No commitment made to IMF on gas tariff hike, circular debt recovery: Dar

The government has made no commitments with the International Monetary Fund
(IMF) to increase gas tariff or to recover power sectors circular debt from
consumers through electricity bills, Finance Minister Ishaq Dar said on Saturday.

On the privatisation of Pakistan International Airlines (PIA), the minister said that his
government increased the fleet from 16 to 38 and improved the airlines flight operations to
80pc. He also dispelled any doubts that 8,000 employees of the company would be laid off,
adding: We want to improve PIAs performance through better management.
But he was specific on the performance of Pakistan Steel Mills (PSM). The mill had assured the
government to increase production capacity to 74pc by December 2014, but failed. The
products that PSM produced at a cost of Rs40,000 a tonne were available at Rs10,000 in the
open market, he said. The PSM wants a 30pc regulatory duty on imports of such products. We
cant do it.
On new auto policy, the minister said the committee concerned had sought more time to make
further work on it. However, he said the only reason behind delay was that the existing players
wanted the same incentives which would be offered to the prospective new players.
The minister said Voluntary Tax Compliance Scheme would encourage businesses to formalise
their income, help promote tax culture in the country and bring more people into the tax net.
Additional revenue measures, he said, helped the FBR recover an extra Rs35bn in the second
quarter of the fiscal year. Revenue collection grew by 18pc in July-December 2015-16, the
minister said, and admitted that Rs200bn refund/rebate of taxpayers was stuck with the tax
department.
Commenting on the IMF review of Pakistans economy, he said Pakistan achieved all targets
under the five heads taxes, monetary policy, inflation, large-scale manufacturing, growth and
fiscal deficit. We havent demanded any waiver from the IMF this time, he said.
The minister said the government was willing to further negotiate the debt limitation act. We are
ready to bring down the limit of debt to 50pc of GDP. It stands at over 63pc as against the limit
of 60pc of GDP.
He said petrol and diesel at 73 and 79 US cents per litre, respectively, were cheaper in Pakistan
as compared to worlds average of $1.19 and $1.5. (dawn)
http://www.dawn.com/news/1237881/no-commitment-made-to-imf-on-gas-tariff-hike-circulardebt-recovery-dar
Pharma companies await resumption of PIA flights to import raw material

The pharmaceutical industry, beset by suspension of Pakistan International Airlines flights, sees a
tough week ahead if operations did not resume, as it relies on raw material imports from India
and some other countries.
Former chairman of Pakistan Pharmaceutical Manufacturers Association (PPMA) Saeed
Allawala said that the industry imports raw material worth $350-400 million per annum mainly
from India, Europe and China. (Dawn)
http://www.dawn.com/news/1237879/pharma-companies-await-resumption-of-pia-flights-toimport-raw-material
Lubricant prices unchanged despite cheap oil

Lubricant makers have yet to reduce prices despite a significant drop in global crude oil prices
since mid-2014 and a cut in lube base oil (LBO) rates by a local refinery.
They said the oil marketing companies (OMC) were quick in pushing up the rates on increasing
crude oil or LBO price but now they are reluctant to pass on the benefit to the consumers. Many
countries have reduced lubricant prices in the wake of falling oil prices.
Stakeholders offered mixed views for not reducing prices. Kenlubes International (Pvt) Ltd CEO
Mian Zahid Hussain said there was no direct link between prices of crude oil and lubricating oil.
He also cited a weaker rupee, rising cost of doing business, local taxes and increase in prices of
packing material as reasons behind the unchanged prices. (Dawn)
http://www.dawn.com/news/1237663/lubricant-prices-unchanged-despite-cheap-oil
IMF clears tax compliance scheme

ISLAMABAD: The International Monetary Fund (IMF) has asked the Federal Board of Revenue
to register maximum number of traders under the Voluntary Tax Compliance Scheme.
An official source told Dawn on Friday that the IMF had not only cleared the tax amnesty
scheme, but also urged the tax officials to achieve the target. The clearance came after the tax
authorities assured the IMF during recent meetings in Dubai that the scheme would not be
misused.
The traders who avail the scheme will be subjected to a lower rate of 0.3 per cent banking tax.
The official said this rate will be enhanced to the original level of 0.6pc after the end of the
scheme. The last date for availing the scheme is Feb 29, 2016. (Dawn)

http://www.dawn.com/news/1237662/imf-clears-tax-compliance-scheme

Wars, cheap crude hurting ME growth: World Bank

WASHINGTON: The World Bank said on Thursday that 2015 economic growth in the Middle
East and North Africa likely came to just 2.6 per cent, falling short of a 2.8pc forecast in October
as war, terrorism and cheap oil took their toll.
The plunge in oil prices to around $30 a barrel from over $100 two years ago is causing major
problem for the regions oil exporters, with government revenue falling sharply and budget
deficits growing. The World Bank said Saudi Arabias public debt would reach 20pc of GDP in
2017, 10 times its level of 2.2pc in 2013.
The richest oil exporters in the region, Saudi Arabia, Qatar, Kuwait and United Arab Emirates,
have large reserves that will enable them to run deficits over the coming years, although not far
beyond that, the World Bank said in the report. At current levels of spending, and an oil price
of USD 40 per barrel, Saudi Arabia will exhaust its reserves by the end of the decade. (Dawn)
http://www.dawn.com/news/1237661/wars-cheap-crude-hurting-me-growth-world-bank
Irans oil sales to Europe above 300,000 barrels

Iranian Oil Minister Bijan Zanganeh said on Saturday that Irans crude oil sales to Europe after
the lifting of international sanctions on Tehran had already reached above 300,000 barrels,
according to the ministrys news agency.
Irans oil exports, which had peaked at more than 3 million barrels per day (bpd) in 2011, fell to
a little more than 1 million bpd after tougher sanctions were imposed in 2012 because of its
nuclear programme. (Dawn)

5pc growth target to be achieved: Dar

Finance Minister Ishaq Dar said on Thursday that Pakistan has successfully completed 10th
quarterly economic review with the International Monetary Fund (IMF).

The government is now set to achieve five per cent economic growth target this year, along with
development and creation of jobs, Mr Dar said while speaking at a joint news conference with
Chief of IMF mission to Pakistan Harald Finger.
Mr Dar said it was for the first time that Pakistan had successfully completed 10 quarterly
reviews with the IMF.
Harald Finger agreed with the finance minister that economic activity remains robust, adding
that although a weak cotton harvest, declining exports, and a more challenging external
environment were weighing on growth prospects, real GDP growth is expected to reach 4.5pc
this fiscal year helped by lower oil prices, better energy supply, China-Pakistan Economic
Corridor (CPEC)-related investment, buoyant construction activity, and acceleration of credit
growth. (dawn)
http://www.dawn.com/news/1237462/5pc-growth-target-to-be-achieved-dar

Forex reserves fall by $227mln

Big banks set to report record profit

Lahore - The big banks of the country are anticipated to register impressive growth despite a
350bps decline in policy rate during 2015. This is due to major investment in high yielding long
term Pakistan Investment Bonds (PIBs) by these banks (34% of total deposits) and volumetric
deposit growth of around 10% for big banks.
According to statistics, big banks investment to deposit ratio (IDR) reached an all time high of
71%, whereas advance to deposit ratio (ADR) dropped to 44% as of Sep 2015. Net Interest
Income (NII) of these banks is projected to grow by 17% to Rs298bn driven by major
investments in PIBs and double digit deposit growth.
Alongside increase in NII of these banks, growth in capital gains is likely to drive earnings of
banks in 2015. Analysts of Topline have anticipated in a report that capital gains to grow by 79%
to Rs37bn in 2015. Banks have aggressively realized capital gains on PIBs and equities in 2015.
They said that big banks are expected to report record profits of Rs130b in 2015, up 12% YoY.
The top 6 banks in terms of deposits, including Habib Bank (HBL), National Bank (NBP),
United Bank (UBL), MCB Bank (MCB), Allied Bank (ABL) and Bank Alfalah (BAFL),
represent 63% of the total industry deposit, analysts added.

In 9M2015, big banks had reported capital gains of Rs30bn in 9M2015, up 109% YoY.
Report added that advances of big banks are expected to grow by 4% in 2015 as against 9% in
2014 due to lower working capital requirement and aggregate demand. However, with
commencement of China-Pakistan Economic Corridor (CPEC) projects and uplift in economic
activity we expect advances of big banks to grow by 13% on average during 2016-18.
Private sector credit has already started depicting improvement. In 2H2015, credit to private
sector has grown by 9% as against 7% in the same period last year and 7.5% for the full year
2015.
Despite sharp fall in interest rates and big PIB maturities expected in 2016, banks still trade at
attractive multiples. Banks are currently trading at attractive forward PE of 7.2x and PBV of 1.2x
and ROE of 16% as against PE of 11.7x and PBV of 2.6x and ROE of 19% during high growth
period (2007-08). Banks are also offering attractive dividend yields of 8% higher than the
prevailing 6-month kibor rate of 6.3%.
Experts reiterate Overweight stance on banking sector. Their investment thesis is based on
factors including 1) Improving macros (estimated 2016-18 average GDP growth of over 5%), 2)
expected increase in credit growth to 13% in 2016-17, 3) Strong Capital Adequacy Ratio (CAR)
of 16% vs 10% requirement). (The nation)