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Sunday, 30 September, 2012
ADB provides power generation clout $2.9b to be given to Pakistan to enhance power generation system ISLAMABAD
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ONLINE
HE Asian Development Bank (ADB) has committed a financing facility of $2.9 billion over a medium term for the government of Pakistan to enhance power generation system in the country. Well informed sources told Online here on Saturday that following the tight energy crises in the country the government approved a package of power sector reforms to settle this energy crisis
which are under implementation. The source said key pillar of these reforms in the power sector of the country was to further develop the power sector of the country especially to enhance power generation and to replace inefficient power production plants in the country. Sources informed that another objective by the government was to improve the power sector which is causing 3 to 4 per cent loss to the national economy while power sector inefficiencies and losses have eaten Rs 1.2 trillion of the national exchequers
during last four years. Sources informed that to improve the transmission and distribution system in the country government has entered into an agreement with ADB for enhancement of investment program to the tune of US $ 243 million. Under this program new transmission lines would be layed and performance of inefficient power generation plants would be improved. This would helpful to reduce the transmission and distribution losses that have been reached to 22.42% thus resulting into loss of billion of rupees to the economy.
“These reforms would provide adequate and reliable power supply to commercial and residential consumers while it would also provide an opportunity to complete the requirements of industries,” said sources, adding that industrial units which were suffering a lot due to the power outages and capacity of industries have been reduced to 30 percent. Sources said that another worse affected to inefficiencies of power sector was resulting into promotion of corrupt activities at the end of power distribution companies (DISCOs).
Public debt soars! Surpasses 100% in US, Japan, several EU countries, IMF reveals ISLAMABAD ONLINE
The International Monetary Fund (IMF) has revealed that public debt has surpassed 100 percent of Gross Domestic Product (GDP) in Japan, the United States, and several European countries in recent years. The IMF’s World Economic Outlook notes that public debt has surpassed because of the low growth, persistent budget deficits, and looming liabilities due to aging
populations in these countries. A result, particularly in Europe, has been ratings downgrades and higher borrowing costs.The main IMF forecast for the global economy will be released on October 9 next month in Tokyo. According to World Economic Outlook there is widespread debate about the best way to reduce public debt. Some advocate strict budgets or fiscal austerity; others, reinvigorating growth through spending, or fiscal stimulus; and still others cite the successful post–World War II U.S. strategy of “financial repression”—governments channeling funds to themselves. It study said countries battling high public debt must combine policies that support economic growth with lasting changes in government spending and taxation. The World Economic Outlook further said in Japan, weak growth prevented fiscal consolidation.
The ecstasy of gold $2.7b IMF gold sales profits to help poor WASHINGTON: The International Monetary Fund approved Friday $2.7 billion in gold sales profits to boost financing to low-income countries. The IMF executive board earmarked the money for the global lender’s concessional lending program, the Poverty Reduction and Growth Trust. The distribution of the windfall profits will occur “only when members have given satisfactory assurances that an amount equivalent to at least 90 percent of the distribution will be made available to the PRGT,” the institution said in a statement. “This is a major step towards putting our important concessional lending operations for lowincome members on a sustainable footing,” IMF managing director Christine Lagarde said. “During the 2009 financial crisis, we were able to boost financial assistance to our low-income country members, helping them weather the storm and preserve their hard-fought gains in the battle against poverty.” Jubilee USA Network, an alliance of activists advocating debt cancelation to fight poverty, cheered the board’s decision, saying combined with a first installment of $1.1 billion, the IMF has put nearly $4 billion into the PRGT from the windfall gold profits. “This translates into real relief for some of the world’s poorest people,” said Eric LeCompte, executive director of Jubilee USA Network. “This has been a global campaign more than two years in the making and our work paid off.” The IMF sold more than 400 tonnes of gold in 2009-2010 in a bid to put the Washington-based lender’s finances on a sound long-term footing. Due to the high price of gold at the time, the IMF booked $3.8 billion in profits. AFP
Debt continued to climb until the authorities addressed weaknesses in the banking system and corporate sector that limited the efficacy of monetary policy. And in Belgium, Canada, and Italy, debt did not fall until monetary conditions were supportive. These countries all implemented large fiscal adjustments. But it was only after real interest rates fell that all three countries were able to reduce their debt. In some cases, reforms to wage-setting mechanisms broke a wage-price spiral. And exchange rate depreciation supported external demand and growth. “The case of the United Kingdom offers a cautionary lesson for countries contemplating internal devaluation today. The U.K. government combined tight monetary policy and severe fiscal austerity to cut the price level and return the pound to prewar parities,” the study continued. The IMF in his study added that the U.S. experience in the immediate postwar years confirmed the importance of supportive monetary policy. Limits on nominal interest rates and bursts of inflation quickly reduced the debt ratio, while growth remained strong.
Counties hanker after Pakistani sports goods Export of sports goods go up in two months ISLAMABAD APP
Exports of sports good increased by 1.31 percent during the first two months of the current fiscal year as compared to the same period of last year. According to the data of Pakistan Bureau of Statistics (PBS), the exports of sports good were recorded at US$.53.229 million in July-August (2012-13) against the exports of US$.52.543 million during July-August (2011-12). Among the sports goods, the highest growth of 73.40 percent was witnessed in the exports of gloves, exports of which decreased from US$.13.607 million last year to US$.23.595 million during the current year. Trade of footballs witnessed decrease of 12 percent during the period under review as its exports decreased from US$25.803 million to US$22.707 million. The exports of all other sports goods decreased from US$13.133 million last year to US$6.927 million during the current year, showing decrease of 47.26 percent. Meanwhile, during the month of August 2012, the exports of sports good increased by 13.82 percent when compared to the exports of same month of last year, however decreased by 0.09 percent when compared to the exports of July 2012. Exports in August 2012 were recorded at US$26.602 million against the exports of US$23.373 million in August 2011 and exports of US$26.627 million in July 2012. During July 2012 the exports of gloves surged by 291.49 percent and 9.49 when compared to the exports of August 2011 and July 2012. The exports of gloves during August stood at US$12.332 million against the exports of US$3.150 in August 2011 and US$11.263 million in July 2011, the data revealed. However, the exports of footballs decreased by 13.25 percent and 3.93 percent during August 2012 when compared to the exports of August 2011 and July 2012 respectively. Similarly, the exports of all other sports good decreased by 57.50 percent and 16.89 percent in August when compared to the August 2011 and July 2012 respectively.
‘France must chart own path to EU deficit goal’ French Finance Minister Pierre Moscovici says cutting public deficit to three percent of economic output next year is a realistic goal and France must set its own course to reaching it to preserve its independence PARIS AGENCIES
The Socialist government unveiled a tough 2013 budget on Friday that slaps higher levies on business and a 75-percent tax on the super-rich but does not reduce public spending, to the dismay of pro-reform lobbyists. Moscovici defended the approach in an interview with Le Monde newspaper, arguing that harsher austerity measures being imposed in
Spain, Greece and Italy were not appropriate for France and would undermine its independence. “Other countries succumbed to budgetary carelessness and ended up in the hands of the market, hands and feet chained,” he said. “They fell into recession and their unemployment rates have worsened in a climate of widespread social tension.” “That’s why the 3-percent target a condition for debt-clearing and returning to growth - is neither biased nor out of reach. France can and must achieve it.” With record unemployment and a barrage of data pointing to economic stagnation, economists have high-
lighted a risk of missing the target if France were to fall short of a modest 0.8 percent forecast for growth next year. Moscovici called the growth target “ambitious, but realistic”, and said the government should be judged on the result of its economic policies, not their method. “I accept Europe’s demands, I respect France’s commitments, but I refuse to have outsiders put their fingers into the French welfare system. It needs to be reformed, not broken,” he said. As German Chancellor Angela Merkel and European Central Bank governor Mario Draghi maintain pressure on euro zone states to pursue structural reforms, Moscovici pointed
to overhauls of labor and welfare planned for next year. However, the 55-year-old poured cold water on Merkel’s calls for a new European treaty to deepen integration in the bloc, saying it was “not a current question” - despite another public official hinting at openness to the idea. On a planned merger between European aerospace group EADS (EAD.PA) and British defense contractor BAE Systems Plc (BAES.L), Moscovici said a variety of “complex” concerns still needed to be addressed. “France has a particular stake on this issue, that of a state that is both sovereign and stakeholder, and wants to remain so,” he said.
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Business 02 Wall Street marks best third quarter since 2010 Wall Street closed its best third quarter since 2010 after a wave of central bank actions sparked a dramatic reversal in equity markets, but signs of weakness in the economy drove stocks lower NEW YORK
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AGENCIES
HE S&P 500 climbed 5.9 percent over the past three months as central banks geared up to boost liquidity to markets and kick-start their flagging economies. The move has lifted the benchmark index as much as 17 percent this year, recently pushing the S&P to its best level in five years. But on Friday, investors grappled with more disappointing U.S. economic data as business activity in the U.S. Midwest contracted for the first time since 2009. The news came on the heels of other weak regional manufacturing reports and a sharp drop in U.S. durable goods orders last month. “The reality is that the fundamentals of the market certainly don’t support a 17-plus-percent run-up year to date, but with all the QE (quantitative easing) action, that has had a huge, huge impact,” said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, New York. The Dow Jones industrial average .DJI fell 48.84 points, or 0.36 percent, to close at 13,437.13. The Standard & Poor’s 500 Index .SPX lost 6.48 points, or 0.45 percent, to finish at 1,440.67. The Nasdaq Composite Index.IXIC dropped 20.37 points, or 0.65 percent, to close at 3,116.23. For the third quarter, the Dow rose 4.3 percent and the Nasdaq climbed 6.2 percent. For the month of September alone, the Dow gained 2.6 percent and the S&P 500 rose 2.4 percent, while the Nasdaq advanced 1.6 percent. In contrast, the trend for the week was down, with the Dow off 1.1 percent, while the S&P 500 shed 1.3 percent and the Nasdaq dropped 2 percent. In Friday’s session, stocks came off their lows after Spanish bank stress tests were released, and were mostly within expectations. The independent audit showed banks will need 59.3 billion euros ($76.3 billion) in extra capital to
ride out a serious downturn. But Spain still remains mired in difficulties. Moody’s review of the country’s credit rating, due later in the day, could add to its challenges. On Thursday, ratings agency Egan-Jones cut Spain’s sovereign rating further into junk status, citing the country’s faltering banks and struggling regional governments. The euro fell against the dollar on Friday, declining for a second straight week, as uncertainty persisted about Spain’s prospects for receiving a bailout to prop up its ailing banks. Recent protests in Spain and Greece
against austerity plans have also heightened investors’ concerns as the turmoil could impede political maneuvering. On the earnings front, U.S.-listed shares of Research in Motion (RIM.TO) (RIMM.O) jumped 5 percent to $7.50 a day after a smaller-than-expected quarterly loss. Pledges by the European Central Bank, the Federal Reserve and the Bank of Japan to buy government bonds helped cement a summer rally in stocks and commodities. But markets have lost some of their luster after the announcements from the central banks in the first half of September. After pulling back 1.7
percent over the last two weeks, the S&P 500 is now up 14.6 percent so far this year. The S&P 500’s drop of 1.3 percent this week is its worst weekly decline since the start of June. The coming months hold a series of difficult challenges for markets, including third-quarter earnings season, which is expected to show the first drop in earnings since 2009, and the U.S. presidential election in November. Reflecting Friday’s defensive tone, nine of the 10 S&P sectors fell. Only the S&P utilities index .GSPU was positive, up just 0.5 percent. The decline in the S&P technology sector index .GSPT was limited, as Accenture PLC (ACN.N) climbed 7.1 percent to $70.03. Accenture’s gain followed its forecast of full-year earnings higher than analysts’ estimates as the company bolsters its outsourcing business. Nike Inc (NKE.N) warned of slowing orders in China, becoming the latest company to sound a note of caution about how economic weakness in the world’s secondlargest economy was affecting its business. Nike’s stock fell 1.1 percent to $94.91. Trading was light on the quarter’s last day, when money managers reposition their portfolios. About 6.15 billion shares changed hands on the New York Stock Exchange, Amex and Nasdaq, compared with the average daily volume of 6.38 billion. Decliners outnumbered advancers on the NYSE by a ratio of 3 to 2, while on the Nasdaq, nearly two stocks fell for every one that rose.
Wall street banks not among Fed borrowers in Q3 2010 NEW YORK: The U.S. Federal Reserve on Friday named the banks that borrowed at its discount window during the third quarter of 2010 but the period showed limited activity and none of the biggest Wall Street firms had turned to the emergency facility for help. The disclosure of the once closely guarded information was forced on the Fed by the Dodd-Frank financial reform law. Some of the decline in borrowing may have reflected banks steering clear of the discount window because they knew their visit wouldbe published, albeit with a two-year lag. Lending activity was very modest compared to the peaks reached during the 2007-09 financial crisis, when banks borrowed billions of dollars to stay afloat. The 360 borrowers were mostly small institutions and were widely spread across the country from Anchorage in Alaska down to Winter Park in Florida. The central bank had strenuously opposed naming banks which accessed the window, arguing it could put them off using it in times of future stress out of fear it might make them look weak, which in turn could weaken the financial system. The Fed last year had to disclose details on discount window lending during the financial crisis after media organizations sued for access, but Friday’s release was the first quarterly batch of data mandated by Dodd-Frank. AGENCIES
Oil prices rise on Middle East friction NEW YORK AFP
Crude oil prices rose modestly Friday as worries over Middle East tensions stoked concerns about supply from the oil-rich region. New York’s main contract, light sweet crude for November, gained 34 cents from Thursday in choppy trade, closing at $92.19 a barrel. In London, Brent North Sea crude for November delivery settled at $112.39 a barrel, up 38 cents, after spending part of the session in the red. Matt Smith at Summit Energy said the oil market was “very undecided — we are just trading sideways.” Oil prices, which had jumped sharply Thursday, were still supported “because of the overhang from the geopolitical rhetoric yesterday and this week from the UN General Assembly, specifically with (Israeli Prime Minister Benjamin) Netanyahu’s comments yesterday,” Smith said. During his address before the UN, Netanyahu called for a “clear red line” to stop Iran from getting a nuclear bomb. He used a red marker pen to draw a line through a cartoon diagram of a bomb to illustrate what the international community’s limit for Iran’s nuclear enrichment program should be. He said Iran had 70 percent of the necessary uranium for a bomb and warned that at the current pace of enrichment, the Islamic republic could have nearly all the material needed to create a first bomb by next summer. “Tensions between Iran and the West reinforced concerns about potential supply disruptions,” Phillip Futures said in a market commentary. “Israeli Prime Minister Benjamin Netanyahu drew his ‘red line’ for Iran’s nuclear program in a speech at the United Nations... and voiced confidence the United States shares his view.”
Global stocks drop, euro falls on euro zone worries Stocks in the United States and Europe declined and the euro dipped after initial optimism about Madrid’s debt-cutting plans gave way to anxiety over its troubled banks and faltering global economic growth NEW YORK AGENCIES
Spain plans to ask for around 40 billion euros ($51.46 billion) in European aid to recapitalize its weak banks, Bank of Spain Deputy Governor Fernando Restoy said on Friday. An independent audit of Spanish banks by consultancy Oliver Wyman showed the country’s troubled lenders would need 59.3 billion euros in extra capital to ride out a serious economic downturn. Spain will remain in focus, analysts said, with Moody’s Investors Service expected to finish a credit rating review soon that may cost Madrid its sovereign investment-grade status. “At some point that (Spanish) credibility issue is likely to come back,” said Derek Halpenny, European head of FX research at Bank of Tokyo Mitsubishi in
London. “This is the fifth package - so the history of previous packages is that they weren’t enough and lacked credibility.” The MSCI index .MIWD00000PUS of world stocks was down 0.6 percent. Madrid’s IBEX .IBEX index led the falls, down 1.7 percent as an early lift from Spain’s new round of spending cuts faded. The Dow Jones industrial average .DJI was down 48.96 points, or 0.36 percent, at 13,437.01. The Standard & Poor’s 500 Index .SPX was down 6.30 points, or 0.44 percent, at 1,440.85. The Nasdaq Composite Index .IXIC was down 20.40 points, or 0.65 percent, at 3,116.20. Equities were hit by a report showing business activity in the U.S. Midwest contracted this month for the first time in three years, while the dollar strengthened against the euro as investors shunned risk. “We had been seeing good data recently, but now we seem to be following
the slowdown in China and Europe and we’re seeing weakness,” said Paul Nolte, managing director at Dearborn Partners in Chicago. Still, the S&P 500 index closed out the third quarter with a gain of around 5.8 percent. FRANCE ALSO IN THE SPOTLIGHT: France was also under the microscope on Friday. President Francois Hollande’s first annual budget, the country’s toughest in 30 years, raised taxes to bring in 30 billion euros ($39 billion) to keep deficitcutting promises. France announced its public-sector debt rose almost 2.0 percent to 91 percent of gross domestic product. Investors this week have again expressed concern that the euro zone is failing to gain control over its debt crisis though spending cuts announced in Spain’s budget on Thursday helped the
yield on Madrid’s 10-year bond fall back below 6.0 percent. However, euro zone inflation data limited any falls in yields on Friday as a surprise rise in Eurostat’s flash September reading cast doubts over the nearterm chances of another interest rate cut from the European Central Bank. The euro fell 0.5 percent to $1.2847 as risk aversion rose after the U.S. data. The dollar gained 0.6 percent against the yen, while the euro managed to gain 0.1 percent against the Japanese currency. In other currency markets, China’s yuan hit an all-time high versus the dollar, despite slowing Chinese economic growth recently. Concerns about progress solving the
euro-zone debt crisis and slowing global economic growth helped to support U.S. Treasury prices. U.S. Treasury debt prices were higher. The benchmark 10-year U.S. Treasury note was up 6/32, with the yield at 1.6335 percent In commodity markets, gold surrendered gains on Friday as the U.S. dollar rallied but the metal stayed on track for its biggest quarterly gain in more than two years on the back of this month’s central bank easing measures. Oil markets were steady with those investors more inclined to look at tight gasoline supply in the United States. Brent crude futures for November rose 0.1 percent to $112.17 per barrel. U.S. crude rose 0.2 Percent to $92.03.
Sunday, 30 September, 2012