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Institute of Financial Markets OF Pakistan
(Formerly Institute of Capital Markets)
NEWSLETTER | AUGUST 2016
“The name of the institute has been changed
from Institute of Capital Markets (ICM) to Institute
of Financial Markets of Pakistan (IFMP).”
Our New Address and Telephone Number:
Park Avenue Building, Suite No. 1009, 10th Floor,
P.E.C.H.S Block No. 6, Shahrah-e-Faisal, Karachi.
+92 (21) 34540843-44
AN OVERVIEW OF ECONOMIC GROWTH IN PAKISTAN
INVESTORS’ TERMS OF THE MONTH
REGULATORY NEWSFLASH
BUSINESS AND ECONOMIC NEWSFLASH
MARKETS IN REVIEW
PUBLIC DEBT IN PAKISTAN
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00 CONTENT
01
Message from the CEO
02
Introduction to the
Organization
03
Public Debt in Pakistan
04
An Overview of
Economic Growth in
Pakistan
06
Business and Economic
Newsflash
07
Regulatory Newsflash
08
Markets in Review
05
Investors’ Terms of
the Month
Page: 3 Page: 4 Page: 5 Page: 11
Page: 14 Page: 15 Page: 17 Page: 18
DETAILS: www.ifmp.org.pk 92 (21) 34540843-44 [email protected]
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Message From The CEO
The last few years have seen a rapid growth in size, quality and
sophistication of financial markets, because of changes in the policy
and regulatory environment, the entrepreneurial initiatives of indi-
viduals and institutions, and the availability of trained manpower.
The continuing growth of financial markets is further adding to the
demand for well-trained professionals.
Institute of Financial Markets of Pakistan is dedicated to the profes-
sional development of financial markets and research on financial
markets as well as the well being of financial markets by educating
the professionals about the norms and ethics being practiced in the
markets. IFMP has had a pioneering role in meeting the demand for
educated manpower. It is Pakistan's first specialized institution
devoted to the education and updating of knowledge of manpower
for financial markets. It will provide high-quality educational stand-
ards for all types of financial market participants; investors, bro-
kers, mutual funds, investment banks and policy makers.
The Institute's main activities are (1) Licensing the professionals
working in the financial markets by certifications. The institute’s key
responsibility is to educate the professionals working in different
financial markets of Pakistan through examining their knowledge in
their relevant field of work; (2) Studying the latest developments in
the financial markets in order to discover whether there is such a
thing as an ideal market economy; and (3) Contributing to the devel-
opment of financial markets in Pakistan. By means of these three
activities the Institute seeks to communicate its ideas to the audi-
ence both at home and overseas. The Institute's research is intend-
ed, first and foremost, to be neutral, professional and practical.
Rooted in practice, it aims to contribute to the healthy development
of Pakistani financial markets as well as to related policies by con-
ducting neutral and professional studies of how these markets and
the financial system are regulated and organized and how they per-
form.
The economy is changing all the time. The Institute hopes that, by
responding to these changes positively, it can contribute to the dy-
namic development of the country's financial markets as well as of
the economy itself.
Mr. Muhammad Ali Khan
Message from the Chief Executive Officer 01
The last few years have seen a rapid growth in size, quality and so-
phistication of financial markets, because of changes in the policy
and regulatory environment, the entrepreneurial initiatives of in-
dividuals and institutions, and the availability of trained manpow-
er. The continuing growth of financial markets is further adding to
the demand for well-trained professionals.
Institute of Financial Markets of Pakistan is dedicated to the pro-
fessional development of financial markets and research on finan-
cial markets as well as the well being of financial markets by educating the professionals
about the norms and ethics being practiced in the markets. IFMP has had a pioneering
role in meeting the demand for educated manpower. It is Pakistan's first specialized insti-
tution devoted to the education and updating of knowledge of manpower for financial
markets. It will provide high-quality educational standards for all types of financial mar-
ket participants; investors, brokers, mutual funds, investment banks and policy makers.
The Institute's main activities are (1) Licensing the professionals working in the financial
markets by certifications. The institute’s key responsibility is to educate the professionals
working in different financial markets of Pakistan through examining their knowledge in
their relevant field of work; (2) Studying the latest developments in the financial markets
in order to discover whether there is such a thing as an ideal market economy; and (3)
Contributing to the development of financial markets in Pakistan. By means of these
three activities the Institute seeks to communicate its ideas to the audience both at home
and overseas. The Institute's research is intended, first and foremost, to be neutral, pro-
fessional and practical. Rooted in practice, it aims to contribute to the healthy develop-
ment of Pakistani financial markets as well as to related policies by conducting neutral
and professional studies of how these markets and the financial system are regulated and
organized and how they perform.
The economy is changing all the time. The Institute hopes that, by responding to these
changes positively, it can contribute to the dynamic development of the country's finan-
cial markets as well as of the economy itself.
Mr. Muhammad Ali Khan
IFMP Monthly Newsletter 01 August, 2016
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The Institute of Financial Markets of Pakistan (IFMP) (Formerly Institute of Capital Markets), Pakistan’s first secu-rities market institute, has been established as a permanent platform to develop quality human capital, capable to meet the
emerging professional knowledge needs of financial markets and create standards among market professionals. The Insti-
tute has been envisioned to conduct various licensing exami-
nations leading to certifications for different segments of the financial markets. In addition, IFMP will also provide a plat-
form for research & development, exchange of ideas and con-
sulting services on financial markets issues.
IFMP Monthly Newsletter 01
Introduction To The Organization
PROGRAMMES
LICENSING CERTIFICATIONS
Fundamentals of Capital Markets
Pakistan’s Market Regulations
Stock Brokers Certification
Mutual Funds Distributors
Commodity Brokers Certification
INSURANCE CERTIFICATIONS
General Takaful Training
Family Takaful Training
Life Insurance Agent
Non-Life Insurance Agent
OTHER CERTIFICATIONS
Financial Advisors Certification
Financial Derivative Traders
Certification
Compliance Officers Certification
Clearing and Settlement Operations
Certification
Risk Management Certification
Capital Budgeting and Corporate
Finance Certification
Investment Banking and Analysis
Certification
Islamic Finance Certification
August, 2016
02
For more information, please visit our website: www.ifmp.org.pk
-FEE STRUCTURE-
Candidate Registration Fee (One-Time)
Rs.10,000
Examination Registration Fee
Rs.7,000
Membership Fee (Annual)
Rs.5,000 -EXAMINATION
SCHEDULE-
(2016-2017)
- Sunday, 25 September, 2016
- Sunday, 27 November, 2016
- Sunday, 29 January, 2017
- Sunday, 26 March, 2017
- Sunday, 28 May, 2017
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IFMP Monthly Newsletter 04
03
August, 2016
Public Debt in Pakistan
Public Debt refers to government borrowing through
various instruments domestically and internationally.
Governments may borrow money to meet the budget
deficit, meet the expenses related to extraordinary
situations, and to finance development activities.
The public debt comprises of the domestic debt and
external debt. Further classification of the public debt
in the Pakistani context is presented in Figure 1.
Figure 1: Classification of Public Debt
Source: Pakistan Ministry of Finance (2016)
Instruments for Domestic Public Debt
The Government of Pakistan (GoP) issues short-term
Treasury Bills (T-Bills) and long-term Pakistan Invest-
ment Bonds (PIBs) to raise a large portion of domestic
debt. The auctions of the long term Federal Invest-
ment Bonds (FIBs) were suspended in 1998 (Khalil,
2004). The PIBs were introduced in 2000 to enable
the GoP to raise long-term debt, to create a bench-
mark yield curve, and to meet the long-term invest-
ment needs of institutional investors.
As of April 2016, the GoP had issued PKR 4473.60 bil-
lion and PKR 4,909.9 billion worth of T-Bills and PIBs
respectively. The State Bank of Pakistan (SBP) issues T
-Bills and PIBs on behalf of the GoP under the Public
Debt Act 1944 (SBP, 2016 b,c). Table 1 presents an
overview of the characteristics of T-Bills and PIBs.
Table 1: Characteristics of T-Bills and PIBs
Source: SBP (2016 a,b)
Treasury Bills Pakistan
Investment Bonds
Denomination Multiples of PKR 5,000
Multiples of PKR 100,000
Tenor 3, 6 and 12 months 3, 5, 10, 20 years
Coupon Zero Coupon (Issued at dis-count)
Face value
Profit Difference between discounted and face value
Fixed semi-annual coupon
Auction Fortnightly Quarterly Form Scrip less (Electronic) Participants in the Auction
Primary Dealers designated by the SBP
Investors Retail and Institutional Eligibility for Investment Resident and non-resident
Internment holding of Secu-rities
Investor Portfolio Securities (IPS) ac-count maintained by primary dealers and scheduled banks
Custodian SBP Redemption Upon maturity only Trading Primary and secondary markets Liquidity High Returns High as compared to bank deposits Default Risk Virtually risk free securities
Income Tax Payable on profit based on prevailing rates
Zakat Deduction Not mandatory at source
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IFMP Monthly Newsletter 04
03
August, 2016
The SBP floats T-Bills of varying maturities to main-
tain the desired levels of liquidity in the economy,
control inflation by managing liquidity, and at times
to control monetary exchange rates.
The GoP also borrows funds from retail investors
through National Savings Schemes (NSS), which in-
cludes Regular Income Certificates, Defence Saving
Certificates, Special Savings Certificates, Prize Bonds,
and Pensioners Benefit Accounts. The Central Direc-
torate of National Savings (CDNS) is responsible for
raising funds through NSS. The CDNS operates
through 12 regional directorates and 367 savings cen-
ters across Pakistan (National Savings Organization,
2016). The GoP considers this mechanism to mobilize
national savings and offers significantly higher rates
of return on these instruments.
Insights into Pakistan’s Total Public Debt
Figures 2, 3, and 4 highlight the composition of the
overall public debt, domestic debt, and external debt
as of April 2016. It is evident that the domestic debt is
nearly 2.5 times of the external debt, with nearly 45%
of domestic debt being permanent. On the other hand,
short-term external debt is a mere 3% of overall ex-
ternal debt.
Figure 2: Composition of Domestic and External Debt
Source: SBP (2016c) Notes: *excludes IMF loans to Central Bank for BOP support, for-eign exchange liabilities and includes IMF loan for budgetary sup-port
Figure 3: Composition of Domestic Debt
Source: SBP (2016c)
Notes: *It includes FEBCs, FCBCs, DBCs and Special US Dollar Bonds held by the residents.
Figure 4: Composition of External Debt
Source: SBP (2016c)
Public Debt in Pakistan
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IFMP Monthly Newsletter 04
03
August, 2016
Figure 5 presents the details of domestic public debt raised through NSS in recent years. A decline in the NSS
instruments in 2015-2016 from the previous year is evident. This may be a reflection of GoP’s preference to
retire expensive debt and investors’ preference for higher returns that can be earned from the exceptional
performance of the Pakistan Capital Markets.
Figure 5: Domestic Public Debt Attributed to National Savings Scheme
Source: SBP (2016d)
Yields and Rates of Return on Domestic Public Debt Instruments
The target policy rate has been declining gradually and steadily. The SBP reduced the policy rate from 7% in
May 2015 to 5.75% in May 2016. A subsequent decline in the cut-off and secondary market yields for T-Bills
and PIBs is witnessed as presented in Figures 6 and 7. The average secondary market yields are higher as
compared to cut-off yields for T-Bills. On the other hand, for PIBs the secondary market yields are lower than
the cut-off yields.
Figure 6: Average Monthly Cut-off and Secondary Market Yields for T-Bills
Source: SBP (2016e)
Notes: * 12-m T-Bills bids rejected in a fortnight of Nov, Dec ‘15 and two fortnights of Sept’15
Public Debt in Pakistan
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IFMP Monthly Newsletter 04
03
August, 2016
Figure 7: Monthly Cut-off and Average Monthly Secondary Market Yields for PIBs
Source: SBP (2016d) Notes: *Bids for 10-yr PIBs were rejected; **Bids for all PIBs were rejected
Auctions for 20-yr PIBs are infrequent
Historically the GoP offered exceptionally attractive returns on the NSS instruments (Figure 8); however, in
recent months the rates of return on these instruments has declined significantly, which is in line with the cur-
rent target policy rate of 5.75% (since 23 May 2016). Offering high rates on the NSS instruments encourages
savings from retail investors, but restrains efficient allocation of resources and impedes the growth of finan-
cial markets.
Figure 8: Rates of Return Offered on NSS Instruments
Source: SBP (2016e)
Notes: *Includes Pensioners’ Benefit Accounts
Public Debt and Economic Development
Panizza (2008) argues that in the recent years, developing countries have opted to increase domestic public
Public Debt in Pakistan
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IFMP Monthly Newsletter 04
03
August, 2016
Public Debt in Pakistan
Figure 10: Trend in Composition of External Debt (Current US$)
Source: World Bank (2016)
The literature also provides evidence that there is a non-linear, concave (U-shaped) association between the
Debt-to-GDP ratio and economic development. This means that the ratio positively impacts the economic de-
velopment up to a certain level; however, once the ratio surpasses that level, it has a negative impact on eco-
nomic development. The ratio varies greatly for developed and emerging countries. Mencinger et al. (2015)
provide evidence from several OECD member and non-member countries that the cut-off Debt-to-GDP ratio
for developed countries is 90-94% and 44-45%.
Figure 11: Percentage Change in GDP per Capita and Public Debt
Source: Pakistan Ministry of Finance (2016 a,b); World Bank (2016)
Figure 11 highlights the association between the two variables, Debt-to-GDP ratio and GDP per capita in the
Pakistani context with the former ranging between 56% and 64% since 2008, nearly 28% to 42% greater
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than the threshold level suggested in the literature. Further research may provide detailed insights into the as-
sociation between public debt and various macroeconomic indicators.
IFMP Monthly Newsletter 04
03
August, 2016
References:
Mencinger, J., Aristovnik, A. & Verbic, M. (2015). Revisiting the Role of Public Debt in Economic Growth: The Case of Oecd Countries.
Engineering Economics, 26(1), 61-66.
National Savings Organization. (2016). About Us - National Savings Organization [Online]. Islamabad, Pakistan: Central Directorate of
National Savings, Available: http://savings.gov.pk/about_us.asp. [Accessed 8 August 2016].
Pakistan Ministry of Finance. (2016a). Pakistan Economic Survey 2013-2014 (Public Debt) [Online]. Islamabad, Pakistan: Pakistan
Ministry of Finance. Available: http://www.finance.gov.pk/survey/chapters_14/09_Public_Debt.pdf. [Accessed 10 August
2016].
Pakistan Ministry of Finance. (2016b). Pakistan Economic Survey 2015-2016 (Public Debt) [Online]. Islamabad, Pakistan: Pakistan
Ministry of Finance. Available: http://www.finance.gov.pk/survey/chapters_16/09_Public_Debt.pdf. [Accessed 10 August
2016].
Panizza, U. 2008. Domestic and External Public Debt in Developing Countries. United Nations Conference on Trade and Development.
United Nations. Available: http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1147669_code1051321.pdf?
abstractid=1147669&mirid=1. [Accessed: 10 August 2016].
SBP. (2016a). Central Government Debt (Provisional) [Online]. Karachi, Pakistan: State Bank of Pakistan. Available: http://sbp.org.pk/
ecodata/savings.pdf. [Accessed 10 August 2016].
SBP. (2016b). Investors' Guidelines for Market Treasury Bills [Online]. Karachi, Pakistan: State Bank of Pakistan. Available: http://
sbp.org.pk/dmmd/Guidelines/MTB.pdf. [Accessed 10 August 2016].
SBP. (2016c). Pakistan Investment Bonds Investor Guide [Online]. Karachi, Pakistan: State Bank of Pakistan. Available: http://
sbp.org.pk/dmmd/Guidelines/PIB.pdf. [Accessed 10 August 2016].
SBP. (2016d). Savings Mobilized by National Savings Schemes [Online]. Karachi, Pakistan: State Bank of Pakistan. Available: http://
sbp.org.pk/ecodata/savings.pdf. [Accessed 10 August 2016].
SBP. (2016e). Structure of Interest Rates [Online]. Karachi, Pakistan: State Bank of Pakistan. Available: http://sbp.org.pk/ecodata/
sir.pdf. [Accessed 10 August 2016].
Khalil, U. (2004). The Development of Debt Securities Market Country Experience of Pakistan. Seacen-World Bank Seminar on
Strengthening the Development of Debt Securities Market. Karachi, Pakistan: State bank of Pakistan. Available: https://
www.google.ca/url?
sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjsidq0psHOAhWMth4KHaZpCuoQFggbMAA&url=http%
3A%2F%2Finfo.worldbank.org%2Fetools%2Fdocs%2Flibrary%2F83883%
2Fcountry_pakistan.doc&usg=AFQjCNEox5p3dEiw_1iFsGc82f1z-1JZSg&sig2=53YBTY3f34b1ajohqS262Q&bvm=bv.129422649,d.dmo.
[Accessed: 11 August 2016].
Public Debt in Pakistan
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The economy of Pakistan during last three years has
witnessed higher economic growth accompanied by
remarkable recovery in commodity and services sec-
tors. The economy maintained its growth momentum
in the year 2015-16 which suggests that the recovery
of investment is more sustainable. The growth that
the economy has sustained for last few years is sup-
ported by vitality in industry, agriculture and ser-
vices.
The government infrastructure development drive
along with SBP’s expansionary monetary policy has
enhanced business activities. The preconditions for
sustained economic growth appear to have gained on
account of economic reform and improved security
situation. Inflation went down during the recent
years, and current account deficit reduced with favor-
able prices for oil and other commodities.
Government initiated a mega relief package for small
farmers to introduce progressive agriculture by
providing them cash support and agriculture loans. A
new Automobile Policy 2016-21 was approved by the
government which offers tax incentives to new en-
trants in order to help them establish manufacturing
units and build a healthy car competition in the indus-
try.
Government also presented the Strategic Trade Policy
Framework (STPF-2015-18) to promote regional
trade particularly with Afghanistan, Iran, China and
Central Asian Republics to boost annual exports to
$35 billion. The policy will improve export competi-
tiveness, transition to efficiency and innovation driv-
en economy and increase share in regional trade.
The confidence of domestic as well as international
investors is rebuilding which can be noticed by stock
market, rise in domestic commerce in Karachi and
increase in FDI. The country is committed to imple-
ment China-Pakistan Economic Corridor (CPEC)
which is a mega project of US $46 billion with Chi-
nese Government. CPEC will provide major support
for development of infrastructure including commu-
nication, energy, special economic zones and Gwadar
development.
Government is implementing an agenda of four
points which primarily aims at energy, economic sta-
bility, education and elimination of extremism. With
concrete efforts of government, Pakistan’s economy
04 AN OVERVIEW OF ECONOMIC GROWTH IN PAKISTAN
August, 2016 IFMP Monthly Newsletter 02
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IFMP Monthly Newsletter 03
is stabilized and revived and the focus is now to accel-
erate economic growth and maintain sustainability.
GDP GROWTH
Figure 1: GDP Growth (%)
Source: MoF, Foundation Research, June 2016
Figure 1 presents an overview of GDP growth which
shows that positive economic growth is projected to
continue in the coming years. The economy has con-
tinued the recovery path, GDP growth has been pro-
jected to increase to 4.7% in FY2016 against the
growth of 4% recorded in FY2015. The economy
could not reach to the target of 5.5% due to lower
growth of agriculture sector. However, the GDP
growth attained in this fiscal year is higher as com-
pared to previous years since FY2009.
04
August, 2016
Sectoral Performance
The economy of Pakistan is divided into three main
sectors: Agriculture, Industry and Services. Sectoral
share recognizes performance of various segment of
the economy and also identifies their significance in
growth of the economy.
Pakistan’s economy has been experiencing structural
transformation as its GDP structure has changed dur-
ing last few decades. Manufacturing and services sec-
tors got relatively more advantage as compared to
agriculture sector.
Agriculture sector could not grow due to some struc-
tural, social and cultural drawbacks. It remains
weather dependent which makes it inconsistent in
performance. Manufacturing and services sectors
performed better due to government policies along
with scientific and technological developments com-
pared to agriculture sector.
Share in GDP
Composition of the economy has changed over time.
In 1969-1970, agriculture was the largest commodity
producing sector with 38.9% contribution in GDP,
which has decreased to 19.82% showing that the
share of the agriculture has been reducing over time
in favor of the manufacturing and service sector. The
share of services sector has gone up to 59.16% in
FY2016 indicating an upward trend in the services
sector of the GDP.
AN OVERVIEW OF ECONOMIC GROWTH IN PAKISTAN
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IFMP Monthly Newsletter 04
04
August, 2016
AN OVERVIEW OF ECONOMIC GROWTH IN PAKISTAN
Figure 2: GDP Composition
Source: Pakistan Bureau of Statistics
Figure 2 shows the composition of GDP. The composition for the year 2015 and 2016 shows no major differ-
ence. Agriculture sector has further declined from 20.88% to 19.8%. The sectoral share of the large scale
manufacturing sector has slightly gone up from 10.62% to 10.9%. The share of other industries has increased
from 9.68% to 10.1%. The share of the various components of services sector has also risen in 2016.
POLICIES
Government’s economic policies were quite successful in maintaining the price stability and smooth supply of
the commodities. The economic situation improved and reflected better movement in key economic indicators
due to growth policies of the government.
The remarkable improvement in workers’ remittance is also recorded during the FY2016 which shows that
overseas Pakistanis have confidence on government policies. This improvement has played an important role
in building foreign exchange reserves of the country.
Government took different policy measures to enhance economic activities in all major sectors of the economy
and played major role in picking up all sectors of the economy. SBP has also brought down the discount rate
gradually and reached at 5.75%, which is also a major stimulus for business and investor’s community to in-
crease economic activities.
2014-2015 2015-2016
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Asset Management Company
A company which offers invest-
ment schemes under trust deeds
and issues redeemable securities.
Body Corporate
It includes a company incorpo-
rated outside Pakistan, but does
not include-
i. A corporation sole; or a co-
operative society registered un-
der any law relating to the regis-
tration of co-operative societies;
or
ii. Any other body corporate, not
being a company as defined in
this Ordinance, which the Federal
Government may notification in
the official Gazette, specify in this
behalf.
Discretionary Portfolio
A portfolio of securities managed
by a Non-Banking and Finance
Companies under an agreement
entered into with a client on a du-
ly notarized stamp paper of appli-
cable value and whereby investment
decisions are made and executed by
the Non-Banking and Finance Compa-
nies on behalf of its client.
Family Takaful
Takaful for the benefit of individuals,
groups of individuals and their fami-
lies as elaborated in the provisions of
the Ordinance pertaining to life insur-
ance business.
Free Reserves
Any amount which, having been set
aside out of the revenue or other sur-
pluses is free in that it is not retained
to meet any diminution in value of the
assets, specific liability, contingency
Investors’ Terms Of The Month
IFMP Monthly Newsletter 8
05
or commitment of that company
known to exist at the date of the
balance sheet.
Last Quoted Price
The Closing Price as reported by
the Exchange, on each trading
day, for the purposes of risk man-
agement and collection of market-
to-market differences.
Other Form of Security
It includes hypothecation of stock
(inventory), assignment of receiv-
ables, lease rentals and contract
receivables.
Retrocession
A contract of reinsurance under
which the event, specified in the
contract, contingent upon the
happening of which, payment is
promised to be made to the policy
holder there under, is payment by
the policy holder of a claim or
claims made under another con-
tract or contracts of reinsurance
issued by that policy holder.
August, 2016
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Business and Economic Newsflash
IFMP Monthly Newsletter 9
06
August, 2016
Domestic Newsfeed
IMF Bailout Programme completed by
Pakistan
Pakistan and IMF completed the
$6.4 billion bailout programme
on a successful note, paving the
way for release of $102 million
last tranche next month. The
successful completion indicates
government`s strong commit-
ment in implementing difficult structural reforms in
the areas of taxation, energy, monetary and financial
sectors and public sector enterprises.
The government met the end-June 2016 quantitative
performance criteria on net international reserves,
foreign currency swap/forward position, and govern-
ment borrowing from the SBP by significant margins.
The targets on net domestic assets and budget deficit
were missed marginally.
The target for end-June 2016 on targeted cash trans-
fers through BISP and on power sector arrears were
also met. The Federal Board of Revenue (FBR) not on-
ly achieved its original annual target of Rs.3.104 tril-
lion but exceeded it to reach Rs.3.115 trillion. In the
process, the figure of FBR`s tax-to-GDP ratio regis-
tered an increase to 10.5% from 8.5% in 2013.
All indicative targets and structural benchmarks were
met, except for the delayed notification of multi-year
tariffs for three power distribution companies.
Increase in Repatriation of Profits
Repatriation of profits surged to $145.8 million in July
from $52.5 million in the same month last year.
The amount of profits repatriated by foreign compa-
nies operating in Pakistan stood at $2 billion which
was the second biggest payment after debt servicing.
Pakistan has been facing many
odds on external front, the ex-
ports and remittances are de-
clining and foreign direct in-
vestment (FDI) inflows re-
duced to $64 million in July
compared to $75 million.
The country is already under stress to meet the trade
deficit which was close to $21 billion in 2015-16.
The uptrend shows that Pakistan would be under
pressure to arrange more than $7 billion in the cur-
rent fiscal year. It will be hard for the country to keep
its foreign exchange reserves at the current level. The
remittances for July 2016 fell by 20 per cent mainly
because thousands of Pakistanis working in the Mid-
dle East, lost jobs and their payments were held by
their employers. Decrease in remittances could add
more worries for the government struggling to in-
crease exports, which have been declining for last two
years.
Property Price Evaluation carried out by
FBR
The government implemented
new rates of taxes for the pur-
pose of taxation of property in
major cities.
The areas where no valuation
tables have yet been notified,
the district officer revenue or
provincial or any other authority authorized in this
behalf for the purpose of stamp duty will apply for the
collection of taxes.
The new valuation tables will only be used for the
purpose of calculating Capital Gains Tax (CGT), with-
holding taxes and for the purposes of Section 111 of
the Income Tax Ordinance 2001.
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Business and Economic Newsflash
IFMP Monthly Newsletter 10
06
If the fair market value of the property is different than
the auction price, the applicable price will be the higher
of the two. The holding period of property was also re-
duced to three years from five years.
The government has introduced three slabs in order to
facilitate real estate investors, effective from July 1,
2016, on properties. The rate of CGT will be 10 per cent
on a property held for one year, 7.5 per cent held be-
tween 1-2 years, and 5 per cent if the holding period is
between 2-3 years. If a property is held for more than
three years, it will be exempt from CGT.
On the issue of transactions made before July 1, 2016,
the CGT rate will be 5pc on a property held up to three
years. No tax will be charged on property held for more
than three years.
International Newsfeed
Slide of Britain`s Pound
The pound has sunk about 10
per cent since Britons voted to
leave the EU. It is expected now
that it will fall roughly 6 per
cent. According to a Reuters poll,
the pound would fall to a level
not seen in over three decades.
It is also only expected to nudge up slightly by this time
next year.
Sterling is currently trading around $1.33, but accord-
ing to a forecast, the pound will fall as low as $1.25 this
year. With a July Reuters poll suggesting the economy
faces a 60 per cent chance of recession in the coming
year, the Bank is almost unanimously expected to an-
nounce a cut to interest rates when it reveals its latest
policy decision.
According to the policy makers, Britain should also ex-
pand fiscal policy to stimulate its economy as the
Bank`s tools have largely reached their limits and are
likely to be less effective than in the past.
After leaving policy unchanged last month, the Euro-
pean Central Bank left the door open to further stim-
ulus and a July Reuters poll suggested it would soon
be forced to extend and expand the scope of its asset
purchase programme. So with both central banks
loosening policy, sterling will hold pretty steady
against the euro.
Iraq’s Plan to Sell Oil
Iraq plans to sell crude oil
through Iran if talks with the
autonomous Kurdish region
on an oil revenue-sharing
agreement fail.
Iraq is the second-largest pro-
ducer of oil after Saudi Arabia,
depends on oil sales for 95 per cent of its public in-
come. Its economy is reeling under the double im-
pact of low oil prices and the war against Islamic
State militants. Minister Fayadh al-Nema said in an
interview that if the negotiations come to a close
without an agreement, they will find a way in order
to sell oil because they need money.
An agreement between Iran and Iraq could function
in a similar fashion as oil swap deals. Iran would im-
port Iraqi oil to its refineries and export an equiva-
lent amount of its own crude on behalf of Baghdad
from Iranian ports on the Gulf.
The Kurdish government has been calling on Bagh-
dad since March to resume the pumping of Kirkuk
crude. Kurds are ready to strike an agreement with
Baghdad if it guarantees them monthly revenue of $1
billion, more than double what they make currently
from selling their own oil.
The dispute revolves around Kurdish oil exports that
Baghdad wants to bring under its control.
August, 2016
-
Regulatory Newsflash
IFMP Monthly Newsletter 11
07
Credit Rating Companies Regulations, 2016
The SECP has approved the Credit Rating Companies Regula-
tions, 2016. It is a new regime which has been introduced
for credit rating companies (CRC) based on international
best practices.
The regulations introduce some new requirements and
strengthen the existing requirements for the CRCs in order
to achieve the objectives of investor education. The key as-
pect is the brief introduction of licensing regime for the CRCs
with fit and proper criteria for promoters, CEOs, senior man-
agement officers and directors.
Internal control and business conduct requirements have
been introduced to protect the interests of investors and
other stakeholders.
Listed Companies (Buy-Back of Shares) Regula-
tions, 2016
The Securities and Exchange Commission of Pakistan has
notified the Listed Companies (Buy-Back of Shares) Regula-
tions, 2016. The new requirements will reform the Compa-
nies (Buy Back of Shares) Rules, 1999.
New regulations have been issued because the previous
framework did not provide for the retention of purchased
shares as treasury shares, rather the repurchased shares
had to be cancelled.
The guidelines provide the eligibility criteria for a buy-back,
like maintaining the minimum paid-up capital and free float,
procedure for setting the price, limitations of the treasury
shares, compliance with the applicable international finan-
cial reporting standards, maintaining records and disposal of
treasury shares .
The regulations will provide assistance to listed companies
to buy-back their own shares in a transparent manner.
Benchmark
Debt Market
Exemption
Financial Statements
Insider Trading
Late Fee
Paid-up Value
Quoted Shares
Revenue Board
Public Sector Companies (Corporate
Governance) Rules, 2013
The SECP has issued the draft of amendments in
the Public Sector Companies Rules, 2013. The
Rules were introduced in 2013, aimed at im-
proving the governance of PSCs.
Amendments have been made to ensure proper
compliance and implement good corporate gov-
ernance principles in the state owned compa-
nies.
Strict amendments have been made to remove
non-performing directors while the criteria for
appointment of chairman and CEO of PSCs has
been revised. The proportion of independent
directors in the Boards has also been reduced
from a majority to a minimum of one-third level.
GLOSSARY
August, 2016
-
Monthly Review
Gold
10 Grams
Beginning Rs.45,469.92
Ending Rs.44,485
Change -984.92
Crude Oil
(WTI)
Beginning 41.76
Ending 46.44
Change +4.68
KIBOR
(6 Months)
Bid % Offer %
Beginning 5.73 5.98
Ending 5.78 6.03
Change +0.05 +0.05
Foreign Exchange Rates
GBP (£) EURO (€) USD ($)
Buying Selling Buying Selling Buying Selling
Beginning Rs.137.79 Rs.138.05 Rs.115.75 Rs.115.97 Rs.104.40 Rs.104.60
Ending Rs.136.61 Rs.136.87 Rs.116.64 Rs.116.86 Rs.104.40 Rs.104.60
Change -1.18 -1.18 +0.89 +0.89 0 0
Pakistan
Stock
Exchange
100 Index
Beginning 39,636.66
Ending 39,809.58
Change +172.92
Silver
10 Grams
Beginning Rs.686.34
Ending Rs.634.28
Change -52.06
Markets In Review
IFMP Monthly Newsletter 12
08
August, 2016
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DETAILS: www.ifmp.org.pk 92 (21) 34540843-44 [email protected]