Pakistan Economy - News & Updates - Archive

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ISLAMABAD (April 19 2006): The Anglo-Dutch Company's 4Gas plans to expand its network in Asia, and it will be setting up an LNG terminal in Pakistan. The increasing pace of development and the government's strong interest in energy supply sector has prompted the company to develop gas network in the country, Company sources said.

According to an official statement issued on Tuesday, a delegation of the Company, led by Chief Executive Officer Paul Van Poecke, met with the Minister of State for Petroleum and Natural Recourses, Muhammad Naseer Mengal, at his office. Secretary Ahmad Waqar and Joint Secretary (Dev) Jehangir Khan were also present. The Minister welcomed potential plans for the construction and operation of an LNG terminal in Pakistan.

4Gas is the only global independent LNG terminal developer and operator. It has projects around the Atlantic basin, including in the United Kingdom, the Netherlands and Canada/USA. Van Poecke said that while the company's Atlantic network of LNG terminals is being finalised, 4Gas is now preparing its network throughout Asia.

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By Imran Ayub

KARACHI: The federal government has asked Sindh fisheries authorities to ensure compliance with European Union quality standards by May this year, when an EU delegation is due to visit Pakistan, to ward off the looming threat of export ban.
In case the authorities failed to do so, the government said it would act independently and stop exports to European countries.
The Federal Ministry of Food, Agriculture and Livestock (MINFAL) has come up with a clear-cut argument, pointing the finger at institutions concerned within the Sindh government for non-compliance with quality measures required by the EU during its delegation’s visit last year.
"Non-compliance is largely attributed to management problems at the Karachi Fish Harbour and Fishermen Co-operative Society," said the federal secretary MINFAL in a letter to the Sindh chief secretary.
"I wish to emphasise that if the assurances given to the EU are not met within one month, the MINFAL will be constrained to take necessary remedial measures including suspension of fish exports to the EU countries."
The letter said the Marine Fisheries Department in the capacity of the competent authority and in consultation with the Government of Sindh had given assurances to the EU that their recommendations would be fully complied with.
"Export of seafood to the EU and other countries is critical to the national economy and for the livelihood of fishermen in coastal areas," said the letter.
A three-member team from the EU’s Food and Veterinary Office (FVO) visited Karachi in February 2005 to check seafood quality and inspected facilities and installations at the Karachi and Korangi fish harbours.
The team concluded the visit with warnings that Pakistani authorities should maintain seafood quality as per EU’s set standards, otherwise they would lose their largest seafood export market.
The EU warning rang alarm bells in the federal government quarters and in March 2005 it banned seafood export to European countries as a precautionary measure. Later, the government lifted the self-imposed ban in August 2005 on the assurance of Sindh government that it would meet required quality standards within next few months. But the misery goes on.
"The EU delegation in its earlier visit had inter alia recommended establishment of an isolated auction hall for EU, rehabilitation and improvement of chill room, flake ice plant and upgradation and improvement of 255 boats to bring them in accordance with the EU directives," said the letter.
"The next visit of the EU delegation is scheduled in May 2006, but little progress has been made for the rectification of these faults."
The MINFAL secretary urged the Sindh chief secretary to intervene in the matter and advise the organisations concerned for early implementation of the EU directives as non-compliance would have serious consequences for seafood exports to the EU.
Exporters share the same concerns as the country lost the European market for several months on the same grounds in 1998. The EU countries, which accounted for 54 per cent of Pakistan’s $128 million seafood export during 2003-04, have already imposed 100 per cent checks on the import of frozen fish products from Pakistan.
"We have separately approached the prime minister, his adviser on economic affairs and other high officials," said Sardar Hanif Khan, President Pakistan Seafood Industry Association.
"They have issued necessary directives to the institutions concerned but unfortunately no one paid heed."
He said the situation was very critical and the EU delegation’s visit in May could negatively affect the overall seafood exports from the country.

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Wednesday, April 19, 2006
By Fida Hussain

ISLAMABAD: The government is considering allowing the ministry of railways to resume the purchase of locomotives from a Chinese company, a senior government official told Daily Times on Tuesday.

However, when contacted a senior official of the ministry of railways said that the ministry was unaware of any such development. He said that Economic Coordination Committee (ECC) had already constituted a committee with deputy chairman of the Planning Commission as head to look into the matter after detection of defects in the under-frames of railway engines of 3000 horsepower. The purchase of the locomotives was stopped after defects had been found and no review of the decision has been taken so far, he added.

However, an official closed to the committee deliberations said the committee recently reviewed the operations of the defected railway engines and found them “fully satisfactory” after those were repaired. The Pakistan Railways signed a contract in 2001 for the purchase of 69 locomotives from M/s Dongfang Electric Corporation, China at a cost of Rs 89 million. M/s Dalian Locomotive and Rolling Stock Works, China is the manufacturer of the locomotives. This firm has manufactured more than 6000 engines of different horsepower.

According to the official, 3000 HP engines had developed cracks. These cracks were later rectified by the supplier. According to the findings of the committee specially constituted by the ECC the defected locomotives have been operating well for over one year.

The committee is also of the view that the 2000 HP locomotives supplied by the company did not develop any defect. The committee observed that similar teething problems were also experienced in the locomotives, which were supplied by various Western countries to Pakistan Railways.

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Wednesday, April 19, 2006

By Zulfiqar Ghuman and Irfan Ghauri

ISLAMABAD: The National Assembly’s standing committee on food and agriculture on Tuesday criticised the government for failing to implement its decision of procuring wheat from farmers at support price.

“The state promised the people to procure wheat from farmers at support price because if farmers did not get the price pledged to them, they will opt not to cultivate the crop in future leading to a wheat crisis and the country would lose self sufficiency in wheat,� Makhdoom Ahmed Anwar Alam, the chairman of the committee, said.

The committee members from the government as well as the opposition said the government allowed the increase in input prices and reduced the number of purchase centres, creating chaos among farmers. They said the government announced the support price of Rs 415 per 40 kilograms, but farmers in Sindh were offered Rs 360 to Rs 370, which did not even cover the input cost of the crop.

The committee decided to meet the prime minister and convey the concerns of the farmers. They also demanded a ban on wheat imports and asked for taking every possible step to ensure that farmers got the price they were promised. Syed Zafar Ali Shah and Pir Aftab Shah Jilani of the Pakistan People’s Party Parliamentarians complained that the Sindh government has politicised the procurement process and politicians included in the procurement committees, were patronising their political supporters and victimising opponents.

Taking notice of the complaint, the chairman told the Sindh Food Department to ensure transparency in procurement.

The committee was informed that the government had fixed 21.5 million tonnes as the wheat target this year but it was expected that the country would produce 20.5 million tonnes, which was less than the target set. Procurement in Sindh started on April 15 and 4000 tonnes had been procured so far. In Punjab, the procurement will start on April 20.

“There are serious flaws in the system and market perceptions need to be changed,� Ismail Qureshi, the Food and Agriculture secretary said. He said the issue had been taken up with the Economic Coordination Committee of the cabinet and important decisions were expected in a few days. He said 2.2 million tonnes of wheat was left over from the previous year in government stocks.

He said that on the directions of the prime minister, the Punjab government was to procure a minimum of 3 million tonnes, Sindh 0.7 million tonnes and PASSCO 1.30 million tonnes of wheat from farmers.

The government has decided that there would be no restrictions on inter-district and inter-provincial movement of wheat. The banks were also directed to provide a cash margin of 90:10 to the private sector for wheat procurement.

He said that since the prices of wheat remained stable this year, the private sector had not come to purchase wheat, which was adding to the farmers’ difficulties.

http://www.dailytimes.com.pk/default...-4-2006_pg7_14

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President General Pervez Musharraf raised a number of key economic issues during a meeting with the senior officers of the State Bank of Pakistan on Monday. Inflation, he said, should be controlled, trade deficit reduced, micro-finance made available to the poor and the benefits of economic progress carried to the people.
The president pointed out that tax revenue collection will exceed the target this year but there was still need to strengthen the tax to the gross domestic product ratio. He asked the banks to share the hefty profits they are making with the depositors by increasing the rate of return on deposits. The president has been quite candid in his observations and directives about various important economic matters that underscores the need for greater attention at all the policy-making levels for early initiatives to fully address these issues.
On this occasion, the State Bank Governor Dr Shamshad Akhtar informed that the central bank had continued with a tight monetary policy in order to control inflation. However, the price hike, especially of essential items, is an area where greater effort is required to keep inflation and prices under close watch and strict control. Sustained economic growth can alleviate poverty by increasing the access of poor people to micro-finance, agricultural credit and small and medium enterprises; finance was yet another key observation made by the president. This will generate new economic activity in rural areas and help reduce poverty. The president observed that exports should be increased to reduce the trade deficit.
Meanwhile, the president also addressed the members of the American Business Council and Overseas Investors Chamber of Commerce and Industry where he asked the investors to take advantage of investment-friendly policies and abundant skilled labour in Pakistan. The government has been encouraging maximum investment in the country. Pakistan has also been seeking greater market access to boost exports. During the current financial year, foreign direct investment will cross three billion dollars, which is highly encouraging, and this trend should not only be sustained but it should be further accelerated.

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GDP in current fiscal year likely to remain at 6.8%
KARACHI: Pakistan’s gross domestic product (GDP)’s growth rate in the current fiscal is expected to range between 6.3-6.8 percent, while the national economic growth rate throughout this decade could be retained at over 6 percent per annum provided the process of reforms kept continuing.

State Bank of Pakistan (SBP) in its second quarterly report on the current fiscal year told that the weakness of the economy was mainly due to agricultural production decline, however, the services sector was seen excelling more than the expectations.

The Central Bank, foreseeing the possibility of inflation rate this year mellowing down to 7.7-8.3 percent, underscored the need of further toning down of this rate so that the contracting cost of production could expand exports.

SBP report also underlined the need of addressing the declining trend in savings and widening trade deficits. Current account deficit has been anticipated to remain at 4.7 percent of the GDP during current fiscal year.

The report further said that the wheat production was likely to be around 21 million tons. However, nothing categorical could be said about the large manufacturing sector’s production due to non-availability of the relevant data, report said.

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Thursday, April 20, 2006

* Inflation to fall to 7.7-8.3 percent
* Wheat yields could exceed record set last year
* Growth in textile, car sectors

By Sarfaraz Ahmed

KARACHI: The GDP growth rate this financial year is likely to be less than the 7 percent target, according to the State Bank of Pakistan.

Fast growing globalisation and increasing regional competition means Pakistan can ill afford to derail its macroeconomic stability, which has been the lynchpin in restoring domestic and foreign investor confidence, says the second quarterly report on ‘the state of Pakistan’s economy’ for financial year 2005-06 released by the State Bank on Wednesday.

The central bank estimates that real GDP growth will fall in the range of 6.3 to 6.8 percent. The slowdown relative to the target owes principally to “the (estimated) weakness in the commodity producing sectors of the economy, the impact of which will be partially offset by an anticipated above-target performance of the service-sector,� says the report.

Also, while inflationary pressures show a welcome decline, the downward trend is unsettled, and inflation remains relatively high. Inflation is projected to fall in the 7.7-8.3 percent range during FY06.

According to the central bank, the relative improvement in water availability and availability of agriculture credit bodes well for Rabi crops, in particular the wheat crop. Wheat yields could surpass the record (2586kg/hectare) set last year. In aggregate, minor crops could also do better than targeted during Rabi. The overall growth of the crops sub-sector remains below target due to underperformance by two major Kharif crops - cotton and sugarcane.

In large-scale manufacturing, the report says the largest industrial group, textiles, grew 7.7 percent year-on-year (yoy) during the first seven months of FY06, but far below the 26.4 percent yoy growth in the corresponding period of FY05. The chemical industry posted only 4.4 percent yoy growth in output during July-Jan FY06, primarily due to capacity constraints. The fertiliser industry, also facing capacity constraints, witnessed 16.4 percent growth, as compared with 42.2 percent last year. However, the automobile industry posted encouraging growth of 28.2 percent.

The central bank report says the government’s fiscal position witnessed moderate deterioration during H1-FY06, despite recording strong growth in tax revenues. Monetary policy remained tight throughout July-Feb FY06, while the benchmark 6-month T-bill rate was kept almost unchanged.

The report says that large government borrowing during July-Feb FY06 was mainly due to relief spending needs in the earthquake affected areas, retirement of long-term government paper and less than anticipated external receipts from NSS instruments.

Pakistan’s overall external account deficit narrowed marginally during July-Jan FY06 to $0.58 billion from $0.61 billion in the corresponding period of FY05, says the report. The sharp deterioration in the current account ($2.4 billion) deficit was principally due to higher import related activities.

The central bank says a substantial part of improvement in financial flows was due to increased foreign private investment, especially FDI, including a substantial $255 million received as privatisation proceeds.

http://www.dailytimes.com.pk/default...0-4-2006_pg1_1
GDPexpected lower than 7%: SBP

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Thursday, April 20, 2006
Staff Report

KARACHI: The inflows of the foreign direct investment has shown some improvement in the country during this current fiscal, but it is still less than one percent of the global FDI flows.

The central bank in its second quarterly report said while there has been some improvement in the investment climate of the country, much remains to be done in order to deepen these flows sustainably. Despite the gradual rise in foreign investment, Pakistan still receives a meagre share (less than one percent) of the global FDI flows.

It said a comparison with some other countries of the region Pakistan’s share in the global FDI flows though rising is still less than the other large countries.

During the July-Jan period the FDI flows recorded a substantial rise of $711 million to reach $1.226 billion.

A large share of this increase came from rising investment in equity capital, the bulk of which was in the sectors of telecommunication, financial business services, oil and gas exploration, power and trade.

The country’s outstanding export bills held by exporters increased by $173 million during July-Jan 2005-06 as compared with the $132 million rise in the same period last year.

During the period the trade balance deteriorated sharply from $2.6 billion to $4.7 billion during July-Jan 2005-06 as a very strong import growth of 31 percent outpaced a reasonable 13 percent growth in exports.

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Lending rates more likely to go up: State Bank second quarterly report for fiscal year 2006 issued

KARACHI (April 20 2006): The State Bank of Pakistan has ruled out any reduction in the interest rates in fiscal year 2006, and has indicated that a change, if warranted, is likely to be on the upside, through further monetary tightening.

The second quarterly report on the state of the economy fiscal year 2006, sent to the Federal legislature, released on Wednesday, says: "Despite evidence of the slowdown in credit off-take, relative to last year (which saw exceptionally high growth in net credit off-take), and a visible weakening in manufacturing growth, the SBP monetary policy stance has come under debate.

Ironically, this centres on a very welcome weakness in inflationary pressures and particularly the deceleration in core inflation. On the one hand, some stakeholders (including manufacturers and exporters) point to the fall in inflation and stress the need to immediately lower interest rates to reduce the cost of production and investment in order to strengthen growth.

On the other hand, the SBP is also exhorted by other stakeholders to tighten its monetary posture even further, by increasing rates immediately. It is argued that this is needed to reduce inflation to the low single digit, support long-term growth, and curb speculative pressures (alleging that asset bubbles have been created and need to be pricked), even at the risk of substantially depressing economic activities in the short-term. Both arguments merit some consideration."

The SBP says: "The problem with the first argument is simply that despite the decline, domestic inflation rates remain relatively high and, while slowing, fiscal year 2006 real GDP growth is also expected to remain strong, at over 6 percent.

At present, it can be argued that given the monetary overhang of the preceding years, a premature easing of monetary policy runs the risk of reversing the downtrend in inflation, and that any financial savings as a result of lower interest rates could therefore be quickly eaten up by a rise in the cost of inputs.

It must also be remembered that deposit growth (and indeed, the national savings rate) have already weakened in FY05 and fiscal year 2006." This means that the country will be hard-pressed to meet its growing investment requirements through domestic savings, with attendant costs in terms of a widening current account deficit, slower growth, and eventually, higher inflation, warns SBP.

In the light of the above, and the emerging competition for deposits, it therefore seems (particularly as increasing trade and fiscal imbalance, as well as the persistent high fuel prices may not allow inflationary expectations to weaken significantly), and the potential build-up of asset bubbles, a decision to sustain the current monetary stance must centre on the SBP's statutory responsibility to sustain both the price stability and the growth, in the economy.

Indeed, while there is some evidence of a slowdown in the commodity producing sectors, and particularly large-scale manufacturing, this seems to be driven more by factors other than a very substantial slowdown in demand (eg capacity constraints).

ASSET BUBBLES: It must be recognised that these are notoriously hard to define ex-ante, and there is also a considerable controversy in economic literature on the appropriate policy response. This is particularly true if the bubbles are restricted to small components of the economy, says the report.

The SBP says: "On balance, based on the above discussion there seems to be little room for a reduction in the interest rates through the remaining months of fiscal year 2006, and indeed there is some support for a policy bias towards a further tightening of the monetary stance.

In accordance with the Monetary Policy Statement for January-July fiscal year 2006, the SBP will therefore continue to monitor economic developments, particularly the trends in inflation, with a view to containing inflationary pressures without significant prejudice to growth."

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MoU signed for coal-based power plants in Thar

RECORDER REPORT
KARACHI (April 20 2006): Sindh Coal Authority and Associate Group, an American-Canadian company, on Wednesday at the Chief Minister House here signed a memorandum of understanding (MOU) to set up two 250 megawatts coal-based power plants in Thar.

The Director-General, Sindh Coal Authority, Abbas Ali Shah, and Iqbal Z Ahmed of Associate Group signed the MoU. On this occasion, Sindh Chief Minister Dr Arbab Ghulam Rahim said that there were ample opportunities for foreign investment in minerals based projects in the province.

He said that in view of huge coal reserves in Thar the government was encouraging different projects that would use coal as the main material for industrial activities.

The company has already started work on feasibility report for power plants.

The chief minister said that there was no law and order concern in Thar and the entire region was rich in mineral resources. Coal reserves are one of the biggest in the world, he added.

He said that work on water the project was in progress and soon there would be plenty of water supply for industrial and other uses.

Minister for Mineral Development Irfanullah Marwat said that extractable coal would be enough to produce 10,000 mw electricity. He said he would provide help to investors and protect their investment. Secretary Mines and mineral Abdul Majeed Akhund, Director General Mines and Mineral Sohail Akber Shah were also present on the occasion.

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KARACHI (April 20 2006): The consortium, led by Al-Tuwairqi Group of Saudi Arabia after receiving the letter of acceptance from the Privatisation Commission, on Wednesday deposited 25 percent (90.5 million dollars) of the bid money for Pakistan Steels, Zaigham Adil Rizvi told the Business Recorder here.

The Privatisation Commission had accepted the highest bid of 362 million dollars offered by the consortium and the bidders were asked to deposit 25 percent of the bid offer by April 20, which they did a day earlier, and the remaining amount in 60 days.

The winning consortium comprises Al-Tuwairqi Group, Magnitogorsk Iron and Steel Works (Russia) and Arif Habib Securities. The second highest bidder consortium comprised Al-Noor Financial Investment of Kuwait, Industrial Union of Donbass of Ukraine and Al-Jamiah Holdings of Saudi Arabia. Meanwhile, a three-member delegation of Islamic Development Bank (IDB), accompanied by two officials of Tuwairqi Steel Mills Limited (TSML), visited Port Qasim Authority (PQA) on Wednesday.

Since TSML will be utilising PQA's service for all imports and exports from Pakistan, they were briefed on the on-going and future projects. The delegation members evinced keen interest in port activities. PQA Chairman Vice-Admiral Asad Qureshi assured the delegation of full support to TSML whenever required. He also appraised the delegation of the reduced cost of port charges and terminal charges and also reduction in the berthing period of vessels calling at the port. All steps have been taken to make Port Qasim cost effective to enhance Pakistan's trade competitiveness, he said.

The IDB will be financing TSML projects in this connection. The delegation later paid a visit to Pakistan Steels jetty at the port as this jetty is likely to be used for transportation of raw material for TSML. The Tuwairqi Steel Mills Limited will start production from its plant within 18 months. It will be using the latest Directly Reduced Iron (DRI) technology and will produce one million tonnes of steel in the first phase and later go up to three million tonnes. The TSML will employ 3,500 engineers and technicians, thereby creating massive job opportunities in the service sector. Iqbal R. Siddiqui and Mateen Jalal Khattak from TSML and Sadiq R. Muhammad, Mehmet Fatih and Nohammad Hussein Khalif from ICIEC, a subsidiary of IDB were accompanied with the delegation.

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ISLAMABAD (April 20 2006): The sugar import bill has jumped up from $230 million in December 2005, to $450 million in April 2006, as the international market has gone highly bullish, leaving no sign of relief for the consumers, at least for some months to come.

Two factors played a big role in increasing the import bill. These were delay in import, and the consumption of huge quantity of sugarcane in gur-making. Gur making had remained a great attraction for its commercial exporters who enjoy duty-free business at a time when gur prices touched Rs 45 and Rs 50 per kg level.

This was the first season when gur-making extended to Punjab. Pakistan proved the best market for commercial gur makers and exporters throughout last season. They made money by hurting the government as their entire activity remained tax-free, and the organised sector by utilising its share.

According to the market sources, gur makers widened the sugar shortfall by around 0.130 million tons. The import of this quantity would cost additional $67 million to the national exchequer.

Faced with a shortfall of 0.9 million tons sugar, the government is desperately placing orders now for import of the commodity at $480 and $490 per ton and, with freight, its cost would be around Rs 34 and Rs 35 per kg at Karachi port. Transportation and handling charges will add considerably to increase the rates to Rs 40 and even higher after August when locally produced commodity will be no more to supplement imported stocks. This equation shows that sugar rates will remain all-time high from now onward.

Only timely import could make a difference, but both advisers--Dr Salman Shah and Dr Ashfaque Hasan Khan--whom Prime Minister Shaukat Aziz had asked to keep on watching sugar situation in December last year to ensure adequate supply to the open market did not rise to the occasion. They contested the production and consumption figures in every meeting with industry representatives from December 2005 to March 2006, till the international market jumped up from $225 to $230, taking landed cost to $530 per ton.

Sources said the industry gave a clear picture of production and consumption in more than one meeting from December onward by conveying to the advisors that they should suggest the government to import at least 0.6 million tons sugar to ease stocks, but they preferred to wait till things went literally out of control in March- April this year.

Market analysts said had the import option used in December last year or even in January this year, its cost per ton could have been around $225 and $235 pert ton.

They added that the landed cost of one kg sugar in December 2005, at the rate of $225 and $230, could be Rs 20 and with freight and other cost its retail rates could be maximum Rs 22 and Rs 22.50. These rates went up to Rs 35 and Rs 36 per kg in March and April this year.

Market experts worked out import bill on the basis of official shortfall figures. The official figures on sugar production and estimated consumption showed that Pakistan needs 0.9 million tons additional stock to meet its requirement till November 30, possible start of the new crushing season 2006-07.

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KARACHI (April 20 2006): Divergent trends were seen in the currency market on Wednesday in process of modest trading, dealers said. Importers rush for dollars pushed the rupee down at the forth quarter of the current fiscal year.

The rupee lost four paisa against the dollar in the interbank market for buying and selling at 60.02 and 60.04, respectively. Strong supply of dollars helped the rupee minimise its losses and it seems the rupee would move both ways in short-run, they said.

Reuters adds, dollar hit a seven-month low against euro in the world markets, extending losses made after minutes of the Federal Reserve's March meeting suggested the central bank was close to ending a two-year run of raising interest rates.

Amid a broad sell-off, the dollar also slipped to a fresh three-month trough versus the Swiss franc, stung by the minutes as well as softer-than-expected data for US producer prices and housing starts.

OPEN MARKET RATES: The rupee picked up two paisa against the dollar for buying and selling at 60.08 and 60.13, dealers said.

The rupee extended its erosion versus the euro, shedding 60 paisa for buying and selling at Rs 73.50 and Rs 73.60 after sharp rise in the value of the single European currency, dealers said.
================================Buying Rs 60.08Selling Rs 60.13================================

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Inflation to remain around eight percent in fiscal year 2006: SBP
RECORDER REPORT KARACHI (April 20 2006): Inflationary pressures through most of the eight months of the current fiscal year weakened, because of the central bank's stance of continuing tight monetary posture, administrative measures and favourable movements in key international commodity prices, and the likelihood that 8 percent target would be achieved.

The State Bank of Pakistan in a report released on Wednesday on the 'State of the Economy' said that "particularly notable is the gradual reduction in CPI inflation despite sustained high oil prices and the supply shocks". It said that CPI inflation had dropped from 9.3 percent in the year ended June 30, 2005 to 8 percent in February 2006.

Moreover, while CPI inflation remained in high single digit throughout the period, the volatility in the inflation rate was significantly lower than what it was in the corresponding period of last year.

Also, core inflation, after clinging stubbornly in the range of 7-8 percent during Jun FY04-October FY05 period, was finally trending downwards, dropping to 6.4 percent by February 2006, for the first time in the last 20 months.

The report added that the WPI inflation had also decelerated, falling to 9.9 percent on year-on-year basis in February 2006, after maintaining an average of more than 11 percent during the first half of the current fiscal year. As with the CPI, the contribution to the decline in WPI inflation was quite broad-based, with all the sub-groups of the index recording a deceleration in price rises.

"While there exists a possibility of a rebound in food inflation, the impact of this should be mitigated by the impact on aggregate demand (and particularly non-food, non-oil demand) and lower volatility in energy prices." As a result, barring unforeseen supply shocks, SBP forecasts suggest that the average annual inflation for fiscal year 2006 is likely to be in the neighbourhood of the 8 percent annual target.

The central bank has emphasised that the monetary policy remained tight throughout July to February 2006 period, while the benchmark treasury bills rate was kept almost unchanged. The SBP increased its interventions during the period to ensure that short-term interbank rates remained close to discount rate, ie 9 percent.

The higher interbank rates, amidst declining market liquidity and rising credit deposit ratio of the banking sector, contributed significantly to the 196 basis point increase in the weighted average lending rate during July-February 06 and a consequent relative deceleration in non-government credit growth.

Although credit growth remained strong at 18.1 percent during the period under review, it was substantially lower than the very high growth of 25.3 percent during the same period of last year.

Thus, the lower monetary expansion during the period was due principally to the slowdown in non-government credit growth, and depletion in banking system NFA.

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Japanese-Korean consortium to set up LNG terminal at Port Qasim
RECORDER REPORT KARACHI (April 20 2006): A consortium of leading Japanese and Korean companies have expressed interest in setting up a LNG terminal at Bundal Island, Port Qasim.

A four-member delegation, comprising Mitsui (Japan) and Kogas and Vopak (Korea), visited the site on Wednesday, and showed deep interest in the site which, they said, had great potential and could be developed into a leading LNG terminal in the world.

Kogas from Korea is the largest LNG importer in the world and another Korean company Vopak are established chemical terminal operators.

The LNG terminal is likely to be established at Port Qasim with an investment of one billion dollars. Port Qasim Authority (PQA) had issued expression of interest (EOI), which attracted the attention of the consortium and ultimately led to their visit to the site.

The delegation members, comprising Ishikawa Eiichi, Reika Shin, Lee Ho In, and Takayuki Hori, were briefed on PQA's ongoing and future projects.

PQA Chairman Vice-Admiral Asad Qureshi apprised the delegation of PQA's three-pronged strategy to facilitate the trade ie, cost effective and time efficient port services and facilities, customer-friendly approach and close liaison with port users. He also enlightened the delegation members of his vision of Port Qasim.

The Chairman saw Port Qasim as the port of first choice for customers and stakeholders providing time efficient and cost effective port services and facilitating industrialisation thereby making tangible contribution towards the economic progress and prosperity of Pakistan.