Saturday, June 22, 2013

SSUET’s Rs 897 million deficit budget approved

By Abdul Qadir Qureshi
(Pakistan News & Features Services)

The Rs 897.07 million budget for fiscal year 2013-14 of the Sir Syed University of Engineering & Technology (SSUET), Karachi, was passed on June 21.

The University’s Board of Governors which met under the chairmanship of Vice-Chancellor Prof Dr  Jawaid H. Rizvi, granted approval to the budget which shows a deficit of Rs 35.56 million.

The budget showed an income of Rs 861.50 million while the expenditure has been set at Rs 897.07 million thus making the budget  in deficit by Rs 35.56 million.

Of the total budgetary estimates Rs 13.2 million have been earmarked for research projects while Rs 40 million have been set aside for provision of scholarships, Rs 26.9 million for purchase of additional lab equipments, Rs 20.5 million for construction of new academic block, Rs 7.8 million for providing financial help out of profit of endowment fund to students and employees. The University’s Endowment Fund has been set at Rs 320 million.

The budgetary estimates shows Rs 5 million having been allocated for providing financial incentive for faculty ccarrying out work on research projects , Rs 0.8 million for Ph.D graduate programme, Rs 5 million for hiring foreign specialists faculty, Rs 8.5 million for development of new campus on 200 acres of land as well as IT Park.

During 2013-14, the University will spend Rs three million on purchase of new books, research journals and equipments for the library.

A provision of Rs 23.3 million has been made for development works out of profit from endowment fund. The budget shows an accumulated development fund of Rs 111.4 million.

Out of total income of Rs 861.50 million estimated for the fiscal 2013-14, the university will receive Rs 752.15 million from tuition and allied fees, Rs 77.35 million from other income, Rs 31 million as profit on endowment fnd and Rs one million from donations.

On the expenditure side, the highest chunk of the budget of Rs 545.48 million will be consumed on establishment cost.

The budget estimates of Rs 897.07 million for 2013-14 are higher as compared to revised estimates of Rs 791.41 million of  2012-13.

Similarly expenditure is also estimated to go up to Rs 897.07 as compared to Rs 791.41 million during outgoing financial year.

Meanwhile the Board of Governors  paid homage to late Chancellor Engr Z A Nizami, who passed away on April 7, and unanimously passed a resolution eulogizing his services and achievements besides lauding his dedication and commitment to the cause of education.

The Board granted approval to the recommendation of the University’s Academic Council for introduction of new disciplines, and modifications in different courses studies. It also approved the audit report for the period upto June 2012 and also approved the appointment  of existing external auditor for the period July 2012 to June 2013.

State Bank reduces policy rate by 50 basis points to nine percent

Yaseen Anwar, SBP Chief
By Mohammad Nazakat Ali
(Pakistan News & Features Services)

The State Bank of Pakistan (SBP) has decided to reduce the policy rate by 50 basis points to bring it down to 9 percent with effect from June 24, 2013.
This was decided by the Central Board of Directors of the State Bank of Pakistan at its meeting held under the chairmanship of SBP Governor, Yaseen Anwar, in Karachi on June 21.
According to the Monetary Policy Decision, the SBP has decided to place a higher weight to declining inflation and low private sector credit relative to risks to the balance of payments position.
Following is the complete text of the Monetary Policy decision:
“There has been a discernible positive change in sentiments post May 2013 elections because of clarity on the political front. The change in the behavior of banks in auctions of government securities and reaction of stock market are two examples. Importantly, there has been a considerable improvement in SBP conducted surveys of consumer confidence, expected economic conditions, and inflation expectations. The absence of foreign financial inflows and high fiscal borrowings from the banking system, however, remain formidable economic challenges, especially for monetary policy. Similarly, power shortages and security conditions continue to be strong impediments to growth.”
“An almost continuous and broad based deceleration in inflation over the last year has had a favorable impact on inflation outlook – a key variable in monetary policy decisions.  In May 2013, the year-on-year CPI inflation was 5.1 percent while trimmed measure of core inflation was 6.7 percent; the lowest levels since October 2009. The average CPI inflation for FY13 is expected to be at least two percentage points below the target of 9.5 percent.”
“However, in the latest budget the government has announced an increase of 1 percentage point in the General Sales Tax (GST), from 16 percent to 17 percent, and changes in the tax structure for some goods and services. In addition, the government is considering a phase-wise upward adjustment in electricity tariff. The exact magnitude and timing of this adjustment is yet to be decided. Therefore, there is a risk that average inflation for FY14 could exceed the announced target of 8 percent for the year. However, aggregate demand in the economy is expected to remain moderate, which could have a dampening effect on inflation.”
“A reflection of the current declining trend in inflation can be seen in the muted real economic activity, especially private investment expenditures. Beset by energy shortages and law and order conditions, the GDP growth has struggled to ameliorate in the last few years and this year was no exception. The provisional estimate of GDP growth for FY13 is 3.6 percent, which is lower than the 4.3 percent target for the year. Similarly, private fixed capital formation has decreased by 1.8 percent – the fifth consecutive year of a declining trend. Although there has been an encouraging uptick in the growth of Large Scale Manufacturing (LSM) sector, 4.8 percent in April 2013, it is too early to term it as an emerging trend.”
“A declining inflation trend and below potential GDP growth make a case for further reduction in the policy rate. The argument is twofold. First, the SBP has been giving a relatively high priority to inflation in its monetary policy decisions over the last few years. Thus, continuing to do so would indicate consistency in the monetary policy stance. Second, without further reduction in the policy rate, the real interest rate – policy rate minus expected inflation – would increase due to declining inflation. High real interest rates are not helpful for supporting private investment in the economy.”
“However, as indicated in the last monetary policy decision, the current balance of payments position and a structural imbalance in fiscal accounts suggest vigilance. The stress in the balance of payments position was a prime consideration in maintaining the policy rate at 9.5 percent in the last two monetary policy decisions. The basic argument has been that the return on rupee denominated assets needs to be sufficiently attractive to discourage speculative demand for dollars.”
“There is no significant revision in the assessment of the balance of payments position since the last monetary policy decision. The external current account deficit is expected to remain manageable, around 1 percent of GDP for FY13, signifying very low risk from this source for the external accounts. The real challenge continues to emanate from the lack of financial inflows. Let alone finance the small current account deficit, there has been a cumulative net capital and financial outflow of $143 million during the first eleven months of the current fiscal year. Add to this the on-going payments of IMF loans and it becomes clear that the pressure on foreign exchange reserves has not abated. As of 14th June 2013, SBP’s foreign exchange reserves stand at $6.2 billion.”
“There are two developments, however, that are worth highlighting. First, there has been a noticeable change in sentiments, as highlighted above, that can potentially have a favorable influence on private financial inflows. Other than the overall economic outlook, investment decisions do take into account the relative political certainty that determines the continuation of economic policies for some time in the future. Second, declining inflation has increased the relative real return on rupee denominated assets. This could provide some room for downward adjustment in nominal returns to cater to broad macroeconomic considerations despite external account concerns.”
“In this context, a lot depends on the fiscal outlook. The fiscal deficit for FY13 has been estimated to reach 8.8 percent of GDP, which is considerably higher than earlier projections. The source of deviation is structural and well known – low tax revenues due to absence of meaningful tax reforms and continuation of untargeted subsidies without comprehensively addressing the energy sector problems. For FY14, the federal government has announced a provisional estimate of 6.3 percent of GDP. “
“From the monetary policy perspective, it is the financing pressure of the fiscal position that is the source of stress. Due to almost zero net external financing in FY13, the burden of financing the sizeable deficit of 8.8 percent has fallen disproportionately on domestic sources, in particular the banking system. During 1st July – 7th June, FY13, fiscal borrowings from the banking system for budgetary support were Rs1230 billion, including Rs413 billion from the SBP. The high level of these borrowings has kept an upward pressure on the system’s liquidity and thus short term market interest rates and is restraining growth in the private sector credit.”
“If the economy is to reap the benefits of evolving positive sentiments and lure the domestic as well as foreign investors then implementation of a reform oriented and credible medium term fiscal outlook is essential. On its part, the Central Board of Directors of SBP has decided to place a higher weight to declining inflation and low private sector credit relative to risks to the balance of payments position. Therefore, the policy rate is being reduced by 50 basis points, to 9 percent, with effect from 24th June 2013.”