economicletter

Pakistan According to SBP, the U.S. was the top destination for Pakistans exports which totaled $ 4.101 bn in 2010-11 followed by United Arab Emirates at $ 1.855 bn, by Afghanistan at $ 1.864 bn, by China at $ 1.645 bn, by the U.K. at $ 1.277 bn and by Germany at $ 1.216 bn. According to Federal Bureau of Statistics, the country exported 1.707 mn tons of wheat worth $ 587 mn in 2010-11, second highest food item export earner after rice. According to SBP, liquid foreign exchange reserves as on July 23, 2011 stood at $ 18.303 bn of which $ 14.743 bn was held by the SBP and the rest with banks. The SBP has allowed relaxation under the Export Finance Scheme (EFS) to exporters whose export earning proceeds are overdue. The Federal Board of Revenue has revised downward its revenue collection for 2010-11 to Rs 1,550 bn against the target of Rs 1,588 originally estimated at Rs 1,590 bn. Consequently, the fiscal deficit is now being placed at 5.9% of GDP rather than 5.2% of GDP. According to World Investment Report 2011 of the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) into Pakistan has declined from $ 5.590 bn in 2008 to $ 2.016 bn in 2010. The U.K. based Oxfam, an international relief agency, has warned that Pakistan is vulnerable to another flooding following last years which killed 1.750 mn people besides massively Markets at a glance
Weekly Review Beginning Ending Change KIBOR (6months) Bid % Offer % 13.55 13.56 +0.01 13.80 13.81 +0.01 Foreign Exchange Rates GBP () Euro () Rs 138.98 Rs 140.92 +1.94 Rs 121.94 Rs 123.53 +1.59 USD ($) Rs 86.14 Rs 86.47 +0.33 KSE 100 Index 12,470 12,190 -280
Volume 6, Issue No. 30 |

a weekly publication of The Institute of Bankers Pakistan

damaging infrastructure as sufficient reconstruction work, suitable new housing units and early warning systems have not been put in place. Services sector trade deficit in 2010-11 stood at $ 2.14 bn against $ 1.7 bn in the previous fiscal, a rise of 25.88% with total exports at $ 5.45 bn and imports at $ 7.59 bn. The sectors import in 2009-10 stood at $ 6.92 bn and exports at $ 5.23 bn. The sectors imports and exports in 2010-11 over 2009-10 were higher by 9.7% and 4.3% respectively. The government has approved a disbursement of Rs 65 bn to Pakistan Electric Power Company (PEPCO), the regulatory body of power distribution companies (discos), to help it improve services provided by it. According to Sindh Chamber of Agriculture, a private sector representative body, production of minor crops has declined by 15-20% due to non-availability of water as it is being diverted towards production of major crops. The Securities & Exchange Commission of Pakistan (SECP) registered 3,400 new companies in 2010-11 against 3,041 in the previous fiscal. Of the 2010-11 total, 39 were foreign companies. The Sensitive Price Indicator (SPI) registered an increase of 16.09% in the week ending July 21, 2011 over the same week of 2010. The weekly SPI monitors changes in prices of 53 essential commodities, mostly kitchen items, data for which is collected form 17 urban centres.
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Gold Rate (10gm) Rs 43,971 Rs 44,657 + 686

July 29, 2011

a weekly publication of The Institute of Bankers Pakistan

International The Reserve Bank of India, the central bank of the country, has raised its repo rate, at which it lends to commercial banks, by 50 basis points to 8.0% as also the reverse repo rate, at which it borrows from commercial banks, by 50 basis points to 7.0%. The raise is 11th in succession since March 2010. India has the highest inflation rate in major economies after Russia recorded at 9.44% in June this year over June 2010. In May 2011 it stood at 9.06% over May last year. India plans to open its retail sector estimated at $ 450 bn more fully to foreign investors provided they put in at least $ 100 mn in setting-up their multi-brand retail stores in cities of at least one million people or more. Bangladesh trade deficit in 2010-11 (July-June) widened by 49% to $ 7.69 bn against $ 5.15 bn in 2009-10, mainly due to increases in international prices of food and fuel costs. Iran has signed two Memorandums of Understanding (MoUs) for construction of pipelines to deliver its natural gas to Iraq and then to Syria. The deal is worth $ 10 bn and is expected to be completed by 2015, depending upon finalization of financing arrangements. Once completed, the project might be extended to Lebanon and Europe. Iran has the second largest proven gas reserves after Russia in the world. Saudi Arabias Aramco and U.S. Dow Chemical have signed a deal worth $ 20 bn to build a chemical plant in the Saudi port city of Jubail. The project is expected to be completed by the second half of 2015. Japan has approved a $ 25 bn package for disaster relief for reconstruction needs required consequent to last Marchs earthquake and tsunami. The amount is to be raised by bond borrowings as also increased taxes. Consumer price inflation (CPI) in Vietnam was recorded at 20.82% in June at 20.82% and is projected to fasten to 22% in July, year-on-year, driven mainly by food costs. The CPI has been rising continuously for 11 months to June 2011 level. The German government has forecast a growth for the countrys economy at 3.6% this year, the same as in 2010 after the contraction of 4.7% in 2009. Bundesbank, the central bank of the country, has forecast a growth of 3.1% while the IMF expects a growth of 3.2%. The 17-nation Eurozone countries as well as some other international creditors, have provided Greece a second bailout package worth $ 159 bn to avert Greek debt default, which otherwise could produce ripple effect threatening global economy as a whole. Moodys Investor Services, an international credit rating agency, has downgraded Greeces sovereign debt rating by three notches, leaving it one away from default, from Ca to Caa1. Consumer price inflation (CPI) in Canada was registered lower at 3.1% in June over May with non-food, non-energy core inflation recorded at 1.4%, year-on-year.

Editor: Syed Mahdi Mustafa

Published by: The Institute of Bankers Pakistan, M.T. Khan Road, Karachi 74200, Pakistan Phone: (021) 35689718, 35680783 | Fax: (021) 35683805 | Email: ibp@ibp.org.pk | Website: www.ibp.org.pk

General Disclaimer: IBP Weekly Economic Letter is based on information obtained from local and international print and electronic media. IBP has not verified this information and no warranty, expressed or implied, is made that such information is accurate, complete or should be relied upon as such. In no circumstance IBP and its team members would be liable for any incidental or consequential damage that may incur from the use of information contained in IBP publication(s).

Volume 6, Issue No. 30 |

July 29, 2011