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Sunday, 29 July, 2012
Saving our fiscal soul Savers add over Rs 242bn to government’s ‘unfunded debt’ during FY12 KARACHI
T
ISMAIL DILAWAR
he recently concluded FY12 augured well for the country which saw the countrymen managing to save a huge sum of over Rs 242 billion despite a persistent backbreaking double-digit inflation. This saved amount, however, may not seem to set well, in terms of economic soundness, with the cashstrapped government which would have to see this money as an “unfunded debt” to be repaid to the savers with heavy returns. During July-June FY12, the cash-
strapped government garnered Rs 242.168 billion through selling its risk-free saving certificates under the head of National Savings Schemes (NSS). This amount shows an upsurge of 3 percent or Rs 7.22 billion when compared with Rs 234.943 billion the government had raised in FY11. This means, during the year in review, the savers lent over Rs 242 billion to the funds-starved government which would be paid with a 2043 basis points increase announced by the Central Directorate of National Savings (CDNS) on March 30. The current rate of return on NSS instruments stands at 11.87 percent on Special Saving Certificates (SSC), 12.12 percent on Regular Income Certificates (RIC), 14.28 percent on Behbood Saving Certificates (BSC) and Pensioners Benefit scheme, 12.33 percent on Defense Saving Certificates (DSC) and 8.40 percent on the NSS savings accounts. The analysts believe that these savings could have been a very positive and most useful economic indicator for developing Pakistan, had the gov-
WTO sets date for MC9 meeting in Bali, Indonesia GENEVA AGENCIES
The Indonesian island of Bali is to be the venue of next World Trade Organization inter-ministerial meeting, the international trade arbiter said. The decision to hold the ninth Ministerial Conference (MC9) in the first week in December 2013 was decided by the WTO General Council meeting in Geneva on July 25-26. Making the announcement late Friday, chair of the General Council Ambassador elin Johansen of Norway thanked Indonesia for its “kind offer”, which she said was “a clear sign of its commitment towards this organization”. Members would discuss the precise dates of MC9 after the summer break, Johansen added. Representatives from Indonesia said that in the face of the global economic crisis the inter-ministerial meeting could galvanise and strengthen international trade. It could also help relaunch negotiations on the stalled Doha accords, which focus on dismantling obstacles to trade for poor nations, Indonesia said. “In the situation where crisis is still hampering the global economy, Indonesia continues to believe that the multilateral trading system has a significant role in fostering a fair global trade, sustaining the world economic growth, eradicating poverty and creating job opportunities,” its delegation said. “In this regard, the next MC9 will therefore be very important to re-energize the negotiation process and the progress achieved so far, and to strengthen the multilateral trading system.” It said Indonesia also hoped the exotic ambiance, the warm weather and the hospitality of the people of Bali “will rejuvenate and renew the constructive spirit” of the Doha negotiations. The Doha round of global trade talks began in 2001 but have been dogged by disagreement, including how much the United States and the european Union should reduce farm aid and the extent to which emerging market giants such as India and China should cut tariffs on industrial products. The Ministerial Conference is the highest decision-making body of the WTO and meets approximately every two years. The last one was held in Geneva in December.
ernment not been using the saved money under the non-development heads, such as running of the government. The economic observers, though positive towards the current upward trend in national savings, are critical of piling up of the heavily indebted government’s liabilities for the retirement of which the latter was doing no provisioning. A recent history of the government borrowings through NSS instruments shows that the risk-free and heavily-weighted saving certificates had fetched the government over Rs 224.767 billion in FY10, Rs 267.223 billion in FY09, Rs 86.639 billion in FY08, Rs 67.651 billion in FY07 and Rs 6 billion in FY06. The investments in NSSs, which amounted to a meager Rs 6 billion in FY06, ballooned by over 1000 percent in FY07, over 28 percent in FY08 and over 208 percent in the recession-hit FY09 and then dipped by 15.8 percent in FY10. But, finally, in FY12 a recovering global economy seems to have restored the investors’ confidence who bought saving certificates worth Rs 242 billion. “The money that come to the government through saving
schemes is a liability and is called unfunded debts,” views a senior analyst Asfar Bin Shahid,. But, the analyst believes, worrisome was the fact that the government was using these debts without creating a separate fund that could ensure retirement of the borrowed money. “Spending these unfunded debts without doing provisioning is going to be a dangerous thing,” Shahid warned. he says setting a sort of collateral for these unfunded debts by the government would also provide the investors with a confidence against his/her money. “It’s a kind of confidence building measure that we are apportioning a certain amount to retire your debt,” said the analyst. The provisioning against the unfunded loans, he suggested becomes easier when the maturity periods have been set in advance for these credits. About usage of the NSS debts, the analyst said, ideally, every penny of the taxpayers’ money should be spent “optimally” for the development purposes, especially in the socio-physical infrastructure side.
Investors terrorised
ISLAMABAD ONLINE
Pakistan loses $18 billion investments in three years due to terrorism, energy crises
Pakistan has lost around $18 billion foreign and domestic investments in last three years due to terrorism and chronic energy crises, an official of Board of Investment said. The official told “Online” Saturday that the expected investment of about $18 billion of last 3 years did not come in Pakistan after investors cited the problems of terrorism and energy shortages. “Now government is making all-out efforts to build the confidence of foreign investors by removing the barriers that discourage investment in the country,” said the official, adding that terrorism and energy shortages have put long-off term investors. The official told that unstable law and order situation, political instability, corruption and inconsistent policies on part of government were also major impediments in way of promoting investment in the country. The official further told that the Board of Investment will now move ahead more rapidly for motivating local and foreign investors to invest in the country and through recently passed Special economic Zones (SeZ) bill some of the investor countries like Korea, China and Japan were expecting to benefit from the scheme as soon as it became operational. According to the State Bank of Pakistan (SBP) foreign investment into Pakistan fell 65.6 percent to $680.4 million during financial year 2011-12 and foreign direct investment fell 50.3 percent to $812.6 million.
Indebted to lack of payments Pakistan may face ‘unpleasant implications’ for exchange rate due to foreign debt repayments
ISLAMABAD ONLINE
The aid-dependent Pakistan may face unpleasant implications for exchange rate due to foreign debt repayments in current financial year 2012-13 which in return will fuel inflation due to increasing cost of imported goods. The approved current 2012-13 fiscal year financial year’s development budget and annual plan said the country’s gross official reserves may d eplete to $8.24 billion by June 2013 which is 28 per cent or $3.2 billion, lower than what has been projected for last financial year 2011-12. An official working in the Finance ministry told “Online” that in current financial year 2012-13 unavoidable, international and domestic contractual and obligatory payments will be considered on case to case basis and relaxation if required may be allowed by the Finance Secretary The current account deficit – gap between total foreign receipts and payments –is expected to widen to $5.3 billion or 2.1 per cent of total size of economy during on going fiscal year. According to the repayment schedule agreed between Pakistan and IMF, Pakistan will repay its $7.6 billion debt to the IMF till the end of fiscal year 2014-15. The $11.3 billion SBA program had expired on September 30, 2011 and the last two trenches of $3.7 billion could not pay to Pakistan by IMF following Islamabad’s failure to pursue key reforms as well as the emergence of the revenue figures fiasco. Despite depressive economic situation of the country, the government had paid back total amount of $1.2 billion to International Monetary Fund during fiscal year 2011-12 from foreign currency reserves held by the State Bank of Pakistan (SBP). Pakistan had entered into $11.3 billion programme in 2008 with IMF and got disbursements of about $7.6 billion, but failed to get the remaining $3.7 billion due to slippages in performance criteria, leading to suspension of the programme in May 2010 and was ended unsuccessfully on September 30,2011.
PAMA, PAAPAM for consultation with stakeholders KARACHI NNI
The auto sector of the country while showing serious concerns has requested to the federal information minister to ensure consultation with the sector about new entrant policy before making any final recommendations for eCC. The Federal Minister for Information is heading a
sub committee constituted by the economic Coordination Committee of the Federal Cabinet to evaluate the proposal by Ministry of Commerce to allow new investment with additional incentives over the existing tariffs and regulations. Pakistan Automotive Manufacturers Association (PAMA) Director General Abdul Waheed Khan and Pakistan Association of Automotive Parts Accessories Manufacturers (PAAPAM) Chairman Syed Nabeel hashmi have made this request in a letter to Ministry of Information & Broadcasting Federal Minister Qamar-uz- Zaman Kaira. They said that unfortunately the voice of auto industry, which is the major stakeholder in this issue, has totally been ignored in government’s policy of extending tariff concessions to new entrants. ‘Both these organizations are the only officially recognized representatives of the OeMs and the vending industry working in the country. On the other hand, the sub-committee formed in this regard by the government has been gracious in allowing the opportunity to a particular foreign investor to make presentations to it and thus influence the decision making process in its favor,’ they stated in the letter. But a decision reached and policy de-
veloped without having an opportunity to listen to both sides of an argument cannot be balanced, they reasoned, adding that the motorcycle sector is the most vibrant sector of the industry. It has registered a growth of 37 percent on year-on-year basis over the last 10 years and no other sector has shown such consistent high growth. They stated that policy interventions are being made in this sector just to appease interest of persons related to a single investor in total disregard of the interests and concerns of an industry which has billion of rupees of investment and is supporting direct employment for around 200,000 skilled and semiskilled jobs. Motorcycle industry has a high multiplier effect due to its forward and backward linkages and is supporting around 1.5 million jobs in different sectors of the economy, so the way the policy is being developed for this sector is most unfortunate indeed, they stated in the letter. They further said that ‘the proposed policy shift will have serious ramifications for the vending industry of 800 odd players, as the technology transfer rolls back, investment decisions are suspended and will have long-term negative impact on investors confidence on governments policies for future investment.