February 3, 2019 (MLN): This past week brought a series of economic events both in terms of data releases and the developments in public policy.
This Thursday State Bank of Pakistan (SBP) announced monetary policy and raised its benchmark policy rate by another 25bps to 10.25%, taking the tally to 450bps since Jan-2018 and at the highest levels in over 6 years.
On Tuesday, Economic Coordination Committee approved to launch Islamic Sukuk bond amounting to 200 billion rupees for payment of circular debt.
On the upside, the government reduced prices of various petroleum products for the month of February 2019. As per Finance Ministry notification, the prices of petrol have been reduced by Rs0.59 per liter, bringing down the price of the product from Rs 90.97 per liter to Rs 90.38 liter.
Another development took place when Karandaaz Pakistan, a company funded by the UK’s Department for International Development (DFID), and JS Bank, one of Pakistan’s fastest growing banking institutions, signed the risk participation agreement to jointly facilitate SME financing.
On the down side, in a report released on Thursday Moody’s Investors Service expects Pakistan’s deficit to widen to 6% of GDP in fiscal 2019 because revenue growth is likely to be below government projections, given slower economic growth and the new revenue-based incentives, before gradually narrowing to 5% of GDP by fiscal 2021 as the economy picks up.
The report said that the measures announced in government’s second mini-budget will keep Pakistan’s budget deficits wider for longer, potentially eroding the credibility of government efforts to achieve fiscal consolidation as no new spending cuts or revenue-raising measures were announced.
Likewise, Fitch Ratings downgraded Pakistan’s long-term ratings to ‘B-’ from ‘B’ in December 2018 to reflect heightened external financing risk from the low level of reserves and high gross financing needs arising from elevated external debt repayments.
Meanwhile, this week's data releases apprised the following developments in Pakistan's equity market and overall economic scenario:
• The Federal Government’s cumulative net borrowing for budgetary support has risen to Rs.734.77 billion for the period July – January 19, 2019.
• Disbursement of foreign loans during July – December FY19 have plunged by 61% to $2.3 billion whereas last year’s disbursement for corresponding period was $5.89 billion.
• Pakistan’s weekly SPI for the combined group increased by 1.65 percent compared to the previous week (Jan 24, 2019) and increased by 8.89 percent compared to the corresponding period from last year (Feb 01, 2018).
• Pakistan’s Yearly Inflation rate was 7.19 percent in January 2019 compared to 6.17 percent in December 2018 and 4.42 percent in January 2018
• The government has released around Rs 32.646 million funds for three ongoing projects of the Petroleum Division under the Public Sector Development Programme (PSDP 2018-19) during last seven months of the current fiscal year against the total allocation of Rs 463.175 million.
• Engro Powergen Qadirpur Limited reported annual profits of Rs. 2.6 billion for the year ended December 31, 2018, exhibiting an increase of 9.9% as compared to the same period last year.
• Atlas Honda Limited reported its nine-month earnings for the period ended December 31, 2018, at Rs.2.5 billion, EPS: Rs.24.3 marking a 26% decline from last year’s net income (Rs.3.4 billion).
• Archroma Pakistan Limited’s (ARPL) quarterly profits (Rs.332.7 million) in 1QFY19 have expanded by 18.5% as compared to last year’s first quarter (Rs.280.7 million). The company has reported its EPS at Rs.975.
• Siemens Pakistan Engineering Co. has announced its financial earning for the quarter ended with December 2018 to have suffered a considerable decline of 27.3% as its net income for the period rounded up at Rs.204.9 million, (EPS: Rs.24.84) down from a profit of Rs.281.7 million recorded last year.
• ICI Pakistan Limited has stated Profit after tax (PAT) for the six months ending December 31, 2018 at PKR 825 million, 49% lower than the same period last year.
• Arif Habib Limited (AHL) has reported a profit of Rs 71.2 million for the six months ended December 2018, showing a remarkable recovery after incurring losses in the same period last year on account of significant decline in company’s unrealized loss in re-measurement of investments.
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