economicletter
Pakistan
According to SBP, the current account deficit in
the first eight months of the current fiscal (July-
February 09-10) narrowed to $ 2.563 bn against $7.962 bn in the
same period last fiscal. Deficit on the trade account was lower by
21.27% to $7.449 bn against $9.462 bn as import payments were
lower to $19.9 bn against $22.33 bn while export earnings stood
at $12.48 bn against $12.87 bn during the above periods. Home
remittances were up by 17.6% to $5.78 bn during July-February
2009-10 against $4.91 bn in the same period last fiscal.
Pakistan and Iran have signed “Heads of
Agreement” and “Operational Agreement” for export
of natural gas from Iran to Pakistan at a level of 750 mmcfd through
a pipeline projected to be laid by 2015. Originally conceived as Iran-
Pakistan-India (IPI) gas pipeline project, doors have been left open
for India to join the project at its option, presently out of it.
The government is to raise the tax-GDP ratio from
the current level of 8% to 12% within three years. The volume
is projected to rise from the current fiscal’s target of Rs.1.38 trillion to
Rs.1.71 trillion in 2010-11 and to Rs.2.47 trillion in 2011-12.
The telecom sector attracted foreign direct
investments of $1.438 bn in 2008 and of $815 mn in 2009
mostly related to different projects in various ministries of the
government and its attached departments.
The government is to increase its Public Sector
Development Program outlay from Rs 250 bn to Rs 300 bn,
in the ongoing current fiscal originally envisaged at Rs. 421 bn.
According to a Deputy Governor of the SBP, real
lending rate in Pakistan is 0.4% compared to 9.5% in Indonesia,
7.6% each in Bangladesh and Sri Lanka, 4.2% in Malaysia and 0.8%
in India.
The government is to abolish inland freight
equalization margin on petroleum products at a cost of
Rs.15 bn annually to itself. It would result in reduction of prices of
these products in Karachi while resulting in price increases in the
northern parts of the country.
Export earnings of rice in the first eight months of
Markets at a glance
Weekly KIBOR (6months) Foreign Exchange Rates
Review Bid % Offer % GBP (£)
Beginning 12.18 12.43 Rs 127.96
Ending 12.19 12.44 Rs 129.09
Change +0.01 +0.01 +1.13
a weekly publication of The Institute of Bankers Pakistan
the current fiscal (July-February 09-10) amounted to
$1.363 bn, about 2.34 % lower over the same period last fiscal.
Rice export earnings accounts for about 11% of total exports and
about 65% food exports.
According to SBP net foreign investment into
Pakistan during the first eight months of the current fiscal (July-
February 09-10) at $1.02 bn was lower by 45.9% against the
investment of $1.89 bn in the same period last fiscal. Foreign direct
investment (FDI) at $1.32 bn was lower by 52.8% against $2.79 bn
during the above periods. Portfolio investment net outflow was lower
at $295.2 mn during July-February 2009-10 against $902.3 mn in
the same period last fiscal.
The government is to exempt the levy of excise
duty effective July 1, 2010 in the “most affected areas” of NWFP
and FATA to the extent of 100%. In the “less affected areas” the
exemption would be to the extent of 50%.
The government is to offer 5% shares of Oil & Gas
Development Company Limited (OGDCL) worth $500
mn before the end of the current fiscal year.
The Securities & Exchange Commission of
Pakistan (SECP) has initiated legal action against eight
insurance companies listed at the Karachi Stock Exchange for failure
to comply with various provisions of law.
Foreign portfolio investors have injected $110 mn
at the Karachi Stock Exchange since January 1, 2010
to March 17, 2010 largely on expectations of economic recovery on
the back of $11.3 bn provided by the IMF which has been regularly
releasing due tranches.
The Sensitive Price Indicator (SPI) registered a
rise of 17.14% in the week ending March 11, 2010 over the same
week of 2009. The weekly SPI monitors changes in prices of 53
essential commodities, mostly kitchen items, data for which is
collected form 17 urban centres.
Liquid foreign exchange reserves as on Mar 13, 2010
stood at $14.85 bn of which $10.98 bn was held by the SBP and the
rest with banks.
>>
KSE Gold Rate
Euro (€) USD ($) 100 Index (10gm)
Rs 115.29 Rs 84.02 10026 Rs 30,600
Rs 115.39 Rs 84.29 10000 Rs 30,600
+0.10 +0.27 -26 0
Volume 5, Issue No. 12  |  March 20, 2010
 a weekly publication of The Institute of Bankers Pakistan

International
The U.S. Federal Reserve has left its prime lending
Standard and Poor’s, a U.S. based international rate unchanged in the range of zero – 0.25% with a view to
credit rating agency, has raised its outlook on India from providing its continuing support to recovery of the economy
“negative” to “stable”. It has placed long-term and short-term credit considered fairly fragile as of now.
ratings of the country at “BBB minus” and at “A-3” respectively.
The criterion of evaluation is debt burden, fiscal deficit and headline
inflation.
IBP Training Programs - This Week

The Reserve Bank of India, the central bank of the country, is Karachi
to invest $20 bn in the resource base of the International Monetary March 25
Fund to help it meet its ongoing emergency lending program. Effective Coaching - A Leadership Tool

India, for the first time, is to allow foreign March 25

universities to open campuses in the country. Its demand for A Practical Approach to Effective Compliance Management
graduates is projected to rise to 13.8 mn over the next five years March 26
against the current capacity of 13.2 mn by then. The above relates to SBP Guidelines on Write-Off of Irrecoverable Loans
english language graduates. The volume of educated unemployed in
regional languages is fairly high as of now. March 29-30
Equity Valuation and Financial Modeling
---------------------------------------------------------------------------------------------------
India’s economy is being estimated officially to
Lahore
register a growth of 7.2% in the current fiscal ending March 2010
to be followed by a growth of 8.75% in the following fiscal. Inflation, March 25
measured by the wholesale price index (WPI) soared to 9.89% in Payments of Cheques and other Negotiable Instruments
February against 8.56% in January this year with food inflation rising
March 30
to an all-time high of 17.79% lately in March.
Know Your Customer and Combating Money Laundering
---------------------------------------------------------------------------------------------------
Net foreign investment into Bangladesh in the first Rawalpindi
half of the ongoing fiscal (July-June 09-10) fell by 67.3%
over the same period last fiscal to $197 mn. March 25
Business Etiquette for Tellers
--------------------------------------------------------------------------------------------------------------
Unemployment in the U.K. at end-February 2010 Islamabad
stood at 7.8% of workforce against forecasts of 7.9% largely
because the number of jobless claimants in the month was at the March 27
lowest level since near end-1996. EDD & AML : Standard and Best Practices
--------------------------------------------------------------------------------------------------------------
Peshawar
Russia is to build sixteen nuclear reactors across
India to meet the country’s growing energy needs. Russia is also March 24
aiming to boost its bilateral trade volume from the current level of $8 Fraud and Forgeries Prevention of Banking Crises
bn annually to $20 bn by 2015. March 26
Demystifying Accounting Finance
The 16-nation eurozone countries, using euro as March 27
their currency for 11 years now, are to invest 20 billion Cash Flow Based Lending
euros ($27.5 bn) to help Greece come out of its present imbroglio --------------------------------------------------------------------------------------------------------------
provided it introduces austerity measures to bring down its fiscal Multan
deficit level from the current 12.7% to 8.7% of GDP within the single
March 29
year of 2010. The EU fiscal deficit prescribed norm is 3% of GDP. Financial Statement Analysis for Prudent Lending
The country has declined the assistance offered to it by the IMF for --------------------------------------------------------------------------------------------------------------
balance of payment support.

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 5, Issue No. 12  |  March 20, 2010