PM Nawaz Sharif's First 100 Days Report Card

FDI is up and load-shedding is down during Prime Minister Nawaz Sharif's government's first 100 days. However, there has been little progress on resolving fundamental issues such as lack of security, growing budget deficits, high current account deficits and continuing heavy subsidies to the power sector and various public sector enterprises like Pakistan Steel Mills, PIA, Railways, etc.

Foreign Inflows Jump: 

Prime Minister Nawaz Sharif's first 100 days in office have seen a significant increase in foreign capital inflows.

Pakistan has $105.4 million foreign direct investment (FDI) in the first two month of the current fiscal year 2013/14 compared to $52.4 million received during the same month of the previous year, according to a Reuters' report. This is a continuation of the trend from the PPP government's last year in office which saw 76% year-over-year jump to reach nearly $1.5 billion foreign investment in fiscal year 2012-13.

Foreign remittances from Pakistani diaspora also saw a 7% increase to reach $2.64 billion in July-Aug 2013. IN addition, Pakistan reached a deal with IMF for $6.6 billion loan and the first tranche of $500 million was disbursed last week.

Load Shedding Decreases:

Circular debt payment of $5 billion by the government has induced power companies to buy more fuel and better utilize installed generating capacity in the last two months. As a result, the people are experiencing fewer hours of load shedding across the country.

The fundamental issue of the gap between cost of generating electricity and the electricity revenue receipts still remains. However, the Nawaz Sharif government is pushing higher electricity rates and lower fuel cost options to reduce this gap. Meanwhile, the circular debt has piled up again to nearly $1 billion in just the last two months. If this debt continues to mount and the government fails to clear it, the load shedding is likely to significantly increase soon.


Prime Minister Nawaz Sharif's government is trying to start talks with the Taliban militants in an effort to reduce the mounting death toll in terrorist attacks. An all-parties conference in Islamabad has endorsed peace talks with the Pakistani Taliban. The TTP leadership has welcomed the talks offer but it has continued to kill soldiers, policemen and civilians to dictate terms to Pakistan government. This was brought in sharp focus when the Taliban killed a top general in Upper Dir recently. The Taliban appear to be exploiting the perceived weakness being communicated by the government in response to continuing attacks.

Recent data from South Asia Terrorism Portal indicates a decline in overall death rate from terrorism but it also shows that more security personnel are continuing to lose their lives in such attacks.

Structural Problems Remain:

Pakistan imports a lot more than it exports. Exports add up to about $25 billion while imports stand at about $45 billion. Similarly, Pakistani government spends a lot more than it takes in as revenue, leaving a budget gap of 6-7% of GDP. It is forced beg and borrow billions of dollars a year to fill this gap. Fundamental structural issues remain in terms of high current account deficits, widening gap between public revenue and spending, and large subsidies to public sector units including the power sector sapping public treasury. FBR is missing revenue target of Rs 2.5 trillion by Rs. 130 billion, according to an International Monetary Fund (IMF) assessment. Debt is accumulating again in the power sector. Economic growth is barely keeping up with population growth.  Creation of new jobs lags growth of new entrants into the work force. National savings rate is only about 10% of GDP which reduces domestic investments needed for the future.


Reviving economic growth is the biggest challenge facing the Sharif administration. It's going to be difficult to revive the economy without structural reforms to increase domestic and attract foreign investments, which in turn requires solving the basic issues of terrorism, energy shortages and  tax collection.

Here's a  video discussion on the subject and other topics:

First 100 Days of Nawaz Sharif Government; Taliban’s Islam is false Islam; Sumbul case; Sheema Kermani from WBT TV on Vimeo.

Related Links:

Haq's Musings

Pakistan to Beg and Borrow Billions More in 2013-14

Power Companies Profits Soar at Taxpayer's Expense

Does Nawaz Sharif Have a Counter-terrorism Strategy?

Pakistan's Tax Evasion Fosters Aid Dependence

Pakistan's Vast Shale Oil and Gas Reserves

Pak IPPs Make Record Profits Amid Worst Ever Load Shedding 

Global Power Shift Since Industrial Revolution

Massive Growth in Electrical Connections in Pakistan

Finance Minister Ishaq Dar's Budget 2013-14 Speech


Riaz Haq said…
Here's an ET Op Ed by Shahid Burki:

The tax-to-GDP ratio has fallen to a record low; at less than nine per cent of GDP. It is one of the lowest among emerging nations. With such a low rate the government is unable to invest in creating the needed infrastructure and improving the state of human development. Most worrying is the sharp decline in both public and private investment. At about 11 per cent of GDP and with the incremental capital ratio of about four — the proportion of GDP that needs to be invested to produce a one percentage point increase in national output — Pakistan can’t have a GDP increase by more than 2.5 to three per cent. Also troubling is the continuous decline in the country’s share in international trade. In other words Pakistan faces a grim economic future unless the many structural problems the country faces are addressed with some seriousness by the makers of public policy. It is from this perspective that the performance of the Sharif government needs to be viewed.
The manifesto issued by the PML-N for the electoral contest of May 2013, promised to set the economy on a growth trajectory that would match that of the more rapidly growing Asian economies. It set its sight on a rate of growth of six to seven per cent, to be reached by the year 2018, when its term in office will be over. To achieve that target the party promised to deal with both the short-term problems faced by the economy and also to address the long-enduring structural problems. Both were well known to the students of the Pakistani economy, including some of the people who were assigned senior positions in the new Sharif Administration. Energy shortages, of both electricity and natural gas, were taking a heavy toll on the economy. Continual activity by the forces of extremism had foreign capital leave the country. Persistent low rates of domestic savings had increased the country’s dependence on external capital. The government turned to the International Monetary Fund and quickly concluded an agreement that would provide $6.5 billion of capital along with another $5.5 billion to be received from other donors. The total amount of $12 billion would be disbursed over a three-year period, provided Islamabad adopted a whole host of issues that would help not only to pull the country out of the recession it was in but will also make it possible for the country to climb on a higher growth trajectory. For the long-term, the government requisitioned a development programme to cover all sectors of the economy and also, the relationship between the public and the private sector. This would be prepared by the Planning Commission in the form of what it called ‘Vision 2030’.
Riaz Haq said…
Here's a NY Times on soaring stock market in Karachi, Pakistan:

If the best time to buy, as the old business adage says, is when there is blood on the streets, then Pakistan’s commercial capital, Karachi, offers the ideal investment opportunity.

For more than a decade, the sprawling seaport megalopolis of about 20 million people has been racked by political, militant and criminal violence that has taken thousands of lives. Yet, over the same period, the city stock market, which is also Pakistan’s main exchange, has posted spectacular results.

Over the past 12 months alone, the Karachi Stock Exchange has surged more than 44 percent, placing it among the world’s top-performing stock markets in dollar terms this year, according to Bloomberg.

That follows a decade of growth in which one dollar invested in an index fund of Pakistani stocks 10 years ago would have earned, on average, 26 percent every year, analysts say, in a period otherwise notable mostly for bad news. As the stock market rose, the Pakistani military leader Gen. Pervez Musharraf fell, Osama bin Laden was captured and Taliban violence spread from the northwest to cities across the country, including Karachi.

Just as surprising, perhaps, Wall Street firms are driving the latest phase of the stock boom. Bad news can make for a good bargain, they say.

“What you see in the popular press is just one part of the picture,” said Mark Mobius, a fund manager at Franklin Templeton Investments, which has more than $1 billion invested in Pakistan stocks, mostly in the energy sector. “There’s another side to these countries, where life goes on. And that’s what we focus on.”

The gloomy image of Pakistan obscures positive aspects of its economy that, investors say, make some companies an attractive bet. Beyond the headline news, much of the country is getting on with normal life. And with a population estimated at nearly 200 million people — a high proportion of them young — Pakistan offers a large, lucrative market for consumer goods, construction and financial services firms, which constitute the bulk of the Karachi stock market.

The biggest publicly listed companies — like the multinational NestlĂ©, the Oil and Gas Development Company and Fauji Fertilizer, a military-run conglomerate — pay handsome dividends, which makes them attractive to foreign investors.

And the recent election victory of Prime Minister Nawaz Sharif, a business tycoon, has injected confidence into the financial community, which had been wary of the previous government.

For a time, Pakistani stocks were undervalued by as much as 50 percent to account for risk, compared with a regional discount of about 20 percent, said Taha Javed, a financial analyst in Karachi. Now, as foreign investors pile in, he said, “we are catching up.”...
Riaz Haq said…
Here's a WSJ story on Pakistan's return to bond market:

Pakistan is returning to the international bond markets for the first time in six years, joining a host of other emerging market governments and companies who are selling debt while borrowing costs remain low.

Pakistan's offering, expected to be up to $1 billion, comes as money flows back to Asia in search of higher yields amid new expectations that the U.S. Federal Reserve will now keep in place for the time being the aggressive stimulus measures that has pumped the world full of cash.

Other countries such as Brazil, Kenya and Honduras are also raising cash to fund infrastructure projects and alleviate heavy debt burdens.

Interest in emerging markets, including their sovereign debt, has been renewed in the past couple of months as the Fed has held off starting to wind down its bond-buying program, said Mr. Rajeev DeMello, head of Asia fixed income in Singapore at Schroders Investment Management, which manages $388 billion globally.

Mr. DeMello said Schroders holds Pakistani bonds and expects the new debt to attract investors, given that it will offer a high yield and that the country's bonds are not highly correlated to those of other markets in the region.

During the summer selloff in global emerging markets, prompted by expectations that the Fed would soon begin withdrawing its stimulus program, Pakistani bonds held up relatively well because most holders are large institutional investors with longer-term outlooks, Mr. DeMello said.

With global interest rates still low and emerging market investors venturing back into Asia, the country is planning to issue debt due in five to 10 years.

Bond yields throughout Asia have fallen over the last few weeks as investors have jumped back in. The yields on government bonds in Indonesia, Malaysia and Thailand have all fallen since early September.

Pakistan's five-year yield is at 12.3%.

"We have started the process [of the bond sale] and are waiting for the appointment of a lead adviser who will take the process forward," said Shafqat Jalil, a finance ministry spokesman.

Still, Pakistan isn't without its problems. Though its economy is humming, its finances are weak, with revenues from taxes floundering and foreign-exchange reserves falling 34% since October last year. Pakistan is already heavily in debt, with its financing needs one of the highest in emerging markets, according to the International Monetary Fund. Rating firm Moody's MCO +1.08% downgraded the country's government bonds to junk in July last year.

The Pakistani government is raising cash to plug its dwindling foreign-exchange reserves, which are symptomatic of the country's economic woes and trade imbalance.

The government's financial history hasn't been without blemishes, either. It last defaulted on debt in 1999 as it struggled with a balance-of-payments crisis aggravated by international sanctions and a military coup.

Pakistan last issued debt in 2007, with $750 million of 10-year bonds intended for general government spending and budget management. At the time, investors snapped up the bond with bids worth seven times the amount of debt on offer.
Riaz Haq said…
Here's Washington Post on Pakistan's new anti-terrorism law:

After a decade of terrorist attacks, Pakistan is implementing a new legal framework to deal with its growing militant threat — what some are calling a local version of the USA Patriot Act.

The government says the measure will improve an anti-terrorism effort plagued by inefficiency and abuses. At times, security forces have swept up thousands of suspected Islamist militants without charge, outraging human rights activists. When terrorism suspects do go before a judge, however, they are often freed, dismaying Western officials.

“This law is war, declared war, against those who challenge the state,” said Khawaja Zaheer, the senior justice adviser to Prime Minister Nawaz Sharif. “This law is intended to do what should have been done in 2001 or 2002,” in the aftermath of the attacks on the World Trade Center and the Pentagon.

But in a debate that mirrors the controversy over the USA Patriot Act, activists argue that the new measure will lead to widespread abuses.

“People are already being detained, people are already being kept in internment camps, people are already involuntarily disappeared,” said I.A. Rehman, secretary general of Pakistan’s Human Rights Commission, an independent Lahore-based body. “The only thing they want to do with this is give even more special powers to security forces to detain.”

For years, Pakistan’s leaders have lurched between tough talk on terrorism and sympathetic outreach to some militant groups. This week Sharif condemned a U.S. drone strike that killed the leader of the Pakistani Taliban, Hakimullah Mehsud, days before planned talks between the group and the Pakistani government.

Still, with Sharif facing pressure from Western governments to act, he has been quietly building a legal framework that could underpin a potential military offensive against the Taliban should talks fail.

The new ordinance — handed down in mid-October and effective immediately pending a review by Parliament — may first be put to the test in the economic hub of Karachi, where an offensive against criminal gangs and militant groups has netted about 5,000 arrests in the past three months.

The ordinance formally defines an enemy combatant, clarifies the powers of the army to intervene in internal security, establishes new federal courts, offers additional protections to judges, and codifies the use of extended detention.

The measure draws on previous laws, but government officials say it is broader, legalizing detention tactics and other practices that military and intelligence officials have been suspected of using for years. By doing so, Sharif’s government hopes to avoid clashes with a increasingly independent court system.

“The organized mafia is roaming free due to [a] legal vacuum,” Sharif wrote in a letter asking lawmakers to support the plan....
One 30-year-old man, who asked that he be identified only by his last name of Khan, a common Pakistani surname, said in an interview that he was picked up by officers in plainclothes while riding his motorbike in northwest Pakistan in June. He said he was blindfolded and detained for 25 days without being told why.

“They did not torture me, just kept me alone,” he said.

The measure also states that enemy aliens “may be detained by the government for such period as may be determined by it from time to time.”

The 1.5 million to 3 million Afghan refugees in Pakistan could be especially vulnerable to that provision, activists say, noting that many do not have proper documentation and that the ordinance considers “crossing national boundaries” as “waging war against Pakistan.”
Riaz Haq said…
Here's a Daily Times story on Pakistan economy as seen by the government:

Dar expressed satisfaction over the positive development that Large-Scale Manufacturing (LSM) had increased by 12.8 percent during the month of September. This sector has experienced a growth of 8.4 percent during the first quarter of the financial year 2013-14, mainly because of the proactive approach of the government in liquidating the circular debt resulting in increased generation. Consequently growth in the large-scale industrial sector experienced an increase of 6.0 percent in June 2013 which gradually increased to 12.8 percent in September because of the addition of 1,700 megawatts (MW) in the national grid.

The meeting was informed that foreign remittances have reached $5.2 billion in the first quarter of FY 2013-14, 6.3 percent more than the corresponding period last year and the foreign direct investment has increased by 85 percent in the first quarter of this financial year. “This speaks volumes about the seriousness of the PML-N government in the economic uplift of the country,” the finance minister said.

Dar, expressing concern over the inflation and price hike in the country said, “It was mainly due to the increase in international fuel prices and expressed hope that there will be lesser adjustments in the future. The government is sensitive to the hardships of the people of this country and was on average providing a subsidy of around Rs 2.2 billion every month just to lessen the burden of the rise in fuel prices on the common man.

The ECC also decided to appoint Asian Development Bank as the transaction adviser (TA) in the Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline Project. Dar said that ‘involving a credible financial institution as the TA will ensure greater transparency in the deal’.

The ECC also discussed in detail the rise in the prices of onions and tomatoes in the domestic markets. The ECC was told the shortage of both the vegetables is the main cause of the rise in prices which will soon be overcome when fresh stocks of onions and tomatoes reach the markets. Officials representing the Ministry of Food Security told the ECC that during the past three days a survey was conducted in the local markets and it was observed that the prices are already going down and by the end of this month they will improve further. However, Dar, advised the officials of the Ministry of Food Security to bring a better and much more practical proposal to check the rising prices on long-term basis. The ECC also directed the Ministry of Food Security to keep a watch over the prices and deferred the matter till the next meeting.

As regard Energy Efficiency Audit of the captive power plants, the ECC decided to form a committee under the chairmanship of Ministry of Water and Power secretary and comprising representatives of ministries of industries and production and petroleum and natural resources, commerce, National Electric Power Regulatory Authority (NEPRA) and Oil and Gas Regulatory Authority (OGRA). The committee will propose a viable plan for the capacity building for energy efficiency audits and to introduce transparency in the system. The finance minister said, “We shall start the process of conducting energy efficiency assessment from the public sector and will initiate awareness campaigns for the private sectors to use methods that could save energy and help in bringing the country out of its present energy crisis.”
Riaz Haq said…
Here's an AFP report on Pakistan economic recovery:

Pakistan's finance minister Ishaq Dar on Wednesday said he was optimistic about an economic recovery after the rupee breached the psychologically important 100 to the dollar mark.
The currency had been losing its value against the greenback since Sharif's PML-N government came to power in June last year, sliding from 97 rupees to the dollar to a low of 108 in December.
Since then it has mounted a recovery and as of Wednesday evening the rupee was trading at 97.90 to the dollar.
Addressing a press conference Wednesday, Dar said: "The price of onions, tomatoes and dollars has been brought down to the level when Prime Minister Nawaz Sharif took oath."
"It is a positive development for the economy and will boost investors' confidence into Pakistan," Dar said, adding the government was not resorting to injecting reserves from the state bank in order to stabilise the currency.
"We did not use State Bank money to strengthen the rupee, but persuaded exporters to bring back their money to Pakistan and checked currency speculation, which resulted in the rising value of the rupee," he added.
Dar said that revenue from tax collection, which has traditionally been problematic, had increased by 17.7 percent and the budget deficit was down to 3.1 percent as compared to 4.1 percent in the first eight months of last year.
He added that overseas remittences by Pakistanis abroad stood at $9.23 billion, representing an 11 percent growth compared with last year.
Dar said that exports have also shown a 6.2 percent growth while the rate of inflation was currently 8.6 percent.
"We are on track to achieve six percent GDP growth rate in three years and Pakistan can emerge as a strong economy in the region," Dar said.
The IMF approved a $6.7 billion bailout loan package for Pakistan in September last year to help the struggling nuclear-armed country achieve economic reforms, particularly in its troubled energy sector.
The IMF said Pakistan's economy was picking up, with growth expected to reach about 3.1 percent in 2013/14 compared to its earlier estimate of 2.8 percent.
Cash-strapped Pakistan, plagued by a bloody homegrown Taliban insurgency, is battling to get its shaky economy back on track and solve a chronic energy crisis that cripples its industry.
The IMF made an initial payment of $540 million, and in November fund officials said during a monitoring visit that Pakistan was "broadly on track" with reforms.
In December, Pakistan received $554 million as a second tranche of the loan.
Riaz Haq said…
Here's a Financial Times report on Saudi aid for Pakistan:

Saudi Arabia has given $1.5bn to Pakistan to bolster the country’s falling foreign currency reserves and help cement security ties between the two countries.
Senior officials at the finance ministry in Islamabad and the central bank in Karachi said that at least half of the funds, which were deposited in March, came as a grant

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“The Saudi leadership has given these funds to Pakistan to help the rupee,” said one central bank official. “The other half [of the funds] could also eventually become a grant.”
The injection of Saudi money will lift Pakistan’s liquid foreign reserves about 18 per cent and offer a boost to a struggling economy.
The Saudi support to Pakistan follows a mid-February visit by Salman bin Abdul Aziz al-Saud, Saudi crown prince, amid suggestions that Saudi Arabia is seeking an expansion of its security ties with Pakistan.
In February a senior Pakistani intelligence official told the Financial Times that Saudi Arabia was seeking “a large number of [Pakistan] troops to support its campaign along the Yemeni border and for internal security”.

The official confirmed that Pakistan’s agreement, during Prince Salman’s visit, to support the establishment of a “transitional governing body” in Syria was an important aspect of the deal. Islamabad had previously remained neutral and urged Syrian president Bashar al-Assad and his opponents to end the conflict peacefully.

The Pakistani rupee has appreciated more than 4 per cent in the past three weeks with officials pointing to the Saudi assistance as one of the reasons for its strengthening. But some believe there are inherent risks for Pakistan, which is fighting an internal battle with Taliban militants, in getting closer to Riyadh.

Historically, Pakistan has sought to maintain an even hand in public in its relations with predominantly Shia Muslim Iran and Sunni Muslim Saudi Arabia.
During Prince Salman’s visit an Iranian minister threatened to send troops across the border in to Pakistan if Islamabad failed to secure the release of five Iranian border guards kidnapped in the country. Officials in Tehran alleged the guards were taken by hardline Sunni militants backed by Saudi Arabia. The Iranian guards have still not been released.
“We have to be careful in how we pursue our relations [with Saudi Arabia],” said Farooq Hameed Khan, a retired brigadier and commentator on security affairs. “As long as our security relations with Saudi Arabia are for internal security duties, that can be managed but we must not extend ourselves beyond that.”
The Saudi assistance may help to support Pakistan’s weak economy though it cannot fund a long-term recovery, economists said.
“The Saudi money for now has helped our reserves,” said Sakib Sherani, a former chief economist at the finance ministry. “But it’s early in the day. We need to build up on our progress. Pakistan’s economy needs to be put through other reforms too.”
Last year, the IMF agreed to a $6.7bn loan programme for Pakistan. However, western diplomats say, Pakistan is riddled with challenges, notably energy shortages and domestic insecurity, which continue to deter investors.
“In a country with major energy shortages, a low number of taxpayers and corruption in many areas, the Saudi money will help but only temporarily,” said one western diplomat in Islamabad.
Riaz Haq said…
Pakistan's exports up, FDI up in first 8 months of fiscal 2013-14:

Pakistan's trade deficit fell 4.89 percent in the July-February of the fiscal year 2013/14 to $12.542 billion compared with a deficit of $13.187 billion for the same period last year, according to the Pakistan Bureau of Statistics.

Exports rose to $16.866 billion in (July-February) from $15.882 billion, and imports to $29.408 billion from $29.069 billion.

On a monthly basis, the trade deficit fell to $1.433 billion in February from $2.076 billion the previous month. Exports totaled $2.167 billion in February and imports were $3.600 billion. (Compiled by Reuters Karachi newsroom)

Foreign direct investment (FDI) in Pakistan increased by 17.9 percent to $606.3 million during the first eight months of the current fiscal year, according to figures released by the State Bank of Pakistan (SBP) on Friday.

FDI inflows stood at $514.2 million during the same period of last fiscal. FDI has been on the decline since 2008 in the wake of security concerns, weak law and order situation and energy and power outages in the country. And while the increase in the pace of FDI inflows is reasonable, the volumes the country received during July-February FY14 are far from satisfactory, economists say.

Between July 2013 and February 2014, overseas investment by businesses declined by 11 percent to $1.262 billion against $1.418 billion in the corresponding period last year. Similarly, outflow was recorded at $656.2 million in the period under review against $904.4 million for the same period in the previous fiscal, revealed SBP data.

The oil and gas exploration sector emerged as the biggest recipient of FDI with $296.2 million, followed by the financial sector with $102.8 million in the July-February period in FY14. Foreign investment in food, chemical and tobacco and cigarette sectors was recorded at $75.1 million, $71.6 million and $55.5 million, respectively.

FDI stood at $79.2 million in February 2014 against outflow of $14 million in the corresponding month of the last year. The numbers on foreign investment showed that portfolio investment fell drastically from $169.9 million for the July-January period in FY13 to $54 million over the same period in the current fiscal – a drop of over 68.2 percent.

Total foreign investment for the first seven months of the current fiscal was up 6.5 percent to $724.6 million against $680.4 million for the same period in the previous fiscal.

“The level of FDI is still too low to have much of an impact on the country’s financial account,” said economist Muzzamil Aslam.

However, foreign portfolio investment at the Karachi Stock Exchange is encouraging despite no listing of new companies at the local equity market, he added.

“In the financial sector, the reason behind the rise in FDI is investments by foreign shareholders and sponsors in banks which were short of the minimum capital requirement fixed by the State Bank of Pakistan for the year 2013,” he said.

The sponsors of the noncompliant banks issued right shares to raise capital. “Once the process of the privatisation gets momentum, foreign investors will come to the country, subsequently improving financial account prospects,” he added.
Riaz Haq said…
Consumer Confidence Index, or CCI, is continuing its upward trend since Nawaz Sharif's election in Pakistan last year.

The latest CCI is 141.82, up from 105.6 in March last year.

Consumer Confidence Survey (CCS) is a stratified random telephone survey of more than 1600 households across Pakistan. The survey is being conducted by Institute of Business Administration (IBA), Karachi and State Bank of Pakistan (SBP) since January 2012 with the frequency of every two months.
Riaz Haq said…
“So, if you look around the world you’ll see cases of countries that have had, you know, serious insurgency problems, or civil wars even, but have managed to maintain a relatively robust economic growth. Now, of course if they didn’t have those security problems, the robust economic growth would certainly have been even higher,” (IMF's Jefferey)Franks said, adding, “But, you know, from the point of view of an economist who is advising the Pakistani authorities on economic issues, what I would say is that regardless of the security conditions, pursuing good economic policies will bring dividends in terms of better economic reforms.”

The mission’s chief said the overall economic situation in Pakistan is gradually improving. “We revised in this round our forecast for economic growth for this fiscal year of 2013-14, from 2.8 percent to 3.1 percent. That 3.1 percent may still be a bit on the conservative side, so we see indicators of growth that are relatively strong considering the fiscal adjustment that has taken place.”

A transcript of the conference call available on the IMF’s official website shows Franks adding that inflation has been somewhat better than anticipated at around eight percent currently, although “we do expect some rebound in the inflation rate in the coming months”. He said the balance of payments situation for Pakistan has been quite difficult, and reserves were declining quite sharply during calendar year 2013. However, so far in 2014, there is a positive turn with reserves beginning to move upward.

The IMF also foresees the further strengthening of the country’s reserves. The IMF country chief said, “Right now we have IMF inflows helping to boost preserves, balance of payment flows are beginning to turn more positive for the country, and of course there has been an influx of money from gold states, which is also helping. In the coming months we expect that this trend of recovering central bank reserves to continue with important inflows coming from other international partners, particularly the World Bank, the Asian Development Bank, and some bilateral donors to Pakistan.”

Franks said that during the review the fiscal deficit target was observed with a substantial margin. “Revenues are coming in roughly as we did forecast, although they are somewhat worse than was in the original Pakistan budget.” However, the IMF official said, expenditures have been very tightly controlled, leaving a substantial margin of over-performance on that target.

“This leaves us with significant confidence that by end of [fiscal year] 2013-14 in June, they will likely meet the deficit target for the year as a whole, bringing the deficit down in the range of 5.5 percent of GDP from around 8 percent of GDP last year.”

The IMF official said that there were two other smaller targets which however were not met. “One was a ceiling on government borrowing from the State Bank of Pakistan. They over-borrowed at the end of December, but that over-borrowing has since been rectified and we expect that they will meet that target for end March. The other target that was met is a target that we have to gradually reduce the State Bank of Pakistan’s open swap forward position. They missed that target by a small margin but here, again, we think that they are now on track to make the target for end March.”

The IMF Mission chief added: “Overall, we saw satisfactory performance by the government in pushing forward the structural reforms under the IMF programme. They are making good progress in reforms in the energy sector, and they are working hard to push forward their privatisation agenda, although there do seem to be some delays in some of the key milestones along the stage to bring certain firms to the market for secondary public offerings, or initial public offerings.”
Anonymous said…
Washington, April 9. 2014—The World Bank said today it was cautiously optimistic about economic prospects in South Asia in 2014 because of growing exports and investment as it emphasized that the risks to growth were becoming more domestic, including an increasingly vulnerable banking sector.

In its twice-a-year “South Asia Economic Focus”, the World Bank forecast that economic growth would rise to 5.8% in 2015 from 5.2% this year and 4.8% last year. South Asian countries – which include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka – appeared to have largely recovered from last year’s financial turmoil caused by changes in US Federal Reserve monetary policy. Many were rebuilding currency reserves while curbing current account deficits.

But these successes on the external side were accompanied by looming problems in the domestic economy. Economic growth could be held back by unstable banking sectors, inflation, fiscal deficits and debt, and persistent shortfalls in energy and transport infrastructure across the region.

“Now that external pressures are waning, it’s time to refocus on addressing problems within the economies in South Asia so that countries can boost growth and reduce poverty,” said South Asia Chief Economist Martin Rama. “The good news is that across South Asia there is a growing momentum in support of reforms to increase growth because governments recognize this is the best way to overcome poverty.”

Over this year, the report saw a strengthening of economic growth for most South Asian countries.

The region’s largest economy, India, would see growth rise to 5.7% in fiscal year (FY) 2014 from 4.8% last fiscal year with activity receiving a boost from a more competitive exchange rate and many large investment projects going ahead. Pakistan’s economic growth could increase to 4% this fiscal year from 3.6% in FY2013 as its economy benefitted from a reduction in electricity blackouts, resilient remittance flows from Pakistani workers abroad, rebounding manufacturing exports and a more buoyant services sector. Nepal was recovering from a difficult year affected by setbacks in the agricultural sector and with its government budget. Helped by strong remittance flows boosting consumption and the services sector, the economy should grow by 4.5% in FY2014 after 3.6% in FY2013. Sri Lanka would continue to grow at 7.3% this year as the economy was sustained by new capacity from infrastructure investments and rebuilding after the country’s recent conflict.

Economic activities recovered in the second half of FY14 in Bangladesh, driven by resilient exports and domestic demand, following setbacks suffered in the first half due to political uncertainty and turmoil. A recovery in export growth and increases in public expenditure are likely to help achieve 5.4% GDP growth in FY14, slightly lower than last year’s 6%.

The economy in Afghanistan will be weighed down by the persistent uncertainty caused by the withdrawal this year of international forces and the subsequent reduction in foreign aid for the economy. In addition, the country’s agricultural sector’s output has declined. Economic growth was therefore projected to fall to 3.2% this year after 3.6% in 2013. Depending on security and whether agriculture rebounds and mining output increases, Afghanistan could see growth recover in 2015 and 2016 to around five percent.

The report made a point of focusing on the banking sector because of its centrality for South Asia’s economic stability and growth.
Riaz Haq said…
Here's Wall Street Journal on infighting among TTP Taliban factions in Pakistan:

ISLAMABAD, Pakistan—Fighting within the ranks of the Pakistani Taliban has stalled peace talks with the government as the militants' focus turns inward, militant commanders and officials said Friday.

A turf war between rival factions of the group, known formally as Tehreek-e-Taliban Pakistan, has claimed between 25 and 30 lives since Sunday in the country's tribal areas, say commanders of the militant group.

Prime Minister Nawaz Sharif in September launched the talks, controversial among Pakistanis because the Pakistani Taliban has claimed the killing of thousands of civilians and security personnel, but they have yielded little progress after weeks. The initiative delayed the planned launch of a Pakistani army operation against the militants.

As the Taliban's cease-fire ended on Thursday, the internecine bloodshed has created a new hurdle in the talks process.

"Our interlocutors are badly split. Unless they can resolve this quickly, things aren't looking very bright," Rustam Shah Mohmand, one of the government representatives at the negotiations, told The Wall Street Journal. "The government is also dragging its feet."

"It appears that we're losing momentum. I fear that we're heading toward a dead end."

People with knowledge of the Pakistan army say the institution has concerns about the way the talks are dragging on.

Meanwhile, the U.S., which has targeted militants in the tribal area, has ceased drone strikes against the Pakistani Taliban since the negotiations policy was set, under an understanding between Islamabad and Washington, officials say.


Militants and officials said the Haqqani network, an Afghan insurgent group also based in Pakistan's tribal areas, is trying to patch up differences between the warring Taliban factions, which come from the Mehsud tribe.

The Haqqani group has repeatedly intervened in internal Taliban disputes, fearing that such fighting will impede its ability to use the tribal areas as a sanctuary, analysts said.

"The Taliban shura [leadership] will now find it more difficult to come to a unanimous view," said Rahimullah Yusufzai, a veteran journalist who was formally part of the government negotiating team. "They will not give up on the option of talks at this stage. Both the Taliban and the government want to continue talks."

The infighting involves a faction led by Khan Said, known as Sajna, and a rival group led by a commander called Shehryar over leadership of the Taliban's powerful Mehsud wing. The conflict dates back to the enmity between two Mehsud commanders who were killed by U.S. drone strikes last year. Their deaths led to a militant outside the tribe, Mullah Fazlullah, taking control of the Taliban for the first time.
Among the dead in recent days are three prominent commanders, militants said. The fighting, which has taken place close to the Afghan border in both North and South Waziristan, has included gunbattles and the firing of rockets and grenades. Some analysts said the government would prefer to deal with a united Taliban but others said the discord should be welcomed.

"There's nothing better for Pakistan than these terrorists killing each other," said Mehmood Shah, an analyst based in Peshawar who was formerly a senior security official for the tribal areas.
Riaz Haq said…
Here's an report on Pakistan's "power grid looking brighter":

Pakistan’s national energy grid will add more than a dozen power projects, including two dams and a coal mine, increasing electricity capacity in one of the worst shortages in the country’s history.

Pakistan’s power sector can generate about 16,000 MW, short of requirements by about 5,000 MW and worsening as demand grows, projected to swell to 26,000 MW by 2020, according to Pakistan’s 2013 National Power Policy report.
Capacity in some Pakistani industries, like the fertilizer industry, fell to nearly 50 percent in the last six months, forcing interruptions to gas supplies and closures. Importing expensive energy over the past few years, when the country had the capacity to produce it, has eroded Pakistan’s foreign exchange reserves.
Work is underway in advanced stages at Gaddani Power Project and two power projects at Bin Qasim, Pakistan Minister for Planning and Development Ahsan Iqbal told Parliament in Islamabad on Wednesday, Pakistan Today reported. He also said work has begun on Thar Coal Project, which includes a mining and three power projects that will begin producing electricity within three years.

China has agreed to ten power projects at Thar, Iqbal added. Chinese banks offered to finance up to $900 million of the $1.2 billion for the Thar coal in December, asking the Pakistani government for a loan guarantee. London-based Oracle Coalfields, the owner and developer of the coal plant project, expects to finalize detailed agreements with two Chinese partners, CAMCE and SEPCO, by the end of the year.
Two hydroelectric projects, the Diamer-Bhasha and Dasu dams, will also help lift Pakistan from its energy shortage and usher in economic progress, analyst Nasir Jamal told Radio Pakistan Thursday.'s-power-grid-looking-brighter-278179
Riaz Haq said…
Here's a Dawn report on additional $400m from ADB for energy projects in Pakistan on top of $900m for coal power at Jamshoro:
The Asian Development Bank (ADB) has approved $400 million loan to help Pakistan carry out reforms for overcoming power shortages.

An agreement in this regard was signed by Secretary Economic Affairs Division Nargis Sethi and ADB's Country Director for Pakistan Werner E. Liepach here on Monday. Finance Minister Ishaq Dar and ADB's Governor witnessed the signing ceremony.

“The ADB has approved a soft and concessionary loan for Pakistan, which has the best terms and conditions with interest rate of even less than 2 per cent annually,” said Ishaq Dar.

He said the ADB had also recently approved a loan of $900 million for Jamshoro coal power project to produce cheaper electricity.

Speaking on the occasion, Werner E. Liepach said the loan would support key reforms in the energy sector to ensure uninterrupted supply of cheaper and dependable power to millions of industrial and private consumers, who were presently adversely affected by long power outages.

“This important energy sector assistance will propel growth, boost businesses, and create jobs that are critical to reduce poverty in the country,” said Liepach.

In line with Pakistan's National Power Policy approved in 2013, the sustainable energy sector reform programme targets robust policy, capacity development and institutional strengthening action to reduce crippling power shortages that according to estimates, are costing the country about 2 per cent of its GDP growth every year.

The ADB along with Japan and the World Bank have been working with the Pakistan government to formulate and implement a five-year plan targeting increased power supply, reduction of losses and boosting the efficiency of the power sector.

The programme would support government's plans to rationalise tariffs and eliminate subsidies by 2016, except for low income customers.

“The reforms will improve transparency and accountability, which will also go a long way in leveraging stronger private sector led investments in the power sector,” said Werner Liepach.

The full programme, set to complete by June 2018, spans a total of $1.2 billion investment by the ADB, and for the first sub-programme, co-financing is expected from Japan with $49 million and the World Bank with $600 million.

The ADB is the lead development partner in Pakistan's energy sector supporting a wide range of power sector development activities, including energy efficiency, transmission, distribution, cross-border natural gas pipelines, power generation, and renewable energy projects.

The ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region.

In 2013, ADB assistance totalled $21 billion, including co-financing of $6.6 billion.
Riaz Haq said…
Here's a Reuters' report on TTP infighting:

The head of the Pakistani Taliban is making a last-ditch bid to stamp his authority on the increasingly divided insurgency by ordering a top commander sacked, Taliban sources said Saturday.

Taliban head Maulana Fazlullah moved against Khan "Sajna" Said on Friday after weeks of bloody infighting in the powerful Mehsud tribe that supplies the bulk of the Pakistani Taliban fighters, they said. Scores of men have been killed.

The risk for Fazlullah is that Said might ignore him and battle on. Said is trying to wrest control of the Mehsud tribe - with its many weapons and lucrative smuggling routes and extortion business - from rival Shehryar Mehsud.

The factional fighting has complicated attempts by the Pakistani government to end the insurgency through peace talks it proposed in February. Some commanders are in favor of talks but others vowed to continue their insurgency.

"It's a test case for Maulana Fazlullah and his shura," a Taliban commander said, referring to the movement's leadership council. "It will determine their future."

"If Sajna is convinced and he stops fighting, it conveys a good message to rest of the Taliban factions," he said. "Otherwise it will be a setback for Fazlullah if Sajna refuses to obey his command."

Fazlullah has repeatedly appealed in vain to the two Mehsud rivals to stop fighting. An earlier peace deal brokered by the powerful Haqqani network of fighters fell through, undercutting the militants' ability to mount attacks against security forces.


Notorious for ordering the attempted killing of schoolgirl activist Malala Yousafzai, Fazlullah is the first non-Mehsud leader of the Pakistani Taliban and has struggled to impose his authority on the powerful tribe.

He faced many challengers to become chief of the Pakistani Taliban last year after the death of the previous head in a drone strike. He has been hiding in Afghanistan since then.

But the time has come to exert his authority, a senior member of the Taliban said.

"Senior members of Tehrik-e-Taliban Pakistan had tired of appealing (to the two rivals) to stop their clashes," he said.

The Taliban sources said Fazlullah turned to an influential hardline commander, Khalid Omar Khorasani, to appoint a new commander in place of Said, who wants to join the peace talks.

Khorasani, who opposes the talks, ordered the decapitation of 23 hostages from a government paramilitary force shortly after Islamabad announced its peace initiative.

Taliban commanders said Khorasani had been chosen to appoint a successor not just because of his hardline reputation, but because of his ability to unite various factions.

"All militant leaders respect him for his sacrifices in organizing all the militant factions and that's why Fazlullah gave him this difficult task," a Taliban commander said.
Riaz Haq said…
#Nawazsharif #PMLN Government will forfeit right to rule if energy crisis not resolved #Pakistan #loadshedding

WASHINGTON: The government will forfeit its right to rule if it fails to resolve the energy crisis, says Musadik Malik, Special Assistant to the Prime Minister on Energy.

“It happened to the previous government and it will happen to this government too if we do not end the load-shedding,” he said.

Addressing a seminar on Pakistan’s energy crisis at the Woodrow Wilson International Centre for Scholars, Washington, Secretary Water and Power Nargis Sethi emphasised the need for a multi-pronged approach to end this crisis.

“The power sector subsidies had been costing about 2 per cent of GDP and taking 15-17 per cent of the revenues,” she warned. “This is not sustainable.”

Power ministry hopes new strategy to cut losses will pay off

In a power-point presentation, Mr Malik said the government had developed a new approach, based on “meritocracy, transparency, automation and accountability” to overcome this crisis.

“We will encourage competition by developing energy corridors and favourable tariffs for low cost energy sources, and by creating a key client management system,” he said.

He identified load-shedding, theft, receivables and poor collection of revenues as the key distribution issues causing circular debt and compromising the viability of the power sector.

Mr Malik said there’s considerable variance in load-shedding across feeders; ranging from as little as 3 hours a day to as much as 23 hours.

“In addition to human suffering, the load-shedding is causing a loss of up to 3 pc of GDP each year; in 2013-14 this loss amounted to Rs 630 billion,” he said.

Nearly all DISCOs had losses that were considerably higher than acceptable levels indicating that “theft is occurring across the board,” he said.

Mr Malik said that more than 90 pc mixed feeders had theft / under-billing, hidden often by overbilling remote or rural feeders. “In industrial connections (3 per cent loss), 30 feeders steal 64 per cent of all stolen electricity,” he explained. “This theft is hidden by over-billing other companies.”

The government had created loss targets for each feeder length and linked it with load-shedding, he said. “Meeting these targets will save Rs 40 billion to the national exchequer just from 6 DISCOs, (27 Billion rupees from MEPCO and LESCO alone).”
Riaz Haq said…
#Pakistan Minister Ahsan Iqbal claims 3,600 MW #electricity will be added in May 2017 to cut #loadshedding #CPEC

Minister for Planning, Development and Reforms, Ahsan Iqbal on Monday said some 3,600 megawatt (MW) electricity would be added to the national grid by next month, which would help reduce energy shortfall in the country.
Addressing a press conference here, he said total 10,000 MW electricity would be added to the grid by May 2018 bridging total gap in demand and supply.
He said the Pakistan Muslim League-Nawaz (PML-N) government had made record investment in the energy sector. Such investment had not been seen in the sector for the last 15 years and production of only 16,000 megawatt electricity was made possible during 66 years. After completion of projects, uninterrupted power supply would be available, which would start a new of era of development in industry, agriculture and services sectors, he added.
Responding to the criticism that the present government could not manage to overcome the energy crisis despite lapse of four years, the minister said energy projects took three to four years to complete. The projects initiated by the PML-N government were near completion and would soon start commercial operations, he added.
He said since the PML-N government came into power, the economic indicators were on the upward trajectory. “Economic growth has gone up to over 5 per cent in 2016 from 3.7 per cent in 2013, inflation rate has come down and industrial growth rate is improving,” he added.
He said the government was focusing on manufacturing high cost commodities instead of low cost ones, therefore, during last three years the export of former had increased.
To a question, he said though the public debt had increased, yet the debt to GDP (gross domestic product) ratio decreased to 60.5 per cent in December 2016 against 62.4 per cent in December 2015.
The minister said the opponents of China Pakistan Economic Corridor (CPEC) were trying to mislead the people that the project would increase the public debt and damage the local industry. In fact, it would help strengthen the country’s industrial sector, he added.
“Huge number of employment opportunities will be created for the local people as Chinese industries are being shifted to Pakistan,”, he said, adding that the Pakistani industry would also become more competitive.
He said due to the CPEC, Pakistan’s economy was now shifting from low cost agriculture industry to high value industrialization. Major development projects, which had been pending for decades, were now at the completion stage, he added.
He said the government had completed the long awaited N-85 connecting Quetta with Gwadar. It would construct over 1,000 kilometer roads across the Balochistan province, he added.
It was the current government that made the long awaited Diamir Bhasha Dam project a reality as its ground breaking was going to be held in a few months, he added.
Ahsan Iqbal rebutted an allegation levelled by scientist Dr Samar Mubarak against the government of fixing tariff rate of Rs 24 per unit of electricity produced from Thar Coal. The traiff was fixed at only Rs 8.5 per unit, he added.—APP
Riaz Haq said…
Glimmer of light in #Pakistan’s blackout crisis. #loadshedding #CPEC … via @FT

The households and small businesses that crowd the narrow lanes of Gazdarabad, Karachi, are used to blackouts. Until recently, residents here, as in many parts of Pakistan’s biggest city, suffered between eight and 10 hours a day without electricity.

It has taken years for engineers from K-Electric, the local power company, to unpick the tangle of loose wires and illegal connections that were symptomatic of a city deprived of regular electricity for the past decade.

“We would have up to 10 hours of load-shedding,” says Tariq Gulsher, a local resident, referring to the area’s power cuts during the latest of Pakistan’s energy crises. “Although we could pay people for access to a back-up generator, it was expensive and fluctuations in the power often meant our equipment broke.”

Gazdarabad’s residents now have reliable, 24-hour power — but they are the lucky ones. Pakistan is facing an unprecedented power crunch, which has left households and businesses either in the dark or relying on back-up generators for large portions of the day.

It poses a risk to economic growth as Pakistan becomes a more attractive place for foreign consumer businesses, which are enticed by its young and growing population and cautiously optimistic about improving security.

Ehsan Malik, chief executive of the Pakistan Business Council, says the energy shortfall “is business’s biggest difficulty right now”.

Electricity in Pakistan is both insufficient and expensive. Peak demand surpasses maximum generating capacity by 6 gigawatts — equivalent to about 12 medium-sized coal power plants.

Pakistan plans to remedy this by building coal-fired power stations funded by more than $35bn in Chinese loans — part of the $50bn-plus China-Pakistan Economic Corridor scheme to improve Pakistan’s infrastructure. Several large power stations are under construction and the government says at least one will come online every month until next March, producing eight gigawatts of new capacity.

These schemes are intended eventually to take advantage of the 175bn tonnes of coal reserves discovered at Thar, about 400km east of Karachi. The amount of fuel there puts Pakistan in the top 10 countries in coal reserves.

Pakistan has some of the highest power prices in the region, at $0.13 per unit of electricity, compared with $0.12 in India, $0.11 in China and $0.09 in Bangladesh. Furnace oil is burnt to produce 40 per cent of the supply, with hydroelectric dams accounting for 30 per cent and gas 25 per cent. Virtually none of the energy comes from coal, which is far cheaper,

“We are sitting on some of the largest coal reserves in the world but the government in the 1990s was completely focused on furnace oil,” says Syed Murad Ali Shah, chief minister of Sindh province. A concern is the financial risk. The falling cost of solar energy could render coal power plants useless, and energy suppliers complain the electricity tariffs set by authorities are too low for them to make a profit or attract new investment.

Energy regulators have slashed the tariffs of a range of suppliers in the last year, causing three of them to slide from profits into losses. Since virtually all the electricity distribution companies are state owned, it is up to the government to fill the holes its policies have created.

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