economicletter
Pakistan
The SBP Governor expects GDP growth in the
current fiscal at 2.8% against earlier estimates of it
being at 2.5%. He has forecast inflation to be at 15%
and fiscal deficit to range between 5.3-5.5% of
GDP by end-2010-11 fiscal.
According to the SBP, money generated by the
agricultural sector in 2009-10 stood at Rs 3.016
trillion, by the industrial sector at Rs 3.269 trillion and
by the services sector at Rs 7.557 trillion.
The SBP has issued license to National Rural Support
Program (NRSP) to operate as a microfinance bank
throughout the country. The privately owned institution
is a joint venture funded by a consortium including the
International Finance Corporation, the World Bank’s
private sector arm.
The SBP has renewed the status of External Credit
Assistance Institutions of both the credit rating
agencies operating in Pakistan namely JCR-VIS Credit
Rating Company Ltd. and Pakistan Credit Rating
Agency Ltd. for 2011 calendar year.
The SBP has directed all authorized foreign exchange
dealers to ensure that forex transactions with Iran are
in no way related to any activity against sanctions
imposed by the international community.
According to SBP’s Inflation Monitor for February
2011, the Consumer Price Index (CPI) as also the
Sensitive Price Indicator (SPI) have decelerated for
three consecutive months. CPI inflation in February
was recorded at 12.9% against 14.2% in January while
SPI inflation was lower at 16.2% in February against
18.4% in January, both year-on-year.
According to China Council for Promotion of
International Trade, bilateral trade between China and
Markets at a glance
Weekly KIBOR (6months) Foreign Exchange Rates
Review Bid % Offer % GBP (£)
Beginning 13.48 13.73 Rs 137.64
Ending 13.50 13.75 Rs 138.93
Change +0.02 +0.02 +1.29
a weekly publication of The Institute of Bankers Pakistan
Pakistan rose by 27.7% in 2010 over 2009 to a record
$ 8.6 bn.
Pakistan and China have signed an agreement for the
construction of the 720 MWs hydel power project at
korrat, bordering Punjab and Azad Kashmir. To be
completed in four years, it would cost $ 1.2 bn.
China has expressed its willingness to invest upto
$ 15 bn in Pakistan’s various hydro-power projects
including the Kohala, Bunji, Bhasha and Dashu dams,
amongst others.
Summit Bank has reportedly finalized a deal to acquire
314.701 mn shares at Rs 8 per share of Mybank for
which a no-objection certificate has been obtained
from the SBP giving it control of 59.34% shares and
thereby of management. The deal is subject to final
approval of the SBP.
Federal Board of Revenue (FBR) has provisionally
placed total revenue collection by it in the first nine
months of the current fiscal (July 2010-March 2011) at
over Rs 1.010 trillion or 99% of the target set for the
period.
The government has constituted a joint working group
to look after the expansion needs of Pakistan Steel
Mills as also its revamping requirements for which
expressions of interest have already been received.
Trading volume of Pakistan Mercantile Exchange
Ltd. (formerly National Commodity Exchange Ltd.)
recorded an increase of 1,026% in traded value in the
first quarter of 2011 over the same quarter of 2010 and
of 62% over the October-December 2010 quarter.
According to the National Clearing Company of
Pakistan Ltd. (NCCPL), the bourses of the country
>>
KSE Gold Rate
Euro (€) USD ($) 100 Index (10gm)
Rs 121.31 Rs 85.35 11837 Rs 39,171
Rs 122.77 Rs 84.81 11905 Rs 39,600
+1.46 -0.54 +68 +429
Volume 6, Issue No. 14  |  April 08, 2011
 a weekly publication of The Institute of Bankers Pakistan

attracted net foreign portfolio investment of $ 52.379
mn during the first quarter of 2011.
According to the Trade Development Authority of
Pakistan (TDAP) export earnings of basmati rice in the
first nine months of the current fiscal rose by 12% to
$ 665.606 mn. Export earnings of non-basmati rice fell
by 18% to $ 851.840 mn during the above periods.
The Asian Development Bank (ADB) in its Asian
Development Outlook, 2011, has forecast Pakistan’s
GDP growth in the current fiscal at 2.5% with an
annualized average CPI inflation at 16%. It expects the
fiscal and current account deficits to be 5.5% and 1.7%
respectively, of GDP by the end of the ongoing fiscal.
The Oil and Gas Regulatory Authority (OGRA) has
raised the prices of various petroleum products by
between 9 to 13% as also of compressed natural gas
(CNG) by Rs 2.77 per litre.
According to Federal Bureau of Statistics (FBS), CPI
inflation in March this year was recorded at 13.16%
against 12.91% in March last year. The average CPI
inflation in the first nine months of the current fiscal
stood at 14.20% against 11.29% in the same period
last fiscal.
International
The Bank of Japan has launched a new scheme under
which it would provide $ 11.7 bn to financial institutions
in the quake-hit areas at 0.1% interest rate for one year
to cope with damaged needs.
India and Thailand have agreed in principle to double
their bilateral trade volume by 2014 from the level of
$ 6.7 bn recorded in 2010. To this end, the two
countries are to sign a free trade pact before the end
of 2011.
Home remittances into Bangladesh by about 7 mn
expatriates working abroad stood at $ 8.6 bn in the first
nine months of the current fiscal (July-March 2010-11)
against $ 8.3 bn in the same period last fiscal. In the
previous full fiscal ending June 2010 these remittances
totaled $ 10.97 bn.
The People’s Bank of China has raised one-year
deposit and lending rates by 25 basis points (bps) each
to 3.25% and 6.31% respectively. The latest rate rises
are fourth since October 2010.
Unemployment in the U.S. in March this year
stood at 8.8% of workforce, lowest for two years.
Unemployment in the 17-nation eurozone area fell
to 9.9% in February against 10.0% in January. In
the 27-nation European Union (EU) area it stood
unchanged at 9.5% during the above periods.

Notwithstanding international oil price increases,
Bangladesh government has decided to keep
petroleum products prices on hold lest they add to
inflationary pressures particularly of food inflation
already high at 12%.
China has raised the prices of petrol and diesel by
5.6% and 4.9% respectively as a consequence of rising
international oil prices. China is currently the second
largest oil consumer after the U.S.
The London-based Fitch, an international credit
rating agency, has downgraded its rating of Ireland on
“negative watch” relative to the country’s sovereign
debt standing.
Standard and Poor’s, an international credit rating
agency, has downgraded the sovereign debt ratings of
Greece and Portugal by two notches and one notch
respectively to “BB minus” and “BBB minus”.
.

The European Central Bank (ECB) has raised its key

lending rate by 25 bps to 1.25%, the first rise in over
two years, while the Bank of England (BoE) has left its
prime lending rate unchanged at 0.5%.

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. 14  |  April 08, 2011