NEWS COVERAGE PERIOD FROM MARCH 23RD TO MARCH 29TH, 2020
WORLD HEADING TO RECESSION, WARNS IMF CHIEF
Anwar Iqbal Updated March 25, 2020
WASHINGTON: International Monetary Fund (IMF) President Kristalina Georgieva warned on Tuesday that she expects a global recession this year due to the Coronavirus (Covid-19) outbreak.
In a statement released by her office in Washington, the IMF chief said that since the breakout, 80 countries had sought help from the Fund to cope with its consequences.
The statement followed a meeting of the G20 finance ministers and Central Bank governors that took place online due to the Corona scare. The group represents the world’s 20 most influential nations.
Another statement said that G20 finance ministers and central bank governors also conceded that the global economy was heading to a recession and that “coordinated fiscal action” was needed to deal with this crisis.
Ms Georgieva said the IMF was focusing on policy actions to reduce the impact of this crisis and was ready to assist those needing financial support.
“We will massively step up emergency finance — nearly 80 countries are requesting our help — and we are working closely with the other international financial institutions to provide a strong coordinated response,” she said.
Ms Georgieva reminded the world’s richest nations that now was the time for solidarity, noting that this was also the main theme of the G20 meeting.
“The outlook for global growth is negative for 2020, and perhaps a worse recession is expected, as in the time of the global financial crisis. We expect recovery in 2021,” Ms Georgieva said.
The IMF chief also highlighted this point in her address to the G20 meeting.
Ms Georgieva said that efforts to control the epidemic should be the first priority of all governments who need to devote their resources to strengthening their health systems.
But the IMF chief warned that “the economic impact of the epidemic will be severe” too and the recovery could be fast and strong, only if the virus was stopped quickly.
She noted that many countries support the extraordinary financial measures taken to improve the health system and protect the workers and businesses affected by the epidemic.
But they also welcome the steps taken by large central banks to expand monetary policy, she added.
Pointing out that many emerging economies and low-income countries face significant challenges, Ms Georgieva noted that $83 billion had flown out of emerging markets since the beginning of the crisis, which was “recorded as the largest capital outflow ever.”
The IMF chief reminded the international community that the Fund was ready to use its $ 1 trillion credit capacity to combat the epidemic.
Published in Dawn, March 25th, 2020
GOVT TO GET $4BN FROM LENDING, AID AGENCIES
Khaleeq Kiani March 26, 2020
Financial assistance to help counter adverse impact of pandemic on economy. — AFP/File
ISLAMABAD: Pakistan has arranged about $4 billion additional financial assistance from multilateral lending and aid agencies to shore up foreign exchange reserves and budgetary support for fighting adverse impacts of the coronavirus pandemic.
“We have made progress in mobilisation of additional funds,” said Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh, adding that discussions with the International Monetary Fund (IMF) were in progress for $1.4bn additional funds for fast track disbursements on same terms as the ongoing fund programme.
Leading a team of economic members of the federal cabinet at a news conference on Wednesday, the adviser put the total size of the emergency response and fiscal stimulus package announced by the prime minister at Rs1.24 trillion. He explained that it would take a couple of weeks to put in place a mechanism for some relief measures to reach targeted sectors without leakage of public money.
He announced abolition of the capital value tax on capital markets.
Financial assistance to help counter adverse impact of pandemic on economy
Replying to a question, he said Pakistan was not seeking additional funds from $50bn special fund created by the IMF for Covid-19 because it required a certain level of economic loss to be eligible for the emergency fund and Pakistan would hopefully not go to that extent. “Our priority is to secure commitment for additional funds for quick disbursement even if we do not qualify for the emergency fund”, he said.
Also, the government had asked the World Bank for $1bn assistance, including diversion of unutilised funds for other projects for early disbursement, he said. In addition, the Asian Development Bank would provide $350 million immediately and a request had been made for another $900m disbursement by June this year to meet emerging needs.
Minister for Economic Affairs Hammad Azhar explained that total additional flows from the ADB and the World Bank had been committed at $600m while there were unutilised funds for some projects or funds originally committed for projects that were moving slowly which would now be diverted to fast moving projects for early disbursements.
The minister said he also had begun talks with the Japan International Cooperation Agency and Department for International Development of the UK and other countries for rescue assistance as United Nations agencies engaged in loss assessment due to Covid-19. In the next phase, he said, the government would step up efforts with various lending agencies for financial assistance for budgetary support and economic support.
Dr Shaikh repeatedly evaded questions relating to estimates of overall economic losses to the country and as to what extent these losses could be minimised by injection of Rs1.24tr of public money.
However, he said the economic indicators were stabilising when unfortunately Covid-19 emerged, which would definitely have negative consequences given the weakening economies in the region and other countries where demand for Pakistani exports would suffer right at the time of nascent expansion of the country’s exports.
Likewise, the remittances from overseas Pakistanis had been rising for the last four months that would be affected to the extent of weakening economies and lockdowns in regions like the Middle East and Europe and countries like the UK and the US having major concentration of Pakistani diaspora.
Moreover, domestic commerce would be affected owing to lower economic activities and consequently tax collections would also be affected, the adviser said. In the given difficult circumstances, the federal government has come up with an economic response and expects the provinces to join hands given the constitutional roles and responsibilities.
Dr Shaikh said Prime Minister Imran Khan had come up with the country’s largest ever stimulus amounting to Rs1.24tr to mitigate the impact of Covid-19 on economic activity and vulnerable segments of society, but declined to say as to how much of its burden would be on the federal budget, saying spending in some areas was slow and would now be expedited to support the affected sections of society.
For example, he said the Benazir Income Support Programme (BISP) expenditure so far had amounted to about Rs50-60bn against an annual allocation of Rs192bn and now first priority would be to exhaust the allocation in full and then provide more funds if required. “You can say the expected savings to the government would now be converted into expenditure,” he said adding the number of BISP beneficiaries would increase by 7m to 12m for four months from its existing roll of 5m.
Finance Secretary Naveed Kamran Baloch said the government had strictly blocked supplementary grants which would have to be relaxed in the given circumstances, but it was not yet clear as to what extent the fiscal deficit limits might be breached as assessments were in progress.
Mr Shaikh divided the Rs1.24tr package into three broad categories, including Rs190bn emergency response, Rs570bn relief for people and Rs480bn support to business and economy.
He said the Rs190bn emergency response included Rs25bn allocations to the National Disaster Management Authority to meet health and emergency relief needs, Rs50bn for providing facilities and incentives to health workers and Rs100bn emergency fund for evolving needs. Another Rs15bn would be in the shape of elimination of all taxes (i.e. Customs Duty, GST, WHT) on 61 essential health machinery, equipment and food items.
He said the Rs570bn relief to citizens included Rs200bn to protect jobs and incomes of industrial and business labour and daily wage workers.
Asked about the mechanism, Dr Shaikh said a mechanism would be developed in consultation with business community and the provincial governments who would also put in their share over and above Rs200bn allocated by the Centre. The social security institutions and the Employees Old-age Benefit Institution would also be utilised for this purpose.
Another Rs150bn relief would be to vulnerable families through the BISP and expansion of Panahgah network, Rs70bn in the shape of reduction in petroleum prices, Rs50bn additional support to Utility Stores to ensure supply at affordable prices of key kitchen items like wheat, sugar, rice, cooking oil and pulses. Also, Rs100bn relief has been envisaged for electricity and gas consumers with less than 300 units monthly consumption and less than Rs2,000 gas bill, respectively.
Of the Rs480bn support to business and economy, he said, the exporters would be released their Rs100bn refunds, of which Rs30bn (Rs10bn each under GST, duty drawback, DLTL) would be disbursed by the end of current month. He said the State Bank of Pakistan with the consultation of relevant banks would put in place a mechanism to ensure 3-6 month deferment of principal and interest due to the entire business community.
Another Rs100bn relief would be in the shape of a gap in repayment of principal and interest and concessional loans to small and medium enterprises, cheaper fertiliser and other subsidies on agriculture. Moreover, Rs280bn will be separately used for procurement of 8.2m tonnes of wheat.
Published in Dawn, March 26th, 2020
GOVERNMENT SEEKS IMF LOAN TO FIGHT OFF CORONAVIRUS
By ZAHEER ABBASI on March 26, 2020
Pakistan is in negotiation with the International Monetary Fund (IMF) to seek additional $1.4 billion fast-track and upfront payment package, said Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh on Wednesday.
Speaking at a media briefing along with Minister for Economic Affairs Division Hammad Azhar, Adviser to the Prime Minister on Commerce Razak Dawood, Chairperson Federal Board of Revenue (FBR), Special Assistant to Prime Minister on Petroleum Nadeem Babar, and on Information and Broadcasting Firdaus Ashiq Awan, the Adviser on Finance Shaikh added that $1.4 billion being negotiated by Pakistan would not be part of $50 billion package announced by the IMF for corona-affected countries. The adviser initially stated that the terms of conditions of $1.4 billion would be the same of those of existing Extended Fund Facility but later on he stated that it would be concessional loan.
He said that the CVT tax would be removed on capital market.
He further stated that as per commitment with the IMF additional spending on account of coronavirus would not impact the commitment with the fund. Shaikh said that the government had also made progress for fund mobilization and reached an understanding with the World Bank that $1 billion from other projects should be diverted in case of need for the coronavirus.
Pakistan would seek $300 million from the Asian Development Bank (ADB) now, and $900 million in June, to meet the emerging needs of the country, he added. Minister of Economic Affairs Hammad Azhar said that fresh component of the ADB and the World Bank would be $600 million, whereas remaining would be that which was committed to Pakistan but was not disbursed due to slow moving projects.
Now it would be diverted to fast moving projects and commitment would be materialised. “We are monitoring the situation and there are emergency funds with financial institutions, and so far, Pakistan requested to them for COVID-19 funding for support, relief and social economic impact to cater for the vulnerable,” he said, adding that in the next stage the government would request them (the IFIs) for economic and budgetary support package.
The minister for information said that the government had not forgotten the media industry and a comprehensive package to cater for their legitimate needs would be unveiled soon, whereas secretary Finance stated that so far no supplementary grant had been issued by the government but as the package was of considerable amount, the supplementary grant and budget would be used to finance it.
However, he said it would be too early to project its impact on the budget deficit. Adviser to the Prime Minister on Commerce Razaq Dawood said that the government would have to handle the industry very sensibly, and all the points would be discussed in the National Coordination Committee (NCC) meeting to address them.
He said that export orders were being cancelled but 25 percent orders were not being cancelled, so that the decision would be taken how to ensure their transportation to the port in the backdrop of the lockdown. The government is focusing on domestic economy and everyone is taken care of in the economic package, he said.
Special Assistant to the Prime Minister on Petroleum Nadeem Babar stated that the government would pick up exchange movement loss of OMCs but not the inventory price subsequent to decrease in petroleum prices, and the summary would be taken to the ECC in this regard. Nadeem Babar said that the government would be looking at OMCs prices holistically as the current situation was expected to continue in the coming six to eight months owing to oversupply of oil situation in the international market.
He said that there would be no late payment surcharge on installment and in case if this issue continued for three months that installments would be divided on nine months. He said that electricity and gas bills would be spread on three months.
Earlier, the adviser on finance, while giving details of the economic package announced by the prime minister on Tuesday, stated that Pakistan’s economy was moving towards stabilization as exports were increasing, foreign direct investment recorded $4 billion during the last eight months, and current account deficit was reduced to $3 billion from $20 billion.
He said that Rs 4,000 billion loan was repaid and primary deficit was surplus, which was rare in the country’s history, while revenue collection was historic, during the first eight months, with 17 percent growth, and provinces’ transfers were also historic.
He added that the State Bank of Pakistan (SBP)’s reserves increased by $5 billion and all these indicators were reflecting positively about Pakistan’s economy. He added “now as you all know that COVID-19 issue is expected to have negative impact on the economy and on economies of our neighboring countries and where Pakistan has been exporting goods and its labor were working, were affected, certainly, Pakistan’s export and remittances would be affected.”
He said that the federal government and the provinces were trying to make a united strategy to fight against the impacts of coronavirus and a package of Rs 1.24 trillion was announced by the prime minister on Tuesday.
The basic components of the package, he said were to protect those labour affected by the virus with Rs 200 billion. He said that the people would be identified with the help of business community, provinces and mechanism to this effect was being finalized to ensure that taxpayers’ money reached the deserving people, social security and the EOBI, and the provincial government would be taken on board.
The adviser further stated that for exports industry the government had allocated Rs 100 billion to pay them tax refunds immediately. The SMEs and agriculture would be given Rs 100 billion for increasing their activities, he said adding that for agriculture sector, fertilizer prices would be reduced and it would be subsidized through other measures as well.
He said that small business interest and principle would be deferred and concessional loans should be provinces. The adviser continued that a total 12 million people would be provided monetary support for four months including five million existing, getting monetary support, and seven million additional would be provided Rs 3,000 per month.
He said that Rs 150 billion had been earmarked for monetary support including expansion of Panah Gah (shelter homes) concept. The USC would be provided Rs 50 billion, said the adviser that procurement of 8.2 million tons wheat would transfer Rs 280 billion to the farm sector.
Petroleum products prices have been reduced by Rs 15 per liter and in the coming months this would be reduced further, and would not be increased, and electricity and gas consumers would be allowed to pay bills in installments, and Rs 50 billion are being earmarked for health workers and essential items taxes pulses, ghee and sugar taxes would be reduced to completely eliminated. The NDMA would be provided Rs 50 billion and Rs 100 billion would be earmarked for industry’s needs, he added.
He said that the government wanted to provide financial and monetary stimulus and two big decisions were taken in this regard, to reduce policy rate by 2.25 basis points by the State Bank of Pakistan and another big decision was that principle and interest payment, if both are due would be provided three to six months for payment to all businesses.
The PSDP programme would be expedited and should be put on fast track, he said. The adviser said that Ehsaas budget has been earmarked at Rs 192 billion and after exhausting existing allocation and would be provided, whatever would be need to them and government would divert its saving to the expenditure.
There is an agreement between provinces and the federal government to protect the daily wagers and other issue that in case of lockdown, stock market should continue working and truck should reach to the port. He said that Rs 30 billion tax refunds would disbursed to the industry by end of this month and Rs 70 billion by mid of April.
Copyright Business Recorder, 2020
UN LAUNCHES VIRUS AID PLAN WORTH $2BN
Agencies March 26, 2020
UNITED NATIONS: The coronavirus pandemic is threatening the entire human race, the United Nations warned on Wednesday as it launched a humanitarian response plan featuring an appeal for $2 billion to help the world’s poorest and most vulnerable people.
“Covid-19 is threatening the whole of humanity — and the whole of humanity must fight back,” Secretary General Antonio Guterres said in announcing the initiative.
“Global action and solidarity are crucial. Individual country responses are not going to be enough.”
By Wednesday night the coronavirus pandemic had killed more than 20,000 people worldwide, over 13,000 of them in Europe, according to a tally.
The UN plan “aims to enable us to fight the virus in the world’s poorest countries, and address the needs of the most vulnerable people, especially women and children, older people, and those with disabilities or chronic illness,” said the UN chief.
World Bank and International Monetary Fund urge bilateral creditors to provide debt relief to the world’s poorest countries
If fully funded, “it will save many lives and arm humanitarian agencies and NGOs with laboratory supplies for testing, and with medical equipment to treat the sick while protecting health care workers,” he added.
The UN plan is designed to last from April to December — suggesting the world body does not see the health crisis abating any time soon. The exact total of $2.012bn is supposed to flow in in response to appeals that various UN agencies, such as the World Health Organisation and the World Food Programme, have already made.
Guterres said that in parallel, humanitarian aid provided yearly by member states to help 100 million people around the world must continue.
Otherwise, he said, the coronavirus pandemic could lead to rampant outbreaks of other diseases such as cholera and measles, as well as higher levels of malnutrition. “This is the moment to step up for the vulnerable,” he said.
As spelled out in an 80-page booklet, the UN plan will be carried out by UN agencies that work directly with non-governmental organisations (NGOs).
The money will be used for a variety of purposes: to set up hand-washing facilities in refugee camps, launch public awareness campaigns and establish humanitarian air shuttles with Africa, Asia and Latin America, the UN says. The exact needs of some countries are still being identified.
The plan names 20 or so as deserving top priority for aid, including some enduring war or some degree of conflict, such as Afghanistan, Libya, Syria, the Central African Republic, South Sudan, Yemen, Venezuela and Ukraine. But countries such as Iran and North Korea are also analysed in the booklet.
The plan foresees two general scenarios as to how the pandemic might evolve.
Under the first, the pandemic is brought under control relatively quickly as its rate of spread slows over the course of three or four months. This, it says, would allow for a relatively swift recovery in terms of public health and the economy.
But under the second model, the pandemic spreads quickly in countries that are poor or developing, mainly in Africa, Asia and parts of the Americas.
“This leads to longer periods of closed borders and limited freedom of movement, further contributing to a global slowdown that is already under way,” said the UN.
IMF and World Bank
The World Bank and the International Monetary Fund urged official bilateral creditors to provide immediate debt relief to the world’s poorest countries as they grapple with severe consequences of the rapidly spreading virus. In a joint statement, the two institutions called on official bilateral creditors to immediately suspend debt payments from International Development Association (IDA) countries, if requested. Those nations, home to a quarter of the world’s population and two-thirds of the world’s people living in extreme poverty, would be hit hardest by the pandemic, they said.
“This will provide IDA countries with immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country,” the IMF and the World Bank said. Most of the 76 countries receiving IDA support have gross national income per capita of below $1,175, a threshold that is updated annually. The World Bank and the IMF said suspending debt payments, consistent with national laws of the creditor countries, would provide “a global sense of relief for developing countries” and send a strong signal to financial markets.
Published in Dawn, March 26th, 2020
IMF, WORLD BANK URGE DEBT RELIEF FOR POOREST COUNTRIES AMID CORONAVIRUS CRISIS
By Reuters March 25, 2020
WASHINGTON: The World Bank and the International Monetary Fund on Wednesday urged official bilateral creditors to provide immediate debt relief to the world’s poorest countries as they grapple with severe consequences of the rapidly spreading coronavirus.
In a joint statement, the institutions called on official bilateral creditors to immediately suspend debt payments from International Development Association (IDA) countries, if requested. Those nations, home to a quarter of the world’s population and two-thirds of the world’s population living in extreme poverty, will be hardest hit by the pandemic, they said.
“This will help with IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country,” the IMF and the World Bank said.
Most of the 76 countries receiving IDA support have gross national income per capita of below $1,175, a threshold that is updated annually.
‘Highly indebted states have limited policy space’
The World Bank and the IMF said suspending debt payments, consistent with national laws of the creditor countries, would provide “a global sense of relief for developing countries” and send a strong signal to financial markets.
They urged the world’s 20 largest economies (G20) to support their call for action.
Pakistan’s public debt stood at 85% of gross domestic product (GDP) or Rs31.8 trillion at the end of last fiscal year. In terms of the size of national economy, the public debt is projected at 83% of GDP by the end of current fiscal year.
Similarly, Pakistan’s gross official foreign currency reserves held by the central bank are also highly dependent on hot foreign money. In the past almost five months, foreign investors had invested $3.4 billion in government securities.
However, after local and international markets reacted nervously to the situation arising out of the surge in coronavirus contagion, so far foreign investors have withdrawn $1.74 billion worth of hot foreign money or more than half of their total investment, according to the State Bank of Pakistan (SBP).
Pakistan puts currency printing press on high alert
G20 leaders are due to hold a virtual summit on Thursday to discuss an action plan to deal with the worsening pandemic.
The new coronavirus, which originated in China in December, has infected over 438,000 people around the globe and killed more than 19,000, according to a Johns Hopkins University tally.
The World Bank and the IMF invited G20 leaders to assess the crisis impact and financial needs for each of the IDA countries, including identifying those with unsustainable debt situations, and to prepare a proposal for comprehensive action by official bilateral creditors.
They said they would seek endorsement of the proposal at the combined spring meetings of the WB and the IMF next month.
(With additional input from Our Correspondent in Islamabad)
PAKISTAN TO SEEK $3.7B MORE IN LOANS TO OFFSET VIRUS IMPACT
By Shahbaz Rana : March 26, 2020
ISLAMABAD: Pakistan has decided to seek $3.7 billion additional financing from three multilateral creditors including another loan of $1.4 billion from the International Monetary Fund (IMF) to cope with the challenges being posed by the novel coronavirus outbreak.
In addition to the IMF loan, the World Bank and the Asian Development Bank will extend loans of $1 billion and $1.25 billion respectively to the country, Adviser to the PM on Finance Dr Abdul Hafeez Shaikh said at a news conference on Wednesday.
The step is aimed at soothing the markets that remained in panic despite Prime Minister Imran Khan announcing a Rs1.2 trillion economic relief package a day earlier.
Pakistan announced the decision on the same day the IMF and the WB made an appeal to all bilateral creditors to suspend debt repayments by countries that were eligible for loans from the WB’s arm, the International Development Assistance (IDA).
Pakistan also receives IDA loans but it is clubbed with blend countries that are eligible for both concessional and commercial terms loans from the WB.
“With immediate effect—and consistent with national laws of the creditor countries—the World Bank Group and the IMF call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance,” read a joint statement issued by the WB and the ADB.
“This will help with IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country,” it added.
Shaikh also announced abolishing the capital value tax to support the Pakistan Stock Exchange that recorded a decrease of 1,336.03 points, or 4.68%, to settle at 27,228.80 on Wednesday.
The Pakistani currency depreciated around Rs3 against the US dollar to a nine-month low at Rs161.6 in intra-day trade in the inter-bank market.
“Pakistan and the IMF have agreed on an additional upfront financing of $1.4 billion as part of the Extended Fund Facility [EFF],” said Shaikh.
This amount will take the total size of the bailout package by the IMF under the EFF to $7.4 billion. The IMF board is expected to meet next month to approve Pakistan’s second review.
Shaikh clarified that the IMF would not disburse $1.4 billion out of its $50 billion emergency facility for COVID-19, which was only meant for countries whose economies were the worst hit by the pandemic.
“However, Pakistan’s economy is expected to suffer significant damages,” he added.
The finance adviser said Pakistan’s exports were likely to fall as the economies of the countries that purchased goods from the country would weaken.
Similarly, remittances from expatriates might decrease as well as the countries where they are based, including Saudi Arabia and the UAE, will be affected.
The economic activity in the country will reduce which in turn will decrease the income of people and taxes.
Shaikh said the WB would divert $1 billion and the ADB will also provide $350 million on an urgent basis. In addition to this, the ADB will also approve $900 million in June.
Federal Minister for Economic Affairs Hammad Azhar, who was also present on the occasion, said the WB and the ADB would provide $600 million in fresh concessional lending. The remaining amount will be mobilised from slow-moving projects.
Shaikh provided further details of the Rs1.2 trillion economic relief package that the prime minister had announced.
He said the government would keep the prices of petroleum products at their new levels for three months, or reduce them further, costing the government Rs70 billion.
The prime minister had announced slashing the prices of petrol and diesel by Rs15 per litre.
Shaikh said the government would disburse Rs150 billion among the poor under the Ehsas programme.
However, he made it clear that this amount was not in addition to the Rs192 billion budget of the Benazir Income Support Programme (BISP) for this fiscal year.
“The BISP has so far spent about Rs60 billion and the government will expedite the remaining disbursement and if needed additional budget will also be provided,” he added.
The finance adviser said the amount of Rs150 billion would be disbursed among the existing five million beneficiaries and seven million new beneficiaries would be added by the provinces and districts.
“Both the provinces and the federal government are working together.”
To a question, Finance Secretary Naveed Kamran Baloch said the government had not yet worked out as to how much of the Rs1.2 trillion package would be funded from the budget.
It also has to figure out the revised projected budget deficit for this fiscal year.
Shaikh said a fund of Rs100 billion had been kept for other demands of the business community that the government would receive during the course of the emergency period.
The finance adviser also promised financial monetary stimulus and said the major decision in this connection was the reduction in the policy rate. He added that if the principal and interest were both due, the business sector would be given three to six months to return it.
The PM’s aide said the federal government would give incentives worth Rs200 billion to industries to keep labourers employed and it was ready to provide relief on a cost-sharing basis.
Special Assistant to the PM on Petroleum Nadeem Babar said deferred bill payments for the next three months for power consumers using up to 300 units and gas consumers whose bills were Rs2,000 or less would be facilitated with an extension of nine months to decrease the burden.
He added that the government would bear the exchange rate losses being suffered by the oil marketing companies but they would have to bear the inventory losses due to the reduction in prices.
Shaikh said wheat, sugar, rice, cooking oil, pulses would be provided at reduced rates at Utility Stores to check inflation. “The FBR will abolish taxes on the import of cooking oil, sugar and pulses.”
Special Assistant to the PM on Information Firdous Ashiq Awan said a bailout package for the media industry will be announced soon in consultation with the owners.
IMF HINTS AT HELPING PAKISTAN TO FIGHT OFF CORONA IMPACT
Mubarak Zeb Khan March 28, 2020
ISLAMABAD: The International Monetary Fund has announced that it would consider Islamabad’s request for financial assistance under IMF’s Rapid Financing Instrument (RFI) facility to shore up the country’s foreign exchange reserves and budgetary support in the wake of the adverse impact of the coronavirus pandemic on its economy.
“Our team is working expeditiously to respond to this request so that a proposal can be considered by the IMF’s executive board as soon as possible,” said IMF Managing Director Kristalina Georgieva in a statement released to the media by the Fund’s Islamabad-based office on Friday.
On the sidelines of the government economic team’s media briefing on March 25, Adviser to the Prime Minister on Finance Dr Hafeez Shaikh had announced that Pakistan had arranged about $4 billion additional financial assistance from multilateral lending and aid agencies, including $1.4bn additional funds from the IMF. Soon after the announcement, Ms Georgieva has confirmed Pakistan’s request for financial assistance under the RFI to ensure prompt and adequate relief to the people and the economy. This emergency financing, the IMF chief said, would allow the government to address additional and urgent balance of payments needs and support policies that would make it possible to direct funds swiftly to the country’s most affected sectors, including social protection, daily-wage earners and the healthcare system.
On March 4, the IMF had announced that it would support vulnerable countries with different lending facilities, including through rapid-disbursing emergency financing, which could amount up to $50 billion for low-income and emerging markets. Of this, $10bn is available at zero interest for the poorest members through the Rapid Credit Facility (RCF).
It is worth mentioning that Pakistan’s additional financing request is not being considered through the RCF which attracts zero interest rate. The financial assistance provided under the RFI is subject to the same financing terms as the Stand-By Arrangement.
Fund chief says emergency financing will allow government to address urgent balance of payments needs and support policies
Ms Georgieva also spoke about the current IMF programme and its outcome. “The authorities have continued their reform efforts to address Pakistan’s economic challenges, but progress is being threatened by the devastating effects of the Covid-19 outbreak and the deterioration in global economic and financial conditions,” she said.
She said Prime Minister Imran Khan and his government had swiftly approved an economic stimulus package aimed at containing the spread of coronavirus and providing support to the affected families and businesses. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including lowering of the policy rate, new refinancing facilities to support the flow of credit, and temporary regulatory relief measures.
“In parallel, the authorities have reaffirmed their commitment to the reform policies included in the current arrangement under the Extended Fund Facility (EFF). These reforms are crucial to boost Pakistan’s growth potential to deliver broad-based benefits for all Pakistanis, especially the most vulnerable segments of the population,” the IMF chief said in the statement.
“The Fund stands ready to continue to support the authorities’ efforts to implement much-needed economic and structural reforms aimed at fostering strong and sustainable growth,” it added.
The IMF has replied to a series of questions posted on its website seeking details of the support facilities for the vulnerable countries.
As per replies, the IMF has two facilities — Rapid Credit Facility created in 2009 and Rapid Financing Instrument set up in 2011 — that provide emergency financial assistance to member countries without the need to have a full-fledged programme in place. These loans can be disbursed very quickly to assist member countries in implementing policies to address emergencies such as coronavirus.
The financing under the RCF is available to low-income countries. It carries a zero interest rate, has a grace period of five-and-a-half years, and a final maturity of 10 years. Members have used this facility 29 times, including last year for Mozambique in the wake of Cyclone Idai and in 2014-15 for Guinea and Liberia to confront the Ebola outbreak.
The financial assistance provided under the RFI is subject to the same financing terms as the Stand-By Arrangement (interest rates are currently about 1½pc), and should be repaid within 3¼ to 5 years. Members have used this facility five times – for instance, in 2016, the IMF provided an RFI emergency loan to Ecuador after one of the strongest earthquakes in decades.
Published in Dawn, March 28th, 2020
WE HAVE ENTERED RECESSION, SAYS IMF CHIEF
Agencies March 28, 2020
WASHINGTON: The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said Friday.
“It is clear that we have entered a recession” that will be worse than in 2009 following the global financial crisis, she said in an online press briefing.
Over 80 countries, mostly of low incomes, have already have requested emergency aid from the International Monetary Fund, she said.
With the worldwide economic “sudden stop,” Georgieva said the fund’s estimate “for the overall financial needs of emerging markets is $2.5 trillion.”
But she warned that estimate “is on the lower end.”
Governments in emerging markets, which have suffered an exodus of capital of more than $83 billion in recent weeks, can cover much of that, but “clearly the domestic resources are insufficient” and many already have high debt loads.
“We do know that their own reserves and domestic resources will not be sufficient,” Georgieva said, adding that the fund is aiming to beef up its response “to do more, do it better, do it faster than ever before.”
The IMF chief spoke to reporters following a virtual meeting with the Washington-based lender’s steering committee, when she officially requested a increase in the fund’s fast-deploying emergency facilities from their current level of around $50 billion.
She also welcomed the $2.2 trillion economic package approved by the US Senate, saying “it is absolutely necessary to cushion the world’s largest economy against an abrupt drop the economic activities.
Debt relief for poor countries
In direct response to the Covid-19 crisis the International Monetary Fund (IMF) Executive Board has adopted some immediate enhancements to its Catastrophe Containment and Relief Trust (CCRT) to enable the Fund to provide debt service relief for its poorest and most vulnerable members.
The CCRT enables the IMF to deliver grants for debt relief benefitting eligible low-income countries in the wake of catastrophic natural disasters and major, fast-spreading public health emergencies.
The Covid-19 outbreak and the associated global economic turmoil creates a critical need to support the Fund’s membership, including exceptional balance of payments support for the poorest members especially impacted by the pandemic.
Well-targeted support will allow these countries to prioritise medical spending and health-related as well as other immediate needs in the challenging economic environment, characterised by sharp declines in income, lost revenue and higher expenses. In that context, the IMF Executive Board has approved changes to the CCRT that expand the qualification criteria to better cover the circumstances created by a global pandemic and to focus on delivering support for the most immediate needs.
Specifically, the decision will allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for up to two years.
This would apply when a life-threatening global pandemic is inflicting severe economic disruption across the Fund’s membership and is creating balance of payments needs on such a scale to warrant a concerted international effort to support the poorest and most vulnerable countries.
The IMF has also launched a fund-raising exercise that would enable the Trust to provide about $1bn for the current pandemic. Georgieva has called upon the Fund’s economically stronger member countries to help replenish the CCRT, which had only $200 million available for the world’s poorest countries.
The UK has responded with a pledge for £150m ($183m). Other donors, including Japan and China, are also coming forward with important contributions.
Published in Dawn, March 28th, 2020
NEWS COVERAGE PERIOD FROM MARCH 16 TO MARCH 22ND, 2020
COVID-19: PAKISTAN, WORLD BANK IN TALKS FOR $200 MILLION LOAN
By Shahbaz Rana Published: March 18, 2020
ISLAMABAD: Pakistan and the World Bank are in talks for up to $200 million (Rs32 billion) in loans to enhance the capacity of resources-deficient 270 public hospitals and laboratories to control the spread of deadly coronavirus contagion.
The federal government has lately responded to the dangerous situation amid calls from exporters to bail them out by changing their tax regime and waiving interest cost to help them cope with the losses being incurred due to the disruption to exports.
Amid a surge in virus cases, a government paper showed that Pakistan did not have any legislation that may bind reporting from public and private-sector health facilities and laboratories about the detection of new coronavirus cases.
Headed by the Planning Commission deputy chairman, a concept clearance committee approved the “Enhancing capacity for preparedness and mounting response to COVID-19” project on Monday.
At this stage, Pakistani authorities expect at least $140 million in loan from the World Bank, which it wants to enhance to $200 million.
After approval of the concept, details of fresh lending and diversion of some of the already approved World Bank loan towards fighting the pandemic will be finalised this week, according to government officials.
“The government of Pakistan and the World Bank are discussing a financial assistance package of between $100-200 million to effectively respond to COVID-19 crisis Pakistan is facing,” confirmed local World Bank office spokesperson Mariam Altaf. The National Disaster Risk Management Fund will also contribute about $50 million by readjusting its existing resources, which will take the overall package cost to $250 million.
Prime Minister Imran Khan said on Tuesday that if the coronavirus spread exponentially, Pakistan did not have the capacity and resources to contain the contagion.
Pakistan faces acute deficiency of resources to fight the pandemic and its public health system is not capable of coping with a large number of patients if the virus spreads rapidly. So far, the Punjab government appears to be the most ill-prepared while the Sindh government has done well. The project has been undertaken to procure equipment and consumables for 200 hospitals, including 44 tertiary-level hospitals, for effective clinical management of the confirmed cases. Personal protective equipment will be procured for 200 hospitals, 19 POEs, 10 quarantine sites and 42 laboratories.
The technical review of the project has been undertaken by six public health-sector experts, who have given 15 set of recommendations for better implementation of the project, including identifying the gaps.
The experts have recommended that case definitions need to be updated in the National Action Plan, which still refers to the positive history of travel from Hubei only.
They have also recommended that the National Action Plan should revolve around prevention, detection and response since the country is already beyond prevention of primary case. They have suggested that strategies should focus on detection, response and prevention of future cases.
The experts have recommended the use of loan proceeds to subsidise coronavirus testing at private laboratories that are charging Rs8,000 per test, which is uneconomical for a majority of the country’s population.
The World Health Organisation chief has called on countries to ensure maximum testing of the population to curb the disease, which Pakistan has not yet adopted as a strategy due to a lack of facilities and resources.
The experts have also underlined the need for stockpiling of critical equipment and other supplies by the government due to shortages in other countries.
In a letter to Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh, the Pakistan Textile Exporters Association (PTEA) has demanded an immediate bailout package from the government to cope with the losses.
PTEA Patron-in-Chief Khurram Mukhtar demanded that the government restore the zero-rating sales tax facility for exporters till June 30 in order to ease the liquidity crunch as the FBR had not been able to process their tax refund claims.
Published in The Express Tribune, March 18th, 2020.
ASIAN DEVELOPMENT BANK, WORLD BANK TO GIVE $588M FOR FIGHT AGAINST VIRUS
Khaleeq Kiani March 19, 2020
KARACHI: Police personnel arrest a shopkeeper who refused to shut down his shop at Light House Market on Wednesday in violation of the provincial government’s directive.—PPI
ISLAMABAD: The Asian Development Bank (ADB) and the World Bank on Wednesday committed to providing $588 million to Pakistan for its emergency response to fight coronavirus and cater to the socioeconomic impact of the pandemic.
This was announced by the Planning Commission after a meeting with country representatives of the two lending agencies on Pakistan’s preparedness and response to fight COVID-19.
The meeting, presided over by Deputy Chairman of the Planning Commission Mohammad Jehanzeb Khan, was attended by World Bank Country Director Illango Patchamuthu, ADB Country Director Xiaohong Yang, besides Member Social Sector Dr Shabnum Sarfraz, Member Private Sector Asim Saeed, Director General Health Dr Safi and representatives of the ministries of economic affairs, finance and national health services.
Cooperation urged to jointly fight challenges
The meeting also approved in principle a project concept “Pakistan National Emergency Preparedness and Response Plan for COVID-19”.
According to an official statement, the World Bank would provide $238m and the ADB $350m to Pakistan in support for the COVID-19 emergency response and to address the socio-economic disruption associated with it.
The participants of the meeting agreed that not only they needed to enhance cooperation to jointly fight challenges but also work to demonstrate firm commitment for a multifaceted cooperation in different fields.
Published in Dawn, March 19th, 2020
JAPAN TO PROVIDE RS700M AID TO FAISALABAD TEXTILE UNIVERSITY
Amin Ahmed March 20, 2020
ISLAMABAD: Japan has agreed to provide a grant assistance of Rs700 million to Pakistan for procurement of sophisticated equipment and machinery to enable the National Textile University in Faisalabad to strengthen the foundation of textile industry in the country.
The aid framework under the Economic and Social Development Programme for which notes were exchanged between Japan and Pakistan, will not only enhance educational functions of the national textile university by upgrading the educational environment, but also help boost the country’s exports of value-added products and improve the national economy.
The Ambassador of Japan, Matsuda Kuninori, and the Secretary of Economic Affairs Division, Dr Syed Pervaiz Abbas, signed and exchanged the notes at a ceremony here on Thursday.
Under Japan’s economic and social development programme, ring spinning machine, electronic flat knitting machine, carbon fibre rapier looms and other equipment will be provided to the university. Textile is a key industry of Pakistan, occupying almost 60 per cent of its total exports.
According to a recent press report, textile exports have recorded the growth of 3.94 per cent in the first six months of the ongoing fiscal year.
Published in Dawn, March 20th, 2020
IMF TO GIVE TAX BREAK TO BUSINESSES HIT BY CORONA
By Shahbaz RanaPublished: March 21, 2020
ISLAMABAD: The International Monetary Fund (IMF) has agreed with Pakistan to give tax breaks to businesses being affected by the global coronavirus pandemic but Islamabad does not feel the need to renegotiate the $6 billion package, which may also make next year’s tax collection target unrealistic.
“The IMF has agreed to give tax concessions to industries and individuals, who are being affected by the coronavirus,” said Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh on Friday. He was responding to a question during Prime Minister’s media interaction.
But the adviser ruled out the possibility of declaring force majeure to renegotiate the deal saying “nobody thinks that we are there”.
Shaikh said in case of need, Pakistan can ask the IMF for additional support while the Asian Development Bank (ADB) and the World Bank have also agreed to give concessional loans to fight the spike in cases being affected by the global pandemic.
The IMF has already announced $50 billion package for the economies being hit by the contagion.
The adviser said the government would announce a comprehensive relief package for people, industries, exporters, construction, tourism and small and medium enterprises on coming Tuesday.
Shaikh said the economy had started stabilizing before coronavirus contagion hit it. He said besides exports the foreign remittances are also affected. The IMF has already agreed to relax the budget deficit ceiling to the extent of COVID-19 related spending.
The government is also expected to give a general economic policy direction on Tuesday but specific taxation relief measures will be announced in the budget.
However, the monetary policy that the State Bank of Pakistan (SBP) announced this week and the Budget Strategy Paper approved by the federal cabinet on Tuesday suggest that it is business as usual for the government.
The federal government plans to set the Federal Board of Revenue’s (FBR) tax collection target at over Rs6.3 trillion –higher by at least 32% over this year’s now projected collection of Rs4.8 trillion.
In a situation, where the consumption will be drastically affected and some businesses may come to a grinding halt, setting nearly one-third higher revenue collection target would be replication of wrong policies implemented in this fiscal year.
In a possible lockdown scenario due to COVID-19, even R6 trillion tax collection target for next fiscal year seems highly unlikely, according to Ashfaq Tola – a member of the government’s Tax Reforms Implementation Committee.
The ground realities have not been considered while preparing these projections when the stock market shed around 11,000 points, or 27%, since Feb 3, the large-scale manufacturing (LSM) sector dropped by 3.37% during July-Jan period and exports grew marginally, he added.
For this fiscal year, the government had succumbed to the IMF pressure and set the FBR target at Rs5.5 trillion. On this basis, it had estimated provincial shares under the National Finance Commission (NFC) award at Rs3.255 trillion.
But the cabinet’s approved budget strategy paper showed that the provincial governments will now receive only Rs2.836 trillion this year due to steep shortfall in revenue collection.
Balochistan gets its share on the basis of projected revenue while the other three provincial governments receive their shares on the basis of the actual collection.
The strategy paper shows that the three provinces will get Rs419 billion less than the projections, which will adversely hit their spending plans.
For the next fiscal year, the federal government has projected Rs3.626 trillion provincial shares, which suggest that the FBR’s revenue collection target will be above Rs6.3 trillion.
The strategy paper showed that the FBR will impose additional taxes equal to 2% of Gross Domestic Product (GDP) or Rs1 trillion by curtailing exemptions, rationalizing income taxes, enforcing real income-based taxation by gradually phasing out the final tax regime, and broadening the tax base.
This seems an unrealistic plan and the government needs to seek concessions from the IMF to defer the plan of withdrawing concessions until normal economic conditions are restored.
The IMF Board is expected to approve the second review of the programme on April 10. The government still has time to renegotiate the tax collection target.
The FBR is expected to generate tax revenues of Rs4.4 trillion in this fiscal year with a massive shortfall of over Rs1.1 trillion or 25% against the IMF’s original target of Rs5.5 trillion, according to Ashfaq Tola.
Meanwhile, the federal government exempted 61 types of medical equipment and lifesaving instruments from all types of imported taxes and duties for a period of three months in view of coronavirus pandemic.
The Federal Board of Revenue (FBR) issued three separate notifications for exempting sales tax, custom duties, additional custom duties, regulatory duties and withholding taxes with effect from March 20th to June 19th. These goods can be imported by both the government and private sector entities.
The goods that are exempted from taxes include life technologies real time PCR, biosafety cabinets, PCR chambers, kits, ventilators, masks including N 95 types, vital signs monitors, Intensive care unit beds, infusion pumps, X-Ray machines, face shields, disposable shoes, etc.
PAKISTAN SEEKS DEBT RELIEF TO FIGHT COVID-19
Baqir Sajjad SyedUpdated March 22, 2020
ISLAMABAD: Foreign Minister Shah Mehmood Qureshi has said that countries like Pakistan, which are burdened by external debt, should be provided relief in repayment of loans so that they could focus on dealing with the coronavirus pandemic.
Mr Qureshi made this request while talking to his German counterpart Heiko Maas over the phone on Saturday.
Besides the situation of economically fragile countries in the context of the pandemic, the communications blockade and lockdown in India-held Jammu and Kashmir and the crippling sanctions against Iran came under discussion.
He told the German foreign minister that united efforts were needed for dealing with Covid-19 that had emerged as a major challenge for the entire world.
Mr Maas assured Mr Qureshi that he would raise the issues of debt relief for economically struggling countries and the international sanctions against Iran at the upcoming G7 meeting and the European Union Foreign Ministers’ Conference next week.
Mr Qureshi said the situation in India-held Kashmir, which had been under a lockdown imposed by Indian authorities for eight months, was dire.
Mr Qureshi said the lockdown in the Valley had caused shortage of food and medicine aggravating the plight of the Kahsmiris.
Four cases of coronavirus have been reported in the occupied Valley, whereas 3,611 cases are under observation and nearly 2,600 have been quarantined.
Describing the situation in Iran as extremely serious, FM Qureshi told his German counterpart that Iran had been the worst-hit country in the region. Therefore, he said, sanctions on Iran should be lifted immediately so that it could use its own resources to fight the novel coronavirus pandemic.
The German foreign minister said he was deeply concerned about the situation in Iran and assured Mr Qureshi that he would take up the issue at the conference next week.
Meanwhile, in a separate statement, the foreign minister asked the permanent members of the United Nations Security Council to remove US sanctions against it (Iran) for aiding its fight against the infectious disease.
Mr Qureshi said: “We have requested the ambassadors of permanent members of the United Nations Security Council to convey the message of Prime Minister Imran Khan to their countries for lifting of sanctions on Iran on humanitarian grounds.
“Economic sanctions against Iran are hampering their efforts to fight coronavirus,” the foreign minister said, adding that Iran was in desperate need of ventilators, medicines, and other medical equipment.
According to Iran’s health ministry, 1,556 people have so far lost lives due to Covid-19 while the number of patients infected by the virus in the country has grown to 20,610.
Iran’s President Rouhani had written a letter to Prime Minister Imran Khan and number of other world leaders seeking their help for removal of US sanctions in view of Covid-19 pandemic. Foreign Minister Javad Zarif in his conversation with FM Qureshi too had called for ending sanctions.
“Iran is our brotherly Islamic country and our neighbour. We are fully aware of their situation, and we stand with Iran in this difficult time,” he said while expressing solidarity with Iran.
Published in Dawn, March 22nd, 2020
PAKISTAN’S $300M LOAN RATED ‘MODERATELY UNSATISFACTORY’ BY WORLD BANK
By Shahbaz Rana Published: March 22, 2020
ISLAMABAD: An independent evaluation group of the World Bank has declared that Pakistan could not successfully implement the $300 million budget support loan that the lender had given three years ago for bringing transparency and deepening the financial sector.
The findings of the Independent Evaluation Group have once again endorsed the deeply-held view that successive governments have been availing budget support loans for delaying balance of payments crises instead of introducing any meaningful reforms.
The independent evaluation has given “moderately unsatisfactory” rating to Finance for Growth policy loan that the Pakistan Muslim League-Nawaz (PML-N) government had availed for bringing transparency in the financial sector, according to the report that the World Bank made public 10 days ago.
The evaluation has also termed the performance of the PML-N government “moderately unsatisfactory” on the implementation of the loan conditions. “The degree of achievement of the programme development objective is assessed as moderately unsatisfactory,” read the report.
The findings also endorse the outcomes of the Implementation Completion and Results Report (ICR) of the programme that the World Bank completed three months ago.
The development objective of the loan was to support the government of Pakistan’s efforts in promoting an inclusive and transparent financial sector which is better able to intermediate resources for long-term finance.
The $301.6 million International Development Association (IDA) had been approved by the board of directors of the World Bank in March 2017 and closed in June 2018.
Improving access to finance was directed at problems with financial inclusion which remained low in Pakistan, 100 million remain unbanked and only 13% of adults had a formal account, including less than 5% of women compared to an average 37% in the south Asian region.
The multilateral lenders, excluding the International Monetary Fund (IMF), give mainly two types of loans – the project and policy loans. The successive governments have availed the policy loans at the names of reforms but used the money for building foreign exchange reserves and budget financing.
The World Bank had suspended the budgetary support in 2017 and there are hopes that the Washington-based lender may restore the policy loans in coming months after Pakistan has fulfilled an important condition on reaching an agreement between the centre and the provinces on better management of taxes.
These policy loans have increased the burden of the external debt and their share in total external gross loans has touched 70%, which is unsustainable.
The independent evaluation group has also termed the performance of the World Bank local officer moderately satisfactory, underpinning the need for improvement in processing of loans.
The evaluation showed that the then government did not complete in time many follow-up steps to the prior actions that were necessary to achieve many result targets like full operationalisation, and not just a pilot, of the Digital Transactions Accounts scheme; operationalisation of the Deposit Protection Corporation; issuance of the rules and regulations to implement the Benami Transactions Prohibition Act; and completion of the AML/CFT Mutual Evaluation Report. The target of increasing long-term banking loans as percentage of total loans was not achieved. The plan was to increase the share from 8.8% in 2018 to 10% of the deposits by 2018. Actual ratio stood at only 8.9%.
For enhancing transparency of the financial sector, the World Bank had placed a condition of establishing an adjudicating authority. But the target was not achieved and an adjudicating body for Benami accounts would have been put in place only after the rules and regulations for the newly enacted Benami Law were in place. These rules and regulations were formally launched after significant delay in March 2019.
The World Bank had also placed a condition for complying with Financial Action Task Force (FATF) recommendations. Pakistan’s mutual evaluation process was completed in late 2019.
Pakistan was put on the FATF grey list in June 2018 and this was reconfirmed after the mutual evaluation in October 2019, this would indicate weaknesses in compliance with recommendation.
The World Bank had also placed a condition to register 2% of the total outstanding bonds, which Pakistan could not meet. Only 0.7% of the bonds could be registered till the deadline.
The lender also asked to separate roles of chairman and chief executive officer of the State Life Insurance Corporation. Pakistan could not comply with the condition.
The target of improving access to finance and enhancing financial inclusion from 45 million accounts to 50 million was achieved; however, this may not be directly attributable to the prior action since the Digital Transaction Account which was approved as the action was not implemented by the target date.
There was a target to ensure 5% payments of profits on seven million national saving accounts through banks. Later on, it came to know that the accounts were not 7 million rather there were only 2.4 million accounts. The target of increasing the number of registered companies was achieved.
The target of increasing banking deposit base from Rs11 trillion in 2016 to Rs12.5 trillion by June 2018 was also achieved. The Deposit Protection Corporation was formally established on June 1, 2018, almost at the target date. However, the passing of the law may have served as a signal to the market and boosted depositor confidence, leading to an increased depositor base, according to evaluation group report.
Going forward, the evaluation group has suggested that follow-on steps to prior actions of a development policy operation (DPO) should be made explicit in the programme document and agreement for their effective and timely implementation should be secured from the government. The World Bank should be cognizant of the risks of undertaking DPO actions close to an election date and devise better mitigation measures to address political risk, it added.
Published in The Express Tribune, March 22nd, 2020.
NEWS COVERAGE PERIOD FROM MARCH 02 TO MACH 08, 2020
PLANNING COMMISSION FAILS TO UTILISE WB’S $5M TECHNICAL AID
Amin Ahmed Updated March 02, 2020
ISLAMABAD: The Planning Commission has failed to utilise the World Bank’s technical assistance of $5 million approved in 2018 for capacity building for housing policy and analytics as part of Pakistan Housing Finance project, and this assistance is now expected to be allocated to the Naya Pakistan Housing Programme.
It is learnt that the World Bank has received multiple requests from the federal government for technical support for implementing the ambitious housing programme.
The Naya Pakistan Housing and Development Authority appears to be the most likely and viable recipient of these technical assistance funds.
Now that the Naya Pakistan Housing and Development Authority Act has been passed by parliament, the technical assistance funds may be reallocated to it. However, any reallocation of funds to a new implementing agency would also require the World Bank to evaluate the capacity of the new agency as part of the standard due diligence procedures, a report of the World Banks says.
The World Bank had approved $145 million for Pakistan Housing Finance project in March 2018 to expand home ownership through access to affordable housing finance in Pakistan.
The report says that the implementation of the housing finance project has been progressing satisfactorily. More than 90 per cent of the project amount has been disbursed within 18 months of the project effectiveness.
The report says that the World Bank is ready to support the government in the housing programme. However, for the bank’s additional support to be viable, certain prerequisites will need to be met. Since the Naya Pakistan Housing and Development Act has gone through all requisite parliamentary approvals, rules and regulations underpinning its operations should be fast-tracked, ideally by April 2020, suggests the bank report.
The technical assistance funds must be mobilised at the earliest and the housing authority must start working to commence the process for reallocation in March. The Risk Sharing Facility (RSF) should be operationalised and progress must be made on regulating builders.
There should be robust pipeline of housing projects under the housing programme to demonstrate an increase in affordable housing supply; and Pakistan Mortgage Refinancing Company should undertake a capital markets transaction to demonstrate its market viability, before June 2020, the report suggested.
Published in Dawn, March 2nd, 2020
FBR EXPECTS SUBSTANTIAL CUT IN TAX TARGET BY IMF
By Shahbaz Rana Published: March 4, 2020
ISLAMABAD: The acting chairperson of the Federal Board of Revenue (FBR) believes that the International Monetary Fund (IMF) is likely to reduce the country’s tax collection target by a substantial margin because of their negotiations with the global lender but the finance ministry does not share her optimism.
“The IMF was very satisfied with the FBR’s performance and is likely to substantially bring down the target,” Nausheen Javaid told the Public Accounts Committee, the parliamentary watchdog, on Tuesday.
However, the finance ministry dismissed her claim saying that the IMF had not agreed to reduce target yet.
The acting FBR chief’s statement came as her organisation’s performance is under question for the reduction in income tax returns filed in the three categories of taxpayers in the tax year 2019, which officially closed last week.
Less than 4,900 individuals and companies have paid taxes up to the tune of Rs10 million or more in the year. “The target is likely to go down as a result of IMF negotiations,” she told the committee.
Special Finance Secretary Omar Hamid, who was also present at the committee’s meeting, told The Express Tribune that the IMF had not agreed to reduce the target so far.
The anticipated shortfall between the Rs5.238 trillion downward revised target and collection projections was one of the main reasons behind a two-week delay in reaching a staff-level agreement with the IMF.
The IMF was pushing for a Rs200 billion mini budget but Prime Minister Imran Khan did not agree to that.
The acting chief claimed that the FBR had performed very well in the first seven months of the fiscal year and achieved 96% of the assigned target.
PTI MNA Syed Fakhar Imam, a member of the Public Accounts Committee, questioned the rationale for trying to have the target reduced if the FBR had achieved 96% of it.
The acting chairperson said the FBR had missed the targets because of a steep compression of imports that caused a reduction of Rs307 billion in the collection in seven months.
The FBR has missed the first eight-month revenue collection target by Rs484 billion despite slapping Rs735 billion additional taxes and double-digit inflation. Its collection was higher by 16.5% against the same period last year.
The FBR has faced another setback in the shape of the reduction in the income tax base.
The acting chairperson told the committee in comparison with February last year, there was an increase in the number of income tax returns filers.
However, she admitted that against the tax year 2018, about 337,756 less people and companies had filed their income tax returns — a reduction of 12% — this year. She did provide the reasons for the shrinking tax base.
In the tax year 2018, over 2.829 million people and companies had filed their returns – a figure that dropped to 2.5 million this year.
There were over 1 million new income tax filers in 2018. This year only 373,756 new individuals filed their returns, according to the FBR chairperson’s presentation.
This means that 715,633 individuals and companies that filed their returns in the previous tax year did not submit the statements of their income and expenditures this year. The FBR has done nothing about them.
The number of 2.5 million filers — to be precise – was just 40% of the people and entities registered with the FBR for income tax, reflecting very poor enforcement.
Around 6.2 million people are registered with the FBR and assigned a national tax number (NTN).
Every person earning taxable income of more than Rs400,000 a year, has at least one 1,000cc vehicle or owns a home is under obligation to file their income tax return.
Fresh details available with The Express Tribune show that there has been a reduction in income tax returns filed in the three categories.
As against 2.7 million individuals who filed their returns in 2018, only 2.38 million fulfilled this legal obligation next year – around 338,400 individuals preferring to stay away.
About 540,000 of the total individuals declared their income as nil and did not pay any taxes. Around 3,100 individuals paid taxes up to the Rs10 million or more.
As many as 63,750 associations of persons filed their returns this year, 300 less than last year. Around 25,000 associations declared their income as nil and did not pay any taxes. Around 1,400 associations of persons paid Rs10 million or more in taxes.
Similarly, only 43,150 companies filed their returns in the tax year 2019 — down by 1,050 companies in 2018.
Around 23,800 companies declared their income as nil and 300 companies paid Rs10 million or more in income tax this year.
There were 118,000 companies that are registered with the Securities and Exchange Commission of Pakistan and only 36.5% of them chose to file their income tax returns with the FBR, raising serious questions about its capabilities.
The committee also inquired about the status of the reforms in the FBR.
“We are part of the tax service and we know that gradual tax reforms will work better than quick reforms,” the acting chief said. “Introducing quick reforms might jeopardise the FBR’s revenues and we cannot retrench people because of the manual operating systems,” she added.
Shabbar Zaidi, the outgoing chairman of the FBR, was in favour of radical reforms in the FBR and wanted to lay off thousands of employees.
BILAWAL CALLS IMF BAILOUT PACKAGE ILLEGITIMATE
The Newspaper’s Staff Reporter Updated March 05, 2020
LAHORE: Pakistan People’s Party (PPP) Chairman Bilawal Bhutto Zardari calls the International Monetary Fund (IMF) bailout package illegitimate as it doesn’t carry parliament’s seal of approval.
“The deal signed with the IMF carries no legal value for it has been struck by a selected government and it has not been approved by the parliament,” he told participants of a seminar organised by party’s labour wing here on Wednesday.
He demanded that the loan agreement be renegotiated in the interest of the poor.
“We don’t accept this PTI-IMF deal and want to re-negotiate the deal in favour of the people of Pakistan, the working class and the poor,” he said, expressing his pessimism about anti-poor intentions of the PTI government.
“This government won’t do a deal with our labour force rather it sacrifices rights of labour at the altar of IMF.”
Pledging not to allow the privatization of state enterprises, he said whenever a selected government came into power public institutions are put on sale. But, he pledged that if former army ruler Pervez Musharraf could not succeed in privatizing state enterprises, a ‘puppet’ government won’t also.
“We will not let sell out of the institutions developed with the blood and sweat of labour force. We will not let them privatise these institutions,” he said, hoping that the judiciary would also play its role like in the Musharraf regime in checking sell-off at throwaway prices of public assets.
The PPP chairman said that every citizen was feeling the brunt of economic mismanagement of this “PTI-IMF” government as price-hike in the last 15 month is unprecedented. Citing reports by world agencies like Moody’s and Bloomberg, he said no international financial institution could tell better than the local workers the agony they were undergoing since this government came into being.
Distinguishing his party’s economic philosophy than that of other parties, Mr Bilawal said there’s a basic difference between the philosophy of the PPP and other parties. “Both the PTI and the PML-N think that if industrialists are given facilities and benefits they will spend to create more jobs. But we believe in spending more on labourers as most of the [pubic] money given to businesses and landlords go to their bank accounts but if the same cash is put into the pockets of the poor it immediately comes into circulation and thus helps run the wheel of economy.”
He said the PPP introduces programmes like the Benazir Income Support Programme under the same philosophy so that money went to the poorest of the poor. “This is the reason that whenever the PPP comes into power it increases wages and pensions.”
He recalled that during PPP’s 2008-13 tenure the world was in recession and the government also had to deal with two floods and the menace of terrorism but it created employment opportunities.
The PPP leader said that his party was starting its struggle against what he said economic murder of the people and urged the working class to join hands with it to win this fight.
“As grandson of Shaheed Zulfikar Ali Bhutto and son of Shaheed Mohtarma Benazir Bhutto it is my responsibility to struggle for the labour rights. I will not leave the labour force for a single day like you have not left Bhuttos for a day.”
He said that the labour policy of the Sindh government, where the PPP is in power, is pro-labour and has recognised the status of women workers in the agriculture sector women through an enactment. He said fruits of this and other pro-worker laws would soon be visible.
Published in Dawn, March 5th, 2020
WB COMMITS $300M TO HEALTH & SOCIAL SECTORS
TAHIR AMIN March 05, 2020
ISLAMABAD: The World Bank has committed $300 million to support livelihood in Pakistan including $200 million for the Punjab Human Capital Investment Project that will strengthen health services and social protection for poor and vulnerable households in selected districts of Punjab.
According to the Punjab Human Capital Investment Project documents, the total cost of the project is $330 million where International Development Association (IDA), the concessional financing arm of the World Bank, financing is $200 million and the remaining $130 million is to be financed by the provincial government.
Pakistan is accelerating investments in healthcare and education to prepare children to reach their productive potential and generate wealth, says a WB official statement.
“Pakistan’s strongest asset is its people. Investing at the start of life, especially for girls and women, is essential to empower citizens to thrive,” said Illango Patchamuthu, World Bank Country Director for Pakistan.
“This project will help the Punjab province to invest in early years now, to create a productive workforce for the future.”
The project will increase the quality and uptake of health services, including maternal care, immunizations, and childbirths attended by qualified professionals, reaching up to 18 million people.
It will provide early childhood education and skills training for young parents and will improve systems to more efficiently manage economic and social inclusion programmes.
“There are substantial financial and non-financial barriers to access quality health services, such as expenses to visit health facilities and the burden of household chores and childcare, especially among women in poor households,” said Yoonyoung Cho, Task Team Leader for the project.
“The first 1,000 days are the most critical time in a child’s development, thus prioritizing maternal and natal care is integral to their productive capacity and strengthening human capital accumulation in Pakistan.”
As per the project documents Pakistan’s most abundant asset is human capital, but the country has not been effectively investing in or utilizing this significant resource. The country’s demographic transition, characterized by the young, working-age population growing faster than the overall population, could also help create an environment conducive to economic growth and demographic dividends. However, as highlighted by the latest Human Capital Index (HCI), released by the World Bank in 2018, an average girl born in Pakistan today will have realized only 40 percent of her overall human capital potential by the time she turns 18, if no changes in human capital accumulation take place. The country’s high stunting rate (which was 37.6 percent in 2017, despite some progress) among children under five, and poor education and learning outcomes, also highlight the challenging human capital outcomes in the country.
Pakistan’s low human capital indicators are in large part due to lagging outcomes among poor and vulnerable households and are associated with weak female empowerment. While primary school attendance is over 90 percent in the richest quintile, less than half of children in the poorest quintile attend primary school.
Weak female empowerment, manifested in a large gender gap in education, employment, and earnings, also has significant implications on investment in children’s human capital, given the strong association between mother’s education and household income and children’s human capital outcomes.
Women’s participation rate in earnings generating activities is strikingly low: female labor force participation in 2017 is low (28 percent in rural areas and 11 percent in urban areas); and among the employed the share of unpaid work is high (60 percent in rural areas and 15 percent in urban areas).
The macro-economic and fiscal crisis that the country is currently facing adds further challenges to poverty reduction and human capital accumulation in Pakistan. Pakistan has been experiencing repeated boom-bust patterns and fiscal crises due to some structural factors.
The latest economic downturn accompanied by growing current account deficit and falling foreign currency reserves led the Pakistani government to accumulate bilateral short-term debt and macroeconomic imbalances.
As part of its stabilizing efforts, the government signed a $6 billion bailout programme offered by the International Monetary Fund (IMF) through a 39-month Extended Fund Facility in July 2019.
The IMF programme and its accompanying measures could expose a number of vulnerable households to the risk of falling back into poverty putting them at risk of reversing the gains.
Punjab is home to about 48 percent of the country’s poor (estimated at 23 million in 2017), and inequality remains a challenge in the province.
A large proportion of Punjab’s population is clustered around the poverty line and thus remains vulnerable to poverty, especially during shocks, whether environmental (e.g., floods and climate-change-induced disasters) or economic (e.g., the recent debt crisis). Punjab’s inequality is not only in incomes but also in opportunities for human capital investment.
The World Bank also approved $85 million in grants and credits from IDA18 Regional Sub-Window for Refugees and Host Communities and $15 million from the Multi-Donor Trust Fund to the federal government and the Government of Balochistan to support the strengthening of institutions, delivery of services, and support for livelihoods and enterprise development.
IN PAKISTAN: WORLD BANK OKAYS $300M FOR HUMAN DEVELOPMENT
By Our Correspondent Published: March 5, 2020
ISLAMABAD: The World Bank has approved a $300-million financial package for human development in Pakistan, including a loan of $200 million to improve social and health indicators in about a dozen poorest districts of Punjab.
The loan has been approved under the Punjab Human Capital Investment Project that will strengthen health services and social protection for the poor and vulnerable households in select districts in Punjab.
Key results of the loan include an increase in the share of pregnant women among beneficiaries of the conditional cash transfer, who delivered a child attended to by skilled health personnel, share of children among conditional cash transfers and increase in shares of economic inclusion programme beneficiaries and transition of children from pre-school to Grade 1.
A World Bank project document stated that southern Punjab had the highest percentage of malnutrition and undernourished population in the province.
Among the 11 districts covered by the project, Layyah district is on top with 29.6% stunted growth. Due to poor nutrition facilities and access to basic healthcare services, the percentage of children under five having diarrhoea is 25% and 30% in DG Khan and Layyah districts respectively and they are on top in Punjab.
Bahawalnagar, DG Khan, Muzaffargarh and Rajanpur districts are facing partial water logging and salinity and water shortages for drinking as well as for irrigation.
Investing at the start of life, especially for girls and women, is essential to empower citizens to thrive, said World Bank Country Director for Pakistan Illango Patchamuthu.
He said the project would help the Punjab province to invest in early years now to create a productive workforce for the future.
The project is also aimed at increasing the quality and uptake of health services, including maternal care, immunisation and childbirths attended to by qualified professionals, reaching up to 18 million people.
It will provide early childhood education and skills training for young parents and will improve systems to more efficiently manage economic and social inclusion programmes.
There are substantial financial and non-financial barriers to access to quality health services, such as expenses to visit health facilities and the burden of household chores and childcare, especially among women in poor households, said Yoonyoung Cho, task team leader for the project.
A large proportion of Punjab’s population is clustered around the poverty line and thus remains vulnerable to poverty, especially during shocks, whether environmental or economic. Punjab’s inequality is not only in incomes but also in opportunities for human capital investment.
There are large variations in poverty rates across districts and in human capital indicators by household income as well as by geographical location. Overall health and educational outcomes are far poorer among households in south Punjab, where the poverty rate at 39% is almost twice as high as the province’s average of 21% poverty.
The World Bank also approved $85 million in grants and credits from the IDA Regional Sub-Window for Refugees and Host Communities and $15 million from the Multi-Donor Trust Fund for the federal government and the government of Balochistan to support the strengthening of institutions, delivery of services, and livelihoods and enterprise development.
According to the latest Human Capital Index (HCI), an average girl born in Pakistan will have realised only 40% of her overall human capital potential by the time she turns 18, if no changes in human capital accumulation takes place.
The country’s high stunting rate among children under five and poor educational and learning outcomes also highlight the challenging human capital outcomes.
While primary school attendance is over 90% in the richest quintile, less than half of the children in the poorest quintile attend primary school. Weak female empowerment, manifested in a large gender gap in education, employment and earnings, also has significant implications for investment in children’s human capital, given the strong association between mother’s education and household income and children’s human capital outcomes.
Published in The Express Tribune, March 5th, 2020.