each other's markets, said Tariq Sayeed and stressed for formulation a strategy that trade volume between the two countries is augmented to the level of existing potential and Pakistani products are marketed in a prospective manner.

Iftikhar Ali Malik, Deputy leader of Pak delegation said that the present volume of trade between Indonesia and Pakistan was estimated $1.24 billion in the year 2007-08, showing a huge trade deficit of $1.17 billion to Pakistan, which was due mainly to import of vegetable and animal fats, petroleum products, man-made fibre, paper products and organic Chemicals from Indonesia.

Tariq Sayeed urged the ICCI to encourage imports from Pakistan since many of Pakistani products had a great potential for Indonesian Market and in the absence of appropriate marketing such products had not been able to capture the market.

The exports from Pakistan were disappointingly estimated at only $61 million in the year 2007-08. Fachry Thaib, chairman organising committee of WIEF for Middle East and Asia,Herbursy,Sachman H. Kademin Secretary General ICCI and many other businessmen from Indonesia were present in the meeting.

The other members of Pak delegation who attended the meeting comprised Zubiar Tufial, former VP, FPCCI, Muhammad Siddique Sheikh,Azhar majeed Sheikh, Mian Mehmood Ahmed,Jamil Naz,Muhammad Aamir Sorathia,Sheharyar Ali Malik,Salman Tufail and Kashif Younus Mehar.

Copyright Associated Press of Pakistan, 2009

KARACHI (March 03 2009)
Political turmoil in country after a court banned the most popular opposition leader running for public office could make the stagnant economy even more dependent on US aid and IMF bailouts. Thousands of supporters of Nawaz Sharif have rallied across the country, with mobs setting cars ablaze and clashing with police in the biggest protests against the rule of President Asif Ali Zardari.

Analysts say Pakistan can ill afford a political crisis on top of extremist attacks that have killed more than 1,600 people in under two years, financial crisis and international pressure to prosecute those behind the Mumbai attacks. As soon as the Supreme Court disqualified Sharif last Wednesday, panic selling wiped five percent off the Karachi Stock Exchange in the worst single-day performance in 32 months.

"The current political crisis will force us to depend even more on the International Monetary Fund (IMF) and accept all its conditions," economist Rauf Nizamani told AFP. Buffeted by nation-wide bombings, insurgency and global financial turmoil, country was hit last year by 25 percent inflation and saw 10 billion dollars wiped off its international reserves from October 2007 to October 2008.

The country's economic managers had no choice but approach the IMF to stave off a looming balance-of-payments crisis that could have seen the Muslim country of 160 million default on its foreign debts. The IMF approved a stand-by loan of 7.6 billion dollars for cash-starved Pakistan and released its first tranche of 3.1 billion dollars in November.

This year's fiscal deficit target is 5.5 percent of gross domestic product (GDP), compared to last year's 7.4 percent. country's current account deficit was 8.4 percent of GDP last year, which the authorities are trying to get down to 5.5 percent under IMF targets. The authorities also aim to get inflation down to 20 percent by the end of this fiscal year in July.

In its first quarterly review, the IMF praised Pakistan and noted initial success in stabilising the economy, but it wants a reduction in the deficit and huge borrowings from the central bank. "The present situation will lead to further political instability, weaken the government's position and increase its dependence on the United States and the IMF," said Yusuf Nazar, an independent economist.

US Senator John Kerry has called on the United States to triple non-military aid to Pakistan to 7.5 billion dollars over five years, warning that "time is running out" to help the civilian government survive. The Atlantic Council think tank has estimated that Zardari's government has six to 12 months to enact successful security and economic policies or face the prospect of collapse.


Copyright Agence France-Presse, 2009

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