Ban proposed on 1000, 5000 rupee notes to fight graft

ISLAMABAD: A Senator of Pakistan People’s Party (PPP) on Friday tabled a motion in the upper house for a ban on currency notes with 1,000 and 5,000 denominations. Usman Saifullah, who is also a member of the Senate Standing Committee on Finance, tabled the motion and said there are increased chances for currency notes of bigger denominations to be used in money-laundering and corruption; hence, big currency notes are being discouraged across the world. Citing an example from India, Usman also underscored the need for Pakistan to ban both currency notes with 1,000 and 5,000 denominations. It should be mentioned here that Indian government led by Prime Minister Narendra Modi announced to put a ban on currency notes of one thousand and five hundred denominations.

Poverty almost halved in a decade

ISLAMABAD - Pakistan has made significant progress in reducing poverty over the last decade and the economic growth is expected to reach 5.4 percent in financial year 2018 (FY18), the World Bank says in a report.The percentage of people living below the poverty line in the country has decreased from 64.3 percent to 29.5 percent over a 12-year period, the global financial institution noted in its report ‘Pakistan Development Update’.The Bank however warned that Pakistan’s low rates of investment and declining export competitiveness remain a concern. “The government recently set a new national poverty line that identifies 29.5 percent of Pakistanis as poor (using the latest available data from FY14. By back casting this line, the poverty rate in FY02 would have been about 64.3 percent. This means that poverty has more than halved between FY02 and FY14,” the report stated.

It further stated that Pakistan’s economic growth in fiscal year (FY) 2016 reached 4.7 percent-the highest rate in eight years and a significant increase from the previous year’s 4.0 percent. Growth acceleration will depend on the implementation of structural reforms, such as energy and taxation and implementation of the China Pakistan Economic Corridor (CPEC). In the long term, growth will be driven by increased investment in both physical and human capital, with increased focus on better nutrition, health and education outcomes.

In the medium-term, Pakistan’s growth is expected to continue to accelerate, reaching 5 percent in FY17 and 5.4 percent in FY18. A moderate increase in investment (related to CPEC projects) is expected to contribute to an acceleration of growth, which will continue to be driven by public and private consumption. Energy reforms are expected to support higher growth in the industry and services sectors. The agriculture sector is forecast to recover from its poor performance in FY16. Subdued growth in exports and accelerated growth in imports are expected to lead to a widening of the current account deficit from 1.1 percent in FY16 to 1.7 percent in FY17. Like in previous years, this will be offset by remittance inflows so foreign exchange reserves are expected to continue to accumulate

The low and stagnant investment rate, however, continues to pose significant challenges. After strong growth in FY15 of 13 percent, investment grew by only 5.7 percent in FY16. The ratio of investment to GDP is 15.6 percent-compared with an average rate in South Asia of 34 percent between 2010 and 2015. Pakistan’s much lower rate of investment is driven by its volatile security situation, energy shortages and poor business regulatory environment, the World Bank report noted.

“FY16 saw the continuation of a longstanding decline in Pakistan’s share in global trade. This trend is a combined reflection of Pakistan’s weakening export competitiveness and soft global demand in key sectors. Food and textiles, in particular, are key contributors to Pakistan’s exports and continue to suffer from a decline in international prices and demand,” it remarked. More generally, Pakistan’s decline in competitiveness has been driven by poor trade facilitation, infrastructure gaps, inefficient logistics and a poor investment climate. Pakistan has also lagged behind its competitors in trade openness, reducing its prospects of regaining export momentum. The simple average tariff has fallen only slightly from 14.4 percent in FY13 to 13.4 percent in FY16.

The World Bank said the government continues to make progress on fiscal consolidation, reducing the consolidated fiscal deficit from 5.3 percent of GDP in FY15 to 4.6 percent in FY16. The FY17 budget implies a further fall in the fiscal deficit to 3.8 percent of GDP. Revenue growth is underpinning the falling deficit, driven in FY16 by a 20 percent increase in the Federal Board of Revenue’s (FBR) collection. Some of this collection may, however, affect the progress of other reform efforts.

The end of the IMF’s Extended Fund Facility program in September 2016 marked significant progress in achieving macroeconomic stability over the last three years. Fiscal deficits are significantly reduced, foreign reserves have returned to comfortable levels and inflation is in-check. There remains, however, a significant agenda of economic reform to be implemented. The energy sector has reduced financial losses and load shedding-particularly for industry-but investments in transmission and distribution are desperately needed. The government has also made solid progress on financial sector reforms, but will need to continue to strengthen and diversify the sector and improve its governance and transparency. Continued improvements in tax collection will also be essential for the government’s economic agenda, particularly those that widen the tax net and increase provincial revenue collection

At 43.7 percent, Pakistan has the third-highest rate of stunting in the world.3 In spite of economic growth, and unlike its regional peers, it has made no progress on nutrition indicators in recent decades. Poor nutrition exerts a heavy toll on health outcomes and economic activity-stunted children start school later, are less likely to graduate or undertake higher education and earn significantly less in adulthood. It also affects lifelong health, hindering brain development, intelligence, educability and productivity. Pakistan’s public policy discourse is starting to give more attention to nutrition in recent years, and small but growing shares of provincial and federal budgets are being diverted to addressing it.

However, a concerted effort at all levels of government is needed to exert a meaningful impact on national stunting rates. Without these structural reforms and other efforts to improve the investment climate, Pakistan’s rate of investment will remain weak and its consumption-driven growth will eventually slow down.

In addition, the 2018 election may have implications for the pace of reform implementation while ‘Brexit’ and the imminent US interest rate hike may affect the overall macroeconomic environment. In the longer-term, Pakistan’s economic and human development relies heavily on better nutrition, health and education outcomes-which would in turn lift the productivity of the workforce. Using Pakistan’s economic gains to invest in health, education and nutrition would also significantly lift wellbeing, making growth matter for all Pakistan.

Taliban attack German consulate in Afghanistan

MAZAR-I-SHARIF: A powerful Taliban truck bomb struck the German consulate in the northern Afghan city of Mazar-i-Sharif late Thursday, killing at least two people and wounding 32 others, officials said.

The Taliban called it a "revenge attack" for a US airstrike in Kunduz earlier this month that left up to 32 civilians dead.

"The suicide attacker rammed his explosives-laden car into the wall of German consulate in the city," local police chief told AFP. At least two dead bodies and 32 wounded people had so far been brought to the city hospital, said Noor Mohammad Fayez, the head doctor.

US forces conceded last week that its air strikes "very likely" resulted in civilian casualties in Kunduz, pledging a full investigation into the incident which triggered angry protests.–AFP

The strikes killed several children, after a Taliban assault left two American soldiers and three Afghan special forces soldiers dead near Kunduz city.

India signs controversial civil nuclear deal with Japan to import atomic technology

Japan and India signed a controversial civil nuclear deal on Friday that will allow Japanese companies to export atomic technology to the South Asian state as the two countries deepen economic and security ties.

The pact signed by Japanese Prime Minister Shinzo Abe and his Indian counterpart Narendra Modi is Japan's first with a nation that has not signed the Treaty on the Non-Proliferation of Nuclear Weapons (NPT).The treaty bans nations other than the five permanent members of the UN Security Council from developing and possessing nuclear weapons. Japan, the victim of US atomic bombings in the final days of World War II, had long shunned civil nuclear cooperation with energy-starved India over the NPT issue. But it has softened its stance as it competes for lucrative deals and steps up strategic cooperation with New Delhi in the face of China's expanding economic and military presence in the region.The agreement is a legal framework to ensure India acts responsibly for the peaceful use of nuclear energy,” Abe told reporters with Modi at his side. Japanese official told reporters that the two nations have agreed Japan can cease cooperation if India resumes nuclear testing.“Today's signing of the agreement for cooperation in peaceful use of nuclear energy marks a historic step in our engagement to build a clean energy partnership,” Modi said. Besides the US and Japan, India also has similar deals with France and Australia. The Asian allies have stepped up cooperation in recent years, signing agreements last December on the transfer of defence equipment and technology and on exchanging classified military information. The nuclear deal comes against the backdrop of growing unease over China's expanding role in the region. India has a longstanding territorial dispute with China, and troops from the two countries engaged in a major stand-off at the border in 2014. Tokyo has its own spat with Beijing over islands in the East China Sea, and is increasingly vocal about its rival's ambitions to control almost the whole of the South China Sea. Modi visited Japan in August 2014 on his first bilateral trip outside South Asia, months after coming to power. Subsequently Abe paid a two-day visit to India last December. The Indian leader will wind up his trip in the city of Kobe on Saturday as he and Abe visit a plant that manufactures high speed bullet trains.