Category: Business

The most important business news, explained in a young, easy to understand way. News that affects young career professionals.

  • State Bank of Pakistan’s foreign exchange reserves rise to $4.3 billion after Chinese loan

    State Bank of Pakistan’s foreign exchange reserves rise to $4.3 billion after Chinese loan

    Pakistan’s foreign exchange reserves held by the State Bank of Pakistan (SBP) have exceeded $4 billion after the country received a $500 million loan from the Industrial and Commercial Bank of China (ICBC).

    In a weekly bulletin, the SBP reported a rise in foreign exchange reserves by $487 million, boosting the total to $4,301 million as of 3 March, providing an import cover of around a month. This was part of the ICBC’s $1.3 billion facility, which followed another loan of $700 million from the China Development Bank.

    These loans were essential as Pakistan has not received funds from any other country, except China, while the $350 billion economy struggles to revive its stalled International Monetary Fund (IMF) program.

    There are $7 billion of repayments due in the coming months, including a Chinese loan of $2 billion due in March. According to Geo, experts believe that the Pakistan rupee, which has fallen to a historic low of Rs282.30 against the dollar in the interbank market, can only recover to Rs265 if the situation improves.

    Meanwhile, the government has imposed restrictions on imports due to a shortage of dollars, which has resulted in the partial closure of textile and automobile manufacturers, raising fears of unemployment.

  • Toyota IMC records worst sales in three years, selling less than 2,000 cars in February

    Toyota IMC records worst sales in three years, selling less than 2,000 cars in February

    Toyota Indus Motor Company (IMC), a leading automaker renowned for offering the country’s best-selling sedan, has reported a significant decline in sales in February 2023, marking the worst sales month since the onset of the Covid-19 pandemic.

    Having previously sold over 7,100 units in March 2022, the company’s sales have now plummeted to a meager 1,803 vehicles in February 2023, according to Autojournal.

    It is pertinent to note that this represents the lowest sales figures for Toyota in the past three years, since the outbreak of the Covid-19 pandemic and subsequent lockdowns.

    Toyota is not the only company experiencing this phenomenon, as Pak Suzuki Motor Company has also reported a massive decline in sales, selling only 544 units in February 2023, despite having sold over 6,000 units of Suzuki Alto in a single month previously.

    Pakistan’s auto industry is currently facing significant challenges due to production halts, resulting from a lack of availability of auto parts and restrictions on imports.

    As a result, car manufacturers are facing difficulties in meeting consumer demands, leading to decreased sales figures for many companies, including Toyota and Suzuki.

  • Pakistan ‘very close’ to signing staff-level agreement with IMF, says Finance Minister

    Pakistan ‘very close’ to signing staff-level agreement with IMF, says Finance Minister

    Finance Minister Ishaq Dar has reaffirmed his team’s commitment to completing Pakistan’s $7 billion Extended Fund Facility programme with the International Monetary Fund (IMF).

    Speaking at a seminar organised by the Finance Ministry in Islamabad, Dar acknowledged the need for swift implementation of measures to reach an agreement with the IMF as the country has reserves barely sufficient for three weeks of essential imports.

    He noted that the government had inherited an economy that was “in a shambles” and that it had decided to honour the commitments made by the previous administration, despite a serious trust deficit with the lender.

    According to Dawn, the minister also confirmed that Pakistan was “very close” to signing a staff-level agreement with the IMF, which would unlock inflows from friendly countries and lead to a disbursement of $1.2 billion. The prerequisites by the lender are aimed at ensuring Pakistan reduces its fiscal deficit before its annual budget around June. The country has already taken most of the other prior actions, including hikes in fuel and energy tariffs, the withdrawal of subsidies in export and power sectors, and generating more revenues through new taxation in a supplementary budget.

    Furthermore, Dar highlighted the need for all stakeholders to contribute to overcoming the challenges facing the country, including the implementation of austerity measures. These measures, which include cabinet members forgoing their salaries, paying their own bills, banning the purchase of luxury vehicles from 2024, and slashing current expenditure by 15 per cent, have already been implemented and notified to the Finance Ministry.

    Dar also noted that Pakistan’s economic difficulties were compounded by the devastating 2022 floods, which affected 33 billion people and caused physical and economic losses of nearly $30 billion.

    Despite fiscal constraints and limitations, Dar pledged that the federal and provincial governments had jointly allocated Rs452 billion for relief and rehabilitation work of flood affectees. International agencies have calculated that around $16 billion would be required for reconstruction and rehabilitation work in Pakistan in the next two years, half of which will be met by Pakistan from its own resources.

  • Pakistani rupee’s three-day winning streak ends due to delayed IMF deal

    Pakistani rupee’s three-day winning streak ends due to delayed IMF deal

    The value of the Pakistani rupee (PKR) decreased 0.45 per cent against the US dollar following a three-day period of gains due to prolonged delays in critical funding from the International Monetary Fund (IMF).

    During the interbank session held today, the PKR depreciated by Rs1.3 to settle at Rs279.12 per USD, compared to yesterday’s closing of Rs277.87 against USD.

    Throughout the session, the local unit traded within a range of Rs1.75, reaching a high bid of Rs278.75 and a low offer of Rs277.5. In the open market, the PKR was traded at Rs277/Rs280.5 versus USD.

    On the other hand, the local unit gained Rs5.1 against the Pound Sterling, with the day’s closing quote at Rs329.98 versus GBP, while the previous session closed at Rs335.11 per GBP.

    Furthermore, the PKR’s value also strengthened by Rs2.9 against the EUR, which closed at Rs294.19 at the interbank today.

  • Economic situation forces Honda Atlas Pakistan to suspend production for more than 20 days

    Economic situation forces Honda Atlas Pakistan to suspend production for more than 20 days

    Honda Atlas Cars Pakistan Limited (HACPL), one of the leading car manufacturers in Pakistan, has announced the temporary closure of its plant from March 09, 2023, to March 31, 2023.

    In a notice sent to the Pakistan Stock Exchange (PSX), the company cited disruptions in its supply chain caused by the current economic situation in Pakistan.

    The government’s strict measures, such as restricting the opening of LCs for the import of completely knocked down (CKD) kits and raw materials, and halting foreign payments, have significantly impacted the company’s production capabilities.

    The shutdown is expected to affect Honda car production in the region and potentially impact the company’s financial performance.

    The closure of HCAR’s plant is also likely to have a ripple effect on the automotive industry in the region, highlighting the challenges faced by businesses in Pakistan due to the current economic situation.

  • Pakistan’s oil industry on the brink of collapse, calls for urgent government intervention

    Pakistan’s oil industry on the brink of collapse, calls for urgent government intervention

    According to recent reports, the oil industry in the country is facing serious challenges in obtaining crude oil and petroleum products due to foreign exchange constraints and current product pricing. These challenges have been exacerbated by the recent depreciation of the currency and an increase in the central bank’s policy rate.

    The Oil Companies Advisory Council (OCAC), which comprises over three dozen major oil marketing companies (OMCs) and refineries, has expressed concern to the government about the possibility of a major disruption to the already fragile supply chain.

    In a communication to the ministers for finance and energy, the governor of the State Bank of Pakistan (SBP), and the chairman of the Oil and Gas Regulatory Authority (Ogra), the OCAC has urged for urgent engagement to address the “severe impact of the recent depreciation of the rupee.”

    The association has also requested the development and immediate implementation of a transparent mechanism for the recovery of foreign exchange losses in product pricing. If immediate revision of prices based on the current exchange rate is not feasible, the government should at least put a system in place immediately.

    The recent steep depreciation has rendered the existing letter of credit (LC) lines inadequate for the industry, which could lead to import disruption of crude and refined products. The industry has also expressed concern about the cost of opening confirmed LCs, which has gone up many times and adversely impacted profitability.

    Moreover, maintaining the 20 days’ mandatory stock cover as per OMCs license requirement at the current rupee-dollar parity and after the recent increase in the SBP policy rates has resulted in borrowing costs of more than 50 per cent of regulated margins. Additional working capital burdens can raise significant concerns around OMCs’ ability to sustain operations.

    The association has reported that its members have been doubly hit due to the erosion of equity from foreign exchange losses and a reduction in working capital lines due to an increase in the rupee-dollar parity coupled with a rise in international oil prices, particularly high-speed diesel. The OMCs have already reported about Rs35 billion cumulative losses in POL pricing in recent months.

    The international price of petrol has increased by 3 per cent ($2.8 per barrel) to $94.84 per barrel between Jan 1, 2022, and March 2, while HSD prices surged by $15.48 or 18 per cent to $103.53 per barrel. During the same period, the rupee depreciated by over 61 per cent or Rs108.38 against the US dollar. This means that oil prices and exchange rate changes require an increase in the oil industry’s needs by 90 per cent than LC limits in local currency compared with last year to produce the same quantity of HSD.

    Therefore, the oil industry has called upon the government to ensure that the banking sector enhances limits for oil companies and refineries, enabling them to manage the impact of increased oil prices and rupee depreciation that are critical for the survival of the sector and the integrity of the POL supply chain.

    According to Dawn, the OCAC has warned that the industry is on the brink of collapse, as fuel shortages in certain areas earlier this year highlight the fragile condition of the industry. Urgent government intervention is necessary to ensure uninterrupted supplies.

  • Pak Suzuki suffers worst sales decline, sells less than 1,000 cars in February

    Pak Suzuki suffers worst sales decline, sells less than 1,000 cars in February

    Recent reports indicate that Pak Suzuki Motors has experienced a significant decline in sales due to production issues. The company has recorded its worst sales performance in history, mainly because of a shortage of production parts and rising raw material costs.

    Reports reveal that Pak Suzuki sold fewer than 1,000 units in February, marking its worst performance since the country’s COVID-19 lockdowns in April 2020 when production and sales came to a halt. In January, the automaker sold 2,940 vehicles, a significant 74 per cent decrease in monthly sales. This was attributed to the poor sales of the Suzuki Alto, which declined from 6,898 units in December 2022 to 44 units in January 2023.

    The official figures from the Pakistan Automotive Manufacturers Association (PAMA) are yet to arrive, but the total units sold in February are expected to range from the high tens to low hundreds.

    Despite being among the highest-selling automobile brands in the country, Pak Suzuki’s recent sales decline has left it struggling to maintain its position in the fiercely competitive industry. The drop in Suzuki sales is attributed to production part issues, which have caused difficulty in obtaining necessary auto parts due to major supply chain issues caused by the pandemic. As a result, the company has faced a shortage of raw materials and production parts.

    Global inflation has further exacerbated the problem, leading to a rise in the prices of raw materials and an increase in the car prices. This inflation has further contributed to a drop in sales as it has become difficult for the company to access all the required materials.

  • Another IMF condition met as Pakistan imposes 25% sales tax on luxury items

    On Tuesday, the federal cabinet led by Prime Minister Shehbaz Sharif approved the imposition of a 25 per cent sales tax on luxury items, fulfilling a condition set by the International Monetary Fund (IMF) for the revival of the $7 billion Extended Fund Facility (EFF) that had been stalled for months.

    The cabinet approved the 25 per cent general sales tax (GST) on luxury items through a circulation summary. The Federal Board of Revenue will issue a formal notification in the coming days, and the new rate will be applicable from March 1.

    The list of items subject to the 25 per cent GST includes aerated water and juices, imported cars, mobile phones, pet food, sanitary and bathroom wares, carpets (excluding Afghanistan), chandeliers and lighting devices or equipment, chocolates, cigarettes, confectionery items, corn flakes, cosmetics, shaving items, tissue papers, crockery, decorative devices, doors and window frames, fish, footwear, fruits and dry fruits, furniture, home appliances (CBU), luxury leather jackets and apparel, mattress and sleeping bags, frozen or processed meat, musical instruments, arms and ammunition, shampoos, sunglasses, tomato ketchup and sauces, and travel bags and suitcases.

    The federal government also imposed a 25 per cent GST rate on locally manufactured luxury vehicles of 1,400cc and above. The FBR has estimated that it will collect an additional Rs15 billion in taxes through the enhanced GST rate of 25 per cent in the four-month period.

    According to sources, Pakistan and IMF held virtual negotiations on Monday to revive the loan program that had been stalled for months. During the meeting, the lender expressed satisfaction with the country’s measures, while Pakistan insisted on early finalization of the staff-level agreement.

    The negotiations were moving positively as the Fund did not place any new demands during the virtual session. The State Bank of Pakistan (SBP) informed IMF representatives about the estimated collection of foreign exchange reserves of $10 billion until June, and sources claimed that Pakistan had achieved future targets before the staff-level agreement.

    It is worth mentioning that the government has expedited the implementation of IMF demands to unlock the loan tranche for the country’s economic recovery.

  • Saudi prince aims to create over 1,000 jobs with $100 million tech house investment in Pakistan

    Saudi prince aims to create over 1,000 jobs with $100 million tech house investment in Pakistan

    A Saudi tech company owned by Prince Fahad bin Mansour Al-Saud has announced the launch of a Saudi-Pakistan Tech House in Islamabad on Monday.

    The initiative was first announced by the prince in January at Pakistan’s largest tech event, Future Fest 2023, and aims to forge partnerships with information technology (IT) companies and enterprises in Pakistan to promote greater ease of doing business between the two countries.

    Prince Fahad is the co-founder of ILSA Interactive, which was established in 2009 by Pakistani entrepreneur Salman Nasir with offices in Riyadh and Lahore, reflecting the determination of both Pakistani and Saudi leaders to deepen an existing strategic relationship in all fields.

    The company plans to forge partnerships with IT companies, universities, and large enterprises in Pakistan. The launch ceremony took place on Monday, March 6, and Prince Fahad intends to create more than 1,000 jobs and undertake 300 projects valued at $100 million in Pakistan, Saudi Arabia, and other countries.

    Future Fest 2023 saw leading entrepreneurs, startups, policymakers, and investors from around the world participate, and a delegation of Saudi business leaders attended the event, taking part in keynote addresses, roundtable conferences, and discussions on various topics related to the future of business and startups.