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Friday, 3 August, 2012
Monsoon to pour water over agri targets Inflationary pressures ahead as monsoon rainfall may hit agriculture produce KARACHI
T
ISMAIL DILAWAR
HE economic observers foresee more backbreaking inflationary pressures in the coming months as poor rainfall during this monsoon season is expected to adversely impact the agricultural produces that might lead to the widening of gap between the supply and demand for food items. With official data showing the headline inflation in the country sliding down to a single digit, 9.6 percent year-on-year (YoY), during the month of July against 11.3 percent of the same period last year, the analysts predict tough days ahead for the consumers, who have been braving a backbreaking double-digit inflation for years, on the back of lower than expectation rainfall during the rainy monsoon season, a bad omen for water-intensive agriculture sector. Agriculture output contributes over 21 percent in Pakistan’s Gross Domestic Product.
LCCI’s lovin’ the neighbourly love-in
“Rainfall during this monsoon season has not stood as per expectations,” viewed InvestCap Reserach’s Abdul Azeem. The analyst warned that the less water availability situation due to low rainfall in the country could hurt the supply side situation in agriculture segment that may induce more inflation in the months coming ahead. “Therefore, for the next year we estimate the CPI inflation will stand in double digit,” Azeem said. The figures released by the Pakistan Bureau of Statistics, however, show that the headline inflation in July had decreased by 0.25 percent month-on-month (MoM) to 9.6 percent against 0.04 percent during June. The analysts attribute this downward move in price hike mainly to decline in the group of housing, water, electricity, gas and other by 3.54 percent, which holds 29.4 percent weight in overall CPI basket. In the same group, the analysts said a massive decline of 49.2 percent MoM
and 3.84 percent MoM in gas and kerosene prices respectively were the major reasons behind the significant decline in CPI contributed by this group. Similarly, they said, transport group prices also witnessed decline of 2.4 percent MoM as motor fuel prices posted a decline of 8.82 percent MoM. Communication group sector prices also fell by 0.05 percent MoM, which was mainly contributed by communication and apparatus items during Jul-12. On yearly basis, the highly weighted items (21.8 percent) House rent in the country increased by 6.52 percent YoY, while gas and prices down by 34.25 percent YoY during Jul-12. During the month in review, core inflation remained in double digits at 11.3 percent YoY compared to 9.5 percent YoY witnessed in Jul-11. The increase in nonfood items that posted double digit growth in their prices on yearly basis, includes text books, household servant, motor vehicle tax, doctor (MBBS) clinic
ISLAMIC BANKING growth in Pakistan impressive: Attock Chamber ISLAMABAD ONLINE
Welcomes India’s decision of allowing FDI from Pakistan LAHORE ONLINE
The Lahore Chamber of Commerce and Industry Thursday welcomed the Indian government decision to lift ban on investments from Pakistan and called for liberalising the visa regime to make the move more meaningful and resultoriented. In a statement issued here, the LCCI President Irfan Qaiser Sheikh urged the Indian Authorities to grant multiple visas to bona fide and legitimate businessmen so that they could be able to travel freely and without any hitches and hurdles. Irfan Qaiser Sheikh said that the move would further build the good will between the two neighbouring countries besides promoting joint ventures and paving the way for the transfer of technology as the two countries have their own strengths in different sectors and various areas. The LCCI President said that the Indian decision makes the point that the trade diplomacy is working well and would soon be resulting in more such good decisions that would help bring the people of two countries further close. Irfan Qaiser Sheikh hoped that the Indian authorities would also consider lifting ban on Indian investors who want to invest in Pakistan. He said that the trust level between the two sides will also go up further and help tackle other issues being faced by the two sides since decades. “We hope this decision will be fruitful for the business community and the people of the two countries.” “For a better economic future in South Asia, it will be a huge step when businessmen from both the countries can freely invest in each other’s country.” “Allowing our country to invest in India is a great confidence booster and will pave the way for more cordial bilateral relations.”
fee, utensils, firewood whole and marriage hall which increased by 40.60 percent, 35.04 percent, 28.73 percent, 25.53 percent, 23.85 percent, 23.81 percent and 20.50 percent respectively. About the future outlook, the analysts said the decline in international oil prices inducing a cushion effect to local oil POL price during the last couple of months, however, the upward reversal in international oil prices remain the question
Attock Chamber of Commerce and Industry (ACCI) said on Thursday that growth rate of Islamic banking in Pakistan is very impressive. A decade back Pakistan had only one Islamic bank while now we have five Islamic banks and Islamic banking branches representing all the top ten conventional banks, it said. 75 countries have recognised Islamic banking; major banks including HSBC, Citigroup, Deutsche Bank and Standard Chartered have Islamic banking branches or windows which prove success of Ribafree banking, said Attock Chamber of Commerce President Tariq Mehmood. Over nine hundred Islamic banking branches in Pakistan speak of the confidence of the masses in the Islamic banking and the successful handling of regulator, he added. He said that the share of Islamic banks in the assets of all the banks can exceed ten per cent in the current
fiscal year if introduction of new products is focused. Tariq Mehmood asked the Islamic banks to exploit the full potential of interest-free banking, expand network, and offer new products to reach to underserved sectors and un-banked population. Tariq Mehmood, who is also Pak-UK Business Council Director and FPCCI Committee on Health Chairman, said that Islamic banks should maintain the image of better risk managers which is necessary for depositor’s confidence. The deposit base of Islamic banking has been expanding faster than general banking due to speedy and better returns which is a very healthy development, he maintained. Tariq asked Islamic banks to keep an eye on global strategies, remain Shariah compliant and find ways to improve rates of return to match inflation which will boost confidence of masses in Islamic banking. Islamic banks have remained unharmed during the global financial collapse which has also saved investments of masses, the business leader observed.
mark for the increase in inflation going forward. However, they said, as per the pattern of treasury bills seen during last two auctions, there was a strong expectation of discount rate reversal existed in the market. However, considering the impact of Ramadan factor and variability of POL prices yet to be seen, we expect SBP to maintain the discount rate at current level, they added.
SECP to support Islamic finance summit ISLAMABAD ONLINE
The commitment of the Securities and Exchange Commission of Pakistan (SECP) to Islamic finance is cemented by its support for the second World Islamic Finance Summit (WIFS), which is scheduled for September 12-13, 2012, in Karachi. The industry leaders at the summit will learn the perspectives of the regulator, as the SECP talks about the expanding footprints of Islamic funds and investment and its aspiration to promote and develop a financially strong and transparent Islamic financial market in Pakistan. The SECP is striving to strengthen the capital market and attract national and international pool of resources, through a focus on Islamic finance. In its 3year strategic plan, the SECP visualises the consolidation and growth of innovative Shariah-compliant institutions, products and services. The summit will be held under the theme ‘Islamic Finance: Exploring Shariah Advantage’ and will have keynote addresses, panel discussions, a CEO power table and a 60-minute Shariah dialogue session.
Tobacco issues ‘smoked’ amicably ISLAMABAD ONLINE
The long outstanding problem regarding the tobacco crop prices has finally been resolved. Pakistan Tobacco Board (PTB) has fixed the price of tobacco at Rs 121 per kilogram Senate Standing Committee on Commerce recommended that the tax on tobacco export should be reduced from Rs10 to rs.5/kg. Meanwhile Commerce Federal Secretary, Munir Qureshi, said in the meeting that the price of fixation was made to protect the interests of growers. Ministry of Commerce State Minister, Abbas Khan Afridi said that the consultative meeting was held with all stakeholders regarding the price fixation in the Khyber Pukhtunkhwa (KPK) on rate of Rs.117/ per Kg as fixed by the Board. This decision was finalized following detailed briefing in the National Assembly and Committees on Ministry of
Commerce during the last few days. Experts closely aware of the issue observed that the senate was being blackmailed by elements completely unrelated to the affairs. They said that the main contention was being caused by individuals who were new to the tobacco board and were from areas where tobacco growing doesn’t even take place. The key issues discussed during the last few days in the National Assembly and later Senate Standing Committee on Commerce were related to the damaging impact on export sector incase of drastic revision in tobacco crop prices. Tobacco crop is one of the few crops in which exports increased by more than
300% in last two years. The current price of tobacco crop in Bangladesh is Rs.106/kilogram and if Pakistan increased its price beyond international market standards, it would hurt tobacco farmers instead of protecting them. Many members who took part in these meetings pointed out that sectors like PIA, Railways etc. had already gone under and were a drain on national resources, whereas cigarette manufacturers were contributing near Rs.75 billion (US$800 Million) annually in tax for national revenue. If proper policies were not put in place, this sector and government revenue would be undermined. Actually one of the recommendations put forward was to use these billions of Rupees in tax contribution to subsidise and support tobacco farmers instead of
killing the goose that lays golden eggs. The decision of one of the multi-national cigarette manufacturers to close one of the factories was also discussed as a tip of the iceberg if the proper policies were not put in place. If foreign investors were “blackmailed” or continue to face difficult operating environment, it would not only hurt investments in one sector of the economy but would signal red light to all potential foreign investment. It was also pointed out that the same multinational had last year declared losses due to the market conditions and if the current economic and investment environment was not improved others could also go in losses. In such scenario there would actually be no one to buy tobacco crop from farmers who would suffer more as domestic demand would also end and export potential would anyway be undermined due to drastic prices beyond international market conditions.