PAKISTAN ECONOMY
NEWS COVERAGE PERIOD FROM FEB 24 TO MAR 01, 2020
PAKISTAN’S ECONOMY ON VENTILATOR, CLAIMS EXPERT
The Newspaper’s Staff Reporter February 27, 2020
KARACHI: Due to a lack of adaptation and implementation of policies, in letter and spirit, which could be in the country’s favour, Pakistan’s economic situation is not good; it is on the ventilator. The figures shown by the government are “fancy and are not long-lasting at all”. The claims by the officials are also “not factual”.
So far, Pakistan has gone to the International Monetary Fund 23 times for bailout and if the government did not make drastic changes in its policies, the country would have to go to the IMF for a bailout in future again.
These views were expressed by senior economist Dr Kaiser Bengali on Wednesday.
He was the guest of honour at the Young Economists Conference 2020 at the Department of Economics, University of Karachi. The students and faculty have arranged the conference under the theme of ‘Sustainable growth and economic development in Pakistan’ at the Arts Auditorium.
The past and the present governments have focused on increasing the tax collection only without realising the fact that they should have to reduce their expenditures first and also establish new industries and create new sources to generate income.
It is unfortunate that no government till date has adopted a policy which could provide relief to the masses and society. Their policies are always meant to entertain and to provide more luxuries to the elite class of this country.
“New loans are taken to pay back old loans. There is no policy that could bear fruitful results and bring betterment in the country. There is no change in the mindsets of the governments.”
He informed the audience that governments did not reduce their expenditures but always cut the development projects and funds allocated for them due to which there was also lack of proper facilities and infrastructure in the country and particularly in megacities like Karachi.
He observed that society could not pay taxes as the whole load had been shifted on the shoulders of the people associated with different services. Dr Bengali suggested that non-essential items should immediately be banned in the country to save foreign exchange.
Tens of thousands of people are living below the poverty line but there is nothing for them and on the other hand, we can find pet food and shampoo in stores, which is very irritating, he said.
He shared that international companies were making huge amounts of money from the local market and took the funds to their own countries. He recommended that Pakistan should pay attention to develop its new industries and promote its agricultural products in local and international markets.
Earlier, Deputy Governor of the State Bank of Pakistan Dr Murtaza Syed through his presentation shared the initiatives the government had adopted to improve the current economic situation of the country.
He said that everyone should try to understand the causes of national economic challenges, policy, actions and their impact, near-term outlook and structural issues.
He said that import and export were major factors for foreign exchange of any country and rising fiscal deficits.
Dr Syed said betterment could be brought about through exports and helping to rebuild reserves.
He shed light on the fact that fiscal deficit had also been turned around, driven by significant growth in tax revenues. He shared that monetary policy had been tightened in response to rising inflation due to depreciation, taxes and energy prices.
He admitted that the economy was facing a slowdown but hoped the improvement would be seen in upcoming days as he claimed policies were running in the right direction.
Meanwhile, the chief economist of the provincial government Dr Naeem Uz Zafar discussed uplift projects by the Sindh government and claimed that people would soon see the results.
He said that productivity was not improved in the past, but now gradually things were getting better.
He said that goals could not be achieved without sustainable products and federal and all provincial governments should work on macro and micro levels to bring positive changes in societies and economic conditions of the country.
He also shed light on the projects being initiated by the Sindh government and discussed what plan would be implemented in the near future.
KU Vice Chancellor Professor Dr Khalid Mahmood Iraqi said that this issue was a very serious one and said that for the bright future of Pakistan all stakeholders must provide their inputs and work altogether to produce the best results for the country.
He further said that public policy could play a very important role in this regard and urged that continuous and consistent policies are required to address all challenges Pakistan was facing in the economy.
He added that socio-economic development was necessary for the future of the country and observed that the revenue should be utilised for socio-economic development.
Later, entrepreneur Dr Shahid Qureshi, economists M.A. Faisal Khan and Dr Mohammad Sabir, and local journalists Sohaib Jamali and Usman Hanif participated in a panel discussion on national youth development programme ‘Kamyab Jawan’.
Published in Dawn, February 27th, 2020
https://www.dawn.com/news/1536820
JULY-FEB TAX COLLECTION TARGET MISSED BY RS484BN
Mubarak Zeb Khan Updated March 01, 2020
ISLAMABAD: The Federal Board of Revenue (FBR) missed tax collection target for first eight months (July-Feb) of the current financial year by a whopping Rs484 billion.
According to provisional figures, the FBR has collected Rs2.725 trillion during this period against the target of Rs3.209tr.
The figures, however, show a growth of 16.35 per cent compared to Rs2.342tr collected during the same period of last financial year.
In February, the FBR posted a shortfall of Rs99bn by collecting Rs318bn against the target of Rs417bn for that month. The tax authority estimates it will collect another Rs1-2bn in book adjustments.
In the tax year 2019, the number of return filers reached over 2.44 million against 2.9m of the previous year.
More than double of the current growth levels would be required to approach the annual target.
However, figures show a growth of over 16pc compared to Rs2.342tr collected during the same period of last financial year
FBR spokesperson confirmed to Dawn that the Feb 29 return filing date would not be extended further.
The list of new active taxpayers will be changed from tax year 2018 to 2019 which will be uploaded on FBR website after midnight.
As a result, 400,000 taxpayers did not file their returns in the tax year 2019. The spokesperson, however, said that those who did not file their return this year were nil filers last year.
FBR high-ups believe that the delay in appointment of a regular chairman and other officers at top positions in the board has caused uncertainty within the tax department leading to revenue bleeding on a daily basis.
FBR chairman Shabbar Zaidi is on indefinite leave and the government has given charge to member administration Ms Nausheen Amjad. Since January, tax issues are being handled on a day to day basis which leads to a consistent decline in revenue collection.
The government has almost finalised the appointment of Haroon Akhtar Khan as Special Assistance to the Prime Minister on Revenue. However, the delay in the notification adds to the uncertainty in field formations.
During the first eight months of the current fiscal year, the FBR paid Rs78bn refunds to taxpayers, mostly exporters.
In the last meeting, it has been conveyed to the International Monetary Fund (IMF) that the FBR will not be able to reach even close to the revised target of Rs5.270tr. “We cannot achieve this target” an official privy to meetings told Dawn.
It is estimated that revenue collection will remain around Rs4.8tr as against Rs3.85tr of last year. “This will be an increase of Rs1tr in one year,” the official said, adding that it would be the highest annual growth in revenue collection.
The IMF has already lowered the revenue collection target to Rs5.270tr from the budgetary projection of Rs5.503tr.
The customs gross collection fell short of the target by Rs130.9bn (or 23.5pc) to Rs425.2bn versus the projected Rs556.1bn. This decline was mainly attributable to falling imports, and contributed by mis-declaration, corruption and under-invoicing.
In the first sevenths of the current year, the value of imports went up by 1.14pc in rupee terms. The taxes are being collected in rupees but the decline of taxes at import stage suggests corruption within the customs department.
The government has recently transferred a few senior customs officers from Quetta and Peshawar on charges of corruption. However, the government is reluctant to take action against such officers posted at Karachi ports.
The income tax gross collection clocked in at Rs1.002tr versus a target of Rs1.137tr over the same period last year, showing a shortfall of Rs135bn or 11.87pc. This was despite the imposition of several revenue measures by in the last budget.
In the first eight months, sales tax collection on goods reached Rs1.152tr as compared to the projection of Rs1.310tr, thus missing the target by Rs158bn or 12.06pc. The general sales tax on goods has failed to hit the target despite expansion of tax on goods and double-digit inflation.
Meanwhile, the gross collection of the federal excise duty (FED) reached Rs166.8bn, against a target Rs207.4bn, showing a shortfall of Rs40.6bn or 19.57pc. The FED rates were also revised upward on cigarettes and other products in the last budget.
Published in Dawn, March 1st, 2020
https://www.dawn.com/news/1537449/july-feb-tax-collection-target-missed-by-rs484bn
‘PUBLIC-PRIVATE TIE-UP CAN SAVE SINDH’S ECONOMY’
By Afreen Mirza Published: March 1, 2020
KARACHI: Sindh, a province with enormous potential, has been suffering from financial constraints and is now encountering some serious problems that need to be solved and the only way to deal with them is public-private partnership.
These views were shared by Adviser to Prime Minister on Institutional Reforms and Austerity Ishrat Husain while speaking at a session titled “Sindh’s Economy: The Untapped Potential” at the 11th Karachi Literature Festival on Saturday.
“One of the reasons why Sindh, despite having one of the highest per capita incomes, has been slipping for almost 20-25 years is that neither the urban economy – which is supposed to lead the provincial aggregate economy – nor the rural economy has kept pace with expectations of the people of the province or as part of Pakistan’s economy,” he stated.
Husain, who is also a former State Bank of Pakistan governor, remarked that Sindh has not taken advantage of the coastal belt, which is quite large. “We could be one of the largest exporters of marine products because these are in demand particularly in Japan and other East Asian countries.”
Furthermore, he told the audience that livestock in rural areas has a huge potential. “As the urban taste increases, the demand for meat and poultry keeps on increasing and that can increase the income in rural areas while meeting the demand in urban areas.”
Moreover, the rural-urban female ratio shows that female literacy and female participation in rural Sindh is very low. “We have to invest in our female education because that will boost the aggregate income,” Husain said.
“These are the three areas which have remained untapped in Sindh, but to me these are what I call the growth-enhancing and income distribution areas that remove disparities, which we should pursue.”
Speaking on the occasion, National Resources Limited head Shamsuddin Shaikh remarked that it is time to employ the daughters of the soil as much as the sons of the soil.
Agreeing with Husain, he also emphasised the importance of public-private partnership. “If we are to improve Sindh and its projects, the basic requirement is public-private partnership,” said Shaikh, whose company is engaged in exploring copper and gold resources in Balochistan. Talking about incompetency of the Sindh government, he stressed that the government cannot carry forward projects on its own because of inefficiency, adding that an efficient private sector can stop the government from all corruption.
Husain, while agreeing with Shaikh, said, “If we expect the government to work alone, it is not possible because it has its flaws and weaknesses plus the capacity problem; moreover, if we think that the private sector can do wonders alone, it is also wrong because the private sector can never replace the government sector.”
He emphasised “we must have an all-hands-on-deck approach because when all the sectors work together, the country prospers, but if we focus more on criticising others or get involved in the blame game, we will remain stagnant.”
With the public-private partnership, the private sector can compensate for weaknesses of the public sector as the private sector is efficient and in the meantime exploitation by the private sector can be controlled by the public sector, Husain said.
The adviser pointed out that the confrontational attitude in Sindh should be changed to a collaborative and cooperative approach in order to move forward.
First Women Bank President and CEO Tahira Raza also spoke in the session.
Published in The Express Tribune, March 1st, 2020.
https://tribune.com.pk/story/2166954/2-public-private-tie-can-save-sindhs-economy/
NEWS COVERAGE PERIOD FROM FEB 17 TO FEB 23, 2020
ECONOMY SHOWS EARLY SIGNS OF TURNAROUND: BAQIR
By Our Correspondent Published: February 21, 2020
KARACHI: Pakistan’s economy has started showing preliminary signs of turnaround as it has entered the growth phase after achieving stability in the recent past, the State Bank of Pakistan (SBP) governor said on Thursday.
“We can say with confidence that we have put the worst behind us,” Reza Baqir said at the CEO Summit Asia 2020, organised by the CEO Club Pakistan and Management House, according to a statement.
Increase in the import of machinery, turnaround in the large-scale manufacturing (LSM) output last month and uptrend in sales of cement were the three major indicators supporting the notion that the economy had entered the growth phase, he said.
Pakistan recorded an increase in exports in recent times compared to negative growth in exports of several regional countries, which were considered export powerhouses, Baqir said. “Exports of the country grew 4.5% in the first half of current financial year,” he pointed out. In the same period, exports of India dropped 2.3%, Thailand 2.5%, Sri Lanka 3.6%, Indonesia 5%, Malaysia 6% and Bangladesh 7%, he added.
Baqir emphasised that the public sector had to do a lot to bring reforms in its work to support the growth of private sector, adding that the State Bank had to do much more for the growth of economy and exports.
“Businesses of the country hold a very bright future,” he remarked.
The governor said the central bank had adopted different strategies to increase women participation in economic growth and financial inclusion. “Only 15% adult female population has active bank accounts in Pakistan,” he said.
One of the strategies being used by the State Bank to increase women participation is to promote entrepreneurship among female population of the country. The central bank is promoting digitisation of the economy and has introduced policy measures to promote financial transactions and trade payments through electronic and digital means in the country.
The central bank is also working to launch a micropayment gateway. “Launching of this new platform will put Pakistan prominently on the map of countries having advanced systems of electronic and digital means of money transactions to do business,” Baqir said.
He said the State Bank had been actively supporting the growth of small and medium-sized enterprises (SMEs) for the sake of national economic growth. “The State Bank would make sure SMEs get financing from banks in the country.”
Joint Chiefs of Staff Committee former chairman General (Retd) Zubair Mahmood Hayat said Pakistan’s conduct had always improved whenever the country faced major challenges. “The strategic decisions taken by Pakistan caused an impact in the entire region.” He said United Nations Secretary-General António Guterres had praised the role of Pakistan in peacekeeping in the conflict regions of the world. “Pakistan is a country full of resources,” he remarked.
He said youth of the country had achieved major milestones by showcasing their outstanding talent and qualification on the international online platforms.
Hayat said industrial growth in the country would get a major boost with the development of the China-Pakistan Economic Corridor (CPEC).
He said GDP of the country could grow 3-5% with the inclusion of women in business and economic activities. Speaking on the occasion, Arif Habib Corporation Chairman and CEO Arif Habib said the situation in Pakistan had improved for investment.
“Investment in Pakistan’s market has always paid dividends to investors. Pakistan’s stock market has paid a return of up to 12% on investment by foreign investors,” he said.
Published in The Express Tribune, February 21st, 2020.
https://tribune.com.pk/story/2161007/2-economy-shows-early-signs-turnaround-baqir/
NEWS COVERAGE PERIOD FROM FEB 10 TO FEB 16, 2020
PAKISTAN’S ECONOMY BATTLING A HOST OF CHALLENGES
By HARIS AHMED Published: February 10, 2020
KARACHI: Pakistan’s economy is facing serious challenges on the fiscal and external fronts.
On the fiscal front, the main challenges are insufficient revenue generation and high fiscal deficit whereas on the external front, exports have an insignificant growth and there are fears of a slowdown in remittances.
The Pakistan Tehreek-e-Insaf (PTI) government is trying to overcome the fiscal challenge by implementing a set of World Bank-financed tax reforms. But unscrupulous elements in the bureaucracy continue to throw a spanner in the works.
The result is that tax revenue targets remain elusive. The government is borrowing heavily from banks by crowding out the private sector to fill in the fiscal gap.
Since the private sector is not getting enough bank financing, it is producing less. This low production is dragging down the GDP growth. State Bank of Pakistan (SBP) Governor Dr Reza Baqir fears growth can fall below 3.5% in the current fiscal year. The IMF has forecast an even lower growth of just 2.4%.
In first half (Jul-Dec) of the current fiscal year, the tax revenue collection fell short of the target by Rs290 billion and the fiscal deficit stood around Rs995 billion or 2.3% of GDP.
In seven months (Jul-Jan) of 2019-20, the Federal Board of Revenue (FBR) reported tax collection of Rs2.4 trillion. Can the tax machinery collect another Rs2.8 trillion in the next five months of the year to meet the recently revised full-year target of Rs5.2 trillion? Definitely, not.
The FBR has already informed the visiting IMF review mission that total tax collection in FY20 could reach Rs4.5 trillion. Even if the government, under the IMF pressure, introduces additional taxation measures and accelerates tax subsidy withdrawals, the total collection could hardly touch Rs4.7 trillion.
However, the IMF has agreed to relax the tax collection target from the original Rs5.5 trillion to Rs5.2 trillion – ignoring the FBR’s request to reset it at Rs4.5 trillion or Rs4.7 trillion.
Media reports quoting FBR officials suggest that the tax revenue shortfall during the entire FY20 could reach Rs750 billion. To fill this huge gap, the government will be forced to continue excessive borrowing from banks, further crowding out the private sector.
Besides, it will compel the government to make deeper cuts in development expenses. The lower credit offtake by the private sector coupled with slashed development spending will further constrain GDP growth, pushing it perhaps to the IMF’s projected level of 2.4%.
This becomes all the more likely scenario when we see no serious efforts to boost non-tax revenue collection by the government. Overall fiscal deficit will likely reach 7.2% of GDP in line with the IMF estimate.
This would be lower than the 8.9% deficit seen in FY19 but still quite high. Such is the gravity of the main fiscal challenge.
The principal challenge on the external front – low export growth standing at 3.15% year-on-year in dollar value in the first half of FY20 – is no less grave.
Total merchandise export earnings grew to just $11.533 billion in 1HFY20 against $11.181 billion in 1HFY19.
So, at this stage there is little scope for encouraging imports of industrial raw material to lift the country’s large-scale manufacturing sector out of recession. This, in turn, means industrial growth may remain stalled in the near future.
The exchange rate stability has been achieved through borrowed foreign exchange, thus keeping the external debt servicing pressure intact and exports are not growing fast enough.
There is also no room for the rupee to become strong enough in the short term to create demand for the import of even consumer goods. This is restricting import-led consumption.
Consumption of domestically produced stuff is also dwindling because of falling income levels and high inflation. Inflation is stubbornly high and is on the rise.
In Jan 2020, the annualised consumer inflation shot up to 14.6% – double the pace of 5.6% in Jan 2019, according to the Pakistan Bureau of Statistics.
Agriculture is not growing at the desired pace and industries are producing less. The SBP has refused to relax its tight monetary policy for February-March, dashing hopes of Prime Minister Imran Khan and annoying the business leadership at large.
However, the central bank has expanded the interest rate subsidy regime for the exporters. The SBP believes it could not have done better under the present circumstances.
Inflation is so high that easing the monetary policy is out of question, more so because it continues to help attract foreign investment in government debt securities.
Insulating the exporters from the tight monetary policy had become necessary to reduce dependence on the hot money or investment in short-term government debt papers by foreign investors. In seven months of the current fiscal year, such investments reached a historic high of $2.9 billion.
The PTI government is hoping for the export-sector revival by incentivising the exporters but that is a fallacy. Unless it resolves the circular debt issue in the energy sector, which is behind the rapid upward revision in energy prices, exports cannot be increased substantially.
This seems more likely also because the global trade growth has hit a low of 1% and the global GDP growth has fallen to 2.9% against the 2009-2018 average of 3.5%, according to a recent IMF report.
Meanwhile, economic slowdown in the US and the UAE and repatriation of hundreds of thousands of Pakistanis working in Saudi Arabia also threaten to affect Pakistan’s remittances’ growth.
Failure to accelerate revenue collection and boost export earnings is pushing the government to continue to borrow from domestic as well as external resources. The resultant increase in the debt stock is pushing up the cost of both domestic and external debt servicing.
That, in turn, is creating fiscal deficit even in the midst of reduction in other expenses and is disallowing a significant revaluation of the rupee despite contraction in the current account deficit. Pakistan’s economy is seemingly trapped in a vicious cycle and no early exit is in sight.
The writer is a mechanical engineer and is doing masters
Published in The Express Tribune, February 10th, 2020.
https://tribune.com.pk/story/2153367/2-pakistans-economy-battling-host-challenges/
NEW POLICIES TO BOOST INVESTORS’ CONFIDENCE: CM
By Mohammad ZafarPublished: February 11, 2020
QUETTA: Balochistan Chief Minister Jam Kamal Khan Alyani on Monday chaired the 7th session of Balochistan Economic Zones Authority (BEZA) here in Quetta and reviewed the agenda and progress on provincial economic zones.
During the meeting, the Balochistan government-approved Rs40.7 million grants for provincial economic zones and corroborated the agenda with some amendments.
Balochistan Minister for Secondary Education Sardar Yar Muhammad Rind, Finance Minister Zahoor Buledi, Muhammad Khan Tor Utmankhail and Chief Secretary Balochistan Capt (retd) Fazeel Asghar were present on the occasion.
Secretary Industries and Trade Ghulam Ali Baloch presented the authority’s agenda which was unanimously approved by the meeting.
The meeting directed authorities to finalise their rules and regulations while also announcing vacancies for the post of the chief financial officer and chief operation officer in the Industrial State Development and Management Company.
While reviewing rules for Hub, Gadani and Bostan economic zones, Kamal approved new building rules for provincial economic zones and directed the authorities concerned to ensure the provision of infrastructural facilities, including gas, electricity and water in the zone sites.
“New industrial policies in Balochistan will rebuild the confidence of private investors which will also promote economic and business opportunities in the province,” Kamal said while addressing the meeting.
Expressing consensus over the policy for allotment of land and lease agreements in Bostan, Gadani and Hub economic zones, the meeting also approved the by-laws for provincial economic zones.
Secretary Industries assured the meeting that BEZA will be registered in Security Exchange of Pakistan and briefed the chief minister regarding provincial government’s proposed 13 markets on Pak-Afghan and Pak-Iran borders.
Kamal lamented over previous government’s poor policies with regards to the provincial economy, and added that Balochistan is replete with natural resources but they weren’t utilised properly owing to a lack of interest.
“In order to implement good governance, we have to take harsh decisions to boost the provincial revenue,” he said, adding that Hub and Gadani economic zones will change the province’s fate due to their locations near the sea.
A delegation of the people from Harnai district led by parliamentarian Laila Tareen met Kamal and discussed development plans for the remote district of the province.
The delegation apprised the CM about issues pestering people of Harnai and emphasised the up-gradation of Harnai Grid Station, installation of LPG Plant and construction of Kach- Harnai-Sanjavi Highway.
Kamal assured the delegation that the government would initiate development work in Harnai and added that a mammoth of funds will be allocated for the district in the next budget.
“We will take assistance from the federal government regarding the up-gradation of Harnai Grid Station and other projects,” Kamal told the delegation.
Chairman Senate Muhammad Sadiq Sanjrani on Monday called on Kamal and discussed the development work and political affairs of Balochistan during the meeting.
Sanjrani lauded the performance of the chief minister and added that Balochistan has been rightly put on the development track.
Kamal briefed the senate chairman regarding development affairs of the province.
“Expediting the development work in the province remains the provincial government’s top priority hence all coalition partners will be taken into confidence,” Kamal said.
Published in The Express Tribune, February 11th, 2020.
https://tribune.com.pk/story/2154052/1-new-policies-boost-investors-confidence-cm/
IMF ADVISES PAKISTAN TO OPEN UP ECONOMY
By Shahbaz Rana Published: February 13, 2020
ISLAMABAD: The International Monetary Fund (IMF) has proposed that Pakistan should open up its economy to the rest of the world by lowering restrictions on imports and signing new free trade agreements (FTAs) – recommendations that do not fall under the core ambit of the $6-billion loan programme.
The IMF also proposed that Pakistan should spend Rs6.2 trillion on sustainable development goals (SDGs) over the next 10 years which, according to Member National Assembly Ali Pervez, was an attempt to create room for additional revenue measures.
This comes to nearly Rs620 billion per year, which is even higher than the total federal development spending in the first year of the Pakistan Tehreek-e-Insaf (PTI) government.
The IMF made these recommendations to a joint sitting of standing committees on finance of the National Assembly and Senate. The joint meeting was co-chaired by Senator Farooq H Naek and MNA Faizullah Kamoka. The IMF’s deputy director of Middle East and Central Asia led the fund’s team.
Usually, the mission chief to Pakistan represents the IMF delegation but this time the IMF has raised the level to the deputy director, who joined the ongoing talks early this week.
“The IMF has recommended that Pakistan should open up its economy to the rest of the world, which is currently much closed,” said Faizullah, while talking to mediapersons after the joint sitting. He said the IMF suggested signing new FTAs with the rest of the world to enhance exports.
It is for the first time that the IMF has publicly talked about signing FTAs – an issue that remains controversial in Pakistan due to adverse implications of the China-Pakistan FTA phase-I for the country’s industrial base. Owing to low scale of the economy and high cost, Pakistani industrialists lost market to the influx of cheaper Chinese imported goods.
Yet the Ministry of Commerce signed phase-II of the FTA with China with effect from January that lowered tariffs to zero on three-fourths of the total tariff lines.
The IMF said Pakistan was exporting only 6% of its exports to China while the ratio was 16% with the United States, said PTI MNA and standing committee member Dr Ramesh Kumar.
Pakistan does not have an FTA with the US. Signing the FTA with Pakistan at this stage was not on the US agenda, said Michael Kugleman, Deputy Director Asia Programme of the influential Woodrow Wilson Centre while speaking at the Express News programme, The Review, last Saturday.
Faizullah said the IMF delegation was of the view that import compression was also hurting exports. The IMF advised that Pakistan should reduce import tariffs and remove exchange restrictions to open up the economy, he added.
The IMF should not talk about issues that were not part of its programme, said Dr Waqar Masood Khan, former finance secretary, who negotiated two out of the last three IMF programmes.
Khan said it was the IMF that first distorted the trade regime by allowing increase in maximum import tariffs to 27% to meet its targets. Faizullah said the IMF also gave a presentation with focus on five SDGs which included education, health, provision of electricity, roads and water and sanitation.
The IMF said there was a need to create fiscal space for spending on the SDGs. It said Pakistan needs to spend Rs6.196 trillion on the SDGs from 2020 to 2030, said Kumar.
Poverty reduction is not high on the IMF agenda and it has also not objected to a phenomenal increase in interest payments, which is sheer transfer of resources from the poor to the rich, as the poor face food inflation of 20% in urban and 25% in rural areas, said Dr Khan while talking to The Express Tribune. The credit squeeze was hurting SMEs and growth was even less than the projected 2.4%, he said.
Addressing common man problems was not high on the IMF agenda, said Senator Sherry Rehman of the PPP after attending the IMF meeting. She said it was the responsibility of the government to take care of the people and also ensure economic stabilisation. “The government needs to formulate a joint economic plan in consultation with the opposition but the government is not ready to sit with the opposition,” said Rehman.
She also said Pakistan’s problem was not allocation for the SDGs rather the issue was better utilisation of the funds.
https://tribune.com.pk/story/2155580/2-imf-advises-pakistan-open-economy/
NEWS COVERAGE PERIOD FROM FEB 03 TO FEB 09, 2020
STOCKS NOSEDIVE 1,222 POINTS ON SOARING INFLATION
Dilawar Hussain February 04, 2020
KARACHI: The Pakistan stock market crashed on Monday as investors were rattled over the inflation figures for January which came out at an alarming 12-year high of 14.6pc, fuelling fears of delay in monetary policy easing.
The benchmark KSE-100 index opened deep in the red and sank by 1,222 points or nearly three per cent – representing the highest single day decline in 14 months – closed below the 41,000 psychological level at 40,409.
A staggering sum of Rs203 billion was knocked off the market capitalisation in a single day.
Investors were spooked by uncertainty over the decision by the Financial Action Task Force (FATF) on Pakistan status to be decided later this month and the country’s ability to pull itself out of the grey list; the start of talks with International Monetary Fund on its review which would signal release of its third tranche under the $6bn facility; shortfall in revenue collection and unsettled political wrangling among the coalition partners of the government.
But analysts’ consensus was that the mindblowingly high inflation was at the heart of the meltdown. The market since August last year had been on an upward trajectory amid growing optimism over the improvement in economy and low consumer price index which might allow monetary easing in first quarter 2020.
Arif Habib, former chairman of the stock exchange, said that looking at the January inflation figures, investors worried over the delay in interest rate cut which may be pushed forward from March to May. He said that sentiments were dampened as market believed that the bottom lines of leveraged companies such as cement, steel and others might be dented due to higher finance costs.
It was also thought to cast a shadow over the share valuations. According to Mohammad Sohail, CEO at Topline Securities, the market was now anticipating rate cut in the second half of the year subject to shrinkage in fiscal deficit and decline in inflation.
Besides, the meltdown in global markets spilled into the local bourse as corona virus fanned fears prompting investors to flee stocks and seek the shelter in safe havens such as gold and government papers. The decline in international crude prices kept the heavyweight oil and gas exploration and production shares under the hammer.
Among participants, mutual funds, banks and foreign investors sold off stocks but much of the liquidity was absorbed by the individuals and insurance companies. The volume increased 5pc over last session to 203 million shares while traded value rose 15pc to $59m.
During the session, the KSE-30 index tanked to intraday low at 18,407 points, representing a plunge of 3.87pc, staying slightly short of the 4pc drop which would have brought the market to a halt in compliance of the new circuit breaker regulations that went into effect from January.
Sectors that dragged down the index included commercial banks by 320 points, exploration and production declining 271 points, fertiliser 137 points and cement 98 points.
Stocks that suffered major fall included Pakistan Petroleum, down 5.3pc; Habib Bank 3.7pc; Engro Corporation 3.7pc; Oil & Gas Development Company 4.2pc; MCB 3.8pc; Pakistan Oilfields 3.7c and Lucky Cement 3.5pc which together wiped off 580 points.
Published in Dawn, February 4th, 2020
https://www.dawn.com/news/1532387/stocks-nosedive-1222-points-on-soaring-inflation
FBR CAN COLLECT ONLY RS 4.5 TRILLION, IMF TOLD
By SOHAIL SARFRAZ on February 5, 2020
The Federal Board of Revenue (FBR) Tuesday informed International Monetary Fund (IMF) that the tax machinery would be able to collect around Rs 4.5 trillion during 2019-20 keeping in view current economic situation and without taking additional revenue measures.
Sources told Business Recorder that the issue of further reduction in revenue collection target was discussed during the meeting of visiting the IMF team with the tax authorities on Tuesday.
Tax authorities further informed the IMF that if the government allows operational autonomy, increased enforcement and additional taxation measures, the revenue collection could touch the figure between Rs 4.6 trillion to Rs 4.7 trillion.
The FBR has requested the IMF to further reduce revenue collection target from Rs 5238 billion to Rs 4700 billion for 2019-20. At the time of budget (2019-20), the government fixed the target of Rs 5.5 trillion which was revised downward to Rs 5.238 trillion. According to senior FBR officials, the revised target of Rs 5.238 trillion is still unrealistic for the ongoing fiscal year. As per FBR’s calculations, the tax machinery would be able to collect nearly Rs 4.5 trillion under current economic situation. The maximum collection could be between Rs 4.6 trillion and Rs 4.7 trillion in case further measures are taken to generate revenue.
During the meeting between the IMF and the FBR teams on Tuesday, no final decision was taken on further reduction in the revenue collection target for 2019-20.
FBR has provisionally collected Rs 2404 billion during July-January (2019-20) against the downward revised target of Rs 2622 billion, reflecting a shortfall of Rs 218 billion.
FBR has collected Rs 321 billion during January 2020 against the monthly target of Rs 425 billion, reflecting a shortfall of Rs 104 billion. The FBR has provisionally collected Rs 2404 billion during first seven months of (2019-20) against Rs 1794.9 billion during the corresponding period of 2018-19, reflecting an increase of Rs 609 billion.
During first six months (July-Dec) period of 2019-20, the FBR had collected Rs 2083 billion against the downward revised target of Rs 2197 billion. According to the FBR’s data, the number of returns this year has shown a phenomenal increase of 40% over the same date last year. The number of returns for 2018 on January 31, 2019 was 1,645,828 which has increased to 2,342,642 on January 31, 2020 for tax year 2019 returns.
Copyright Business Recorder, 2020
https://www.brecorder.com/2020/02/05/568098/fbr-can-collect-only-rs-45-trillion-imf-told/