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SBP discloses key features of Prime Minister’s Kamyab Jawan...

August 10, 2020 (MLN): The State Bank of Pakistan (SBP) has disclosed key features of Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES).

According to SBP, financing under PMKJ-YES is available for youth aged between 21 and 45 years for establishing new business or extending existing business.

SMEs owned by youth as per above mentioned age brackets are also eligible. Additionally, for IT/e-commerce related business, minimum age limit is 18 years and minimum education required is matriculation or equivalent.

Under the program, financing is segregated into three tiers. Under tier-1, loan limit is from Rs 100,000 up to Rs 1 million.

Under second plan tier-2, loan limit will be from above Rs 1 million and up to Rs 10 million.

Under the third plan tier-3, loan limit is from above Rs 10 million and up to Rs 25 million.

With regards to interest, for tier-1 loans, markup rate will be 3 percent, for tier-2 loans it will be 4 percent and markup rate of 5% will be charged on tier-3 loans.

Maximum loan tenor will be up to 8 years including grace period of up to one year.

For new businesses, Debt-Equity ratio for tier-1 loans is 90:10, for tier-2 and tier-3 loans is 80:20. For existing businesses, Debt-Equity ratio is Nil for all tiers. The borrower’s contribution of equity would be in the form of cash or immovable property and will be required after approval of the loan.

Tier-1 loans will be clean; however, only personal guarantee of the borrower is required. For tier-2 and tier-3 loans, security requirements are as per executing banks’ own credit policy.

Under the scheme, loan can be availed from commercial banks working as Executing Agencies (EAs).

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Pakistan requests Saudi Arabia for an extension in oil...

August 10, 2020 (MLN): Pakistan has requested Saudi Arabia and the IDB’s Islamic Trade Finance Corporation (ITFC) to extend the oil facilities on deferred payment to the country for another year.

For the uninitiated, Saudi Arabia had offered a 3-year, deferred petroleum products payment facility worth USD 3.2 billion to Pakistan last year, with the first tranche of USD 275 million being received at the start of July 2019.

Similarly, the country had signed a loan agreement amounting to USD 551 million with ITFC, a subsidiary of the Islamic Development Bank (IsDB) Group, for import of oil and LNG. This facility has been exclusively reserved for Pakistan State Oil Company Limited, Pak Arab Refinery Limited and Pakistan LNG Limited.

With both the facilities completing one year upon maturity, the country has requested for further extension in the facilities. This move by the Pakistani government has been termed ‘ironic’ by one of the leading media houses, The News, as the country did not even fully utilize the oil facilities provided to it earlier.

As part of the agreement with Saudi Arabia that reportedly expired around 2 months ago, Pakistan repaid $1 billion just last week, i.e. almost 4 months prior to its scheduled repayment time. This was made possible with the aid of Pakistan’s close ally, China, who immediately came to the country’s rescue when KSA demanded the payment to be made on immediate basis. The remaining $2 billion will be repaid if and when a similar facility is obtained from friendly nations.

According to The News, Pakistan only used about $1.5 billion out of the total $4.7 billion loan facility during the Fiscal Year 2020, on account of exchange rate variation, reduced oil prices and certain specific chemical used in crude oil which made it hard for the country to utilize the entire oil facility.

The repeated requests for renewal and extensions, coupled with minimum to no interest shown from Saudi Arabia, has highlighted the challenging relations between the two countries. This was made obvious from the very beginning of the agreement, when the date of the facility being operational was pushed from January to July, last year.

The same can also be said for the United Arab Emirates (UAE), with which, Pakistan has initially signed a loan agreement of $6.2 billion, which also included a $3.2 billion deferred oil payment facility. However, the loan was subsequently reduced to $2 billion, with the plans for the provision of oil facility being shelved.

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PSX will remain closed on Independence Day

August 10, 2020 (MLN): Pakistan Stock Exchange Limited has announced it will remain closed on Friday, August 14, 2020 being a National Holiday on account of Independence Day of Islamic Republic of Pakistan.

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NEPRA increases power tariff to ensure financial viability of...

August 10, 2020 (MLN): The National Electric Power Regulatory Authority (NEPRA) has made adjustments in the approved tariff on account of variations in the fuel charges from November 2019 to June 2020 for all power distribution companies.

The Fuel Cost Adjustment (FCA) calculations have been delayed by the authority which helped consumers with the limited increase in electricity rates.

According to a notification issued by NEPRA, the fuel cost in December’19 was high when the FCA was Rs 1.8779 per kWh, while it notified Rs1.1108 per kWh FCA for January’20, which increased to Rs1.2051 per kWh FCA for February’20.

The Authority being cognizant of the fact that the period for which FCAs are being allowed i.e. November 2019 to June 2020, has already lapsed and variations on account of fuel cost have not yet been recovered or passed on to the consumers.

In order to ensure the financial viability of the DISCOs, the authority believes that any such variations need to be passed on to the consumers in a timely manner, which otherwise would result in piling up of the legitimate costs and may impact their financial viability.

The authority has decided to club the positive and negative FCAs to minimize the impact on consumers and apply the same in two months period i.e. August and September.

Going into details, the FCAs pertaining to January’20, February’20, March’20, and May’20 will be charged in the electricity bills for the month of August’20.

While the fuel adjustment charges for the months of November’19, December’19, April’20, and June’20 will be charged in September’20.

FCAs will be applicable for all consumer categories except for the lifeline ones.

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COVID outbreak hasn’t impacted JS Company’s portfolio materially, exhibiting...

August 10, 2020: Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of Jahangir Siddiqui & Co. Ltd at ‘AA’ for long-term and ‘A1+’ for short-term, with a ‘Stable’ outlook forecast.  

The ratings reflect Jahangir Siddiqui & Co. Ltd.'s ('JSCL' or 'the Company') strong presence as a Holding Company in the financial sector with a portfolio of strategic investments mainly in banking (JS Bank, BankIslami Pakistan), insurance (EFU Life Assurance and EFU General Insurance), brokerage (JS Global Capital) and asset management segments (JS Investments).

JS Bank is on its path to establish itself as a medium sized bank whereas BankIslami aims to expand its presence in the growing Islamic Banking sphere. The results have been so far mixed with macroeconomic challenges and stiff competition in the banking sector.

JSCL holds significant stake in EFU General Insurance and EFU Life Insurance and plans to maintain it. After witnessing volatile markets for a while, JS Global and JS Investments are expected to have improved performance.

The Company has recently increased its holding in Azgard Nine, while divested some stake in Pakistan International Bulk Terminal and other non-strategic investments. JSCL intends to diversify its portfolio and has made significant investments in LPG storage and infrastructure and OMC segments.

The Company has made ~ PKR 2bln investments in these segments through its wholly owned subsidiary, Energy Infrastructure Holdings (Pvt.) Ltd. This is predominantly being funded by debt instruments. These initiatives are in gestation phase and will take time to mature. The recent upsurge in stock market, coupled with interest rate cuts of 625bps, are expected to improve the profitability of the Company.

Moreover, EFU Life and EFU General remain stable dividend resources. The Company has a very strong capital structure with low leveraging and strong coverages. The debt instruments are covered by a mix of strategic and non-strategic investments.

The Company has availed general relief provided by SBP for COVID-19, to defer part of its long-term debt repayment from bank. This will supplement cashflows along with lower interest payments due to reduced benchmark rate. JSCL does not plan to take further debt in the near term. The COVID outbreak has not impacted the Company's portfolio materially, exhibiting its resilience.

The ratings are dependent on the management's ability to execute its envisaged strategy of growth and expansion amidst prevailing tough environment. Timely materialization of these initiatives into sustainable ventures is critical. Strong performance of subsidiaries, stable dividends, and effective management of financial profile and liquidity remains important.

PACRA

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