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The Board of Directors of SBP, in its meeting held on 19th July, 2014, decided once again to leave the policy rate unchanged at 10 percent for the next two months. A status quo was widely anticipated as the economy was still not out of woods despite improvement in some of the key macroeconomic indicators. According to central bank's Monetary Policy Statement (MPS), economic indicators are certainly better at the beginning of FY15 than a year ago: foreign exchange reserves were considerably higher, forex market had stabilised, growth in broad money (M2) was contained due to a deceleration in government's budgetary borrowings, private sector credit was picking up along with a moderate economic recovery and inflation remained in single digit. More specifically, year-on-year growth in M2 had decelerated to 12.5 percent by end-June, 2014 - the lowest rate of monetary expansion during the last three years. This was mainly due to a significant reduction in government borrowings for budgetary support from the banking system that provided necessary space to the private sector to borrow from banks; it also led to lowering inflationary expectations. The growth in domestic debt during FY14 had decelerated due to a lower fiscal deficit and increase in external financing. Foreign inflows had resulted in a capital and financial surplus of dollar 6.1 billion during July-May, 2014 which was a marked improvement compared to the surplus of only dollar 465 million in the corresponding period last year. From a low level of dollar 2.8 billion on 7th February, 2014, SBP's foreign exchange reserves had increased to dollar 9.6 billion by 4th July, 2014 and exchange rate had stabilised slightly below Rs 99 to a dollar. The average CPI inflation at 8.6 percent in FY14 was in single digit for the second consecutive year. Thanks to a better LSM performance, real GDP had grown by 4.1 percent in 2013-14 despite challenging security conditions and energy shortages.

History appeared to be in the making when the leaders of Brazil, Russia, India, China and South Africa, commonly known as BRICS, on 15th July, 2014 agreed in Portaleza to create a Shanghai-based Development Bank and a Reserve Fund, seen as counterweights to Western-led multilateral financial institutions. The Development Bank will have an initial capital of dollar 50 billion that could rise to dollar 100 billion, funded equally by each nation. The first President of the Bank would be an Indian while the first Board Chair would hail from Brazil. According to the summit declaration, the bank will help emerging and developing nations mobilize resources for infrastructure and sustainable development projects. The Contingency Reserve Arrangement will have dollar 100 billion at its disposal and would help countries avoid "short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financing safety net and complement existing international arrangements." China was expected to make the biggest contribution of dollar 41 billion, followed by dollar 18 billion each from Brazil, India and Russia and dollar 5 billion from South Africa. The BRICS summit declaration also voiced deep concern over the situation in Ukraine and called for a comprehensive dialogue, the de-escalation of the conflict and restraint from all the actors involved with a view to finding a peaceful political solution. While Brazilian President Dilma Rousseff said that "these initiatives show that, despite our diversity, our countries are committed to a solid and productive association", Russian President Vladimir Putin hailed the agreement as "a very powerful way to prevent new economic difficulties."
The unrelenting incidence of terrorism besetting Pakistan has been invariably described as an existential threat to our national independence. It has taken the toll of thousands of innocent lives, ruined national economy, and turned Pakistan into a forbidden land for foreign visitors and stolen people's peace of mind. Even the best of anti-terrorism operations have met with partial success. Like an inflated balloon when pressed on one side it swells on the other side. Only this past Thursday as reports of armed forces' significant gains in tribal areas filtered in the terrorists were knocking at the gate of prime minister's private residence near Lahore. Of course, there are quite a few explanations for 'seven lives' of terrorists, but the one most plausible is that when caught and brought before the court of law barring a few exceptions they just don't get punished. Obviously the security forces are disappointed over the low conviction rate. It is no wonder then the issue was brought to the notice of Prime Minister Nawaz Sharif by Army Chief General Raheel Sharif during a briefing at the General Headquarters - probably the first time GHQ's concern was made public. A communiqué issued after the briefing says: 'The meeting noted with concern that there is an issue of effectively prosecuting terrorists in the courts of law, and terrorists are not getting convictions which has a negative impact on forces' effort in the war on terror'. The prime minister is said to have "agreed that the forces will get full legal backing". What next after passing the Protection of Pakistan Act (PPA) the government would do it's difficult to predict. But on the face of it there is enough of law to effectively prosecute those charged with terrorist acts; the problem is with application. A whole host of negatives abound in the manner police conducts investigation and the prosecution branch works. As for the courts these are the courts of law; securing justice is essentially the responsibility to those who seek trial of the accused. But the dilemma doesn't end here; paradoxically, even in its diluted form the PPA is being opposed by those who want 'justice' to prevail at all costs - as if bloodletting can be condoned under the cover of human rights.
A month on, the gains made by the armed forces against terrorist outfits in the tribal areas fully vindicate those who had insisted not only that the so-called peace talks with Tehreek-e-Taliban were non-starter but also that the military operation should not be delayed. From day one the terrorists deserved a raw deal and now when that is being given results are there for everyone to see. According to latest reports, Miramshah - the capital city of North Waziristan where one could buy an improvised explosive device (IED) or a suicide jacket from the shelf - has been cleared and the other terrorist centre, Mirali, is being cleared of militants. The security forces are now moving westward on Dattakhel road. Those who fled to Shawal mountains were bombed on Wednesday; those 35 were killed included about a dozen of 'Punjabi' Taliban. The planned operation in Bajaur has been put on hold, as the local tribal elders have undertaken to form a 'qaumi lashkar' to foil cross-border forays by Mulla Fazlullah's fighters. Since the launch of the Zarb-e-Azb operation 30 soldiers, including two officers, have embraced martyrdom. The number of terrorists killed by our forces has crossed 400 mark. Of course, they included Uzbek and other foreign terrorists. The forces have also destroyed a large number of terrorist hideouts and their arms-manufacturing factories. By any measure this is one of the toughest campaigns undertaken by Pakistan armed forces, all the more for the reason that the war is being fought within the national borders and its collateral victims are inescapably our own people. Given the decision that life and limb of local population have to be secured at any cost the residents of the targeted areas have been evacuated. But this time there is no turning back; a complete rout of terrorist outfits is the mission and the forces are determined to cleanse the tribal areas of them once for all - and after this the entire country - of terrorists of all hues and shades. This indeed is a tall order but there is no escape from it. Pakistan cannot afford to lose this war. On this the people are with the forces on the same page, but not the politicians. Grisly duels are in progress in political arenas across the national landscape, gladiators crying loud 'give me power or give me death'. Some are clutching onto their 'massive' mandate, while others are bent upon ousting them from power at any cost - both sides least concerned about the challenging mission assigned to the forces. If at all someone out of them talks of the ongoing operation, it is not about the sacrifices being offered by the soldiers, it is about the difficulties encountered by the IDPs, their tone invariably suggesting as if the forces are responsible for their plight. They must know we had had elections in the past and we would have them in future as well. But is there a hope that the next bunch of rulers would be less incompetent and less corrupt than before? Almost all major political parties are in power in the provinces or at the Centre and their performance is before us. It hardly matters to the common man in Pakistan who is in power. But he is absolutely clear that this war on terrorism should not be lost. And that appears to be in the making. Our forces have broken the back of the anti-state, anti-people Taliban in the tribal areas. Next on the list are terrorist hideouts in settled areas and major urban centres. Pakistani forces will also go after them with same vigour and determination as exhibited in the tribal areas. But beyond that it is for the civilians, be they government administrators or political leaders, to ensure that terrorists don't return to the areas cleared by the armed forces. No doubt the electoral process should be clean and transparent and to ask for it is no crime. We believe the government initiates work on electoral reforms without any further loss of time. But equally important is to work out a post-operation legal and administrative framework that should help the tribal areas transit from their colonial era existence to t
Pointing to a glaring injustice, PPP Senator Sughra Imam told the Senate Standing Committee on Law and Justice recently that the conviction rate for rape cases filed during the last five years has been zilch. A press report quoting the Human Rights Commission of Pakistan report for 2013, says that 2,576 rape cases were registered in Punjab, 127 cases of rape and three of gang-rape in Khyber Pakhtunkhwa, and 27 gang rapes in Sindh. Yet no one was brought to book. Frustrated with the situation female members of the Senate staged a protest walkout from the House last December. It is good to see that they have not given up on the issue. Talking to journalists after a roundtable discussion with representatives from bar councils, the committee chairman, Senator Kazim Khan, said "we will first determine why the conviction rate is zero and whether [there is something] in the laws, the judiciary or the legal procedure itself."
Multinational companies suspected of exploiting tax loopholes across countries have, of late, come under increasing pressure. Recently, the European Union finally launched an investigation into sweetheart tax deals negotiated by Apple, Starbucks and Fiat with its three-member states. The investigation is expected to determine whether arrangements offered by Ireland, the Netherlands and Luxembourg give the companies an unfair advantage which would amount to illegal state aid. However, Joaquin Almunia, the EU Competition Commissioner, claimed that "we have reasons to believe that in these specific cases the national authorities have renounced to tax part of their profits (and) in the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes." The investigation would also focus on the use of transfer pricing, an accounting technique where units of a multinational pay royalties to another unit of their business. According to Almunia, various arrangements under scrutiny could amount to illegal state aid that discriminated against other member states while "under the EU state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way." It may be added that the OECD, working under the auspices of the G20, has also embarked on a reform campaign to stop multinationals from exploiting loopholes and divergent tax regimes.
PTI's preparations for its August 14 long march to press for investigation into alleged electoral fraud and legislating electoral reforms are gaining momentum. Following PPP Co-Chairman's support for its demands, the PTI held its core committee meeting on Wednesday, where it was decided to get in touch with other parties, including the Jamaat-e-Islami, MQM and ANP to form a broad consensus on electoral reforms and possibly to participate in the march. The PML-Q has already offered its support. If the PPP decides to upgrade its moral support and join in the march it would become difficult for the government to withstand the pressure. These developments are creating fear of political destabilisation - something this country can ill-afford. Indeed, protest is part of democratic politics, what is worrying is the upping of demands by PTI Chairman Imran Khan. So far he had been saying that he accepts the overall outcome of the elections, but wants a vote recount in only four constituencies to uncover alleged rigging as well as to push for reforms to ensure the next elections are free and fair. He has now changed stance. Borrowing the idea of complete audit from the Afghan presidential election feud, he has now started asking for a complete audit of the May 2013 elections, even raising the question of 'mid-term' elections.


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Foreign Debt $60.9bn
Per Cap Income $1,368
GDP Growth 3.6%
Average CPI 7.5%
Trade Balance $-1.558 bln
Exports $2.117 bln
Imports $3.675 bln
WeeklyJuly 10, 2014
Reserves $14.638 bln