PAKISTAN ECONOMY
NEWS COVERAGE PERIOD FROM MARCH 23RD TO MARCH 29TH, 2020
RAZZAK VOWS SUPPORT TO EXPORTERS, INDUSTRY
By MUSHTAQ GHUMMAN on March 23, 2020
Prime Minister Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood has said that the government will provide all possible incentives to the exporters and industry at this critical time.
Talking to Business Recorder, he said, when the coronavirus started in and outside Pakistan, exporters began contacting him by telephone to update him on the impact of this epidemic on their shipments and other issues. Exporters informed him that international chains like GAP, Zara and Lewis are asking them to hold shipments, which implies that if shipments are on hold , exporters will face liquidity crunch.
“I spoke to the exporters through conference call as we are inviting them in person to hear their concerns. They presented a list for relief due the prevailing situation. Whatever points were related to State Bank of Pakistan(SBP) I gave to the Governor SBP and requested immediate steps because factories production has started to come down as this epidemic will end in one, two or three months but this situation would create liquidity crunch for them,” he added.
Dawood further revealed working capital rules. The Export Refinance Scheme (ERF) he explained by saying if an exporter sends goods worth $ 1000, he can get working capital of $ 500. The SBP has increased the limit of working capital by 33 per cent for the current financial year. However, exporters have sought 100 per cent for the next fiscal year.
According to the rules, exporters’ remittances should come within 180 days, but SBP has extended this period to 270 days. Exporters have also urged Finance Advisor to release their sales tax refunds as early as possible. Dr Hafeez Shaikh has expressed his willingness to release Rs 10 billion immediately.
Exporters also asked Commerce Ministry to release their pending DLTL immediately, he said, adding that approval has been granted and release of Rs 9.3 billion has begun. However, the remaining balance of Rs 10.5 billion will be released in the first week of April 2020.
“As the remaining Rs 10.5 billion is released to exporters, their entire amount of Rs 35.5 billion will be cleared,” he said, adding that the refunds of Technology Upgrdation Fund (TUF) will be paid in next fiscal year as there was no budget provision for this scheme.
Exporters have also demanded that turnover tax should be lowered to 0.5 per cent from 1.5 per cent, he said, adding that the government is looking into it. Meanwhile, Power Division in a statement has said that due to Corona situation, the federal government is working on a relief package in the power sector for businesses and the people of the entire country. On Monday (tomorrow) a high level meeting is to be chaired by the Prime Minister in this regard.
Spokesmen of Power Division said that a lot of work is already going on in the Power Division in this regard, therefore it is advisable that provinces do not announce any relief unilaterally for power sector as all of Pakistan is in this together.
Copyright Business Recorder, 2020
https://www.brecorder.com/2020/03/23/582599/razzak-vows-support-to-exporters-industry/
MULTI-BILLION RUPEE RELIEF PACKAGE APPROVED
Syed Irfan Raza March 24, 2020
ISLAMABAD: Prime Minister Imran Khan on Monday approved a multi-billion rupee relief package for different segments of society who are vulnerable to the adverse impact of the coronavirus outbreak on the country’s economy.
The package was approved in a meeting chaired by Prime Minister Khan at the Prime Minister Office.
A source privy to the meeting told Dawn that under the package the monthly stipend of the Benazir Income Support Programme (BISP) has been increased from Rs2,000 to Rs3,000.
The meeting was attended by Chief of the Army Staff Gen Qamar Javed Bajwa, Inter-Services Intelligence (ISI) chief Lt Gen Faiz Hameed, federal Minister for Planning and Development Asad Umar, Special Assistant to the Prime Minister on Information Dr Firdous Ashiq Awan, Adviser to the PM on Finance Dr Hafeez Shaikh, Adviser to the PM on Textile and Commerce Abdul Razak Dawood and chairpersons of the Federal Board of Revenue (FBR) and Pakistan Housing Authority (PHA).
Governor of State Bank of Pakistan Reza Baqir and the finance ministers of Punjab and Khyber Pakhtunkhwa, Makhdoom Hashim Jawan Bakht and Taimur Saleem Khan, also took part in the meeting through video link.
BISP monthly stipend to be increased from Rs2, 000 to Rs3, 000
The source said it had been decided that the funds of the government’s much ambitious Ehsaas programme would be distributed among the poor according to the available data of the BISP and through the under progress National Socio-Economic Registry (NSER) of the BISP.
It has also been learnt that not only the amount, but also the number of beneficiaries has been increased under the PM’s relief package.
Presently, the total number of BISP beneficiaries is said to be 5.2 million.
According to the PM Office, the overall economic situation of the country was discussed in the backdrop of the adverse impact of the coronavirus outbreak.
The meeting reviewed different options for protecting the poor and low-income segments of society from the outbreak’s adverse impact on the economy.
Speaking on the occasion, PM Khan said that due to present situation the government would go to any extent to protect weak segments of society.
Talking about provision of basic food items to the poor, he directed the authorities concerned to take necessary measures so that no one could take advantage of the situation by involving in wrong practices, such as hoarding. “There should not be any interruption in supply of food items in markets,” he was quoted as saying.
Talking to Dawn after the meeting, Dr Firdous Ashiq Awan said under the package approved by the prime minister, poor and low income groups would be provided monetary assistance through Ehsaas programme.
PM’s spokesperson Nadeem Afzal Chan said in a TV programme that members of National Assembly have their own data regarding poor and low-income groups in their constituencies and they could reach them to provide monetary assistance.
Published in Dawn, March 24th, 2020
https://www.dawn.com/news/1543282/multi-billion-rupee-relief-package-approved
IMF WARNS CORONAVIRUS RECESSION COULD BE WORSE THAN 2009
By RECORDER REPORT on March 24, 2020
The world economy is facing “severe” economic damage from the coronavirus pandemic that could be even more costly than in 2009 and will require an unprecedented response, IMF chief Kristalina Georgieva said Monday.
Georgieva called on advanced economies to provide more support to low income countries, which face a massive outflow of capital, and said the IMF stands “ready to deploy all our $1 trillion lending capacity.”
As much of the world faces mass shutdowns, Georgieva warned finance ministers from the Group of 20 nations that the outlook for 2020 “is negative – a recession at least as bad as during the global financial crisis or worse.”
The global economy contracted by 0.6 percent in 2009 as a result of the 2008 global financial crisis, but major emerging markets like China and India at the time were growing at a rapid rate. In contrast, the coronavirus pandemic is causing worldwide economic and human carnage, and some forecasters now say the downturn could be 1.5 percent.
“The human costs of the coronavirus pandemic are already immeasurable and all countries need to work together to protect people and limit the economic damage,” Georgieva said.
However, emerging markets and low-income countries “face significant challenge” and may need additional financial support and even debt relief.
“Investors have already removed $83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded,” she said.
Nearly 80 countries have already requested emergency aid from the IMF to deal with the virus outbreak, Georgieva said.
Copyright Agence France-Presse, 2020
STIMULUS PACKAGE
By RECORDER REPORT on March 26, 2020
Prime Minister Imran Khan flanked by those members of his Cabinet, and Chairman National Disaster Management Authority, engaged in mitigating the impact of the COVID-19 on the general public as well as the productive sectors, announced a 1.13 trillion rupee package. While the sheer size of the package is impressive and no doubt does lend a comfort level to the people of this country yet further clarifications especially with respect to the mode of implementation of specific components of the package are lacking.
The package focusing on the general public includes 200 billion rupees for labour with negotiations ongoing with the provinces to provide additional support. This can be fully endorsed as the large number of unskilled daily wage earners (whether they operate independently or are hired by the formal sectors including the construction industry) would be the hardest hit as Pakistan goes into a lockdown defined by the Prime Minister as distinct from a curfew. The question is how would the government ensure that only those eligible benefit from this scheme? Additionally, how would the government identify those who are laid off by the formal productive sectors because of lack of business or the inability to reach their place of work due to lack of transport? Pakistan has been engaged in contractionary monetary and fiscal policies under the ongoing International Monetary Fund (IMF) programme since 12 May 2019 when the staff-level agreement was reached with the objective of reducing aggregate demand and inflationary pressures. This in turn accounted for downsizing followed by lay-offs in all productive sectors throughout the current year – in large-scale manufacturing as well as small and medium enterprises. Would those who lost their jobs due to the government’s economic policies also be eligible under this package?
Another 150 billion rupees has been earmarked for paying 3,000 rupees per month to poor families for four months and panahgahs/shelters would be expanded o accommodate those who have been screened and declared virus-free. This would be fairly easy to implement as a new robust and transparent biometric-based payment system was completed in December and therefore the beneficiaries are identified.
An additional 50 billion rupees would be disbursed to Utility Stores Corporation (USC) though if past precedence is anything to go by the government would be well advised to strictly monitor/police these stores to ensure that the beneficiaries of subsidised merchandise are the general public and to set up makeshift stores in rural areas where there are no utility stores. And 280 billion rupees has been earmarked for wheat procurement.
The government has also wisely earmarked 50 billion rupees for medical workers and equipment, 25 billion rupees to NDMA for procurement, and another 100 billion rupees would be allocated to deal with emergencies arising due to the lockdown with those affected by the virus the main beneficiaries one would assume.
Thus a total of 855 billion rupees has been earmarked for the general public, about 74 percent of the package, and while this is appropriate yet one would hope that the modalities of the releases are clarified.
Industry would receive refunds of 100 billion rupees – refunds that the government had already pledged it would release under the IMF programme. And 100 billion rupees was earmarked for small and medium enterprises and agriculture though here too the actual modalities of who would be eligible require further clarification.
A separate package for the construction industry would be announced soon though one would assume that the construction sites may well become breeding grounds for the spread of the virus; besides without transport labourers may not be able to reach the site.
The Prime Minister also announced a reduction in petroleum and products prices by 15 rupees per litre, which would raise the value of each rupee earned, though under a lockdown one would assume that with limited public transport allowed this measure would help those with their own transport – lower middle and middle income earners.
To pay for the package the government is expected to abolish duties and taxes on imports of critical items expected to reduce revenue collections by 15 billion rupees though it is fair to say that any budget deficit target agreed with the IMF under the second review (whose report is not yet uploaded on the Fund website) would have been seriously compromised after this package. Dr Hafeez Sheikh, Advisor to the Prime Minister on Finance, has stated that the IMF has agreed not to include coronavirus-related expenditures in the budget deficit for the year. However, debate on whether all the measures announced by a cash-strapped Pakistani government, only nine months into a 39-month IMF programme, would be accepted in totality by the Fund would depend on the negotiating skills of the economic team leaders.
Copyright Business Recorder, 2020
https://www.brecorder.com/2020/03/26/583636/stimulus-package/
OIL IMPORTING STATES MAY BE HIT BY SECOND-ROUND EFFECTS: IMF
By TAHIR AMIN on March 26, 2020
The International Monetary Fund (IMF) has warned that owing to coronavirus (COVID-19) outbreak, oil importing regional countries would likely be affected by second-round effects, including lower remittance inflows and weaker demand for goods and services from the rest of the region.
This warning was made through a blog written by Jihad Azour, IMF Director for Middle East, Caucasus and Central Asia – the region that includes Pakistan.
In his blog, “COVID-19 Pandemic and the Middle East and Central Asia: Region Facing Dual Shock”, Azour said that in addition to the economic disruptions from COVID-19, the region’s oil exporters are affected by lower commodity prices.
The Annual Plan (2019-20) envisaged exports to reach $ 26.187 billion in fiscal year 2019-20 from $24.656 billion in 2018-19. According to the Finance Division, remittances during July-February fiscal year 2019-20 reached $ 15.1 billion. The Division had claimed that due to this increasing trend in remittances, the remittances will exceed $22 billion at the end of fiscal year 2020.
However, background discussion with exporters and economists maintained that due to the Corona virus outbreak both the targets are unlikely to be achieved.
Javed Balvani, Chairman Pakistan Apparel Forum (PAF) said that country’ exports need to be $70 million per day to achieve the target of over $26 billion for the year. If industry remains closed due to lockdown in the country for one month, exports target would be negatively impacted by around $2.1 billion, said Balvani, adding that in the current scenario it is difficult to achieve export target set for the current financial year.
Former Advisor to Finance Ministry Dr Ashfaq Hassan Khan said that decline in oil prices would have positive as well as negative impact on Pakistan’s economy. The depressed oil prices would help in cutting the import bill as oil is around one third of the total import bill, government can collect additional revenue in shape of petroleum levy and inflation would come down if the impact is passed on to consumers, he added.
However, at the same time if crisis in oil producing countries is prolonged and oil prices remain depressed for a longer period, Pakistani workers would be affected and resultantly remittances would be hit negatively. Further with economic slowdown, the demand for Pakistani products would decline, and resultantly the country’s exports may be negatively affected, Khan added.
The IMF Director further maintained that the immediate policy priority for the region is to protect the population from the corona virus. Efforts should focus on mitigation and containment measures to protect public health. Governments should spare no expense to ensure that health systems and social safety nets are adequately prepared to meet the needs of their populations, even in countries where budgets are already squeezed.
Beyond that overarching imperative, economic policy responses should be directed at preventing the pandemic-a temporary health crisis-from developing into a protracted economic recession with lasting welfare losses to the society through increased unemployment and bankruptcies. However, the uncertainty about the nature and duration of the shocks has complicated the policy response. Where policy space is available, governments can achieve this goal using a mix of timely and targeted policies on hard-hit sectors and populations, including temporary tax relief and cash transfers, Azour concluded.
Copyright Business Recorder, 2020
PIA LOSSES CAN SOAR TO RS6.3B A MONTH
By Usman Hanif : March 18, 2020
KARACHI: Losses of Pakistan International Airlines (PIA) can soar to as much as Rs6.3 billion a month if the situation deteriorates in the wake of fast spreading coronavirus and the airline decides to stop international flights completely.
In such a scenario, it will start posting operational losses again, which it managed to eliminate in the recent past.
According to estimates made by the national flag carrier’s finance department, the airline could book losses in the range of Rs2.6-6.3 billion based on three different scenarios, which it prepared to assess the impact of coronavirus on the air carrier.
An official of the airline, on condition of anonymity, presented a breakdown of each of the three scenarios to The Express Tribune.
Under Scenario A, the airline will completely suspend flights to Saudi Arabia, Doha, Kuwait, Milan and China, which will cause a revenue loss of Rs5.4 billion while net deficit will be Rs2.6 billion after deducting the cost of operations. In Scenario B, the airline plans to operate only 40% of scheduled flights to the UAE and 75% of flights on the remaining international routes. At the same time, it will suspend flights to Saudi Arabia, Doha, Kuwait, Milan and China.
According to the official, the airline is likely to lose Rs8 billion in revenue while following this plan and the net deficit is expected to be Rs3.9 billion. In Scenario C, the airline is pondering over shutting down all international flights after which it would lose Rs12.8 billion in revenue with a net deficit of Rs6.3 billion.
When PIA spokesperson Abdullah Khan was contacted for comment on the matter, he said a massive chunk of the airline’s traffic came from Saudi Arabia with majority of the passengers being Umrah pilgrims.
After Saudi Arabia, the highest traffic for the airline comes from the UK and other European countries.
“Following a halt to Umrah pilgrimage coupled with ferry flights to the UK operated by PIA in the national interest to bring back stranded countrymen, its losses may balloon significantly,” he said.
He added that the airline was yet to make official estimates of the total losses suffered following the coronavirus outbreak, which would be in billions of rupees per month. He voiced fear that the airline might have to halt its entire operations. At present, PIA has suspended flights to China, Japan, Qatar, Kuwait, Oman and Italy with a halt to flights to Saudi Arabia coming into effect from March 18.
The entire international travel industry is faltering and PIA is no different. According to the International Air Transport Association (IATA)’s estimates, global airlines might lose 15-18% of their total revenue in the next few weeks.
“Yes, it is a dire situation and PIA’s financial difficulties will mount further,” said Khan.
Published in The Express Tribune, March 18th, 2020.
https://tribune.com.pk/story/2178286/2-pia-losses-can-soar-rs6-3b-month/
ECNEC OKAYS DEVELOPMENT PROJECTS WORTH RS97.6BN
Mubarak Zeb Khan March 27, 2020
ISLAMABAD: The Executive Committee of the National Economic Council (Ecnec) on Thursday approved six development projects including two major plans for Balochistan with a total cost of about Rs97.646 billion along with over Rs5bn foreign exchange components.
The meeting presided over by Finance Adviser Dr Hafeez Shaikh also okayed a project to manage the operations of Green Line BRTS in the first three years to transfer them to the Sindh government afterwards.
Ecnec approved the second revised cost of Rs4.905bn for the Toiwar/Batozai Storage Dam Project, District Killa Saifullah, Balochistan to be executed by the province’s irrigation department. Ecnec directed the government of Balochistan to ensure the completion of the scheme within revised approved scope and cost. It is estimated that the project will provide storage of 95,000 acre feet of water while 16,750 acres of land will be brought under cultivation.
To enable the Economic Affairs Division for negotiations with the Asian Development Bank for finalising details of project financing, the meeting approved in principle the second revised PC-1 at a total cost of Rs28.465bn for the Naulong Dam Project, Balochistan.
Ecnec also directed the constitution of a committee under ministers of economic affairs, planning development and deputy chairman Privatisation Commission, representative from Ministry of Water and Power as well as Balochistan government to discuss issues related with preparation of second revised PC-I of the project and give its input within two weeks.
To manage operationalisation of Green Line BRTS, Karachi and installation of integrated Intelligent Transport System Equipment, Ecnec gave its nod to a modified PC-1 at total cost of Rs10.956bn with Rs5.316bn as FEC. Sindh Infrastructure Development Company Ltd – a federal government entity – would manage the operations of the project.
It was decided to establish National Electronic Complex of Pakistan, Phase 1 in H-9/1 sector, Islamabad at a revised total cost of Rs16.081bn. Out of this total budgeted amount, Chinese government will provide Rs13.371bn as loan and grant. The project is expected to be completed by June 2022.
Moreover, Ecnec approved a cost of Rs25.345bn for National Programme for enhancing the Command Area in Barani Areas of Pakistan. Its scope includes construction of 2,664 farm ponds for storing rainwater from various sources and installation of solar pumping systems on them for operation of high efficiency of irrigation systems.
The project will also help in development of 4,156 dug wells to promote irrigated agriculture, development/improvement of 2432 watercourses carrying water from various sources for enhancing water conveyance efficiency at farm level and building other beneficial infrastructures and provision of useful equipment for farm land development.
An amount of Rs11.892bn was approved for dualisation and improvement of Mandra-Chakwal Road Project at Districts Rawalpindi and Chakwal, which will be completed from the federal PSDP.
Published in Dawn, March 27th, 2020
https://www.dawn.com/news/1544072
DEVELOPING COUNTRIES: PAKISTAN FOR DEBT RESCHEDULING, ECONOMIC ASSISTANCE
By ALI HUSSAIN on March 27, 2020
As leaders of G-20 are meeting for an extraordinary session to discus a possible joint action plan to fight COVID-19, Pakistan on Thursday reiterated the call for debt rescheduling and economic assistance for the developing countries in the wake of COVID-19 pandemic.
In her weekly media briefing, Foreign Office spokesperson Aisha Farooqui, responded to the pre-emailed queries, saying that Prime Minister Imran Khan has also publicly appealed to the US in his tweet, to lift sanctions from Iran on humanitarian grounds.
She said that the prime minister had also called for debt rescheduling and economic assistance for the developing countries. This was further underscored by the foreign minister in his recent telephonic conversations with his counterparts from France, Spain and Germany, she added.
Faroouqi said that the initiative had gathered traction in recent days, evidenced by the joint statement of the IMF and the World Bank calling for suspension of debt payments for poorer countries, adding that an extraordinary G-20 meeting was also likely to take place to discuss the economic impact of coronavirus pandemic on global economy and developing countries.
When Business Recorder brought in her notice through a question that Pakistan is not among the list of 39 heavily-indebted poor countries (HIPC) – 36 Countries That Have Qualified for, are Eligible or Potentially Eligible, and May Wish to Receive HIPC Initiative Assistance (as of February 2020), 3 others [Eritrea, Somalia and Sudan] Pre-Decision-Point Countries – categorized by the IMF, the spokesperson expressed her inability to comment further, saying “it is a question that Ministry of Finance can best respond to.”
About the assistance pledged and received so far from other country in fight against the coronavirus, she said that the US had announced $1 million in assistance for Pakistan in dealing with COVID-19 situation, adding that the assistance was being disbursed in coordination with the Health Ministry.
She said that China had helped Pakistan a great deal in Pakistan’s efforts to contain coronavirus.
She said that a team of medical experts was expected to arrive soon from China to assist our doctors in battling the coronavirus. The medical team will also bring medical equipment from China to strengthen our capacity, she added.
China’s assistance to Pakistan to fight coronavirus also includes 12,000 test kits, 300,000 masks, 10,000 protective suits and $4 million to build a hospital, she added.
She further said that Xinjiang government had also provided 50,000 masks each to the Islamabad Capital Territory (ICT) as well as Sindh government and a considerable amount of donation from private sources from China was also arriving.
Alibaba Foundation has donated 50,000 test kits and 500,000 face masks as well, she added.
Furthermore, she stated that Pakistani diaspora communities in various parts of the world had also been mobilized to assist their compatriots in Pakistan.
About the level of cooperation between Pakistan and Iran over the issue of pilgrims, Farooqui said that the Government of Pakistan was in touch with the Iranian authorities on a regular basis with regards to matters pertaining to the coronavirus.
Copyright Business Recorder, 2020
https://www.brecorder.com/?p=584005
NEWS COVERAGE PERIOD FROM MARCH 16 TO MARCH 22ND, 2020
RUPEE FALLS TO 158.6 AGAINST DOLLAR IN INTERBANK
The Newspaper’s Staff Reporter March 17, 2020
KARACHI: Only a day after gaining some of the lost ground, the rupee resumed its slide against the dollar as it fell by Rs1.80 to reach Rs158.6 in the interbank market on Monday.
In the open market, the local currency recovered by Rs2 to stand at Rs156.5, as opposed to the Friday’s closing of Rs158.5.
Since the beginning of the last week, the rupee began its downward journey against the greenback as it reached Rs159.3 by Thursday, compared to Monday’s opening value of Rs154.25 – representing a fall of Rs5.05 or 3.27 per cent.
However, the final day of the week recorded a sharp recovery of Rs2.6 to finally close at Rs156.7.
Forex Association of Pakistan President Malik Bostan attributed the increase in rupee’s value to lack of demand for dollars among the foreigners, who he said didn’t book any forward rates as they turned to the sidelines due to the weekend.
Speaking of today’s movement, he explained: “As foreigners were allowed to liquidate even the unmatured positions in treasury bills, that has put pressure back on the dollar,” adding, “however, the greenback outflows are from the interbank supply, not that of the State Bank of Pakistan (SBP) reserves and thus should be a temporary phenomenon.
The volatility in the currency market has also been in line with the global meltdown in the global markets as the Pakistan Stock Exchange was also battered on Monday, losing record-high 2,349 points.
“The increase in dollar is primarily linked to the performance of stocks on Monday,” commented Exchange Commission of Pakistan former general secretary Zafar Paracha.
He added: “expectations of a rate by the SBP monetary policy statement have further expedited outflows in the treasury bills [which stand at $606 million net in March], raising the demand for the greenback and thus putting pressure on the exchange rate.”
“There is still a reasonable supply of dollars, especially hard currency, as even the exchange companies are depositing their holdings in the interbank market. But if the flight operations are curtailed further, that could affect supply,” Paracha continues.
One tola and 10-gram gold prices plunged to Rs89,000 and Rs76,303 respectively, showing a fall of Rs1,850 and Rs1,587 on the back of $60 per ounce fall in world gold prices to $1,470.
Gold prices jumped in early trade on Monday after another emergency rate cut by the US Federal Reserve, before paring gains as some investors sold the metal for cash amid a sell-off in equities, said a note released by the BIPL research on Monday.
Spot gold was up 0.9 per cent at $1,543.60 per ounce by 0248 GMT, having risen as much as 2.8pc earlier. The metal fell 3pc on Friday. The US gold futures rose 1.8pc to $1,544.20 per ounce.
Published in Dawn, March 17th, 2020
https://www.dawn.com/news/1541495
INFECTED ECONOMY
By Editorial Published: March 18, 2020
Coronavirus crisis is upon us. The corona-positive cases are now coming thick and fast. The situation threatens to turn into a major challenge that — needless to mention — is way beyond our capacity. Notwithstanding the direct threat that the virus poses to human life, the economic impact of the mushrooming infection is not going to be easy to swallow for a country that is stony broke already. The estimates by global financial institutions are scary. The Asian Development Bank says that in case of a major outbreak, Pakistan’s economy will take a $5 billion hit, with the private businesses affected the most; the growth rate will fall by 1.5%; and around 946,000 people will be deprived of their livelihood. The IMF is also reported to have forewarned our financial czars of the impact of the economic slowdown in China due to the virus.
In their response to the crisis though, the ministries responsible for economic management in the country were literally slumbering till the corona-infected cases tripled in a single day on Monday, in what does indicate an exponential growth. Consequently came a meeting between the PM and his economic team. The meeting, however, only turned out to be an occasion for stocktaking and making customary announcements. While the meeting was expected to announce a short-term policy relief for businesses and people, especially those belonging to the middle and lower-middle classes, it only culminated in the formation of an inter-ministerial committee, headed by Finance Adviser Hafeez Shaikh, tasked with keeping a constant vigil on the economy and advising steps to ward off the economic impact of the pandemic.
The de facto finance minister must focus on setting up a separate fund over coronavirus. He must not look towards absorbing the whole windfall from cut in global petrol prices into the budget, and go for as much fiscal injection as possible — especially now when the SBP has made only a symbolic cut, of 75 basis points, in its policy rate, and announced refinancing facilities for setting up new businesses and purchase of equipment to fight the virus. There is a dire need to ensure food security for people and supply of resources to medics to fight the outbreak, and minimise the impact on livelihood and businesses.
Published in The Express Tribune, March 18th, 2020.
https://tribune.com.pk/story/2178220/6-infected-economy/
TEXTILE EXPORTERS SAY ORDER CANCELLATIONS GROWING
Khalid Hasnain
LAHORE: Some textile exporters may have to lay off employees mainly daily-wage workers after most of the orders were delayed for an indefinite period due to lockdown in various European countries.
“More than 50 per cent of our ready-to-shipment export orders have been delayed by importers in several countries especially in Europe, where most of the cities are facing lockdowns due to Covid-19 outbreak,” the Pakistan Textile Exporters Association (PTEA) Secretary General Aziz Ullah Goheer said while talking to Dawn on Friday.
The PTEA represents 254 registered member mills involved in manufacturing and export of home textile, fabrics, spinning, garments employing over 500,000 daily-wage workers.
Cognisant of the trouble, authorities moved on Friday to create a package of support polices to help mitigate the danger faced by the industry. A team from textile exporter community spent the day in Islamabad in hectic consultations with government following which PM Imran Khan announced that a package will be unveiled on Tuesday, while the central bank announced relaxations of some schemes for exporters.
In Karachi, Sohail Tabba of Lucky Textiles also said that close to half of his company’s customers had already asked for indefinite postponement of delivery, and they were expecting more in the days to come. When asked how the company’s operation has been impacted by this development, he said the denim unit was down to four days a week and other lines were also cutting output. “More decisions will be made next week,” he said without elaborating.
Bashir Ali Mohammad of Gul Ahmad Textiles also painted a bleak picture. “In a way, a postponement of delivery means the order is cancelled” he said. “In fashion, things change after three months.”
He said the company was still in discussions with those clients seeking postponements trying to see if they could be persuaded to lift at least some of the stock that was ready for delivery. “But we have to manage our relations with them while managing the losses at our end,” he said.
One bright spot, according to him, was the measures being announced by the government, including those by the State Bank of Pakistan which he said will help mitigate the impact.
On the other hand, Pakistan Hosiery Manufacturers Association (PHMA) urged government to announce an instant relief package to help retain millions of workers.
“As the industry is considering laying off workers following the cancellation of export orders, we ask the government to announce a relief package with immediate effect for the workers,” said PHMA Vice Chairman Shafiq Butt on Friday.
He said in the current situation, industry is unable to pay workers due to liquidity crunch amidst non-payment of sales tax refunds. “The industry has also started giving notices to employees, even those working on regular basis for layoffs.”
Published in Dawn, March 21st, 2020
https://www.dawn.com/news/1542563/textile-exporters-say-order-cancellations-growing
IMF SEES SEVERE IMPACT ON GLOBAL ECONOMY
By Reuters Published: March 21, 2020
WASHINGTON: The impact of the global coronavirus pandemic will be “quite severe,” but a long expansionary period and high employment rates mean the global economy should weather the current shock, a top International Monetary Fund (IMF) official said.
Martin Muehleisen, who heads the IMF’s strategy policy and review department, said in an IMF podcast that the main goal for governments should be to limit the spread of the virus in a way that provides confidence that the economic shock will be temporary.
He said banks and governments had already taken unprecedented measures to provide liquidity to markets and keep them functioning, “maybe more than we needed,” but such steps should be coordinated internationally to amplify their effect.
“The better organised and the more coordinated the health responses to this crisis, the more quickly it may be possible that confidence returns,” he said.
Leaders of the Group of Seven (G7) rich nations last week said they would do “whatever it takes” to respond to the outbreak, but provided no specifics, which left markets unsettled.
Leaders of the world’s 20 major economies (G20) will hold a virtual summit next week, but divisions within the group dim hopes for strong coordinated action, experts say.
The virus has infected more than 254,700 people around the world and killed 10,451. Efforts to contain the spread of the disease have resulted in severe shocks to both supply and demand around the world, rippling through to the financial sector.
Muehleisen said financial institutions were more resilient than before the global financial crisis of 2008-2009, and steady growth and high employment rates should create some buffers.
“In that sense the crisis has come at a time where hopefully we are prepared for this kind of shock,” he said, although the impact would still be “quite severe.”
Muehleisen said the IMF was working to address the crisis through zero- and low-interest rate loans and grants, and was ready to help emerging markets deal with sharp capital outflows.
Commodity prices, especially the sharp drop in oil prices, posed a further challenge for many countries, while aiding those countries that imported commodities, he said.
However, he said the crisis highlighted the need for both governments and the private sector to have sufficient buffers, which meant the IMF would continue to look at high debt levels.
“It’s important that countries act responsibly, and that we keep room to respond if there is indeed a need for a public policy response to the degree that is happening at the moment,” he added.
https://tribune.com.pk/story/2181076/2-imf-sees-severe-impact-global-economy/
NEWS COVERAGE PERIOD FROM MARCH 09 TO MARCH 15, 2020
GOVT DEBT RISES 5PC
Fayaz Hussain Updated March 11, 2020
KARACHI: The central government debt during the first seven months of the current fiscal year increased by Rs1.210 trillion to Rs32.997tr mainly on account of a double-digit increase in the funds raised through the Pakistan Investment Bonds (PIBs) auctions.
The total central government debt during the period under review rose by four per cent as the government continued to borrow funds from the domestic and external sources to fill the fiscal gaps.
Moreover, the government’s domestic debt – long- and short-term — saw a massive increase of 10pc to Rs21.79tr in January from Rs20.73tr at the beginning of the current fiscal year. Almost all of this increase came from the funds raised through the PIBs, as the total outstanding debt of these instruments jumped 13pc to Rs12.33tr at the end of January from Rs10.933tr in June, 2019.
Another significant increase in the long-term domestic debt came under the savings schemes — net of prize bonds – which increased from Rs2.99tr in June to Rs3.276tr in January, an increase of 10pc.
However, the domestic debt from prize bonds and foreign currency loans declined by 18pc and 5pc respectively.
On the other hand, the central government external debt rose 1pc to Rs11.20tr compared to Rs11.05tr in June, 2019. Even though, the long-term external debt had decreased by 3pc to Rs10.56tr, the huge 406pc or Rs515bn increase in the short-term external debt pushed up the overall figure.
The short-term external debt increased to Rs641.9bn from Rs126.9bn in June, 2019.
Around 59 per cent of the deposits held by the banks during February were parked in investments as banking sector took advantage of the higher yields on government papers.
The government instruments — treasury bills and the Pakistan Investment Bonds have remained the pick of bankers as they have parked maximum liquidity in these instruments given the high interest rates.
Total investments made by the banking sector during the month rose year-on-year by 16pc to Rs8.72tr compared to Rs7.49tr during the corresponding last year.
The banking sector deposits increased 16 per cent year-on-year to Rs14.81 trillion compared to Rs12.805tr during the corresponding month last year. However, deposits in the ongoing fiscal year rose by 2pc.
On the other hand, the advances to the banking sector showed lackluster growth as banks continue to shy away from loaning funds to the private sector to avoid non-performing loans (NPL) in the high interest rate environment. Advances of the commercial banks during the ongoing fiscal year rose by 1pc.
Published in Dawn, March 11th, 2020
https://www.dawn.com/news/1539986/govt-debt-rises-5pc
FBR FAILS TO CHASE 12,300 PEOPLE WHO OPTED FOR TAX AMNESTY
By Shahbaz Rana Published: March 11, 2020
ISLAMABAD: The Federal Board of Revenue (FBR) has failed to nail 12,300 people down who owned black money but could not timely file asset declarations under the last tax amnesty scheme despite depositing Rs2.6 billion in taxes.
These people had submitted bank challans to avail the Pakistan Tehreek-e-Insaf (PTI) government’s 2019 tax amnesty scheme but could not file declarations of assets, which deprived them of availing the scheme. The FBR knows the whereabouts of these people but instead of forcing them to come in the tax net it took benefit of Rs2.6 billion worth of taxes that these 12,300 people deposited to opt for the tax amnesty scheme.
On the one hand, the FBR has failed to broaden the income tax base that actually shrank 12% this year, while on the other hand, its arm-twisting tactics against the existing taxpayers continued amid desperate efforts to enhance tax collection.
As against 2.82 million income tax returns filed in tax year 2018, this year only 2.5 million fulfilled their legal obligation, which led to a 12% contraction in the tax base.
The FBR has stopped giving exemption from the advanced income tax deduction on import of raw material and plant and machinery, according to a complaint made by the Karachi Tax Bar Association to the FBR headquarters on Tuesday.
The FBR has already stopped clearing sales tax refunds of exporters for the past 22 days under its FASTER system in the name of system glitch, according to Pakistan Textile Exporters Association Secretary General Azizullah Gohar.
Instead of coming in the tax net through normal channels, these 12,301 people have now knocked the door of the Federal Tax Ombudsman (FTO), seeking his intervention to get their declarations accepted. The FBR too did not bother to go after these people and bring them in the tax net.
Although FTO Mushtaq Ahmad Sukhera has taken notice of the pending amnesty declarations, he has given a week’s time to the FBR to come up with a reply to sort out the dispute. The FTO took suo motu notice of over 300 complaints filed by the aggrieved people, according to a statement issued by the FTO office on Tuesday. The complainants took the plea that the FBR’s online system was not working smoothly on the eve of the last date of the tax amnesty scheme.
The FBR’s top hierarchy told the FTO office that the government could not accept their declarations after the expiry of the amnesty scheme eight months ago. There was a possibility that the FBR could adjust the money deposited by those who were active taxpayers against their future obligations. Many of them are active taxpayers but some of them are not even income tax return filers.
FTO Sukhera held a meeting with FBR members to get their side of the story. The FBR informed the FTO that its PRAL system was perfectly working, therefore, it was out of the question that they could not file declarations due to the faulty system. Pakistan Tax Bar Association had also lodged a complaint with the FTO to take suo motu notice of the 12,301 pending cases with the FBR. These 12,301 people paid Rs2.6 billion in taxes at reduced rates, ranging from 1.5% to 4%.
The PTI government had offered the tax amnesty scheme at very low rates of 1.5% to 4% which expired on July 3. As many as 119,595 people availed of the scheme and paid Rs55 billion in taxes, FBR’s Member Inland Revenue Policy Dr Hamid Atiq Sarwar told the National Assembly Standing Committee on Finance on July 4 last year.
The FTO and the FBR discussed the possibility of accepting these returns by invoking Clause 17 of the tax amnesty law. However, the FBR officials said the Ministry of Law did not vet this plan.
“If any difficulty arises in giving effect to the provisions of this ordinance, the federal government may, through a notification in the official gazette, remove such difficulty as is inconsistent with the provisions of this ordinance,” reads Section 17 of the Assets Declaration Ordinance 2019.
When contacted, FBR spokesman Dr Hamid Atiq Sarwar said the FBR could not go after these 12,300 people until the FTO decided the matter.
Published in The Express Tribune, March 11th, 2020.
https://tribune.com.pk/story/2173543/2-fbr-fails-chase-12300-people-opted-tax-amnesty/
‘EXPORTS CAN INCREASE DUE TO SLOWDOWN IN CHINESE ECONOMY’
By RECORDER REPORT on March 12, 2020
Deputy Governor of the State Bank of Pakistan (SBP), Murtaza Syed, said on Wednesday that the country’s exports can increase in the medium term due to slowdown in the Chinese economy due to the coronavirus, resulting in cancellation of export orders around the world.
He was speaking to the business community at the Federation House about the impact of the coronavirus on Pakistan’s trade. Murtaza Syed spoke on the global as well as domestic economic situation in the wake of the coronavirus epidemic.
He said that Pakistan has deep trade links with China and would likely to be affected from the halting of industrial and economic activities in the economic giant of the world.
However Pakistani exporters had started looking towards alternative markets of Africa and Europe for their products, whose exports to China made ten percent of the total exports of the country.
About the exports, the Deputy Governor said that Pakistani exports can be increased in view of halting of exports from China. However, he saw it as a medium term opportunity.
He said that Pakistan imported sixty percent of machinery and twenty percent of raw materials from China and stated that due to disruption in supply chain because of the coronavirus, local importers have started looking at other markets.
He believed that the pace of work of SEZs and FTA with China might be slowed down for a quarter, but he opined that reduction in oil prices in the global market would benefit the country.
He said that the slowdown in world economies led to the central banks in major markets bringing down the interest rate and also thinking about fiscal stimulus to support the markets.
Later, Dr Qaisar Sajjad, Secretary General of Pakistan Medical Association (PMA), highlighted the issues pertaining to coronavirus and informed the members of the business community about the precautionary measures to stop the spread of the virus.
Copyright Business Recorder, 2020
https://www.brecorder.com/2020/03/12/579269/exports-can-increase-due-to-slowdown-in-chinese-economy/
NEWS COVERAGE PERIOD FROM MARCH 02 TO MACH 08, 2020
PAKISTAN’S TAX BASE SHRINKS, ONLY 40% NTN HOLDERS FILE RETURNS
By Shahbaz Rana Published: March 3, 2020
ISLAMABAD: The government’s broadening of tax base campaign has fallen flat as only 2.5 million people have filed annual income tax returns against 6.2 million National Tax Number (NTN) holders that shows the weakening writ of the tax machinery.
The return filers were also 278,581 or 11% less than the last tax year despite Prime Minister Imran Khan’s government giving a tax amnesty scheme and conceding ground to traders in the hope of bringing them in the tax net.
Over one-tenth contraction in the tax base needs serious soul-searching on the part of the government, headed by Imran Khan, who is known for his financial integrity.
The tax base shrank under the watch of outgoing Federal Board of Revenue (FBR) Chairman Shabbar Zaidi, who had been brought in from the private sector to oversee reforms. The government has not been able to announce the successor of Zaidi despite holding numerous meetings in the twin cities.
Another worrisome aspect was that despite winning massive tax concessions from the government, the number of income tax returns filed by traders fell this year as compared to last year, according to the FBR’s statistics.
As compared to 415,624 returns filed by the traders in tax year 2018, this year only 399,534 traders filed returns, according to the FBR. About 16,100 traders escaped the FBR’s net this year.
The 2.5-million filers – to be precise – were just 40% of the people and entities registered with the FBR for income tax purposes, showing very poor enforcement. As many as 6.2 million people are registered with the FBR and hold the NTN.
The filing of income tax return is the legal obligation of every person, earning taxable income of more than Rs400,000 a year, has at least one 1,000cc car or owns a home.
The FBR has published the new Active Taxpayers List (ATL) for tax year 2019 and 2.53 million people have submitted income tax returns, said FBR Inland Revenue Policy member Dr Hamid Atiq Sarwar, who is also the official spokesman.
In tax year 2018, over 2.8 million people had filed returns, said Sarwar.
Instead of showing any increase in income tax returns, the tax base actually shrank by 279,000 or 11% in tax year 2019. To a question about traders escaping the tax net instead of coming in, Sarwar said increasing the number of traders from 400,000 to three million would be a gradual process. He said committees had been constituted that would resolve issues about the filing of returns by the traders.
In October last year, the traders got major concessions from the government on the intervention of PTI’s former secretary general Jahangir Khan Tareen. The government increased the exemption limit for sales tax registration of traders and allowed that only those paying up to Rs1.2 million annually in electricity bills and owning a 1,000-square-feet shop would be required to get registered.
Earlier, any shopkeeper whose annual electricity bill was above Rs600,000 was treated as a class-I trader and subjected to 17% sales tax.
The government had also reduced the minimum income tax rate from 1.5% to only 0.5% for the traders who had annual turnover of up to Rs100 million. All this had been done on the claim that 3.5 million to four million traders would get registered with the FBR.
It is not for the first time that the traders have deceived a sitting government. Earlier, they had made similar promises with Pakistan Muslim League-Nawaz (PML-N) government and got away with major tax concessions.
In tax year 2018, there were 401,807 individual traders who filed tax returns – a figure that has now slipped to 387,867 instead of increasing.
Similarly, there were 13,817 associations of persons owned by the traders that filed income tax returns in the last tax year. This figure too has slipped to 11,667 this year, a reduction of 15%. Under the Income Tax Rules of 2002, the FBR publishes the new Active Taxpayers List on March 1 every year and anybody that does not file return for the year is excluded from the list and is subject to double withholding tax.
Sarwar said the FBR would go after those 279,000 people who did not submit returns for this year.
The political compromise struck by the PTI government twice – first by giving amnesty and then by providing a safe passage to traders – also weakened the FBR’s writ.
In June 2013, the PML-N government had introduced the policy of charging higher tax rates from those who did not file income tax returns. Even that could not compel people to file returns.
Perpetual failure of the FBR to meet assigned targets is not something new but a large part of the blame goes to political masters who keep on giving amnesties, waivers and immunities, said Dr Ikramul Haq, an eminent tax lawyer and expert in FBR’s affairs.
Published in The Express Tribune, March 3rd, 2020.
https://tribune.com.pk/story/2168210/2-pakistans-tax-base-shrinks-40-ntn-holders-file-returns/
SPEAKERS CALL FOR PROMOTING OF WOMEN’S ECONOMIC EMPOWERMENT
By RECORDER REPORT on March 5, 2020
Procter & Gamble (P&G) Pakistan has reinforced its commitment to promoting gender equality in the country through the WeSeeEqual Dialogue, aimed to spark conversations and motivate change to build a better world for everyone.
Held in partnership with UN Women Pakistan, the P&G WeSeeEqual Dialogue brought together business and government leaders as well as influencers to share inspiration and discuss challenges that are preventing individuals and society from accelerating the progress of gender equality in the country. The event held here at a local hotel on Wednesday.
The panel speakers included Sami Ahmed, Vice President P&G Pakistan, Fareeha Ummar, Portfolio Manager, Women’s Economic Empowerment and Sustainable Livelihood, UN Women Pakistan, Javed Jabbar, former Federal Minister and Senator, as well as Samina Baig, UNDP National Goodwill Ambassador and President, Pakistan Youth Outreach Foundation.
Sharing his thoughts, Sami Ahmed, Vice President, P&G Pakistan, said, “We are pleased to continue our work to create an inclusive, gender-equal environment within P&G, while advocating for gender equality externally as well, so that everyone can contribute to their full potential.”
The panelists shared their perspectives on different aspects of gender equality including the need to promote women’s economic empowerment with a view to benefit the society and the role that media and advertising can play to help raise awareness and break gender-biased stereotypes.
They also expressed their views regarding the myths that are holding us back from equal representation in leadership and the workplace, highlighted the importance of men as advocates for the cause of Gender Equality and stressed a call to action, as every person, every day, can be an agent of change – individually and collectively.
Fareeha Ummar also expressed her views, “UN Women Pakistan is committed to engaging with the private sector to drive change that advances women’s equality and economic empowerment. We believe that the time is now to back up our words via action. We hope that the corporate sector will play its role for a socially accountable and gender responsive private sector who thinks, acts and impacts gender equality in their companies, in the market-place and in the community.”
Through its social cause programs, P&G has partnered with UN Women and Health Oriented Preventive Education (HOPE) for women’s skill-development and girls’ education. In collaboration with HOPE, 10,000 women and girls (over 3-year period) are to receive vocational training and quality secondary education in semi-urban/rural areas such as Badin, Sujawal, Thatta, Gadap, Ghagger, and Muzaffargarh. Five centres have been established so far, reaching over 6000 women and girls. In partnership with UN Women Pakistan, so far 52 women have received skill development and financial literacy trainings, enabling them to setup small-scale business ventures in Sialkot.
Javed Jabbar said, “Women’s struggle for equality and justice in virtually every sphere began thousands of years ago. While progress has been achieved in some areas and we have many inspirational examples of women leaders across the world and in Pakistan, there is still a great effort to be made to reduce the gender gap.” He added, “Conversation is vital because it can help change mindsets.”
Pakistan is currently ranked 151 (out of 153) on the World Economic Forum’s Gender Gap Index and the overall literacy rate amongst girls in the country is 46 percent compared to 71 percent amongst men.
Only one-quarter of women participate in the labour force whereas, only 5 percent of senior and leadership roles are held by women. P&G’s commitment to Gender Equality is in line with the United Nations Sustainable Development Goal No 5 – to achieve gender equality and empower all women and girls.
Javed Jabbar however rejected the WEF’s ranking, saying Pakistan has been misrepresented. He said he is going to write to the WEF on the issue.
In partnership with Health Oriented Preventive Education (HOPE) and READ Foundation, P&G has provided quality education to nearly 4000 girls from underprivileged communities in Pakistan.
The event, moderated by Sidra Iqbal, was attended by foreign mission representatives, corporate and business leaders, government representatives, media professionals, civil society leaders, intelligentsia, and P&G employees.
Copyright Business Recorder, 2020