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Pakistan’s inflation rate to drop to 8.3% next year:...

April 8, 2020: The Asian Development Bank has projected that Pakistan’s inflation rate would slow down to 8.3 percent in the fiscal year 2020-21.

“Inflation is forecast to decelerate to 8.3% in FY2021 with the central bank expected to take further policy action to both manage inflation and boost economic activity,” the ADB said in its latest annual flagship economic publication, Asian Development Outlook (ADO) 2020.

It said inflation is projected to accelerate to 11.5 percent in FY2020, reflecting a sharp rise in food prices in the first part of the fiscal year and a 9.8 percent drop in the value of the local currency against the US dollar in the first seven months of FY2020.

A new price series that tracks price movements in rural as well as urban markets showed rural food inflation averaging 16.3 percent in the first seven months of FY2020, while urban food inflation stood at 14.5 percent.

However, high food inflation is expected to be mostly transitory, likely to dissipate as food supplies improve in the second half of the fiscal year.

Further, a drop in international oil prices forecast in the second half of FY2020 should translate to lower production and transport costs for goods and services, which could be passed on to consumers.

After raising the policy rate to 13.25 percent at the beginning of FY2020, the central bank reduced it in two steps to 11.00 percent in March 2020 following the decline in global oil prices and sluggish demand under COVID-19. Growth in private sector credit has slowed considerably.

Inflation accelerated from 4.7 percent in FY2018 to 6.8 percent in FY2019 on poor harvests, tariff increases, and Pakistan rupee depreciation against the US dollar by 24 percent following the adoption of a more flexible exchange rate.

Food price inflation rose to 4.6 percent, while inflation for other goods accelerated to 9.2 percent as tariffs on energy products were raised to manage mounting fiscal pressures. Inflation was estimated using rebased prices from FY2016.

Earlier, to counter inflation, the State Bank of Pakistan, the central bank, raised its policy interest rate by a cumulative 575 basis points to 12.25 percent at the end of FY2019.

APP

PRL puts its Right Issue process on hold due...

April 8, 2020 (MLN): Pakistan Refinery Limited has put its Right Issue process, amounting to Rs. 3.15 million, on hold due to difficulties in arranging underwriting amidst the ongoing pandemic.

“As the entire world has witnessed an unprecedented economic downturn and lockdown due to novel Coronavirus (COVID-19) pandemic, the global financial markets are under tremendous pressure. This serious downturn has taken its toll on Pakistan’s financial sector as well eroding the confidence of investors, as evidenced by the massive erosion in PSX 100 index since March 9, 2020.

“Unfortunately, this adverse phenomenon coincided with our Right Issue process, affecting its negatively. For information, the company is required to arrange underwriting of 40% of the Rights Issue, but the underwriters are unable to give any commitment based on the prevailing uncertainty and hence the Right Issue is practically on hold.

“It is important to note that Pakistan State Oil Company Limited being the parent company with 60% shareholding and all the concerned directors have already deposited amount in designated bank accounts respective to their shareholding. However, considering the aforementioned difficulties in arranging underwriting, which tantamount to a ‘force majeure’ situation, the Company had requested SECP for the waiver of the abovementioned underwriting requirement” the company said in its notification to PSX.

Once the company receives any directive or clarification from SECP, it will inform through PSX and move ahead accordingly. For the time being, the Company is applying to PSX for a one-month extension in the Rights Issue process.

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MTB Auction: Bid Pattern

April 08, 2020 (MLN): The State Bank of Pakistan released the Bid Pattern for today's MTB Auction.

Auction target is Rs.500.00 billion against a maturing amount of Rs.235.30 billion, showing an additional funding requirement of Rs.264.70 Billion.

Link to Full Bid Pattern

In the previous auction cut off yield for 3, 6 and 12 months was 11.2985, 11.2989 and 10.8699 percent.

 

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Fossil Energy to acquire 51% stake in Bawany Air...

April 8, 2020 (MLN): Mr M. Hanif Y. Bawany on behalf of major shareholders of Bawany Air Products has entered into an agreement dated April 7 2020, for the sale of 3,386,280 ordinary shares of Rs 10 each with Fossil Energy Private Limited.

These shares represent 51% of the issued and paid-up capital of Bawany Air Products Limited.  

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Colony Textile begins partial operations at Weaving division

April 08, 2020 (MLN): Colony Textile Mills Limited has partially resumed its production activities at its Weaving division as the Provincial Government has allowed the textile companies to resume their operations.

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