Central Bank keeps discount rate unchanged @ 12.5 percent

The State Bank of Pakistan has decided to keep the policy rate unchanged at 12.5 percent. This was announced by the Governor, State Bank of Pakistan, Syed Salim Raza while unveiling the Monetary Policy Statement at a press conference held at SBP, Karachi this afternoon.
Mr. Raza said that macroeconomic stability has proceeded apace, as evident in the considerable decline in average Consumer Price Index inflation – which is the primary objective of monetary policy. In the first half of the current 2009-10 fiscal year (FY10) inflation recorded at 10.3 percent, compared to 24.4 percent during H1-FY09, he said and added that this decline is visible across almost all the subgroups of CPI.
“The inflation outlook for full FY10, nevertheless, remains somewhat vulnerable to the effects of fiscal consolidation efforts and to incipient international commodity price pressures,” he said and added that the State Bank expects the average CPI inflation for FY10 to remain between 11 and 12 percent, still much lower than the 20.8 percent inflation of last year, but higher than the 10.3 percent recorded in the first half of FY10.
Talking about the real economy, Mr. Raza said that the agriculture sector has shown improvement and the wheat crop was good with higher prices stimulating demand for consumer goods, and the cotton crop higher than last year improving textile production and corresponding exports. Modest but consistent recovery in Large-scale Manufacturing (LSM) is also encouraging, he
said and added that the LSM grew by 0.7 percent in November 2009 compared to a low of negative 20 percent in March 2009. “Revival in private sector credit and better-than-expected global recovery should further support economic growth,” he added.
Assuming that the current trend in LSM growth continues, the Governor said and added that the overall real Gross Domestic Product growth is expected to be 3.0 – 3.5 percent in FY10, as compared to 2.0 percent in FY09.
Referring to external current account, Mr. Raza said that progress in the external sector is also encouraging. The external current account deficit has declined to $2 billion during H1-FY10 from $7.8 billion in H1-FY09. A small decline in exports was substantially offset by a higher decline in imports resulting in significant reduction in the trade deficit, he said and added that the sustained flow of workers’ remittances ($4.5 billion during H1-FY10) has further contributed to the reduction of the external current account deficit.
“External current account deficit is projected at 3.4 percent of GDP for FY10 - a significant improvement over last year’s deficit of 5.6 percent and earlier projections of close to 5 percent,” he emphasized.
SBP Governor said that as a result of significant contraction in the external current account deficit, the overall balance of payments has posted a surplus of
$1.4 billion during H1-FY10 compared to a deficit of $4.8 billion in H1-FY09. A
modest increase in foreign portfolio investment, additional SDR allocation, and
SBA flows from IMF, more than compensated for the decline in foeign direct investment, he added.
However, he said sustained improvement in the balance of payments would depend significantly on the timing and scale of projected foreign inflows, especially the official flows pledged in Tokyo by the Friends of Democratic Pakistan. “Assuming the revised financial inflows are realized, the SBP’s foreign
exchange reserves are projected to reach close to $15 billion by the end of FY10,”
On the fiscal front, Mr. Raza said that the Federal Government has continued efforts for rationalizing expenditures, by phasing out subsidies and by adjusting the administered energy prices. “It has also taken in hand the organizational and administrative measures to bolster tax administration and revenue collection,” he added.
Mr. Raza said the State Bank has managed system’s liquidity to both support smooth functioning of the market and to do this consistent with the monetary policy stance. As a consequence, volatility in the interbank overnight money market Repo Rate – the operational target of SBP – has come down substantially and market interest rates have gradually eased in line with reduction in the Policy Rate."
“Integrating projections for balance of payments, fiscal accounts, and credit growth and given their interrelationships with inflation and real GDP projections, the equilibrium M2 growth is forecasted to be around 14.5 percent for FY10,”

While summing up the overall macroeconomic scenario, Mr. Raza said that much has been gained with respect to macroeconomic stability front on a challenging economic and security environment. Difficult decisions have been taken and adjustments were made to address a host of structural constraints, he
said.
“However, work remains to be done to consolidate this stability and set the stage for sustainable recovery. At the short term, we would want to see a reversion of the current inflationary uptick, and a more certain outlook for system’s liquidity,” Mr. Raza asserted.

TURK ENVOY CALLS ON CITY NAZIM

Ambassador of Turkey called on City Nazim Syed Mustafa Kamal at his office on Thursday to discuss matter of mutual interest.

City Nazim Syed Mustafa Kamal on this occasion said that Pakistan has strong brotherly relations with Turkey. Local Government of Turk City Istanbul can provide valuable cooperation to City District Government Karachi in its Rapid Bus Transport System and training program for rescue workers. He said that Istanbul has one of the best rapid bus transport system while they have also excelled in the rescue works particularly in the earthquakes. He said that we also need cooperation in the solid waste management.

Nazim Karahi informed the ambassador Mr. Hizlan about the importance of Karachi in the region. He said that Karachi offers lucrative business opportunities to foreign investors. Turk business community can also earn heavy profits from doing business here. He said that the government has upgraded infrastructure in Karachi for promotion of investment activities. Turk investors will also be provided with best facilities and support.

Turk ambassador Mr. Hizlan said that Turkey will soon arrange for the training of rescue workers in Karachi for which a permanent office will be established in the city so that the training could be arranged on permanent basis. He also appreciated the performance of City Nazim Syed Mustafa Kamal for his role in the rapid development of Karachi.

Pay Orders will be distribute by President Asif Zardari: on 29th Jan: Siraj Kassam Teli

Siraj Kassam Teli, Chairman Businessmen Group has said that Insha Allah the initial disbursement of Pay Orders will be made by the President of Pakistan , Mr. Asif Ali Zardari on 29th of January 2010 exactly one month after the unfortunate incident and immediately after that this process will continue at Karachi Chamber for all the affected parties till the completion of handing over pay orders to those whose final assessment is below Rs. 1.5 million, said Siraj Teli and the process of making these pay orders has already started in the National Bank as they have received statements and cheques duly signed by the signatories accordingly which is 1437 affected parties and the amount is Rs. 730,227,212.

Karachi Chamber by the Grace of Almighty Allah and as per the commitment has completed the scrutiny and assessment of the losses/claims of the goods/stocks/cash etc. except property/ buildings of the victims of Ashura day of Boulton Market/Light House and vicinity whose claims are below Rs. 1.5 million said Siraj Teli, and the ongoing process of finalizing those, whose amounts are above 1.5 million will be made in a week and Insha Allah they will also get their pay orders as and when their cases are finalized by the Scrutiny Committee.

Karachi Chamber altogether received over 2600 claim forms and after verification it was found that there was a lot of duplication and some were even from the people who were not affected by this incident, therefore the number came down to 1559, this was informed by Siraj Teli, and after the scrutiny of these forms by the Committees of the Managing Committee and Businessmen Group of Karachi Chamber along with representatives of the respective markets, verifying their details under oath with each and every individual concerned decided these cases which was a very hectic and lengthy exercise and consumed over 12 hours on daily basis of 60 businessmen who volunteered and the total staff of Karachi Chamber which is over 100 from the day this incident happened.

Siraj Teli, Chairman Businessmen Group and former President KCCI appreciated the role of the government which started from the day one after the incident i.e. 29th December 2010 when the Governor, Dr. Ishrat-ul-Ebad and the Minister of Interior Mr. Rehman Malik along with Dr. Farooq Sattar and Mr. Raza Haroon visited Karachi Chamber on our request and committed to compensate the affected traders.

In this process of providing relief to the victims the role of the Chief Minister Syed Qaim Ali Shah has been tremendously supportive, said Siraj Teli, by making an Official Committee for the purpose led by Zubair Motiwala and with the majority of the members being from the private sector and Karachi Chamber, and would like to personally thank the President of Pakistan Mr. Asif Ali Zardari for providing immediate time for the meeting with us on 30th December and accepting our demand of immediate initial relief of Rs. 3 billion and also the Honourable Prime Minister of Pakistan Syed Yousuf Raza Gilani for announcing of first Rs.One billion as early as 30th of December in the Cabinet Meeting in Gwadar on our request communicated by Rehman Malik, Dr. Farooq Sattar and Babar Ghouri informed Siraj Teli.

The Karachi Chamber is thankful to Dr. Zulfiqar Mirza, Home Minister of Sindh for visiting personally and after inspection in detail endorsing with 100% satisfaction and trust on the Business & Industrial Community of Karachi, said Siraj Teli and appreciating the fact that such a kind of colossal losses and involvement of thousands of traders in the incident could only be handled by the Businessmen Group of Karachi Chamber. I would like to specially appreciate the support and trust of Federal Finance Minister Mr. Shaukat Tareen and for providing the funds, said Siraj Teli.

Siraj Kassam Teli appreciates and salutes his colleagues of the Businessmen Group and the staff of Karachi Chamber for the job well done and also the great people of the affected areas, who even after suffering critically have cooperated and came down to their genuine losses under oath and proving once again that the vast majority of the traders are God fearing people and allowing to make this process transparent. The involvement of such a huge number of people in the process made sure that the transparency is maintained for above board finalization of the cases.

In the end, Siraj Kassam Teli wants to ensure the affected people that the rest of the claims will be paid and we have already made separate committee for reconstruction of the buildings as they were on 27th of December and this process will start very soon.

28/12 VICTIMS TO GET RELIEF CHEQUES FROM THIS MONTH; SHOPKEEPERS WILL NOT BE VACATED FROM THEIR OLD PREMISES; KARACHI AFFECTED MARKETS RELIEF COMMITT

First Meeting of Government of Sindh’s constituted “Karachi Affected Markets Relief Committee” for the rehabilitation and relief of victims of 28-December, 2009 tragic incident, was held under the Chairmanship of Committee and Advisor to Chief Minsiter Sindh for Investment, Muhammad Zubair Motiwala on January 8, 2010, wherein Chairman Businessmen Group & former President-KCCI, Siraj Kassam Teli, District Coordination Officer- City District Government, Javed Hanif, Additional Secretary Finance – Govt of Sindh, Saeed Ahmed Awan, Special Secretary Finance – Govt of Sindh, Najmus Saqib, President-KCCI, Abdul Majid Haji Muhammad, former President-KCCI, A.Q. Khalil and President, All Pakistan Memon Federation, Ahmed Chinoy also participated.

The House condemned and expressed sorrow on the tragic incident and reiterated the intent that the rehabilitation and relief to the victims will be extended on emergency-basis and it would be ensured that payment of claims would start for disbursement from current month. For this purpose, all the victims were asked to submit their claims through the platform of Karachi Chamber of Commerce & Industry by January 20, 2010, afterwards no claim will be received for assessment/ evaluation and processing. It is pertinent to mention that claim forms for City District Government Karachi and other institutions will also be submitted at KCCI where all the data will be amassed and accumulated for scrutiny in the presence of empowered and authorized representatives of the affected markets.

Committee with consensus agreed with the modus operandi suggested by KCCI and decided that after initial assessment of all claims; payments for disbursement to victims will be commenced from current month for claims being scrutinized (analysed/ assessed, evaluated and processed) in all aspects. Committee asked all the victims to submit their claims with entire responsibility and honesty. If any affected shopkeeper, in hesitation, has submitted wrong claim, he will also be given opportunity to correct the already presented claim and resubmit by January 20, 2010. Committee with consensus agreed that all affected markets which are already collapsed and those shall be demolished as declared dangerous by Karachi Building Control Authority will be reconstructed and repaired by City District Government Karachi. Similarly, all shopkeepers, Office and Godown holders in the said buildings, will be provided with same covered area space and they will not be evacuated from the old premise under their use. In this regard, KCCI, representatives of authorized affected markets, construction experts will give recommendations. Subsequently, it is requested to all affectees to extend their complete cooperation to the Committee. The Committee appreciated the decision of City District Government, especially Nazim-Karachi, Syed Mustafa Kamal whereby they announced for repair of affected buildings by CDGK. Next meeting of the Committee will be held on January 22, 2010.

18PC INCREASE IN GAS TARIFFS ACROSS-THE-BOARD IS A DEATHBLOW: KCCI

“18 per cent increase in Gas Tariffs by OGRA is one-sided decision and a deathblow to industrial, commercial and CNG Sector”, expressed by President, Karachi Chamber of Commerce & Industry, Abdul Majid Haji Muhammad, in a press statement, while expressing his deep concern against the decision of OGRA for allowing Gas Companies to increase gas tariffs across-the-board by 18 percent.

Abdul Majid strongly condemned and criticized the apathetic and slapdash attitude of the concerned quarters. He lamented that in the prevailing conditions, further increase in gas tariffs will worsen the situation, owing to further increase in CNG prices and ultimately commuters will be penalized and cost of transportation will high-rise.

Abdul Majid recalled that during the hearing of SSGC in OGRA, KCCI, raised high-voice against the unjustified increase of tariffs allowed by OGRA to gas companies from time to time, while considering the case one-sided and not bearing in mind the point of views of other parties viz. industrial, commercial and domestic consumers.

Abdul Majid lamented that such actions will protect the vested interests of gas companies and their revenue generation will yield whereas the industry and commercial concerns are fatally stabbed with another deathblow which will increase the cost of production and doing business and will further narrow down their profitability.

Abdul Majid was of the view that such harsh decision without consultation and consent of stakeholder may result in widespread discontentment in the business community. The closure of industry, due to detrimental affect of high cost of production due to higher utility tariffs will lead to flight of capital, massive unemployment and decline in the revenue of government, he focused.

Abdul Majid maintained that the said increase will pose a killing threat for the industry owing to highest-ever tariffs of utilities in the history of Pakistan. The cost of production/ manufacturing has gone exorbitantly higher absolutely due to unjustified policies of OGRA and NEPRA.

Abdul Majid stated that it is incomprehensible that on one pretext, government contemplates to achieve the targets for nominal growth of 2.5 percent and on the other pretext its inconsiderate and austere decisions to increase utility tariffs have already penalized the industry and posed as terrible threats for achieving the same.

At present, country is going through a worst economic crisis in terms of escalating cost of production/ manufacturing based on continuous rise on the utilities. The dollar has depreciated in the international market, oil prices have stabilized, interest rates and inflation started decreasing. In wake of such indicators, it is unjustified to enhance the tariffs, he maintained.

Abdul Majid demanded that Government must negotiate with foreign companies for favourable conditions; and interests of the business community should at the forefront of OGRA decisions rather than that of foreign companies earning huge profits from Pakistan and sending foreign exchange to their respective countries.

POWER TARIFF INCREASE CONDEMNABLE; WITHDRAWAL OF SUBSIDY WILL AGGRAVATE PROBLEMS: ABDUL MAJID

President, Karachi Chamber of Commerce & Industry, Abdul Majid Haji Muhammad, while expressing his concern on announced increase of Power Tariffs by 13.5pc effective from next month, stated that in the presence of worst power crisis of history and highest-ever tariffs, in such unpleasant circumstance, the abrupt withdrawal of subsidy for facilitating and meeting the demand, will further aggravate the problems.
Abdul Majid criticized the power increase decision by the concerned quarter of the Government and said that it is an irony that concerned quarters, despite of protest of masses, at several occasion, has previously increased the tariffs on the request of power generating/ distribution companies and now it has further penalized the consumers with its decision to raise power tariffs, as a gift on the dawn of 2010. He commented that no improvement will come in the energy sector if we keep our hands tightened and blame the previous government for the present serious gas and fuel shortages.
Abdul Majid stated that Business Community, especially the export-oriented industry and lifeline consumers will be penalized with the decision. Consumers using less than 100 units would be affected worse and this will prove a last nail in their coffins.
Abdul Majid lamented that no concrete measures have been witnessed regarding improvement in power/ electricity distribution/ transmission infrastructure nor the load-shedding has been controlled.
Abdul Majid commented on the efficiency of KESC and urged cut-down in prolonged unscheduled electricity outages. He said that the increased power tariffs and power outages have crippled the industry to perform at its par and increasing widespread discontentment in business circles.
Abdul Majid said that the Power Distribution Companies, particularly KESC, should take concrete measures to seriously curtail its transmission and distribution losses rather than adding-on different charges to control its financial losses.
The entire business community now demands the government to improve the efficiency of power distribution companies and do not increase the utility tariffs further for the larger interests of the economy and citizens of the country.

KCCI & KESC ARRANGED KHULI KACHEHRI AT KCCI ON 17TH DECEMBER 2009

Abdul Majid Haji Muhammad, President of Karachi Chamber of Commerce & Industry (KCCI) and Tabish Gauhar, CEO of Karachi Electric Supply Company (KESC) have arranged KHULI KACHEHRI (Open Hearing) on December 17, 2009 at 11:00AM at Majeed Bawany Auditorium-KCCI specifically for the members of KCCI for their pending issues pertaining to KESC.

Members, who are facing any problem from KESC, are requested to kindly forward complaints in writing alongwith supporting documents latest by December 15, 2009 and advised to participate in KHULI KACHEHRI on the above mentioned date and time.

FBR nets Rs 259 billion revenues in first quarter

Federal Board of Revenue (FBR) collected Rs 259.24 billion of revenues during the first quarter of the current fiscal year, according to provisional figures released by FBR on Monday.
According to the figures, the FBR has collected Rs 98.37 billion during the month of September 2009. Aggregate collection during the first quarter of the ongoing fiscal year thus works out to Rs 259.24 billion. The final revenue collection figures for the month of September 2009 are likely to increase further following the receipt of taxes, including taxes deducted at source, collected from different parts of the country.
The break-up of the tax collection figures for the month of September 2009 is attached for further details.

Tarin urges self-reliance to achieve economic stability

Finance Minister Shaukat Tarin Thursday said self-reliance was the only way forward for Pakistan to achieve economic stability and lessen dependence on revenue streams flowing in from donor agencies.

“As long as these revenue streams flow, things work well but once these streams go away, problems re-surface and economic independence becomes a distant dream,” he said in a keynote address to a two-day ‘Conference on Value Added Tax (VAT)’ that started in the capital here under the auspices of Federal Board of Revenue (FBR).

The minister said Pakistan heavily relied on taxes as a major source for government revenues required for socio-economic uplift of the people. Optimum revenues are achieved when an efficient taxation system is in place. Our Government’s vision and strategy of a better Pakistan also rests on a taxation régime which is based on equity and fairness, convenience of payment, economy in collection, and simplicity of procedures, he added.

He said reducing poverty through generating additional revenues is an important step towards achieving our government’s vision and that can only be achieved through an efficient taxation system which conforms to the best international practices in revenue collection.

Shaukat Tarin said these best practices were being adopted by countries all over the world and like others Pakistan had also set about modernising its taxation structure through the Tax Administrative Reforms Program (TARP) aimed at achieving greater efficiency and productivity in the tax collecting business processes and tapping new tax resources.

He admitted there were challenges in the way of generating additional indigenous revenues and exercise of discretionary powers by the government, lack of professionalism due to an inadequate capacity building and existence of certain exemptions in our tax regime were issues which needed to be addressed before the introduction of Value Added Tax.

Tarin said the tax managers alone could not do all this and “a lot depends on the policy, planning, vision and commitment of the political and economic managers”. “It is therefore a common responsibility of all the stakeholders to contribute towards achieving an efficient taxation system which can generate additional revenues for the country,” he added.

He also called for collective efforts to achieve a broader and larger goal of better standards of living for the people through better tax collection. This in turn requires increase in tax base by incorporating maximum categories of services into the tax net. While our tax base includes a wide range of goods, services sector, which is a major source of revenue around the world, is largely out of the tax net and it is time we revisited our exemptions, zero-rated items, rate variations and major sources of irritants to business, he added.

The finance minister said Pakistan could also draw on the experiences of other countries for developing a viable model best suited to our economy. He said the Value Added Tax could be considered as an effective tool for proper documentation of economy, widening of tax base and equitable taxation mechanism.

Later talking to media men, Shaukat Tarin highlighted the importance of value addition for taxation purposes on the retail stage as widening of taxation base. At the retail stage it is basically the issue of understanding and tapping the whole supply chain of goods and services. However, enforcement of any such tax on such a stage cannot be adequately done if the tax collecting machinery is not properly aware of the facts and figures regarding the different social segments, documentation of small to medium businesses, their supply chains and financial capacity of the retailers themselves. All this needs to be thoroughly researched, properly documented and comprehensively digitized by the tax machinery.

To another question, he underscored the VAT service delivery and its impact on the lives of our taxpaying community which is the backbone of our economy. FBR should keep in mind that VAT in today’s world is considered as a powerful tool in harnessing funds in domestic markets. These funds can then be used by the developing countries like Pakistan to meet the challenges like increasing mass education, poverty eradication and provision of socio-physical infrastructure.

The minister cited the example of Sri Lanka which at a 15 per cent VAT had been able to increase its tax-to-GDP ratio by seven per cent and if Pakistan could increase its tax-to-GDP ratio by four per cent through the implementation of VAT, it would be able to raise an additional Rs 600 billion, taking us close to bridging the Rs 722 billion fiscal deficit.

Earlier FBR Chairman Mr Sohail Ahmad in his address to the inaugural technical session of the conference highlighted the steps taken by FBR for generating more revenue through massive reforms, re-structuring and business process re-engineering which he said could also serve in the implementation of VAT from July 2010.

He said the government believed the impact of taxes generated through VAT would be significant in covering all those sectors which earlier enjoyed exemptions in one way or the other. He welcomed the participants of the conference which he hoped would be able to come up with a way forward for the implementation of value added tax in an incentive-based, transparent and harassment-free environment.

Public Warning By State Bank of Pakistan and SECP