- Dollar loses further in interbank market.
- Market boosted after Ishaq Dar’s statement about dollar’s value.
- SBP says action would be taken against banks involved in creating volatility.
The Pakistani rupee continued to gain ground against the dollar Thursday — the 10th consecutive session — and appreciated by 2.19 in the interbank market at the start of the intraday trade.
The greenback was being traded at Rs221.75 after losing 2.19 as the market opened today. It closed at 223.94 per dollar a day prior.
The market observers are of the view that the dollar declined on hopes of inflows, upbeat trade data, and bets that the new finance minister would be able to tame the US currency effectively.
“In my view, recent encouraging trade balance data, hopes from multilateral institutions of additional inflows supported the rupee,” said Samiullah Tariq, the head of research at Pak-Kuwait Investment Company.
“The 215-220 per dollar seems a good level,” he added.
Finance Minister Ishaq Dar’s statement “the actual value of the rupee was less than 200 and it would be brought down, as it was currently undervalued” further bolstered the currency as the dollar sales by the exporters continued to underpin sentiment and improve supplies in the market, according to a The News report.
Meanwhile, the governor State Bank of Pakistan (SBP) informed the National Assembly’s Standing Committee on Finance that action would be taken against banks and forex exchange companies involved in creating volatility in the exchange rate upon the finalisation of the inquiry.
The committee wanted to know the names of the eight banks that were allegedly involved in speculation for making money and there was a considerable difference in dollar rate in the interbank and exchange companies rate.
The committee directed the SBP to take appropriate action against all the banks and exchange companies allegedly firing up exchange rate volatility.
The committee also asked the SBP to take exemplary action against banks and exchange companies involved in speculations to make a profit so that no one could dare to play with the economy of the country in the future.
Gas crisis to aggravate as supplier refuses to deliver LNG cargo
- ENI to not deliver February’s cargo purchased at cost of 12.14%.
- This will result in reduced supplies to power sector.
- End consumers to get costly electricity.
ISLAMABAD: Pakistan is expected to witness an aggravating gas crisis in February as an Italy-based LNG trading company, ENI, intimated that it will not be able to deliver its term LNG cargo due on February 6-7 by claiming the force majeure, The News reported Monday citing a senior official of the Energy Ministry.
“The gas deficit will soar as imported LNG will reduce to 700mmcfd as only five cargoes, at the price of 13.37% of Brent, and 2 cargoes, at 10.2% of Brent under GtG agreements with Qatar, would be available in February. There will be no LNG cargo from ENI at the cost of 12.14% in the month of February. And this will increase the gas crisis in the country.”
The news has disturbed the top mandarins of the Petroleum Division as the country is already facing an acute gas crisis. The crisis has been affecting domestic users in some main cities, with little to no pressure.
The government under its gas load management plan promised gas supply to domestic consumers for cooking times in winter — three hours in the morning from 6am to 9am, two hours from 12 noon to 2pm for lunch, and three hours from 6pm to 9pm for dinner. The ground realities speak otherwise.
Relevant authorities say the impact of ENI backing out will come in the shape of reduced supplies to the power sector and the projected supply of 325mmcfd to the sector next month will not be available.
The reliance on furnace oil-based electricity will increase and end consumers will get costly electricity. The captive power plants will be supplied gas at 50% and supply to fertiliser plants, compressed natural gas (CNG) and local industry shall remain discontinued.
Earlier, the Petroleum Division had claimed that the ENI from January 2023 onward will not default but that is not the case.
When contacted, ENI spokesperson also confirmed the development, saying: “February delivery disruption is beyond the reasonable control of ENI and due to an event of Force Majeure. ENI does not benefit in any way from the situation.”
According to the senior official, ENI defaulted five times in 2022; it failed to provide LNG cargoes in the months of March, May, July, September, and November.
Despite economic crisis, $1.2bn worth of cars imported in just six months
- Pakistanis spent $1.2 billion on import of cars and other related stuff.
- SBP reserves can only cover three weeks’ of imports.
- Huge spending on imports of luxuries calls for shift in govt policy.
ISLAMABAD: Despite efforts to conserve foreign exchange reserves by restricting imports, Pakistan spent $1.2 billion (or Rs 259 billion) on the import of transportation items, including luxury cars, high-end electric vehicles, and their parts, during the last six months, reported The News.
Pakistan is facing an acute shortage of dollars and has less than $5 billion in its reserves which is hardly sufficient to finance three-week of its imports.
Despite the overall reduction in imports of transportation vehicles and other items compared with last year, the economy was still burdened with heavy outflows for buying expensive luxury vehicles and useless items.
During these six months, the country imported completely built units (CBU), completely knocked down/semi knocked down (CKD/SKD) of $530.5 million equivalent to 118.2 billion.
Since CKD kits are not allowed to be imported, yet multimillions of dollars of these kits are being imported, harming the local industry and their production.
The economy is suffering, but hefty spending on cars and other vehicle imports is raising a lot of questions about the government’s policy of halting imports related to the industrial and commercial sectors.
Road motor vehicles (build units, CKD/SKD), $1.03 billion or Rs230.5 billion were spent during these six months. Last year in the same period, the spending on these vehicles was $1.87 billion, showing a reduction of 63%.
Under the completely built units (CBU) during July-Dec 2022-23 imports of buses, trucks and other heavy vehicles imports were $75 million (Rs16.6bn), motor cars with $32.6 million.
Under the CKD/SKD, imports of buses, trucks, and other heavy vehicles imports were $722.5 million (Rs161 billion), while motor car imports were recorded at $498 million (Rs111 billion). Motorcycle imports also stood at $27.6 million.
Besides, the parts and accessories imports stood at $188.6 million (Rs42 billion). Similarly, $47.7 million were spent on the import of aircraft, ships, and boats.
Only in December, the transport sector’s imports stood at $140.7 million (Rs31.6 billion). Of this, $47.5 million or 11.3 billion rupees were spent on the imports of cars, $27 million on parts and accessories, $3.6 million on motorcycles import, $25 million on buses, trucks, and heavy vehicles, and another $22.4 million on the import of aircraft, ships, and boats.
Reportedly, despite economic crises, the incumbent government has lifted a ban on the import of luxury cars recently. This is one of the major sources of dollar outflow from the economy.
Textile sector warns of protest on untimely clearance of imported cotton
- APTMA chief says textile exports will be limited to $16-17bn this year.
- He reveals industry exports raw cotton four times compared to imported value.
- Industry player warns 7m people will be unemployed in January.
LAHORE: As Pakistan struggles to boost depleting foreign exchange reserves, the textile owners threatened the government of staging a protest due to the delay in the clearance of imported cotton containers at Karachi port, The News reported Friday.
All Pakistan Textile Mills Association (APTMA) Chairman Hamid Zaman said: “The textile industry will be forced to protest if the government doesn’t clear the imported cotton coming to Karachi.”
The textile industry would fail to meet an export target of $25 billion in the current year on the non-availability of raw materials, mainly raw cotton, he said during a programme organised by the Lahore Economic Journalist Association.
“This year, textile exports will be limited to $16-17 billion,” he predicted.
The textile industry imports raw cotton and after value addition exports it at four times the imported value. Thus, the government should allow exporters to import 35% of the export value.
The APTMA chief, however, warned that if things are not controlled, seven million people associated with the industry will be unemployed in January.
“The industry was left with 60 days’ of raw materials only and if timely clearance of already arrived cotton will not start from the port, textiles will completely shut down. This will result in unemployment of 25 million people across the country,” he warned.
Zaman informed that almost 30-50% of the textile industry of Punjab, Khyber Pakhtunkhwa, and Sindh had already been completely or partially closed.
“The textile industry has so far ordered 1.7 million bales of cotton from the US, out of which 0.531 million cotton bales have been dispatched while 100,000 bales have already arrived at Karachi port with a value of more than $300 million.”
APTMA chief urged the government to instruct commercial banks as well as the State Bank of Pakistan to ensure the timely opening of letters of credit for the cotton importers to avoid any export crisis.
In response to a question, Zaman admitted that some exporters could not bring their export amount back to Pakistan due to the instability of the exchange rate. He also urged the government to take action against those who were hoarding the US dollar, vowing that the APTMA would support the cause.
Zaman further pointed out that demurrages and detention charges on imported goods had exceeded the value of the goods that foreign companies had to pay.
“So far, Rs2 billion in demurrages and detention charges have been charged, which are increasing with time, and since last few days the traders and banks will be at odds with each other.”
APTMA Senior Vice Chairman Kamran Arshad said a severe shortage of raw cotton was there in the local market as the country had produced only 4.6 million cotton bales.
He mentioned that 15 million cotton bales were required to achieve $20 billion in exports.