Day: September 9, 2021

Federal Minister for Finance and Revenue Shaukat Tarin has announced that the bilateral trade between Pakistan and Afghanistan will be carried out in Pakistani rupees.

In a meeting of the Senate Committee on Finance on Thursday, Tarin said Afghanistan was susceptible to massive damage to its dwindling currency in the wake of the foreign monetary organizations’ decision to withhold the country’s $9 billion in financial assets.

Tarin remarked that the financial situation of Afghanistan was being monitored on a daily basis. He said that skilled manpower could also be sent to run various affairs in the country.

Meanwhile, separately, Senior Vice President Sarhad Chamber of Commerce Shahid Hussain said that the bilateral trade in Pakistani rupees will benefit Pakistan’s economy. He added that the shortage of dollars in Afghanistan was a matter of concern. He urged the Government of Pakistan and the Afghan administration to ensure making it easier for traders on both sides of the border to do business.

Source: Pro Pakistani

Pakistan needs to identify and cultivate all the emerging opportunities of economic development, especially those that are being offered by regional and global development initiatives, including the Belt and Road Initiative (BRI) and Build Back Better World (B3W).

Therefore, a robust engagement with all the stakeholders and improving relevant policy frameworks should be the key priorities for Pakistan. The experts shared this viewpoint during the webinar ‘Belt and Road Initiative (BRI) vs Build Back Better World (B3W): Where does Pakistan Stand?’, organized by the Sustainable Development Policy Institute (SDPI).

Mr. Mustafa Syed, Executive Director of Pakistan China Institute, while sharing his views about international trade diplomacy, emphasized that Pakistan needs to identify viable development projects linked with its national plan.

“Pakistan should partner with all countries as this partnership will be a win-win for all. However, improving security would be imperative as we cannot afford incidents like in Gwadar, Karachi, and Dasu,” Mr. Syed said. He further added that B3W is a good initiative in terms of competition, although it is too late. However, Pakistan should welcome investments from all countries.

Mr. Hassan Daud Butt, the CEO of Khyber Pakhtunkhwa Board of Investment and Trade, explained that Pakistan has been able to showcase through the BRI that it could absorb investment. He said that we could leverage what we know by benefiting from the BRI, where Afghanistan is a partner country, and B3W, which can provide state-of-the-art equipment. We can connect East to West, bringing harmony and people-to-people connections and infrastructure.

Dr. Abid Qayum Suleri, Executive Director of SDPI, highlighted that under B3W, climate, health security, digital technology, and gender equity, etc., are some of the key focus areas, which are quite different from what BRI offers. He added further that B3W projects would be evaluated through different lenses, such as norms on corruption, human rights, labor rights, and environmental standards.

“Pakistan is in a unique position and it needs equally good relations with all powers in this multipolar world including China, Russia, US, EU, etc.,” Dr. Suleri said and added that a single country or economic bloc cannot tackle global challenges. The challenges such as COVID-19 and climate change should also remain areas of the key focus.

Director China Study Centre at the Institute of Strategic Studies, Dr. Talat Shabbir, while giving a comparative perspective, highlighted that the BRI is mostly about economic connectivity. He said that the BRI relies on bilateral loans and state-guaranteed funds, whereas the B3W plans to mobilize bilateral, multilateral, and private sector capital tools.

Dr. Shafqat Munir, Senior Research Fellow SDPI, while moderating the session, pointed out that “where CPEC and BRI are clear in terms of their rules and principles, we are yet to have a clear picture of the B3W.” He asserted that no investment is sustainable until it is secured. Regional countries are in a bid to restore peace in Afghanistan, which is a good omen for the future of development initiatives in the region. Dr. Hina Aslam, Research Fellow SDPI, earlier presented the detail of the various aspects of BRI and B3W.

Source: Pro Pakistani

A higher interest rate and a higher exchange rate depreciation lead to higher inequality and poverty, said Dr. Hafiz A. Pasha, the former Finance Minister of Pakistan, while speaking at the webinar ‘Understanding the Social Implications of Monetary Policy in Pakistan’ held by the Sustainable Development Policy Institute (SDPI).

While highlighting some negative developments in the commercial banking system, Dr. Pasha said that there is a low share of priority sectors such as agriculture, SMEs, and housing in terms of credit to the private sector.

Moreover, the financing schemes put in place after COVID-19 have largely benefited big corporate entities.

It is crucial to evaluate the social implications of monetary policies, such as inequality, but these have been rarely touched upon in Pakistan, he added.

Mr. M. Ali Kemal, Chief SDGs, Ministry of Planning & Special Initiatives, was of the view that inequality in Pakistan is part of a system that has not changed much in the last few years. In Pakistan, the policies made by the powerful are generating inequalities in the system.

However, he added that the green financing mechanisms are playing a key role by reducing inequalities and building back in a more resilient way.

Dr. Abid Qaiyum Suleri, Executive Director, SDPI, earlier emphasized the need for extensive research on the social impacts of monetary policy. Such research should be disseminated to all relevant departments.

While the political economy of policy-making is extremely important, collective efforts should be made to increase the number of beneficiaries of a policy, Dr. Suleri added.

Country Director Friedrich-Ebert-Stiftung (FES) Pakistan, Dr. Jochen Hippler, said that analyzing the social implications of monetary policies is extremely critical.

He added that a general avoidance to evaluate monetary policies leads to significant ignorance towards the developmental role of monetary policy such as reducing inequality.

Dr. Aliya Hashmi Khan, a Former Member Economic Advisory Council, argued that any economic policy should have horizontal linkages with social policies such as inequality, health, and education.

Dr. Waseem Shahid Malik, Professor of Economics, highlighted that we do not have much evidence on how monetary policies affect economic activities in the informal sector.

Dr. Hamza Ali Malik from UNESCAP suggested that there should be a focus on broader central bank policies, rather than just monetary policy while assessing social implications.

Senior economist, Dr. Ahmed Jamal Pirzada, explained that the objectives of monetary policy and the role of the central bank had not been defined in Pakistan.

Dr. Waqas Ahmed, Additional Director, State Bank of Pakistan, highlighted that the exchange rate management is a critical factor and that around 90 percent of the money spent in social sectors such as education or health is spent on creating infrastructure and not on quality improvement.

Dr. Syed Kalim Hyder Bukhari was of the view that institutional development and policy coordination is the solution for balanced growth and social development in Pakistan.

Dr. Vaqar Ahmed, Joint Executive Director, SDPI, said that the evaluation of monetary policies cannot be done by the State Bank of Pakistan alone. There is a need to place an agenda for action research on the social implications of monetary policy since we cannot do evidence-based policymaking without evidence, he added.

Dr. Sajid Amin Javed, Research Fellow SDPI, concluded that green financing, financial inclusion, and SME financing scheme are some positive developments that have contributed to economic recovery.

Source: Pro Pakistani

The return on equity of large banks has deteriorated over the past decade, while that of mid-tier banks has improved, a report by Topline Securities reveals.

The brokerage firm said that the return on equity (ROE) of large banks has fallen from an average of 19 percent in 2011 to 13 percent in 2020, down by 600 basis points.

In contrast, the ROE of mid-tier banks has risen to an average of 18 percent in 2021 from 12 percent in 2011.

For the purpose of its research, Topline Securities categorized Pakistan’s listed banks into large and mid-tier banks.

The class of large banks, included Habib Bank (HBL), National Bank (NBP), United Bank (UBL), MCB Bank (MCB), and Allied Bank (ABL). Meanwhile, it classed all other listed banks as mid-tier.

Amongst large banks, ABL and HBL experienced the highest rate of decline, with ROE sliding to 13 percent in 2020 from 22 percent in 2011.

Topline Securities attributed the deterioration in ROE to factors, including an increase in minimum deposit rate (MDR), the implementation of BASEL-III, a declining Advance to Deposit ratio (ADR), lower payouts, and below-average CASA growth.

The State Bank of Pakistan’s (SBP) move to increase the minimum deposit rate benefitted depositors but led to banks making less profit.

To meet the requirements of Basel-III, which is the regulatory framework on bank capital adequacy and risk, the SBP orders banks to increase their capital adequacy ratio to 12.5 percent in 2019 from 10 percent in 2013. This not only increased the capital base of the banks but also raised interest expense.

In addition, the advance-to-deposit ratios of large banks fell to 60 percent from 40 percent, after they adopted an “ultra-cautious approach” following the 2008 financial crisis, which Topline Securities said prompted them to alter their “asset mix from high yielding advances to low yielding-low risk treasury papers.”

The reduction in dividend payout ratios of large banks has also led to a decrease in ROE. Similarly, large banks saw a slightly lower than industry average growth in current account and

saving account (CASA), which may also have led to lower margins.

In contrast, mid-tier banks enjoyed a gradual improvement in average ROE.

Topline Securities attributed this to their “above average CASA growth, higher concentration in high yielding advances and domestic assets”.

Within mid-tier banks, Meezan Bank Limited (MEBL), Bank AL Habib Limited (BAHL), and Habib Metropolitan Bank’s (HMB) ROEs were the highest, averaging 24 percent, 22 percent, and 16 percent, respectively.

Amid all listed banks, MEBL and BAHL registered the highest ROEs, supported by strong growth in CASA and total deposits.

ABL witnessed the highest decline in ROE, on the back of a low-risk strategy where it avoided high-yielding assets and new initiatives. “Its ADR and payout ratios have fallen over the years and have remained below the industry average,” added Topline Securities.

Topline Securities expects the SBP to tighten regulation further, including the implementation of implement the International Financial Reporting Standard (IFRS-9) in 2022, which requires banks to

take provisions for expected credit losses and could impact profitability.

It recommended that banks with strong coverage and capital adequacy ratio (CAR) ratios should invest in “high yielding advances, low-cost deposit growth and better payouts,” in order to raise ROEs.

Source: Pro Pakistani

The National Assembly Standing Committee on Commerce has directed the Ministry of Commerce to revisit the country’s livestock export policy while expressing grave concerns over the ban on livestock, especially poultry and its allied products.

The Committee held its 26th meeting at the Parliament House with Member of National Assembly Syed Naveed Qamar in the chair.

The Committee was informed that, as per directives of the Committee, the Ministry of Commerce and the Ministry of National Food Security & Research were in touch and were holding sessions with all the stakeholders concerned to resolve the issue. However, the matter of ban on poultry and its products was in the court of law.

The Chair observed that the ban resulted in a failure to meet the export orders, causing huge losses to exporters in particular and the industry as a whole. He said it would also provide other countries the chance to come in and fill the gap. The Committee directed the Ministry of Commerce to peruse the case as a top priority.

The Committee considered “The Trade Organizations (Amendment) Act 2021”, moved by Ms. Sajida Begum MNA, and referred by the National Assembly on 10th August 2021. Secretary Ministry of Commerce Sualeh Ahmad Faruqi informed the Committee that the proposed amendments to the Act, including an increase in the tenure of the Chambers and other organizations, were under consideration with the Ministry of Law and Justice.

After a detailed discussion, the Committee decided to invite the relevant stakeholders, especially the current President Federation of Pakistan Chamber of Commerce and Industry (FPCCI) Mian Nasser Hayat Magoon and former President FPCCI in the next meeting.

The Committee also considered pension and gratuity for the employees of Pakistan Cotton Standard Institute (PCSI) and directed the Ministry to look into the issue as soon as possible.

The Committee unanimously approved the minutes of its previous meeting.

The meeting was attended by Members of National Assembly Mr. Muhammad Yaqoob Shaikh, Mr. Khurram Shehzad, Ms. Wajiha Qamar, Ms. Sajida Begum, Mrs. Farukh Khan, Mr. Usman Ibrahim, Rana Iradat Sharif Khan, Mr. Rasheed Ahmed Khan, Mrs. Tahira Aurangzeb, Ms. Shaista Pervaiz, Ms. Shaza Fatima Khawaja, and Syed Javed Ali Shah Jelani.

Source: Pro Pakistani

Governor State Bank of Pakistan (SBP) Dr. Reza Baqir said that the Securities and Exchange Commission of Pakistan (SECP) played an important role in creating an enabling environment to promote business in the country.

He was addressing the graduation ceremony of SECP’s first batch of ‘HAWKS Training Program’ at the SECP Head Office, where he inaugurated a state-of-the-art Business Center on Thursday.

The Governor SBP informed the new officers about the recent economic reforms and the policy measures taken by SBP to achieve sustainable economic growth in Pakistan. He also commended the simplification, supervision, and transparency reforms implemented by SECP.

The Business Center that has a skilled team has been launched with an aim to improve the overall user experience,. It will bring SECP a step closer to standardizing the process of business registration in Pakistan.

In his welcome address earlier, Chairman SECP Aamir Khan commended the achievements of the central bank’s Governor, putting the economy on the path of recovery. He said, “Dr. Baqir has single-handedly paved the way that has connected millions of Pakistanis living across the globe with our domestic financial system. Roshan Digital Account is a success story that makes a wonderful case study of transformative intervention.”

Talking about the HAWKS program, the SECP Chairman said that it was designed to implement a robust induction mechanism at the entry-level and it was targeted at hiring and grooming highly qualified and talented individuals, who can provide future leadership for the apex regulator.

Source: Pro Pakistani