Pakistan estimates to receive about Rs8.2 billion ($85million) from the United States during the current year under the Kerry-Lugar Aid programme and the amount is also likely to go up with the restoration of normal consultation channels, the official said. – File photo

ISLAMABAD: The sliding rupee and the declining foreign exchange reserves are getting a temporary relief with the United States scheduled to transfer later this week about $1.12 billion to the State Bank of Pakistan as part payment for services provided to coalition forces.

Finance Secretary Abdul Wajid Rana informed a meeting of the Economic Coordination Committee of the cabinet on Tuesday that by the beginning of the next week, the country’s foreign exchange reserves would likely increase to $16 billion.

Pakistan’s total foreign exchange reserves currently stand at $14.77 billion which will go up to $15.89 billion with the inflow of $1.12 billion from the United States under the Coalition Support Fund.

The meeting was also informed that the last financial year had ended with a current account deficit of $4.5 billion which would keep the economy under pressure.

An official said that about 65 per cent of the bills submitted by the defence and finance ministry authorities to the US had been rejected, raising serious questions about the quality of billing.

Pakistan estimates to receive about Rs8.2 billion ($85million) from the United States during the current year under the Kerry-Lugar Aid programme and the amount is also likely to go up with the restoration of normal consultation channels, the official said.

Until May 2011, the defence authorities had billed about $12 billion to the US under the CSF. Most of the bills were disbursed except $3.5 billion that were still outstanding.

This amount did not include services provided to coalition forces in Afghanistan since May 2011 when the defence authorities stopped sending bills as relations started deteriorating in the wake of US action in Abbottabad which led to killing of Al Qaeda chief Osama bin Laden.

The official said that according to rough estimates the total outstanding amount on account of the CSF would be around $4.7-5 billion, including the previously billed amount of $3.5 billion. The monthly CSF bills averaged $100 million.

The ECC was informed at the meeting that consumer price indicator stood at 11 per cent in 2011-12 while it was 13.7 per cent in 2010-11. The wholesale price indicator remained at 10.4 per cent while it was 21.3 per cent in 2010-11. Sensitive price indicator remained at 7.15 per cent while it was 16.6 per cent in 2010-11.

Large Scale Manufacturing grew by 1.3 per cent in May 2012. Exports reached $24.66 billion and imports were worth $40 billion.

The Trade Development Authority of Pakistan is mandated to evolve marketing strategies for selling goods in international market, but its consultants appointed on political grounds are not delivering. And most of the funds meant for export promotion are being used on foreign trips by bureaucrats. - File photo

Exports have decelerated for the fifth consecutive month owing to slack international demand and falling output of trade surpluses because of energy shortage.

The over-all exports proceeds fell to $15.189 billion over July-February from $15.263 billion over the same period last year. And this steep fall will make it difficult to achieve this year’s export target of over $25 billion.

The fluctuating export earnings are generally debated in context of current issues like prevailing international market price, erratic energy supply, and rising input cost. However, the real underlying problem is concentration of exports in few commodities and fewer markets worsened by the lack of product competitiveness in terms of quality, price and value-addition that restricts export growth.

No doubt, the export volume has increased over the past few years, but it has remained focused on few items like cotton manufacturers, leather and rice. These three categories alone contribute more than 70 per cent to the total exports. More than
80 per cent consist of cotton manufacturers,  which makes exports more vulnerable to external shocks.

Last year, textile and clothing export reached $14 billion from $10.221 billion over the previous year. This increase was mainly driven by surge in international cotton prices. This year cotton prices declined impacting on value of cotton and textiles.

Chairman All Pakistan Textile Mills Association, Mohsin Aziz says the target of $16 billion for textile and clothing is not achievable. He projected the actual earning at around $12 billion. While export volumes have continued to grow, the terms of trade (ToT) have declined.

The share of manufactured goods first remained stuck around three-fourth of exports for many years. Since the past few years, a continuous decline in their share in the overall exports is being observed. The share of manufactured goods has decreased from 78 per cent in 2005-06 to 70 per cent in 2010-11.

The performance of the export-oriented industrial enterprises with regard to upgrading productivity, lowering cost and improving the quality of products has remained largely unaddressed, especially in the textile sector.

It is believed that an investment between $3 billion to $5 billion has been invested in the textile and clothing sector but mostly in low value added sector. Bulk of the investment has gone into spinning, weaving and knitting processing.

Exports are also concentrated in few markets. The US continues to be the leading destination with 16.1 per cent share in overall exports when its share is falling since 2005-06 mainly due to weakening economic activity there. However, exports have
somewhat increased to regional countries including China, Bangladesh and Afghanistan.

Exporters are expecting a 25 per cent drop this year in textile and clothing alone to the sluggish European Union markets. The combined value of exports to the EU market crossed the $6 billion mark in 2010-11, up by over 30 per cent from almost $4.6 billion in the previous year because of high cotton price. Approximately, 90 per cent of the total exports to the EU countries include readymade garments, knitwear, bedwear and cotton cloth.

There are also some administrative issues which also need to be addressed. The Trade Development Authority of Pakistan is mandated to evolve marketing strategies for selling goods in international market, but its consultants appointed on political grounds are not delivering. And most of the funds meant for export promotion are being used on foreign trips by bureaucrats.

While the government has created 62 posts for commercial attachés in diplomatic missions across the globe to promote marketing of Pakistani products, there is no benchmark to check their performance. In most cases, their performance leaves much to be desired.

In a fast changing global export market, both the exporters and relevant officials need to be agile to evolve right market strategies to divert sales of goods and services to fast growing economies/markets and capitalising on the potential of much neglected regional trade.

Banks collectively raised deposits by Rs83 billion during the seven months which is comparatively lesser than Rs463 billion raised during the same period of the previous year. - File photo

KARACHI: Banks are earning profits, but they failing to mobilise deposits which fell between June and November 2011 and again in January 2012 after a marginal rise in December.

The State Bank reported on Tuesday that bank deposits, which were Rs5.599 trillion in June 2011, fell to Rs5.415 trillion in November.

The deposits again witnessed a big outflow of Rs192 billion in January after they rose to Rs5.874 trillion in December.

Bankers confirmed that efforts to mobilise deposits from private sector proved futile during the first seven months of the current fiscal year.

Banks collectively raised deposits by Rs83 billion during the seven months which is comparatively lesser than Rs463 billion raised during the same period of the previous year.

The inflation-hit economy, with poor growth rate, could hardly spare liquidity with minimum possible depositors which is also reflected from the shrinking number of accounts of small deposit holders, said a senior banker of a large private bank.

The monetary policy document also indicated that the total deposits of the banking sector during the first quarter of FY-12 contracted by Rs62 billion against an increase of Rs352 billion during the same period of previous year.

Bankers said that deposits suddenly rose in December 2011 apparently on account of government deposits as well as retirement of short term debt taken by the corporate sector for working capital.

The Governor, State Bank, said last week that most of borrowing of the privates sector during the first half of the current fiscal year was meant for working capital. It means short-term borrowing which is retired within months.

Banks also noted that massive debt retirement by the public sector enterprises and retirement of commodity operations, debt also helped improve deposits position of the banking sector.

“Raising Rs83 billion deposits in six months is not enough to keep the banks profitable. Banks are reinvesting money into government papers which offers three tenures of 12 months, six months and three months,” said Mohammad Imran, a banking analyst.

He said there was little chance for growth of private sector credit off-take since the government still offers attractive rates while non-performing loans are also rising.

The State Bank said the NPLs were rising putting banks under pressure to remain attached with cautious lending approach.

“The situation is grave for the banking sector compared to last year since the economy was poor and unemployment was high.

The current fiscal seems worse for the banks also,” said Imran.

He said the banks may still earn profit but the size of the profit would be lesser and the profits could be limited to few banks.

Pakistan`s main food import comprises pulses, tea, dried fruits, powder milk, edible oil, spices, sugar etc.,) whose import bill in JulyNovember 2011 was over $2 billion. - File photo

KARACHI: The falling value of the rupee has yet to make any adverse impact on the edible items thanks to the declining trend on the world commodity markets.

Importers said that the falling prices of commodities on the world markets had nullified the impact of losing value of the rupee against the dollar since October 2011.

They, however, feared that if world commodity prices bounced back and the rupee maintained its slide the consumers would face a double impact of both devaluation and high prices of edible item on the world markets.

Karachi Wholesalers Grocers Association Chairman Anis Majeed told Dawn on Tuesday the edible prices stayed steady despite weakening of the rupee, but he feared coming months would be harsher for the consumers as the world commodity markets started showing rising trend for the last one week.

He said the rupee, which stood at Rs86 to a dollar in October 2011, was now trading above Rs90 in the interbank market.

The price of pulses would have gone up by Rs5 to Rs6 per kg at wholesale market since then but it did not happen due to weakening price of pulses on the global markets.

Anis said that pulses pricesstarted crawling up on the world markets which would push up local prices. He added that gram pulse price in Australia had risen to $520 per ton from $450 per ton in the past one week. The price was $550 per ton two months back.

Masur pulse rose to $590 per ton from $500 per ton. Two months back it was available at $650 per ton. Mash price slightly went up to $640 from $600 per ton. Two months back it was quoted at $800 per ton.

`The State Bank of Pakistan should intervene now to prevent further fall in rupee value otherwise its impact on edible and other imported items will be devastating,` Anis said.

He recalled that prices of pulses had tumbled in Dandi Bazaar in December 2011 due to falling price in international market. Despite persistent appreciation of the dollar against the rupee the wholesale price continued to drop.

However, retailers had not passed on the impact of declining rates in wholesale market to the end users.Sohail Janoo, a powder milk importer at Jodia Bazaar, said so far the powder milk prices had not appreciated in the aftermath of currency fluctuation.

He said not only milk powder but every commodityprice had plunged by at least 20 per cent at Jodia Bazaar.

He said 25-kg bag powder milk (local) was now quoted at Rs8,500 as compared to Rs9,000 while the price of 25kg bag of imported milk fell to Rs9,200 from Rs10,000.

He linked the price fall to over imports and off season during January to February followed by $200 per ton (C&F Karachi) decline in powder milk price to $3,100 from $3,300 per ton in the last two months.

Powder milk is mainly arriving from the USA and also from Germany and the UK.

Sohail said the prices in world markets would definitely not remain depressed for ever and any increase coupled with devaluation of rupee will fuel the domestic prices upwardly.

On the contrary, Pakistan Tea Association Chairman Mohammad Hanif Janoo said that Kenya tea prices surged due to weather conditions in the last one month while erosion in the rupee value had caused price hike of Rs30 per kg in the wholesale market.

Pakistan`s main food import comprises pulses, tea, dried fruits, powder milk, edible oil, spices, sugar etc.,) whose import bill in JulyNovember 2011 was over $2 billion.