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November 29, 2020 (MLN): Economic recovery in Pakistan which was started at the start of the new fiscal year, continued in the month of October 2020. However, the ignorance of the general public caused the resurgence of the COVID 19 infection, forcing the government to follow partial careful policy especially in services sectors and thus putting downside risks to the outlook.

The recent upsurge in COVID-19 infections and hospitalizations have also hit Pakistan’s most important export markets, with the exception of China. In the Euro Area and the UK, fresh lockdown measures have been imposed to flatten the curve. On the other hand, in US, no major restrictions have been imposed yet, thus infection seems still rising. As a result, the recent economic indicators show a mixed global outlook.

The Finance Ministry in its monthly “Economic Update and Outlook” for November 2020, highlighted if the SOPs are strictly followed by the general public, it is expected the negative impact can be dampened and the economy will return to a long-term sustainable growth path.

During Jul – Oct FY 2021, the main drivers of inflation (CPI) in Pakistan are international and domestic commodity prices, especially for food and oil products, the exchange rate and monetary and fiscal policies. Supply disruptions and inflation expectations have also played a major role in the determination of prices of food and non-food items.

In recent months, international food prices have increased compared to last year while the oil price is stable at a lower level. Further, the PKR exchange rate slightly appreciated against the USD when the first 4 months of 2020 are compared with the corresponding months of 2019, thus, easing out inflationary pressures.

There is no change in Indirect tax or other measures that may cause inflationary impact. Likewise, the interest rate is kept unchanged. The CPI level reacts to the aforementioned developments with a time lag, implying that they contain relevant information for short term inflation prediction. On the basis of this information, MoM headline inflation is expected to be around 0.9 percent in November (the margin between -0.3 and +1.4 percent) against 1.7 percent in October 2020 and 1.45 percent in October 2019. It seems that the tendency of inflation easing will prevail in the coming months, the Ministry said.

As per the report, the fiscal sector continues to perform better in the wake of unprecedented challenges due to COVID 19 pandemic. During the first quarter of the current fiscal year, although the fiscal deficit slightly increased to 1.1 percent of GDP against 0.7 percent recorded last year, yet it remained below the target set for the first quarter. On the revenue side, FBR tax collection performed better in the wake of activities during the first four months of the current fiscal year. However, with the increase in COVID infection and related containment measures, slower economic activities in services sectors may slightly impact revenue collection in Q2 FY2021.

On the external front, during October 2020, the Current Account remained in surplus ($382 million) for the fourth consecutive month. Thus, Current Account posted a surplus of $1.2 billion (1.3 percent of GDP) during July-Oct FY2021 against a deficit of $1.4 billion last year (-1.6 percent of GDP). The contraction in the import of goods and services, coupled with healthy growth in workers' remittance resulted in a surplus of the current account.

The report underlined that sufficient orders are available with the exporters for the coming months and it is expected that the export sector will perform better in the future. However, delayed economic recovery in some of Pakistan’s main trading partners may exert a downside risk. On the other hand, the persistent growth performance in Pakistan may lift imports marginally. In November 2020, exports of goods and services are expected to reach around 2.3 billion US$. Imports in the same month may remain around 4.1 billion US$. Regarding remittances inflows, it is expected that these will remain higher than the trade deficit in goods and services.

During 1st July-30th October 2020, Broad Money (M2) observed a cumulative expansion of Rs 76.1 billion (growth of 0.36 percent) compared with Rs 115.4 billion (growth of 0.65 percent) last year. Growth in money supply is completely attributed to Net Foreign Assets (NFA) which remained Rs 314.8 billion as compared to Rs 295.7 billion last year. Net Domestic Assets (NDA) of the banking system declined by 238.6 billion against a reduction of 180.4 billion last year.

The Pakistan economy is underway in recovery. The Monthly Economic Indicator (MEI) shows strong growth in the first four months of the current fiscal year. Furthermore, based on current information, no significant deterioration in the balance of trade in goods and services is expected. Also, the inflow of workers remittances remains strong. Therefore, the recovery may preserve the external balance. External balance implies the prospect for a stable exchange rate in the near term, which may contribute, in addition to specific government measures, to reduce inflationary pressures.

A major risk to this scenario of economic recovery on a path of external and internal balance, is the upsurge of COVID-19 infections, all over the world and also, to a lesser degree, in Pakistan.

On the other hand, very recent world-wide communications regarding the production of several very successful new vaccines may open the scope for opening a back-to-normal path in the near future. These developments may boost business and consumer confidence and further enhance economic growth.

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November 29, 2020 (MLN): The highlights of the important economic and business events that took place during the last week are in order so as to become acquainted with the recent developments in Pakistan’s economic and public policy.

Events of Importance through the Week:

On Friday, President Tanzania Chamber of Commerce, Industry & Agriculture (TCCIA) Paul F. Koyi urged the Pakistani businessmen & industrialists to improve ties with Tanzanian counterparts by exploring more avenues of trade and investment cooperation between the two countries in different sectors of the economy.

Besides, the State Bank of Pakistan (SBP), in order to facilitate Exchange companies and Exchange companies of “B', has extended the validity period of enhancement in exposure limit up to March 31, 2021.

On the upside, Asian Development Bank (ADB) approved a $300 million policy-based loan to help promote macroeconomic stability in Pakistan by facilitating improved trade competitiveness and export diversification.

Moreover, a Dutch company expressed willingness for the establishment of plants for desalination of water and power generation from the garbage in Karachi with the investment of 1.3 billion dollars.

On Thursday, Advisor to PM for Commerce and Investment Abdul Razzaq Dawood chaired the first consultative session with the stakeholders on proposed Pakistan-Afghanistan PTA at the Ministry of Commerce (MOC) today, where various stakeholders provided their valuable inputs.

Furthermore, Pakistani expats have deposited over $100 million in the Roshan Digital Accounts since its launching, disclosed Senator PTI -Chairman Standing Committee on Information Broadcasting Faisal Javed on Thursday.

Besides, the government is expected to hire prospective advisers to float Eurobond and Sukuk bonds in the international market by this or early next week.

On Wednesday, World Bank signed an agreement to provide 19.85 million dollars to Pakistan for Covid-19 response, recovery and resilience in education project.

In pursuance of PM’s directive to kick-start operations at the Gwadar Port, the Ministry of Commerce & Pakistan Customs successfully handled the first fish cargo to be trans-shipped to China. This was a trial run handling 200 MT of fish catch.

Meanwhile, as the Faisalabad textile industry sees a massive rise in demand & export orders, Prime Minister Imran Khan has instructed the Commerce & Industries Ministries to ensure all necessary support to the textile sector to enable them to meet their growing demands.

On the vaccine front, a Memorandum of Understanding (MOU) was signed between Pfizer and Chughtai Labs to establish Vaccination Centers. According to a note released on social media by the lab, these vaccination centers will improve access to vaccines across the country.

On Tuesday, Independent Power Producers (IPPs) refused to accept the proposed payment of Rs 400 billion from the federal government in three years, which is a breach of a memorandum of understanding (MoU) signed between them. 

Dun & Bradstreet Pakistan and Gallup Pakistan issued their third report on ‘Pakistan Consumer Confidence Index (CCI)’ as per which Pakistan’s Consumer Confidence improved in 3QCY20 on account of optimistic future expectations.

On Monday, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) in its meeting held in Karachi, decided to maintain the Policy Rate at 7 percent.

Announcements

On the equity front, Avanceon secured three high-value contracts for Oil & Gas and Infrastructure projects in UAE. Avanceon also won Contract to upgrade Critical Infrastructure for multiple sites across Qatar. In addition to this,

In addition to this, Avanceon’s subsidiary awarded 1.2M QAR Infrastructure Project in Preparation for FIFA World Cup 2022

Besides, National Refinery Limited clarified the refinery is not, in any manner, involved in the joint venture with Mari Petroleum Company Limited (MPCL).

Oil and Gas Development Company Limited (OGDCL) as Operator (100%) of Lakhirud Exploration Licence discovered gas from its exploratory well Lakhirud X-1, which is located in District Musa Khel, Balochistan Province.

The Organic Meat Company purchased land to set up an offal facility.

Hinopak Motors informed the Exchange that the company raised Rs2.86 bln against issue size of Rs2.89 bln through rights issue of shares.

The Shareholders of Fauji Fertilizer Bin Qasim Limited (FFBL) in Extra General Meeting held today, have authorized the company to invest, provide and continue sponsor support to Fauji Foods Limited (FFL) the amount not exceeding in the range of Rs 3,500,000,000.

Pakistan Petroleum Limited (PPL) has been allowed to continue production from the Sui mining lease for another period of six months with effect from the expiry of the existing lease period on 30th November 2020.

Mari Petroleum Company Limited (MPCL) entered into an agreement with Y.B. Pakistan Limited, Arif Habib Equity (Private) Limited, Liberty Mills Limited, and Reliance Commodities (Private) Limited pertaining to a joint venture arrangement through a company (National Resources (Private) Limited (NRL) to potentially undertake mineral mining projects in the Province of Balochistan.

Agha Steel Industries through a notice to PSX, has informed that Military Engineering Services (MES) of Pakistan Army enlisted Agha Steel Industries Limited as the manufacturer cum supplier of deformed steel bar for its projects.

The Federal Board of Revenue (FBR), after a rigorous qualification process, has selected TPL Trakker Limited (TPLT), as one of the approved vendors till December 30, 2023 to avail video monitoring system (System) as required under the newly implemented Video Analytics Rules 2020.

Apart from this, K-Electric Limited announced its financial results for the 1^st quarter ended September 30,2020 as per which, the company earned net profits of Rs 1.11 billion (EPS: 0.04), i.e. 58% lower than the net profits recorded in the same period of last year.

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Market Roundup

The KSE-100 index gained 619.91 points during the departed week and closed at 40,807.09-mark i.e. nearly 1.54% percent higher than the closing of the previous week.

According to a research note by AKD Securities, the index began the week with negative sentiment with the government mulling over measures to contain rising cases of COVID-19, hinting a complete lockdown. To add, IMF hinting at the government’s need to undertake unpopular measures (electricity and gas rate hikes, targeting higher tax collection, etc) to resume the IMF program further dampened the sentiments.

‘Monetary policy announcement of interest rates maintained at 7% in scheduled MPC meeting, despite negative real interest rates, resulting in some exuberance among investors. A rise in international oil prices on the back of mass availability of vaccines in 2021 brought interest in index heavyweight E&Ps in the remaining trading sessions, where profit-taking in the last trading session pared some of the gains’, the report added.

Oil and Gas Exploration and Technology & Communication emerged as the best performing sectors during the week, as they contributed 480 points to the benchmark index, followed by sectors such as Commercial Banks, Chemicals and Vanaspati & Allied Industries contributed around 47, 31 and 20 points, respectively.

Company-wise, the scrips of POL, TRG, PPL, OGDC and SYS were the most desirable ones as they contributed 98, 90, 90, 88 and 60 points to the index respectively.

During the week, The All Share Market Cap increased by nearly USD 47 billion, i.e. 2.31% higher than the previous week.

Figures released by NCCPL showed that foreign investors sold USD 9.26 million worth of stocks during the week with foreign corporates doing the bulk of selling amounting to USD 9.87 million.

On the local front, local companies purchased USD 3.38 million worth of stocks, followed by insurance companies with USD 2.91 million while USD 2.69 million worth of stocks bought by individual investors. Other significant transactions included USD 2.80 worth of stocks sold by Banks/DFI.

Forex

PKR ended the week with gains of Rs.1.26 against the dollar in the interbank, appreciating in all but the final trading session.

The dollar traded in a range of Rs.2.25 hitting a weekly high of Rs.161.15 (bid) and a low of 158.90 (ask) as 10 Day volatility increased from 5.36 % to 6.70%.

PKR has appreciated by 5.38% during FY21, however, it’s still 2.89% down during CY20.

Money Market

Yields in the secondary market remained relatively stable with the SBP holding the policy rate at 7% and the outgoing week bereft of any auction. 3 and 6-month yields were unchanged while the 12-month yields increased by 5 bps. Similarly, 3, 5 and 10-year yields increased by a paltry 1, 3 and 9 basis points.

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November 29, 2020 (MLN): The weekly economic roundup summarizes the country's key economic and financial data for the week from various sectors to keep an eye on next week's trends. 

• The Weekly Sensitive Price Indicator (SPI) for the Combined Group decreased by 0.92% during the week ended Nov 26, 2020 while the SPI increased by 7.48% compared to the corresponding period from last year.
• Pakistan's Forex Reserves increased by USD 466.80 Million or 2.32% and the total liquid foreign reserves held by the country stood at USD 20,552.40 Million on Nov 20, 2020.
• The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) in its meeting held on November 23, 2020 in Karachi, has decided to maintain the Policy Rate at 7 percent.
• The Asian Development Bank (ADB) approved a $300 million policy-based loan to help promote macroeconomic stability in Pakistan by facilitating improved trade competitiveness and export diversification.
• Oil and Gas Development Company Limited (OGDCL) as Operator (100%) of Lakhirud Exploration Licence discovered gas from its exploratory well Lakhirud X-1, which is located in District Musa Khel, Balochistan Province.
• Overseas investors purchased net Rs 45.12 million worth of securities during the week ended November 20, 2020, i.e. around Rs.1.97 billion lower than last week's numbers.
• The State Bank of Pakistan (SBP), in order to facilitate Exchange companies and Exchange companies of “B',  extended the validity period of enhancement in exposure limit up to March 31, 2021.
• Pakistani expats deposited over $100 million in the Roshan Digital Accounts since its launching, disclosed Senator PTI -Chairman Standing Committee on Information Broadcasting Faisal Javed on Thursday.
• Pakistan and Denmark agreed to explore new avenues of cooperation in green technologies by establishing a 'Green Partnership'.
• World Bank will provide 19.85 million dollars to Pakistan for Covid-19 response, recovery and resilience in education project.
• Pakistan ranked 45th in the Internet Development Index with a score of 39.03, but the country placed 42nd, surpassed Vietnam, Kazakhstan and other countries in innovation capacity, according to the World Internet Development Report 2020.
• The USA remained as the top export destination for Pakistan with $413.3 million worth of shipments in October 2020, against the exports of $375.9 million in the preceding month and $374.75 million in October’19, showing an increase of 10% both on MoM and YoY basis.
• Pakistan exports to the United Kingdom (UK), during the month of October 2020, registered at US $ 200 million as compared to US $ 154 million realized in the corresponding month of last year showing an increase of 30 percent.
• Dun & Bradstreet Pakistan and Gallup Pakistan have issued their third report on ‘Pakistan Consumer Confidence Index (CCI)’ for Q3 2020.
• Textile products remained the major exportable goods for Pakistan as it accounted for 58% of the total exports during the period of 4MFY21.  The overall exports of the textile group nosedived by 9% YoY to $4.23 billion from $4.62billion recorded in the same period last year.
• The Banking sector spread for October 2020 has marginally grown by 7 basis points (bps) over the month which brings its latest value to 4.65% as compared to the prior month's spread of 4.58%. On the contrary, the spread has compressed by 148 bps as compared to the same period last year.
• Foreign investors’ confidence in Pakistan’s economy is gradually restoring as multinational companies operating in Pakistan repatriated $678.6 million in profit and dividends on investments in the country during four months of FY21 which was 24% higher than the profits repatriated in the corresponding period of last year.
• The Federal Government has released Rs 299.7 billion for various ongoing and new social sector uplift projects to date under its Public Sector Development Programme (PSDP) 2020-21.

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November 29, 2020: The National Command and Operation Center (NCOC) on Sunday apprised that National Covid Positivity Ratio has reached 7.01 with 2186 patients in critical situation across the country and the observance of critical patients rising at a higher pace.

The highest positivity ratio was observed in Mirpur as 24.85 percent followed by Hyderabad 22.181 percent and Karachi 18.96 percent where 2,186 Covid patients were in critical condition across Pakistan with the number of critical patients rising at a higher pace.

The NCOC daily situational morning session was in progress. The Health experts were briefing the Forum on disease pattern, Covid spread in various areas and enforcement measures being taken to contain the pandemic.

The positivity ratio in various federating units was Azad Jammu and Kashmir (AJK) 16.58 percent, Balochistan was 9.12 percent , Gilgit Baltistan (GB) 5.56 percent, Islamabad 5.30percent , Khyber Pakhtunkhwa (KP) 5.3 percent, Punjab 3.45 percent and Sindh 15.31 percent.

However, the province wise COVID Positivity Ratio was in Punjab, the major city Lahore had 4.00 percent followed by Rawalpindi 6.80 percent and Multan 2.55 percent.

In Sindh, Karachi had 18.96 percent, Hyderabad 22.18 percent with the highest ratio,

in KP, Peshawar had 11.12 percent, in Balochistan, Quetta had 8.84 percent, Islamabad Capital Territory (ICT) 5.30 percent, in AJK, Mirpur 24.85 percent, Muzaffarabad 17.95 percent, in GB, Gilgit 6.77 percent.

As many as 273 Coronavirus patients were on ventilators across Pakistan including Punjab in Faisalaabad had four patients, Lahore 63, Multan 41 and Rawalpindi 25 patients were on ventilator.

In Sindh, there was no patient on ventilator in Hyderabad and Karachi had 61 patients.

In KP, there was also no patient on ventilator in Abbotabad, Peshawarhad 34 patients on ventilators.

In Balochistan, there was no patient on ventilator in Quetta whereas in ICT around 45 patients were on ventilators, in AJK and GB there were no Covid patients on ventilator.

There were around 2,186 critical patients of Coronavirus across the country where in Punjab 620 Coronavirus patients were critical, in Sindh 681 patients, in KP 488, Balochistan16, ICT 315, AJK 50 and GBhad 16 Covid patients in critical condition.

As many as 2,964 oxygenated beds were occupied by Covid patients whereas in Punjab, Faisalabad had 492 patients on oxygenated beds, Lahore had 433 beds occupied, Rawalpindi 52, Multan36, Abbotabad 84, Peshawar 709.

In Balochistan, Quettahad 811 beds occupied, ICT had 148 whereas in AJK, Mirpurhad 101 beds occupied and 57 beds in Muzaffarabad where in GB, 41 beds were occupied.

APP