Thursday June 11, 2009


Kenya is seeking $500 million in funds to help cushion the economy after the global economic crisis cut exports and foreign investment, Prime Minister Raila Odinga said.

The funds are over and above the $200 million loan that Kenya has secured from the International Monetary Fund, Odinga said in an interview in Cape Town yesterday, where he was attending the World Economic Forum on Africa.

The global recession has curbed Kenya’s foreign currency earnings as exports fell and remittances from Kenyans living abroad declined. Foreign currency reserves of about $2.6 billion cover three months of import needs, compared with the government’s target of four months, Scott Rogers, the IMF’s senior representative in Kenya, said on May 29.

“We are hoping we will get more support at this very critical moment to be able to bridge the gap,” Odinga said. “We seek particularly balance of payments support, which will help us to import” food and other goods.

Kenya has approached the African Development Bank and potential donors such as the European Union to help plug the funding gap, Odinga said. The government would prefer not to raise the money through domestic borrowing because that would have “negative” consequences for interest rates on government debt, he added.

Kenya may also revive a plan to sell bonds to international investors next year, Odinga said. The government in December scrapped plans to sell $500 million of bonds after borrowing costs rose and credit markets seized up. The funds had been earmarked for projects such as power plants and roads.

Tourism Recovery

East Africa’s biggest economy will probably expand between 2.5 percent and 3 percent this year, boosted by a recovery in agriculture and tourism, Odinga said. Growth slumped to 1.7 percent in 2008 from 7 percent in 2007, as the economy was hurt by the global recession and by post-election violence in the first quarter.

Odinga became prime minister last year after signing a power-sharing accord with President Mwai Kibaki to end two months of clashes between ethnic groups after a disputed election. About 1,500 people were killed in the fighting.


Courtesy: Bloomberg

Thursday June 11, 2009

European and Asian shares climbed and U.S. stock-index futures advanced as the International Energy Agency increased its global oil-demand forecast, adding to signs the worst of the recession may be over.

GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, rose the most in a month after Morgan Stanley advised buying European health-care shares. Electrolux AB, the world’s second-biggest appliance maker, advanced 5.1 percent after Goldman Sachs Group Inc. added the shares to its “conviction buy” list.

Europe’s Dow Jones Stoxx 600 Index increased 0.7 percent to 214.25 at 9:51 a.m. in London. The gauge has surged 36 percent since March 9 on speculation the first global recession since World War II is easing. The measure is valued at 24.9 times the earnings of its companies, the most expensive level since 2004, weekly data compiled by Bloomberg show.

“The worst is over for banks and the world economy,” said Otto Waser, the chief investment officer at R&A Research & Asset Management AG in Zurich. “The recovery more or less is going to be the stock market theme for the next 12 months. We are saying it’s getting a lot less worse,” he said in a television interview.

The MSCI Asia Pacific Index gained 0.5 percent, led by mining and energy companies, as rising fixed-asset investment in China boosted confidence the global economy is recovering.

U.S. Futures

Standard & Poor’s 500 Index futures added 0.3 percent to 943.3. Sales at U.S. retailers probably rose in May for the first time in three months, economists said before a Commerce Department report due at 8:30 a.m. in Washington today. At the same time, the Labor Department may report that 615,000 workers filed claims for jobless benefits last week, compared with 621,000 a week earlier, according to the survey median.

The Fed said yesterday that the U.S. economic slump may be slowing in almost half of its regions, with the outlook at some companies improving while “stringent” loan conditions and a “weak” labor market persist.

“Economic conditions remained weak or deteriorated further” from mid-April through May, while five of 12 Fed districts “noted that the downward trend is showing signs of moderating,” the Fed said in its Beige Book business survey, published two weeks before officials issue their next monetary policy decision.

Bank of England policy maker Andrew Sentance said the U.K. recession may be “bottoming out,” setting the scene for a recovery as soon as this year.

IEA Forecast

The International Energy Agency today raised its global oil-demand forecast for the first time in 10 months. The adviser to 28 nations increased its demand estimate for this year by 120,000 barrels a day to 83.3 million barrels a day in its monthly report. Still, consumption worldwide will contract by 2.9 percent from last year, the biggest drop since 1981.

Glaxo added 2 percent to 1,053 pence. Pharmaceutical shares were raised to “attractive” at Morgan Stanley, which said “valuations capture both near-term U.S. political uncertainty and growing economic pressure.” Glaxo was boosted to “equal weight.”

Electrolux added 5.1 percent to 108.75 kronor after Goldman Sachs raised its recommendation to “buy” from “sell” and added the stock to the firm’s “conviction buy” list.

China Petroleum, known as Sinopec, climbed 2.3 percent to HK$5.85. The company’s Sinopec Shanghai Petrochemical Co. unit said it expects to post a profit for the first half of 2009, compared with a net loss for the same period last year.

Carnival Plc, the world’s largest cruise line operator, slid 1.1 percent to 1,540 pence as oil climbed for a third day.


Courtesy: Bloomberg

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Thursday, June 11, 2009



Japan’s economy shrank less than the government initially estimated as business investment and inventories fell at a slower pace.

Gross domestic product shrank at a record 14.2 percent annual pace in the three months ended March 31, less than the 15.2 percent reported last month, the Cabinet Office said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for a 15 percent contraction.

The decline may represent the low point for an economy forecast to expand this quarter as demand from China helps stabilize exports and leaner inventories allow manufacturers to increase output. Still, with factories sitting idle and profits falling, companies are slashing investment and jobs, casting doubt on whether the revival will last.

“Today’s revised report confirms that the first quarter was disastrous, but the worst for the economy has already passed,” said Junko Nishioka, a senior economist at RBS Securities Japan Ltd. in Tokyo. “But a rebound doesn’t guarantee that Japan’s economy will regain momentum.”

The yen traded at 98.03 per dollar at 10:50 a.m. in Tokyo from 98.20 before the report was published. The Nikkei 225 Stock Average fell 0.3 percent to 9,958.98 after touching 10,000 for the first time in eight months. The gauge has climbed 42 percent since tumbling to a 26-year low on March 10.

Worst Contraction

Fourth-quarter GDP was revised to a 13.5 percent decline from 14.4 percent, today’s report showed. That’s still the worst contraction since the government began keeping records in 1955.

Capital spending fell 8.9 percent compared with a preliminary 10.4 percent, while inventories shaved 0.2 percentage point from GDP, compared with an earlier estimate of 0.3 point. Exports fell 26 percent, unchanged from the initial reading.

The recession has shown signs of easing since then. Japan’s manufacturers have benefited from revived demand in China, where the government is spending $586 billion on roads, hospitals and housing. Exports and factory production increased in March and April on a month-on-month basis.

Japanese Prime Minister Taro Aso’s record stimulus spending that includes loan guarantees for smaller businesses, cash handouts to households and incentives for buying cars and appliances are starting to work.


Courtesy: Bloomberg



Thursday June 11, 2009


The International Energy Agency raised its global oil-demand forecast for the first time in 10 months on signs that the economic slowdown is abating.

The adviser to 28 nations increased its global oil demand estimate for this year by 120,000 barrels a day to 83.3 million barrels a day, driven by consumption in U.S. and China. Consumption worldwide will contract by 2.9 percent from last year, the biggest drop since 1981, the agency said in its monthly report today.

“These revisions do not necessarily imply the beginnings of a global economic recovery, and may only signal the bottoming out of the recession,” the Paris-based agency said. “It’s a fairly modest uptick. Underlying demand levels remain weak.”

Oil prices have climbed 61 percent this year. They traded above $72 a barrel in New York today for the first time in seven months on growing optimism about an economic recovery and as a weaker dollar drives investors toward commodities. Futures in New York rebounded to a seven-month high of $72.30 after the release of the report from as low as $71.32 earlier in the day.

Confidence in the world economy rose for a third month as U.S. job losses slowed and global production improved, a Bloomberg survey of users showed yesterday. A U.S. Labor Department report on June 5 showed the country lost the fewest number of jobs since September last month.

Tighter Fundamentals

Rallying crude prices have been driven by both tighter supply-demand fundamentals and “short-term flows” of speculative capital, David Fyfe, head of the IEA’s oil industry and markets division, said in a phone interview from Paris.

Analysts expect prices to average $61 a barrel in the fourth quarter of this year, according to the median of forecasts compiled by Bloomberg. Goldman Sachs Group Inc. said this month it expects oil to reach $85 by the end of the year,

The outlook for 2009 consumption in the most industrialized countries, the Organization for Economic Cooperation and Development, was raised “marginally” to 45.2 million barrels a day. Inventories of crude and refined products in these nations amounted to 62 days of demand as of the end of April.

The forecast change in demand was countered by expectations for higher output from outside the Organization of Petroleum Exporting Countries.


Courtesy: Bloomberg


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Thursday, June 11, 2009



Japan’s Nikkei 225 stock average on Thursday broke through the psychological threshold of 10,000 for the first time in eight months, led by steelmakers and financial stocks.

It came as Tokyo revised the country’s gross domestic production in the first quarter to a 3.8 per cent contraction, slightly better than the preliminary estimate of a 4 per cent contraction.




Courtesy: Financial Times




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Thursday, June 11, 2009


The fall in Chinese exports and imports accelerated in May, dashing hopes that a collapse in the country’s external trade flows had bottomed out and pointing to the continued weakness in global demand.

Exports dropped 26.4 per cent from a year earlier, compared with a 22.6 per cent fall in April. This marked the seventh consecutive month of decline. Imports fell 25.2 per cent, following a 23 per cent decline a month earlier. China’s trade surplus rose slightly from Rmb13.1bn in April to Rmb13.4bn in May.

“The global economic situation has hit a bottom but it will still take time to recover. I expect it to take one to three years,” said Hu Yifan, chief economist (global) at CITIC Securities in Hong Kong.

“A technical rebound [in exports] may happen in November but a demand-driven rebound will not come in the short term.”

Beijing has announced a Rmb4,000 ($586bn) stimulus plan after its exports-powered economy was hit hard by weak global demand.

The stimulus packages have spurred investment in government-supported sectors such as transport infrastructure, the power grid and housing, as reflected in a 38.7 per cent rise in fixed asset investment in May from a year earlier.

This marked a larger increase than in April, when FAI rose 33.9 per cent. For the first five months of this year, investments increased 32.9 per cent from the same period in 2008, compared with 30.5 per cent in the first four months of the year and against an estimate of 31 per cent.

“Fixed asset investment in China continues to increase on the back of state-directed projects ... This will help keep the economy growing but there are increasing concerns about the amount of lending that has been required to fund the projects,” said Alaistair Chan, economist at Moody’s Economy.com.


Courtesy: Financial Times


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BAGHDAD: Contracts that semi-autonomous Kurdish authorities have signed with private oil firms are illegal until they are ratified by the Oil Ministry in Baghdad, the Iraqi government reaffirmed on Wednesday.

Oil Minister Hussain al-Shahristani also rejected paying firms that have developed the Taq Taq and Tawke oil fields in northern Iraq as part of contracts signed independently with the Kurdish Regional Government (KRG). “These contracts need to be ratified by the Iraqi federal Oil Ministry. Till that time they are illegal,” government spokesman Ali al-Dabbagh told reporters at a news conference with Oil Minister Hussain al-Shahristani. After the conference, Shahristani told reporters: “We will not discuss any compensation for these companies (developers of Taq Taq and Tawke) under any circumstances.”

His statement could ratchet up tensions between Baghdad and the KRG, which has said it would not pay Norway’s DNO International, Toronto-listed Addax Petroleum and Turkey’s Genel Enerji, from its own purse. Genel is to merge with Britain’s Heritage Oil.

Shahristani said the KRG should pay the firms from the 17 percent of the federal budget it gets each year, an option ruled out by Kurdish natural resources minister Ashti Hawrami.

The Iraqi government at the beginning of the month allowed crude to start being exported from Tawke and Taq Taq. That seemed to represent a break in a long-running dispute between the government in Baghdad and Kurds over land, power and Iraq’s vast oil resources.



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With only three days left for the budget announcement the prices of luxury goods have hiked owing to shortage due to hoarding by traders.

Traders Action Committee Chairman Siddiq Memon said that prior to every budget, two trends are common, prices of most goods, especially luxury items rise and available stocks in the market sell much more rapidly.

This year, Memon informed, prices of the 350 items present on the import list have hiked by 30 per cent including ready-made garments and shoes.

He admitted the fact that traders hoard leading to shortage in the markets. There is a difference between keeping an inventory or stock of goods in warehouses and hoarding. Hoarding means not releasing the goods from warehouses even if there is a demand in the market.

“Currently clothing from China, Thailand, Japan etc are short in the market and after the announcement of the budget, prices of these are expected to rise further,” he added.



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DUBAI: The UAE’s Al Khaleej Sugar has sold several thousand tonnes of sugar to India after the country’s output fell due to weather conditions, an executive said on Wednesday.

“We sold containers with a few thousand tonnes of raw and white sugar to India last month,” Cyrus Raja, corporate affairs general manager at Dubai-based refinery told Reuters.

He declined to give further details about prices or quantities that were shipped.

“Depending on India’s needs for white and raw we are considering selling more sugar to them, but still have no estimates of how much we will sell,” said Raja.

Due to less rain this year traders forecast a 45 per cent drop in India’s sugar output to 14.7 million tonnes in the crop year to September, which has turned the country from an exporting nation to an importing one.

The fall in cane output has caused New York-traded raw sugar to rise by more than 30 per cent this year, striking a near 3-year peak of 16.05 cents/lb two weeks ago.

Al Khaleej, one of the world’s largest sugar refineries had sold 100,000 tonnes of white sugar to Pakistan this month.

In May Pakistan had purchased 50,000 tonnes of white sugar from Al Khaleej for $494.40 a tonne, traders in Pakistan said.

Pakistan was expected to buy up to 600,000 metric tonnes of sugar this year as the subcontinent ramps up imports of the sweetener to keep down prices and avoid dipping into stocks.


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Cellular operators reject govt offer

LAHORE: The cellular phone operators are not willing to accept the government’s offer to increase their SMS rates in order to get relief in the GST and SIM activation charges.

The News has learnt that a meeting was held between CEOs of cellular companies and the adviser to the prime minister on finance Shaukat Tarin on Monday in which the adviser had linked the decline in GST and SIM activation to increase in SMS rates.

All operators rejected the offer except one that is not offering bundle SMS package to its customers. The only beneficiary of the government offer would be that single company, which was unable to continue bundle SMS packages due to network issues, the finance ministry revealed.

The SMS addicted youth would be the target of the government for generating revenue.

Currently, if a company offers unlimited SMS for Rs3 per day the government earns only 0.21 paisa tax from this package. Once the SMS rates would be increased the bundle SMS packages would automatically end. Thus the government will earn taxes on every SMS which ever be the rates.


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ISLAMABAD: The government has allocated Rs38 billion in the budget for 2009-10 for executing development projects in the Federally Administered Tribal Areas (FATA), Azad Jammu & Kashmir and Northern Areas.

According to the executive summary for the annual plan 2009-10, which will be released along with budget 2009-10 documents, the government has allocated Rs12.1 billion for ensuring good governance in 2009-10 against expenditures of Rs9.7 billion in the outgoing fiscal year.

“Funds have been allocated mainly for governance reform projects and programmes such as tax administration reforms, improvement in audit and accounts, public sector capacity building, access to justice, devolution and police reforms and public information and statistical management,” the document shows.

For special areas including the AJK, FATA and Northern Areas, Rs38 billion has been provided in the Public Sector Development Programme (PSDP) 2009-10 against expected utilisation of Rs23.3 billion in outgoing fiscal year 2008-09. For special programmes covering People’s Works Programme-1 and People’s Works Programme-II, Rs35 billion has been earmarked in the PSDP against Rs32.2 billion in 2008-09.

Water resource development: The government has allocated Rs57.8 billion for water resource development in 2009-10 against expected utilisation of Rs36.2 billion in 2008-09. Some important projects included resettlement, improvement of water courses, Thal, Katchi and Rainee canals, eight small and medium dams in each province, Mirani, Sabakzai, Satpara and Gomal dams, Khanki barrage, Right Bank Outfall Drainage (RBOD-II) and RBOD-III.

Power: In order to overcome energy shortages, Rs41.3 billion has been earmarked in 2009-10 against expected utilization of Rs18 billion in the outgoing fiscal year.

The portfolio of the power projects include Basha Dam, Guddu, Chicho Ki Malaian and Nandi Power Plants, Neelum Jhelum, Chashma 2, Chashma 3 and Chashma 4, Golan Gol, Khan Khawar, Dubair Khawar, Jinnah Hydro Power and Thar Coal.

Transport and Communication: The PSDP for 2009-10 provides Rs40 billion to highways against expected utilization of Rs26 billion in the outgoing fiscal year.


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ISLAMABAD (APP) - In recognition of track record and performance of Pakistan Poverty Alleviation Fund, the World Bank’s Board of Directors has approved $250 million for poverty reduction project (PPAF-III) for next five years. Addressing a media briefing on Wednesday here, Chief Executive Officer (CEO) PPAF Kamal Hyat, highlighted the fact that the World bank funding is based on the consideration PPAF’s output, lowest administrative cost, effectiveness of outcomes

and impact on the poorest at the grassroots level.

He said that where as PPAF-I (1999-2004) focused on growth and PPAF-II (2005-09) went to national scale, the thrust of PPAF-III (2009-2013) will be on integration and depth in terms of scope and activities.
Kamal Hyat said it would capitalize on its achievements of last ten years with respect to empowering poor people with increased incomes, improved productive capacity, quality of life and better access to services to achieve sustainable livelihoods and reduce poverty.

He said that it will increase its focus on inclusion of poor people - including women, youth and ultra-poor households - in community organizations and strengthen their participation in all community decision-making processes.


“PPAF-III would focus on five key areas of social mobilization and institutional building, livelihood enhancement and protection, micro-credit access, basic services and infrastructure and project implementation support” he added.

He said that PPAF has consistently received AAA rating from the World Bank. Moreover, PPAF the model is being replicated internationally in various developing countries.

Kamal said in view of its national network and outreach, PPAF was assigned dedicated responsibility by government of Pakistan for housing, water, infrastructure, heath, education, training and disability management in eight districts of earthquake-affected areas of AJK and NWFP.

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