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Motor car imports witness sharp decline

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Motor car imports witness sharp decline

The imports of motor cars, both Completely Built Up (CBU) as well as Semi-Knocked Down (SKD) or Completely Knocked Down (CKD), witnessed a sharp decline of 66 percent and 40.37 percent respectively during the first half of the current fiscal year compared to last year.

According to Pakistan Bureau of Statistics, the imports of CKD/SKD were recorded at $722.524 million during July-December (2022-23) as compared to the imports of $1211.577 million during July-December (2021-22), showing a decline of 40.37 percent.

Likewise, Pakistan imported CBU motorcars worth $108.453 million during July-December as compared to the imports of $318.999 last year, showing a decline of 66 percent.

Overall, transport group imports declined by 49.

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84 percent during the period under review. The imports of the group were recorded at $ 1,163.005 million as compared to the imports of $2,318.457 million last year.

It is pertinent to mention here that overall merchandize imports into the country decreased by 22.97 percent during the period under review by going down from $ 40,563 million last year to $ 31,245 million during the current year.

The exports were recorded at $14,258 million against the exports of $15,125 million last year, showing a decline of 5.73 percent.

Based on the figures, the trade deficit during the first six months of the current fiscal year witnessed a decline of 33.22 percent and was recorded at $ 16,987 million this year against the deficit of $ 25,438 million last year.

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Modi delays India privatisation programme

Modi delays India privatisation programme

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Modi delays India privatisation programme

India plans to overhaul more than 200 state-run firms to make them more profitable, signalling a departure from Prime Minister Narendra Modi’s aggressive privatisation programme that has struggled to take off, government sources said.

The programme to privatise a major portion of India’s lumbering $600 billion state sector announced in 2021, had slowed ahead of the general election in April-May and now faces more resistance after Modi lost his majority in parliament and had to rely on coalition allies to return to office.

Expected to be unveiled as part of the annual budget on July 23 by Finance Minister Nirmala Sitharaman, the new plans include selling large parcels of underutilised land owned by these companies and monetisation of other assets, said two officials who are aware of the policy. Some aspects are yet to be fine-tuned, they added.

The aim is to raise $24 billion in the current April-March fiscal year and reinvest the funds in the companies, while setting five-year performance and production targets for each company, instead of short-term targets.

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The plans to overhaul state firms have not been reported previously.

The officials declined to be identified as they were not authorised to speak on confidential deliberations.

The finance ministry did not respond to requests for comment.

In an interim budget presented before the election, the government did not provide any figures on stake sales for the first time in more than a decade.

“The government is shifting focus from indiscriminate asset sales to enhancing intrinsic value of state-owned companies,” said one of the officials.

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Among other plans, the government intends to introduce succession planning in majority-owned companies alongside a proposal to train 230,000 managers across firms to prepare them for senior roles, the officials said.

Currently, the government appoints top executives in state-owned companies.

The government is likely to implement a plan that includes training of managers, professional recruitment to company boards and incentives for high performance from the 2025-26 fiscal year, with the expectation that increased autonomy would make companies more competitive.

The 2021 announcement to sell most state-run companies included two banks, one insurance company and firms in steel, energy and pharmaceutical sectors besides closure of loss-making companies.

But India has been able to only complete the sale of debt-ridden Air India to the Tata Group, while rolling back plans to sell some others. Only a 3.5 per cent stake in LIC has been sold besides shares in few other companies.

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Hardeep Puri, India’s oil minister, said last week a plan to sell state-owned Bharat Petroleum Corp was no longer on the table as the company was making almost as much profit in a year as the price it was to be sold for.

Sunil Sinha, chief economist at India Ratings, the local arm of Fitch ratings agency, said the sale of government companies, marred by allegations of “selling family silver” at a cheaper price, would be difficult to push after Modi’s reduced majority in parliament.

“This (privatisation) can actually snowball into a political slugfest…recouping it may become very difficult and they may have to pay a political price for it.”

BOOMING MARKET

Despite hurdles in privatisation and stake sales, the overall market valuation of state-run firms has more than doubled in the past one year on hopes of reforms in the sector.

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The BSE PSU index, which tracks state-owned companies, has surged over 100pc in the last one year, outperforming the benchmark BSE Index’s 22pc rise.

“We find the valuations of many PSU stocks to be quite bizarre, when compared with their fundamentals,” Sanjeev Prasad of Kotak Institutional Equities said in a note.

“Some of these companies will require extraordinary assumptions and a massive turnaround in their operations (and financials) to justify their current market caps.”

But the government views the market’s response as a mark of investor confidence, said a senior official at the NMDC, India’s state-run iron ore company.

Looking ahead, the government expects its reforms would translate into higher profits and, subsequently, increased returns for the state, the official said.

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State firms were expected to pay substantially higher dividends to the government, compared to earlier estimates of 480bn rupees ($5.8bn) in 2024-25, said the second government source.

Analysts however said India risked missing the opportunity to cash in on the booming valuations of state companies.

The government could raise about 11.5 trillion rupees ($137.75bn) at current market capitalisation by selling minority stakes in state-owned companies, while maintaining 51pc stake, CareEdge Ratings said in a note last week.

“The conclusion of the election season, combined with stock market hovering around all-time highs, provides a perfect opportunity to advance some significant divestment initiatives,” said Rajani Sinha, chief economist, CareEdge Ratings

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Climate change-driven unemployment: Morocco farm jobs dry up amid persistent Mediterranean drought

Climate change-driven unemployment: Morocco farm jobs dry up amid persistent Mediterranean drought

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Climate change-driven unemployment: Morocco farm jobs dry up amid persistent Mediterranean drought

In a sun-baked village north of Morocco’s capital Rabat, Mustapha Loubaoui and other itinerant workers wait idly by the roadside for farm work made scarce by a six-year drought.

Loubaoui, 40, rode his combine harvester for 280 kilometres hoping to pick up work in what previously had been the booming agricultural village of Dar Bel Amri.

His day-long journey was for nothing. Now Loubaoui fears he will end up like the roughly 159,000 Moroccan agricultural workers who, official figures say, have lost their jobs since early last year.

“Work has become hard to come by because of drought,” Loubaoui told AFP.

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Large areas of the Mediterranean have been under “alert drought conditions”, a phenomenon even more pronounced in Morocco and its neighbours Algeria and Tunisia, according to the European Drought Observatory’s latest analysis.

In Morocco, a lack of water threatens the viability of the important agriculture sector, which employs around a third of the working-age population and accounts for 14 per cent of exports.

More than one third of Morocco’s total cultivated area lies unused because of drought.

The area is now about 2.5 million hectares compared to four million prior to the onset of severe water scarcity, according to figures given by Agriculture Minister Mohammed Sadiki.

And as the arable land shrank, so did employment.

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The North African kingdom’s unemployment rates rose to a record 13.7pc in the first quarter of 2024, said the High Planning Commission (HCP), the government’s statistical body.

It said 1.6 million of Morocco’s 37m people are out of work and stressed that “the labour market continues to endure the effects of drought”.

Among the people behind the statistics is Chlih El Baghdadi, a farmer who lives near Dar Bel Amri.

His grain harvest suffered a major loss from drought, leaving him sitting at home rather than working his fields.

He and his five children now depend financially on his wife, who is employed at a larger farm near the city of Meknes, about 70 kilometres from their village.

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Such operations, whose yield is mainly for export, have survived the drought because of their water-hungry irrigation systems employed under the “Green Morocco Plan” (PMV) launched in 2008.

Since then, agricultural revenues doubled from 63 billion dirhams to 125bn dirhams ($12.5 billion) in 10 years, according to official data.

Another programme, “Generation Green 2020-2030”, aims to enhance Morocco’s sustainable agriculture in light of climate challenges.

It targets a doubling of agricultural exports to reach 60bn dirhams by 2030.

Yet despite the initiatives, climate change-driven unemployment has not eased.

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“We have modern and sophisticated agriculture, but it only spans around 15pc of cultivatable areas,” said Abderrahim Handouf, a researcher and agricultural engineer.

The “majority of farmers remain at the mercy of climate change” and other economic sectors are “not able to accommodate them,” he added.

The kingdom has striven to develop its industrial and service sectors over the past two decades, hoping to create more jobs, but these have not compensated for climate-linked unemployment.

Cars, for example, topped Morocco’s exports last year with a record value of more than 141bn dirhams.

But the industry “only creates up to 90,000 jobs per year” while there are 300,000 job seekers, Moroccan industry minister Ryad Mezzour said in May. “Employment is the weak spot of the economic system,” he said in a radio interview.

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Facing criticism, Prime Minister Aziz Akhannouch told parliament last month that “drought has become reality”. He announced the expected creation of 140,000 new jobs as part of investment deals worth 241bn dirhams in fields including renewable energy, telecommunication, tourism and health.

But the numbers were far from the million jobs he had promised to create by 2026.

For farmers like Benaissa Kaaouan, 66, it’s too late. He said he would have walked away from agriculture if he had learned another skill.

Now he stands in the middle of his zucchini fields in Dar Bel Amri, most of them sun-spoiled. “There’s no life without rain,” Kaaouan said ruefully.

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Aurangzeb sees IMF-induced macroeconomic stability

Aurangzeb sees IMF-induced macroeconomic stability

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Aurangzeb sees IMF-induced macroeconomic stability

Finance Minister Muhammad Aurangzeb on Saturday stressed the need for “structural reforms” and “sustainability”, as he hoped that the latest deal signed with the Washington-based International Monetary Fund (IMF) will help Pakistan achieve macroeconomic stability.

The remarks came after Islamabad reached a staff-level agreement with the IMF on around $7 billion package that will cover a 37-month period.

“We need to ensure structural reforms and bring self-sustainability in areas of public finance, energy, and state-owned institutions” under the IMF programme, Aurangzeb said in a statement.

MORE TAXES

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Earlier, IMF Mission Chief to Pakistan Nathan Porter in a statement said the agreement was subjected to approval by the IMF Executive Board and the timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.

When it comes to the key policy goals, Porter listed “sustainable public finances, through a gradual fiscal consolidation based on reforms to broaden the tax base and remove exemptions, while increasing resources for critical development and social spending” among top priorities.

He added that the authorities, in this regard, plan to increase tax revenues through measures of 1.5 per cent of GDP in FY25 and 3pc of GDP over the programme.

According to Porter, the programme also covers “a fairer balance of fiscal effort between the federal and provincial governments”, which have agreed to rebalance spending activities in line with the 18th Amendment “through the signature of a National Fiscal Pact that devolves to provincial governments higher spending for education, health, social protection, and regional public infrastructure investment, enabling improved public service provision”.

“At the same time, the provinces will take steps to increase their own tax-collection efforts, including in sales tax on services and agricultural income tax. On the latter, all provinces are committed to fully harmonizing their Agriculture Income Tax regimes through legislative changes with the federal personal and corporate income tax regimes and this will become effective from January 1, 2025.”

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INFLATION AND WEAK RUPEE

The IMF says, “Reducing inflation, deepening access to financing, and building strong external buffers are key to development and resilience. Monetary policy will continue to be focused on supporting disinflation, which will help protect real incomes, especially for the most vulnerable.

“To buffer against shocks and build reserves, the State Bank of Pakistan (SBP) will maintain a flexible exchange rate and continue to improve the functioning of the foreign exchange market and the transparency around FX operations. On financial stability, the authorities plan to take measures to deepen access to financing, while strengthening financial institutions, addressing any undercapitalized banks, and upgrading their crisis management framework.”

ENERGY TARIFFS

Also, the staff-level agreement also has terms and conditions meant for “restoring energy sector viability and minimizing fiscal risks through the timely adjustment of energy tariffs, decisive cost-reducing reforms, and refraining from further unnecessary expansion of generation capacity.

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“The authorities remain committed to undertaking targeted subsidy reforms and replace cross-subsidies to households with direct and targeted BISP support.”

NO INCENTIVES TO SPECIAL ECONOMIC ZONES

As far as the business environment is concerned, the IMF aims at “promoting private sector and export dynamism by improving the business environment, creating a level-playing field for all businesses, and removing state distortions.

“In this regard, the authorities are advancing efforts to improve SOE operations and management as well as privatization (with the highest priority given to the most profitable SOEs) and strengthening transparency and governance around the Pakistan Sovereign Wealth Fund and its operations.”

“They are also phasing out incentives to Special Economic Zones, phasing out agricultural support prices and associated subsidies, and refraining from new regulatory or tax-based incentives, or any guaranteed return that could distort the investment landscape, including for projects channeled through the Special Investment Facilitation Council. The authorities have also committed to advance anti-corruption as well as governance and transparency reforms, and gradually liberalize trade policy,” the statement reads.

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