NEWS COVERAGE PERIOD FROM DECEMBER 28TH TO JANUARY 3RD2015
POOR-LED PROGRESS
Dawn, December 28th, 2015
DR NIAZ MURTAZA
PAKISTAN clearly lacks a suitable paradigm to achieve national progress. Having taken 19 IMF loans since 1958 to overcome perennial foreign exchange (FX) crises, IMF-backed, supposedly home-grown, reform plans have been its de facto paradigm.
Since FX crises triggered each loan, the logical main criterion for crafting IMF reforms should be their ability to sustainably, significantly and speedily fix FX problems without harming other critical economic aims. Measures directly increasing FX supply (eg, exports and remittances increases) and decreasing demand (eg, unnecessary imports and volatile foreign portfolio flows cuts) should be central to reforms.
Oddly, one finds no such strategic, foremost focus in the 2013 IMF reforms plan on FX problems. Rather, it contains an unrealistic, non-strategic desire to fix almost every ill in the economy in three years based on discredited neoliberal ideas without linking the targeted reforms to FX problems. Expectedly, these plans have not solved the perennial FX crises.
Recent FX increases are all owed to non-durable borrowings, asset sales and falling oil prices and experts predict another FX crisis and IMF loan by 2018. Overall, despite adopting umpteen IMF reforms plans over the decades, Pakistan has achieved neither FX reserves stability nor a fair and high-revenue tax system to-date.
Since rather than aggressively increasing growth to overcome the FX crisis, IMF plans defensively reduce growth to do so, reforms have impeded long-term growth too. Thus, not just on progressive concerns like poverty and equality, IMF reforms have failed even on mainstream economic criteria. All this reflects poor implementation and weak reform designs. Without major design changes, future IMF reforms too will harm Pakistan.
Meanwhile, various governments have adopted their own development strategies too, like the PML-N’s Vision 2025. However, these have remained dreams as IMF reforms have prevailed. Like the latter, they have lacked a strategic lens which matches Pakistan’s internal strengths with the contours of the global economy to identify a suitable development niche and paradigm for it, as done by many countries.
Small neighbours of developed countries often become free-market offshore financial centres to lure their capital. Some states join rich regional blocs to expand markets. Some thrive by exporting fortuitously present natural resources. Powerful states often become global or regional hegemons to exploit others’ economic resources.
Some fringe states even become transnational criminal hubs. These options are all irrelevant for us, leaving two main options to consider. We could emulate export-oriented developmental states like the Asian Tigers. Even this is largely infeasible since the global economy is saturated with Tigers. Pakistan cannot compete. But it must increase exports enough to avoid FX crises and IMF faulty reforms. CPEC can help in this regard.
The last option is where countries use their large populations and internal markets as drivers of development. Pakistan possesses a large population but not a large internal market given huge poverty. Thus, the most appropriate paradigm for it is increasing the capacities and incomes and hence buying powers of the poor through relevant programmes and policies. This will expand domestic demand and market, production, taxes, jobs and again people’s incomes under a continuous virtuous circle.
Hence, poverty reduction would constitute not a residual welfare aim to help the poor, but a creative national development strategy. This conscious main focus on the poor would go beyond pro-poor growth and represent poor-led progress.
This poor-focused aim would serve as the criterion for developing the details of different state strategies such that they help in achieving poor-led progress and long-term fiscal and external balances. Fiscal policies would increase poor people’s capacities, avoid regressive taxes.
Governance would emphasise devolved and responsive local bodies. Land reforms would occur and professionalisation of boards and management and employee-owned, labour-intensive firms chasing normal, not super, profits would replace crony-capitalism-style privatisation. External flows strategies will insulate Pakistan from frequent global boom-busts cycles.
This would be a radical departure from IMF reforms whose starting points are non-people focused concepts like privatisation, deregulation etc. pursued without a strategic people-focused aim to inform their suitability.
The biggest challenge to realising this very leftist vision is the fact that we are stuck presently with conservative and centrist political parties unlikely to implement it. This challenge can be overcome by progressive forces jointly developing a detailed and compelling poor-led development vision and marketing it aggressively at national and grass-roots levels. This will help the emergence of progressive parties and put pressure on current ones to at least implement parts of it.
http://www.dawn.com/news/1229014
WORLD BANK TO ASSIST PAKISTAN IN REBASING CPI
Dawn, December 29th, 2015
ISLAMABAD: The World Bank has approved a project to assist the Pakistan Bureau of Statistics (PBS) to rebase the Consumer Price Index (CPI) as well as the planned population and agricultural censuses.
Both the surveys will be carried out during 2016. While the population census will be carried out by the Population Census Organisation of the PBS, the agricultural census will be carried with the support of United Nations Food and Agriculture Organisation (FAO). The last population census was held in 1998.
The Agricultural Census Organisation (ACO) conducted four agriculture censuses each in the years of 1980, 1990, 2000, 2010 and three livestock censuses each in 1986, 1996, 2006 and four agriculture machinery censuses each in 1974, 1984, 1994, and 2004 till to-date. In addition, eight mouza (village) censuses each in the years of 1970, 1979, 1983, 1988, 1993, 1998, 2003 and 2008 had been conducted by the ACO in the overall statistical framework under Statistics Division.
According to details made available by the World Bank, the project will entail developing custom software solutions, providing additional equipment to support interviewers together with technical support with software and hardware issues that may arise. The total cost of the project is $0.14 million, approved by the bank this week.
Additionally, the bank will assist the bureau in improving the sampling for the Household Integrated Economic Survey (HIES), implementation of HIES of Pakistan Social and Living Standards Measurement (PSML), and the implementation of Computer Assisted Personal Interviewing (CAPI) or face-to-face surveys to collect price data.
PBS has indicated to the World Bank that it would like to pursue on open source solution based on Open Data Kit (ODK).
Funds from the Trust Fund for Statistical Capacity Building will fund international consultants who are experts in CPI rebasing, sampling and support the development of software based on ODK that can promote the use of CAPI, the implementation of price pilot and ongoing technical support.
The output will be new samples for the surveys and censuses, the rebased CPI, custom CAPI software and a price pilot using CAPI.
PBS has a long history of producing a number of surveys of good quality. The challenge they face now is that their systems for data management as well as for the implementation of surveys has become quite outdated and it has been over 25 years since any serious capacity building effort has been undertaken.
There is also a much greater need for timely and sufficiently disaggregated data to support the effort to ensure equitable access to key services after decentralisation. This grant is a small beginning towards the much larger effort required.
Monitoring and tracking progress on well-being, whether for the poorest or for the bottom of the distribution, requires reliable high quality and relevant data. This is explicitly stated as an objective in the Country Partnership Strategy for Pakistan covering 2015-19.
http://www.dawn.com/news/1229309
NEWS COVERAGE PERIOD FROM DECEMBER 21st TO DECEMBER 27th 2015
WORLD BANK APPROVES $35M LOAN TO PAKISTAN FOR INDUS RIVER BASIN
The Express Tribune December 22, 2015
The World Bank has approved an additional financial assistance of $35 million to support improved management, planning and development of water resources in the Indus River Basin in Pakistan.
“Water sector issues are enormous and complex and addressing them will require a strategic engagement over the medium and long term,” Patchamuthu Illangovan, World Bank country director for Pakistan, said.
This $35 million is in addition to the $38 million given earlier towards improvement of water resources management in the Indus River system, the World Bank said in a statement.
Further, the statement added, “Pakistan is among the most affected countries by climate change as its water, food and energy security is largely dependent on its glacial resources located in the Himalaya-Karakoram range.” The bank said the additional financing will help enhance the government’s capacity to address basin level management of Indus water resources.
“The bank has a long history of partnership and collaboration with the government of Pakistan in the water sector and this additional financing will support water management and distribution, benefit sharing mechanisms, and capacity strengthening for improved water resources management across the country,” Illangovan said.
Discussing the high level of administrative, engineering and scientific capability required for the successful development and management of the Indus Basin, Javaid Afzal, task team leader of the project said, “The additional financing will be used among other things to upgrade hydraulic research laboratories to provide state of the art physical and numerical modeling facilities to strengthen overall capacity in improved water resources management.”
The bank further revealed that the credit is financed from the International Development Association (IDA), the World Bank Group’s grant and low-interest arm. It will offer a maturity of 25 years, including a grace period of five years.
http://tribune.com.pk/story/1014365/world-bank-approves-35m-loan-to-pakistan-for-indus-river-basin/
$4.1 BN ADDED TO FOREIGN DEBT IN 27 MONTHS: DAR
The News, December, 24, 2015
ISLAMABAD: As the foreign currency reserves touched the $21 billion mark for the first time in the country’s history, Minister for Finance Ishaq Dar said that the net addition to foreign debt was standing at only $4.1 billion in the last 27-month rule of the PML-N-led government with an average cost of 3.03 percent.
Dispelling the impression that the foreign reserves were built up with the IMF loans, the minister said in an exclusive interview with ‘The News’ on Wednesday that the IMF’s net contribution in reserves was less than $300 million as the Washington-based lender provided $4.765 billion but Islamabad paid back $4.5 billion on loan that was obtained during the PPP-led regime.
In an exclusive interview with this scribe at his ministerial office at the Q Block (Finance Ministry), Senator Ishaq Dar said that Pakistan’s foreign currency reserves had touched the $21 billion mark after receiving the IMF tranche worth $498 million today (Wednesday) on completion of the ninth review and release of of the 10th installment.
“We have defeated the threat of default which was hovering over the country in June 2013 when PM Nawaz Sharif assumed power after winning the last general elections,” he said and added that the foreign reserves were built up without much net contribution of the IMF.
He said that now he would address the misperception about the increasing debt burden within parliament and outside parliament after completing homework.
The minister said with full confidence that now the stage was set when the government would focus on jacking up the growth trajectory after achieving stabilisation on macroeconomic front.
The minister made it clear that Pakistan just received less than $300 million net inflows from the IMF during the tenure of the current government as Islamabad obtained $4.765 billion from the IMF under the Extended Fund Facility (EFF) but paid back $4.5 billion on the loan obtained during the PPP-led regime, indicating that the net addition was less than $300 million on account of IMF contribution.
While sharing the extensive working done by the Finance Ministry on public debt in the last few weeks, Ishaq Dar said that the stock of external debt stood at $47.9 billion on June 30, 2013 which pushed up to around $52 billion on September 30, 2015, witnessing an upsurge in foreign debt by $4.1 billion.
“It’s wrong perception that we have obtained expensive foreign loan as the average cost of foreign debt stands at just 3.03 percent,” he added. The domestic debt, he said, stood at Rs9,500 billion on June 30, 2013 which increased to Rs12,700 billion, indicating an increase by Rs3,200 billion. The average cost of domestic debt stands at 10.1 percent, he added.
The total public debt stood at Rs2,496 billion on June 30, 1999 which had gone up to Rs5,850 billion on March 2008 when the PPP-led government took over the power. The public debt stood at Rs14,300 billion on June 30, 2013 which increased to Rs18,100 billion on September 30, 2015, so the net increase in public debt was Rs3,800 billion.
When asked about the debt sustainability issues, he said that until Pakistan overcame the budget deficit and current account deficit, the practice of obtaining loans would continue.
To another query regarding the government’s strategy to build up reserves without net addition in foreign loans, the minister admitted that spot purchases of dollars and fluctuation in other currencies helped the government increase its reserves position.
http://www.thenews.com.pk/print/84103-41-bn-added-to-foreign-debt-in-27-months-Dar
NEWS COVERAGE PERIOD FROM DECEMBER 7TH TO DECEMBER 13TH, 2015
IMF BOARD MEETS ON 18TH
Dawn, December 11th, 2015
WASHINGTON: The IMF executive board will meet on Dec 18 to discuss the ninth review under the Extended Fund Facility arrangement with Pakistan and is expected to approve the release of $502 million loan tranche.
Pakistan achieved the staff-level agreement with IMF following talks between IMF officials and the Pakistani delegation, led by Finance Minister Ishaq Dar, in Dubai between Oct 28 and Nov 5.
Harald Finger, head of the IMF delegation, described the discussions on the 9th review as productive.
A statement issued after the meeting praised the commitment of the government of Pakistan to economic reforms which, it said, had significantly reduced near-term risks to economy.
IMF expects Pakistan’s gross domestic product to grow by about 4.5 per cent and the inflation is estimated at 4.5pc by the end of this fiscal year.
However, the slowdown in private credit growth and weakness in exports and imports were weighing on growth prospects.
http://www.dawn.com/news/1225509
RETHINKING IMF PROGRAMMES
The News, December 10, 2015
Dr Akmal Hussain
Pakistan is in the midst of yet another IMF lending programme and is assiduously attempting to fulfil loan conditionalities in the face of mounting evidence that these programmes have repeatedly failed to achieve their objectives.
The IMF claims that its macro-economic stabilisation programmes, which many developing countries have adopted, will achieve exchange rate stability by correcting imbalances in the balance of payments and controlling inflation.
It is further claimed that such macroeconomic stability will ensure accelerated and sustained economic growth. In this article I will attempt to show that these claims of the IMF have neither a sound analytical nor empirical basis.
Within the IMF framework the policy focus is on reducing the balance of payments deficit and the budget deficit. This they think can be done by compressing aggregate demand which in their model would reduce import expenditures on the one hand and the inflation rate on the other.
The logical consequence of compressing aggregate demand through raising interest rates and cutting down of public expenditure is to slow down economic growth.
The IMF believes that macroeconomic stabilisation even at the cost of slower growth in the short run would soon accelerate GDP growth through improving expectations of entrepreneurs and hence higher investment by them. This is an essentially flawed proposition.
Recent research has shown that investment and future expectations of the private sector are determined not just by stable exchange rates and low inflation but more fundamentally by the institutional structure of a country, the control of violence in society, contract enforcement and reducing corruption.
In Pakistan’s case, additionally there are physical constraints to growth beyond the financial sphere, such as a shortage of electricity, gas and water.
Furthermore the lack of a trained labour force with a highly educated stratum that is capable of innovation is also a key constraint to investment and sustained growth. It is these critical institutional and governance constraints that are ignored when the IMF stabilisation programmes are undertaken in the belief that ‘stabilisation’ will induce sustained growth.
Neither long-run stability in the balance of payments nor inflation are necessarily susceptible to the IMF medicine of high interest rates, reduced public expenditure and exchange rate depreciation as past experience shows.
This is because inflation in Pakistan, as in many developing countries, is triggered by cost-push factors such as the prices of fuel, electricity and food to a far greater extent than demand-pull factors. At the same time exchange rate depreciation is unlikely to improve the balance of payments for three reasons.
First, the lower dollar price of Pakistani exportables resulting from exchange rate depreciation would be neutralised by domestic inflation. Second, even if the dollar price of exportables could be maintained at a lower level, exporters are unlikely to be able to cater to increased orders for their goods in time due to the physical constraints to increasing export volumes in the short run.
These include severe shortages of electricity and gas, bottlenecks at Karachi port and transportation constraints. And third, given Pakistan’s export structure which is heavily weighted towards low value added semi finished goods (yarn, grey cloth, leather, rice), export demand is price inelastic, that is the growth in demand is proportionately less than the dollar price reduction.
Consequently the total foreign exchange earnings can be expected to fall following exchange rate depreciation.
On the other side of the coin, Pakistan’s imports are largely necessities such as industrial raw materials, intermediate goods, fuel, fertilizer and cooking oil. Therefore, their import demand is also inelastic – that is, the reduction in import demand following an increase in rupee prices associated with exchange rate depreciation would be proportionately less than the price increase.
Under these circumstances the combined export earnings and import expenditure effects of exchange rate depreciation over time are likely to worsen the balance of trade and hence the balance of payments, rather than improving it.
Continued economic stagnation associated with repeated IMF programmes will have serious consequences for society, state and the federal structure of government.
The latest estimate of poverty made by Malik, Darosh, Nazli and Whitney is that if the poverty line is taken as Rs2,028 per person per month, the percentage of the population in Pakistan living in poverty is 35.6.
We must also remember that 3.1 million persons, out of whom 2.1 million are youngsters, are entering the labour force annually. If GDP growth continues to stagnate, both poverty and unemployment – particularly of the youth – will increase further.
This will provide grist for the mill of militant extremism. At the same time, with the IMF pressure to direct scarce government revenues to debt servicing, the amount of revenues left for the provinces will be further squeezed to a point where not only will Balochistan, Sindh and Khyber Pakhtunkhwa have less to spend on development projects, but even their capacity to pay salaries to government officials will come under stress.
The federal structure is already fragile with an insurgency in Balochistan and seething tensions in Sindh. The political consequences of directing federal government revenues to debt servicing rather than providing succour to the provinces can build up the narrative of grievances in the relatively backward provinces with grave consequences for the federal structure.
At the same time the heroic war against terrorism conducted by the military and the brilliant victories they have achieved must be backed up by economic and social consolidation in the liberated areas. This will require large public expenditures and improved quality of governance.
I have so far questioned the analytical basis of IMF programmes. There is now a corpus of empirical research showing that IMF programmes neither lead to stabilisation nor accelerated growth in the long run. For example, the study by Dreher (2006) analysed the impact of IMF programmes and conditionalities on the short- and long-run economic growth of 98 developing countries from 1970 to 2000 through a panel data econometric analysis.
The over results of the study have shown that IMF programmes and conditionalities are negatively associated with economic growth both in the short and the long run. Similarly the study by Butkiewicz and Yanikkaya (2005) also shows that IMF lending has an overall negative impact on the long-term growth in developing countries.
Barro and Lee (2005), analysing data from 130 countries from 1970 to 2000, come to the same conclusion.
Easterly (2005) analysed the impact of the IMF Structural Adjustment Programs on the macroeconomic performance of 20 countries where these programmes were repeated several times during the period 1980 to 2000.
Easterly concludes his study by stating “if the original objective was adjustment with growth, there is not much evidence that structural adjustment lending generated either adjustment or growth”.
Pakistan went to the IMF because it was in dire straits on the foreign exchange front. Given the weakness of the IMF analytical framework, the uncritical adoption of their programme can have serious adverse consequences for Pakistan’s economy, society and political structure.
There is now considerable evidence from the developing world that IMF programmes neither lead to financial stability on a sustained basis nor to the long-run growth they claim to achieve. Therefore, it is of crucial importance for policymakers to undertake new thinking for an independently formulated economic growth strategy.
http://www.thenews.com.pk/print/81310-A-Sharif-decade
PAKISTAN SHELVES PLAN TO INTRODUCE SINGLE-STAGE SALES TAX
The Express Tribune, December 12th, 2015
ISLAMABAD: Pakistan has deferred a proposal to introduce a new single-stage sales tax regime, which would have lowered the standard sales tax rate to 7%, after reservations expressed by the International Monetary Fund over its implications on revenue and businesses.
The decision to postpone the implementation of the new regime by winding up the existing value-added-based sytem was taken after almost week-long technical discussions with the IMF in Dubai this week, said a top government official.
As a result, the idea to implement the new sales tax regime from fiscal year 2016-17, beginning from July next year, has been shelved.
The IMF acknowledged the problems Pakistan was facing due to the value-added-based sales tax but termed these “administrative in nature” that can be solved without taking a legal course, said an official of the Federal Board of Revenue who attended the IMF parleys.
However, he said the IMF has not outright rejected the proposed single-stage sales tax. The international creditor appreciated many aspects that are covered in the single stage study, carried by the country’s renowned tax expert, Asfhaq Tola.
The IMF also appreciated the Tax Reforms Commission (TRC). Tola is also a member of the TRC that completed the study despite hurdles created by the FBR.
The IMF sought a detailed review of some aspects of the proposed new regime, which the study could not undertake due to FBR’s reluctance to provide requisite data.
“IMF was given a conceptual presentation as the FBR gave fiscal year 2014-15 data hardly three weeks ago”, said Masoud Naqvi, chairman of the TRC, who also visited Dubai. There are two groups in FBR – one is in favour and the other, which is in majority, opposed to the single stage idea, he added.
The IMF was also reluctant to allow implementation of new sales tax regime, as it feared that other countries that are not happy with the value-added based regime may also seek a similar concession.
The standard GST rate in Pakistan is 17% but the government was implementing many rates, taking it up to 45.5%. There are also many sectors paying less than 17%. The effective sales tax rate is 4% less because of exemptions and deep-rooted corruption in the FBR.
“The government cannot take a major risk until it is fully confident that the new sales tax regime will not affect revenue collection,” said Finance Minister Ishaq Dar while talking to The Express Tribune. “The government has not completely abandoned the idea of introducing a new regime and it will carry out further studies.”
The single-stage tax, which is proposed to be levied on the total value of the good instead of on value addition, has been pushed as an alternate to the present system. According to the proposal, the tax collected will be full and final liability and the refunds would not be allowed.
If new regime is implemented, the sales tax rate could be in the range of 7% to 8% due to absence of input adjustment.
http://tribune.com.pk/story/1008482/pakistan-shelves-plan-to-introduce-single-stage-sales-tax/
NEWS COVERAGE PERIOD NOVEMBER 30TH TO DECEMBER 6TH, 2015
ADB OKAYS $250M FOR CROSS-BORDER TRADE
Dawn, December 5th, 2015
ISLAMABAD: The Asian Development Bank on Friday approved a $250 million loan for Pakistan to boost cross-border trade activity with its neighbouring countries by reducing customs processing time for cargo and goods at three key border points of Chaman, Torkham, and Wagah.
The project is part of the ADB-supported Central Asia Regional Economic Cooperation (CAREC) programme, a 10 country-partnership for regional cooperation in transport, energy, trade facilitation, trade policy, and other key sectors of mutual interest.
CAREC member countries are Afghanistan, Azerbaijan, China, Kazakhstan, the Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan.
To improve border services with other CAREC countries, Pakistan will streamline transport, trade, logistics, customs, and other trade-related border control operations, ADB announced on Friday.
“Customs operations have improved substantially since 2010, but border point performance has lagged due to poor infrastructure and facilities, weak governance, insecurity and remoteness, and lack of internet access,” said Dong-Soo Pyo, Lead Transport Specialist in ADB’s Central and West Asia Department.
The project will construct modernised border point infrastructure and facilities, compliant with internationally accepted standards in Chaman and Torkham for cross-border Afghan trade as well as in Wagah.
The work will include ICT equipment and connectivity to link each border point with the central customs database, security trade facilitation equipment, and construction of border point infrastructure.
The assistance will help the government establish the Pakistan Land Port Authority to manage national land border points and develop modern administrative and financial procedures so that project facilities remain under the custody and management of a specialised land port operating agency.
The $250 million loan comes from ADB’s ordinary capital resources ($150m) and its concessional Asian Development Fund ($100m), with the government providing another $50m in counterpart support. The project will run for five years, with a target completion date of December 2021.
The three border crossing points play an important and strategic role in Pakistan’s endowments and development potential. However, all of the three points are facing significant economic and security obstacles which greatly impede the achievement of the desired development outcomes.
Improved border crossing point infrastructure, equipment and procedures are required to reduce cargo dwell time and increase throughput.
http://www.dawn.com/news/1224278
NEWS COVERAGE PERIOD NOVEMBER 23RD TO NOVEMBER 29TH, 2015
BALDIA FACTORY FIRE: THE AUDITOR’S LIE THAT KILLED 259 FACTORY WORKERS
The Express Tribune, November 25th, 2015.
KARACHI: “Look at their red cheeks,” Mehmoodun Nisa whispered to her colleague, nudging her gently with the elbow to catch her attention. “Don’t they look like tomatoes?” she chuckled, referring to two foreign auditors who were visiting the Ali Enterprises garment factory.
“What do you think? Why are they here?” she questioned, stealing glimpses of the two German women, her head bent towards her fingers as they deftly moved around the needles of the sewing machine.
“Don’t be silly; just focus on your work. Panda [the factory manager’s alias given by the workers] is observing us,” her colleague advised. The warning seemed to have the desired effect and Nisa went back to looking busy in the work.
The foreigners, clad in formal suits went about their business. They walked around the floor, stopped at shorts intervals, asked some questions of the factory manager to which he nodded and moved on.
The floor was buzzing with the deafening noise of machines. Yet, the workers could hear the juggling whispers: Who are they? What are they doing here? Where are they from? When will they leave?
The year was 2009. Nisa and her husband, Aleem Ahmed, whose workstation was a few metres away from hers had spent nearly two years at the garment factory. That day, they had even more reason to be happy. It was pay day and they were looking forward to hosting a hi-tea for some guests at their small rented apartment.
“I think we should arrange for ‘nashta’ [hi-tea] followed by dinner. It is the first time they [the guests] are coming to our place. We need to take care of them,” Ahmed suggested to his wife as they walked towards the cafeteria during lunch hour. “There is no need for dinner,” she commanded. It was decided.
At some point during the conversation, she inquired who the foreigners were. They were from Germany, said the husband. “They represent the customer who gave the factory most of its orders. They are here to inspect the premises,” he said.
“Oh I see,” Nisa finally understood. “So this is why the whole factory was cleaned up and we were given cards and safety gear.” Ahmed preferred not to comment further.
The foreigners, according to some statements, were auditing the factory premises for health, safety and payment regulations. They represented KiK Textilien und Non-Food GmbH, a Germany-based retailing giant that procured almost 70 per cent of the products manufactured at Ali Enterprises.
The two-storey factory located in Baldia Town, Karachi, employed around 1,500 to 2,000 workers to run its operations, Ahmed told The Express Tribune. “It was the second time we had seen foreigners visiting the factory,” he added. “None of them ever talked to us. They would just walk around the floor accompanied by the factory management. We never knew the purpose of their visit.”
Over three years have passed since the factory was gutted by the fire. The black patches on its walls are a stark reminder of the fateful turn of events that unfurled on September 11, 2012. Around 259 workers were burned alive. Several others were paralysed for the rest of their lives.
“We can never forget this incident,” says Nisa, wiping away her tears. “We were nearly killed that day.”
Both husband and wife managed to survive the incident. They relive the horror every day though. Shifting her weight on the wheelchair, she pushed herself back. “I saved myself from jumping off the first floor of the factory and that crippled me for life.”
Despite being audited for workplace and safety regulations a number of times, the factory was never blacklisted for lack of safety measures.
According to three audit reports, conducted by Synergies Sourcing Pakistan for KiK in alternative years between 2007 and 2011, the factory was given a high-risk rank but never for lack of fire safety. Instead, the auditors observed: excessive overtimes conducted by around 30 per cent of the workers, an electrical panel with exposed wires, a first-aid kit having inadequate supplies, missing emergency lights on three exits, lack of space for a dozen workers in the sewing section, inappropriate storage of chemicals and unsafe discharge of hazardous waste into the environment.
“This is all based on lies,” Nisa exclaimed, when one of the audit reports was read out to her. “Only a blind person would not see the poor working conditions there,” she added.
The departments at the factory were like prison cells. There was only one gate from where workers could leave or enter the premises. The windows were sealed off with iron bars and a thick metal net was nailed around it,” she described. “There were no fire extinguishers or alarms at the factory,” she said exasperatedly, as she was shown some pictures in the audit reports. “They were only installed when there was visit by some foreigners.”
This was also not the first time that a fire had broken out at the factory, she said, adding that during her five years of employment, she had witnessed two fires. “There was no alarm going off on any of the occasions.”
Much to her surprise, the audit report stated that the auditors also interviewed workers. “They never spoke to any of the workers. The factory management would not let them do so,” she countered. “The workers were ordered by supervisors to remain quiet during the time the auditors were on the floor.”
The audit report stated that there were around 450 workers at the factory, out of which 70 per cent worked on pro-rate basis, meaning they will earn wages in accordance to how many pieces they produce while the rest were salaried. The report also claimed that all the workers had signed contracts with the company, guaranteeing their social security.
“Nothing of the sort was provided,” said Ahmed. “I worked as a helper and for that, I was paid Rs4,500. If I took a day off, it was also deducted out of my pay,” he added
“And this is the biggest lie that only 450 labourers worked at the factory,” his wife intervened, adding that this number would have worked in one department only. “If there were any fire exits or safety equipment, how did such a big tragedy occur?” she questioned.
NEWS COVERAGE PERIOD NOVEMBER 23RD TO NOVEMBER 29TH, 2015
ENERGY SECTOR SUPPORT: GOVT, ADB SIGN $800M DEALS
The Express Tribune, November 27th, 2015
ISLAMABAD: Pakistan and the Asian Development Bank (ADB) on Thursday signed two loan agreements amounting to $800 million to address energy sector bottlenecks besides inking a memorandum of understanding (MoU) to set up the much-needed Pakistan Disaster Management Fund.
The loan agreements will facilitate an immediate disbursement of $400 million in budgetary support while the disbursement of the remaining amount is linked with progress on installation of smart electricity meters in Islamabad and Lahore.
The ADB board of directors last week approved a $1.4 billion loan for Pakistan. The $400 million budgetary support, however, has been diverted from $110 million grants for two hydropower projects in Gilgit-Baltistan.
Finance ministry officials said that after initially agreeing to fund these hydropower projects, ADB later backtracked, saying India may object to the financing due to the disputed status of the territory.
ADB has cut funding to hydropower projects at a time when these schemes are facing funding constraints and the area is witnessing power shortages. India has set up many small hydropower projects in Kargil and Ladakh region, creating uneasiness on Pakistan’s controlled G-B region.
ADB’s latest stance is contrary to the earlier policy, as it has funded over half a dozen projects in Azad Jammu and Kashmir, which is also a disputed territory.
Under a verbal arrangement, which is not binding, the finance ministry has promised that it will provide funds to these two projects from its own resources. The ministry supported the ADB’s move to divert project loans for budgetary support.
Tariq Bajwa, secretary at the Economic Affairs Division, and Werner E Liepach, ADB country director for Pakistan, signed the agreements. Finance Minister Ishaq Dar witnessed the signing ceremony.
Out of $990 million total loan approved last week for power distribution companies, ADB signed the agreement for the first tranche under Multi-tranche Second Power Distribution Enhancement Investment Programme. This will allow Pakistan to introduce for the first time, an Advanced Metering Infrastructure (AMI) system for power distribution companies across the country to improve load management and strengthen the financial viability of the sector by reducing electricity losses and increasing revenue collection, said ADB.
However, the Planning Commission has expressed reservations over the proposed technology of the advanced meters and the project has not yet been cleared by the Executive Committee of National Economic Council.
“The state-of-the-art new metering system will minimize losses and allow effective load management and transparency, thus ensuring a robust and sustainable power supply needed to lift growth and job creation,” said Werner Liepach.
ADB said that the distribution enhancement programme will be rolled out in phases, by covering two to three distribution companies under each tranche.
Both the sides also signed a letter of exchange for the establishment of Pakistan National Disaster Management Fund. The fund is aimed at creating a structure to support disaster risk reduction efforts, enhanced fiscal resilience in case of disasters, and provide for priority relief, recovery, rehabilitation and reconstruction needs.
The fund had been announced in January this year but could not be made effective due to lack of finances and bureaucratic delays.
ADB said that Pakistan was vulnerable to natural hazards including droughts, earthquakes, floods and cyclones. More than 30 million people were affected by the three major floods events in 2010, 2011 and 2014 that resulted in damage and losses amounting to $14.1 billion.
The fund will institute a new and robust approach in mobilizing financial resources to respond to the residual impacts of natural disasters. It will serve as an effective government-owned mechanism to support disaster risk financing and financing that can enhance Pakistan’s resilience to future disaster events, said Liepach.
The fund will allow rapid deployment of assistance on a needs basis to implement the under-resourced National Disaster Management Plan (NDMP), and will present a common window to pool various contributions from a diverse base of contributors.
http://tribune.com.pk/story/999324/energy-sector-support-govt-adb-sign-800m-deals/
RS40 BN DEMANDS TO BE GENERATED THROUGH 75,800 TAX CASES, IMF TOLD
The News, November 28, 2015
Mehtab Haider
ISLAMABAD: The Federal Board of Revenue (FBR) has informed the International Monetary Fund (IMF) that they have projected to generate around Rs40 billion demands through 75,800 cases selected through computerised random balloting related to Income Tax, Sales Tax and Federal Excise Duty during the current fiscal year.
This projection was shared with the IMF for completion of ninth review as the Fund’s executive board is expected to consider approval of next tranche worth $505 million for Pakistan by mid December 2015.
But this whole plan may be going down into drain as some sectors have approached the Lahore High Court (LHC) for obtaining stay order to stop audit exercise because of selection of many cases belonging to only few major sectors.
So they raised questions on random computer balloting on which the Court ordered both sides to sit down and resolve this issue amicably.
“Now the FBR is facing a difficult situation as the Board cannot withdraw cases selected for audit even if its high-ups desire so with serious intentions,” official sources pointed out and added that the random balloting of audit had even selected 44 politicians including Chief Minister Punjab Mian Shahbaz Sharif but no power lied with tax managers to delete any name from the audit list.
Others who were selected for audit by the FBR included Punjab Law Minister Rana Sanaullah, Sindh Finance Minister Murad Ali Shah, Pakistan Peoples’ Party Senator Babar Awan, Muttahida Qaumi Movement leaders Dr Farooq Sattar and Khawaja Izharul Haq, Balochistan National Party chief Sardar Akhtar Mengal and Ports and Shipping Minister Kamran Michael and PPP MNA Mir Munawar Ali Talpur.
When Finance Minister Ishaq Dar pushed the button for selection of audit through computerised balloting, he had selected 21 parliamentarians from his own party (PML-N) out of total 75,871 individuals selected for the audit.
Of the 44 parliamentarians, 21 belong to PML-N, 10 to PPP, six to Pakistan Tehreek-e-Insaf, five to MQM and one each to Jamaat-e-Islami and BNP. These include seven senators, 10 members of the National Assembly, eight members of the Sindh Assembly, three members of the Khyber Pakhtunkhwa Assembly and one member of the Balochistan Assembly.
The sources said that the cases were selected without political or any other consideration so complaints of certain sectors were uncalled for and the FBR was trying its level best to convince them about fair play in selection process.
Against generated high demands through audit, the FBR had collected over Rs8.5 billion during the current fiscal year so expecting generating demands of Rs40 billion and its materialising will pose big risk for tax machinery.
The FBR is struggling to achieve highly ambitious tax collection target of Rs3,104 billion for the current fiscal year. As the practice of decade of 90s is around the corner so the IMF has asked the government to take additional measures in order to meet shortfall being faced in the first quarter (July-Sept) of the current fiscal year.
The Economic Coordination Committee (ECC) is scheduled to meet coming Monday under chairmanship of Finance Minister Ishaq Dar for approving taxation measures mainly in shape of raising Regulatory Duty on over 300 imported luxury items for generating revenue of Rs40 billion in remaining seven months (Dec-June) of 2015-16.
So what will happen if the projections shared on account of audit exercise do not materialise till end June 2016? When contacted, FBR’s spokesman Dr Iqbal said that it was pending before the court but the Board would make efforts to convince the court of law for getting permission to go ahead with audit exercise.
NEWS COVERAGE PERIOD NOVEMBER 17TH TO NOVEMBER 22ND, 2015
WB MAY PROVIDE $625M LOAN FOR TARBELA-5 EXTENSION
The News, November 20, 2015
Mehtab Haider
ISLAMABAD: The World Bank (WB) has indicated to provide around $625 million loan for upcoming Tarbela-5 Extension Project with generation capacity of 1,410 megawatt as the Planning Commission’s Central Development Working Party (CDWP) has already approved this project with estimated cost of $795 million. The WB’s appraisal mission led by Washington based team leader of Bank on water sector Masood Ahmed is currently visiting Pakistan to finalise details of proposed Tarbela-5 extension project.
Although, the exact financing has not yet been finalised but the WB along with other donors is ready to provide external financing to the tune of 85 percent cost of this project out of total requirement of $795 million.
The WB’s office in Islamabad arranged visit of a select group of media persons for Tarbela dam to review progress on Tarbela-4 extension project during this week.
“We are considering Tarbela-5 extension project but nothing has so far been confirmed from our side,” the WB’s team leader on water sector Masood Ahmed told the media at site of Tarbela dam.
By compressing the deadline for completion of this project by eight months from Feb 2018 to June 2017, the government is planning to add cheapest hydropower of 1,410 megawatt (MW) into national grid by June 2017 with completion of World Bank funded Tarbela-4 extension project.
“The WB will provide project loan for upcoming Tarbela-5 hydropower extension for generating another 1,410 megawatt which has already been approved by the Planning Commission’s CDWP. This upcoming project will kick-start by next year in March 2016 and will be completed in 39 months period in May 2019,” Iqbal Masood Siddiqui, General Manager Tarbela Dam project told a select group of reporters at the site of the project this week.
In order to compress the deadline for Tarbela-4 extension project, the government has agreed to provide $51 million to contractor for accelerating the completion period of the project. “We will be able to add 1,410 MW electricity into national grid for peak season of 2017,” he added.
He said the basic purpose of Tarbela dam is to provide water requirement of provinces for irrigation purposes in accordance with the directives of Indus River System Authority (IRSA). After meeting irrigation requirements, the hydro electricity is generated for meeting power sector requirements.
The sediment has been increasing in Tarbela dam and its complete flush out required a cost of $12 billion and another issue is dumping the waste properly. In view of these difficulties, he said that the proper management is being done to tackle increasing sediment that can increase the life of Tarbela project by 50 years.
For Tarbela-4 project, the total cost stood at $922 million out of which the WB provided $845 million. Out of WB’s loan, the saving of this project was estimated at $130 million which might be diverted towards upcoming Tarbela-5 project if the Bank’s Board granted its approval.
http://www.thenews.com.pk/Todays-News-2-352387-WB-may-provide-$625m-loan-for-Tarbela-5-Extension
JAPANESE GRANT FOR NGO HEADED BY ADVISER FATEMI’S WIFE RAISES EYEBROWS
Dawn, November 21st, 2015
ISLAMABAD: A grant of $70,660 by a foreign mission in Islamabad to the True Worth Foundation (TWF), a non-profit organisation headed by the wife of Special Assistant to Prime Minister on Foreign Affairs Tariq Fatemi, have raised many eyebrows.
According to some people in relevant quarters, it is a case of conflict of interest which people holding public office should best avoid, and the government must issue special policy guidelines to discourage this practice.
“On the face of it there is nothing wrong in spending money on a medical facility by a foreign mission. But questions arise when funds are channelled through people holding key positions in the public sector,” remarked a well-placed Foreign Office official who didn’t want to be named.
According to Dr Arif Alvi of Pakistan Tehreek-i-Insaf, the TWF may be doing a splendid job under its chairperson Zahra Fatemi, but the fact is that she is a lawmaker and her husband holds an important position in the government.
In line with best international practices, Mr Alvi said, she should have resigned from the TWF position or at least declined to accept funds from a foreign mission.
The Japanese Embassy in Islamabad provided the grant from the government of Japan to TWF, an NGO working for grassroots development in Pakistan.
According to a press release on the embassy’s website, the grant was meant to provide essential medical equipment and an ambulance to a health centre located on the outskirts of Islamabad.
Japanese Ambassador to Pakistan Hiroshi Inomata, his wife Midori Inomata and Maryam Nawaz Sharif inaugurated the grant in a ceremony also attended by Zahra Fatemi and other members of the NGO, added the statement dated June 12 this year.
Ms Fatemi is an active member of the parliamentary friends group of Japan.
In a frank and candid telephonic conversation with Dawn, Mr Fatemi outrightly rejected the argument that the grant provided by Japan to TWF constituted a case of conflict of interest.
“Soon after I was made the special assistant to the prime minister in 2013, I disengaged myself from the foundation.”
He said that since 2004 his wife who is a member of the National Assembly on a reserved seat, had been involved in the charity work and “I personally believe that everybody who has resources and contacts must do charity work.
“Half of ministers and people sitting in the parliament are running NGOs, some of them doing good work for the destitute and vulnerable sections of the society.”
Mr Fatemi said that because of “inadequate resources and capacity in the public sector to meet health and education needs of the masses, it’s a good thing that the civil society has come forward to fill the gap”.
About this particular grant, Mr Fatemi claimed that having come to know about TWF’s social work Japanese officials approached his wife and offered to provide financial assistance which was being spent on acquiring medical equipment. “I have absolutely no role in this regard.”
When contacted for comments, the Counsellor Economic and Development in the Embassy of Japan Mr Takashi Harada, sent the following email: “We are of the opinion that it does not constitute conflict of interest.”
He said the Grass Root Grant Assistance Programme mainly concerned areas that improve basic human needs. “Typical projects include construction of primary and junior high schools, improvement of fundamental medical equipment for hospitals, vocational training and seminar concerning poverty alleviation,” he said, adding that “since TWF was working to meet the medical needs of the poor community that was why we deemed it eligible, after careful examination of its proposal”.
http://www.dawn.com/news/1221231
ADB APPROVES $1.4BN FOR ENERGY SECTOR
Dawn, November 21st, 2015
ISLAMABAD: The Asian Development Bank (ADB) on Friday approved a combined loan assistance of about $1.4 billion for two programmes to help the government resolve power crisis, including controlling theft and increasing recoveries.
The two separate programmes — $990 million for power distribution enhancement and $400m to support ongoing policy reforms — are aimed to resolve some of the key issues in the power sector, allowing it to lift growth, boost incomes, and cut poverty, the ADB said.
The Executive Committee of the National Economic Council (Ecnec) last week approved two projects under the loan programme to meet requirement of the ADB board to formally approve $1.4bn.
The loans were due early this year but had been delayed because of inability of the authorities in the ministries of water and power, and finance to meet various deadlines for power sector reforms and conditions of the World Bank and the Asian Development Bank.
These included creation of Central Power Purchasing Agency (CPPA) Guarantee Ltd, its registration and operationalisation to act on behalf of power generation companies and distribution companies to acquire and sell electricity and seek tariff approvals from the National Electric Power Regulatory Authority (Nepra).
On completion of these conditions, the World Bank approved $500m loan — Development Policy Credit II — in the second week of this month and formally signed an agreement with the government of Pakistan on Friday.
To enable board approvals, Ecnec approved in principle advanced metering infrastructure (AMI) projects for Islamabad and Lahore electric supply companies (Iesco and Lesco).
The two projects also include establishment of new customer information billing systems for the two distribution companies (Discos). The project in respect of Iesco entailed a cost of Rs18.607bn while for Lesco the cost was estimated at Rs30.597bn.
These projects are expected to enhance load control and load management in the two Discos and reduce losses and to efficiently balance power supply and reduce load-shedding through alternative ways of managing peak load.
AMI system would have smart meters, in-house display units and shall provide head-end system (HES) software for effective liaison between meter and the management information system. A constant watch on the demand and supply position would be maintained through the AMI to guard against any breakdown.
This AMI system would be supported by ADB’s $990m multi-tranche Second Power Distribution Enhancement Investment Programme that would be subsequently spread to all Discos.
The $400m loan for the second sub-programme of the Sustainable Energy Sector Reform Programme will support ongoing policy reforms, aimed to build an affordable and secure energy sector.
“Nearly 20 per cent of generated electricity is lost due to high technical and commercial losses and measures like the installation of the AMI system are necessary to counter this,” said Adnan Tareen, senior energy specialist of the ADB. “The two programmes, collectively, will help create a more efficient, transparent, modern and sustainable energy sector.”
Pakistan is struggling with an ongoing power crisis which puts pressure on real GDP growth. The electricity supply-demand gap of 5,000 megawatts is blamed for a sharp decline in manufacturing.
The government — with ADB as its lead donor partner — has been taking a number of measures to overhaul and reform the sector, but inefficiencies and gaps remain due to a growing demand for electricity.
Discos face financial problems with customer tariffs being lower than the cost of service, and high system losses resulting in delayed payment to generating companies, necessitating imposition of a number of special surcharges on consumers honestly paying their bills.
The distribution enhancement programme will install advanced smart meters at distribution companies across the country to reduce power losses and boost company revenues. A modern, computerised customer billing and information system will also be put in place to improve service quality. This infrastructure will be rolled out in phases, covering Pakistan’s major cities and industrial and commercial hubs.
The $400m programme is aimed at supporting policy measures to address extensive debts in the electricity sector, as well as further market reforms to improve the efficiency of public sector power companies and to encourage competition through more private sector participation.
http://www.dawn.com/news/1221094/adb-approves-14bn-for-energy-sector
ADB, JAPAN INK $16 BILLION DEVELOPMENT PARTNERSHIP
The Express Tribune, November 22nd, 2015
MANILA: The Asian Development Bank (ADB) and the Government of Japan today announced a $16 billion partnership over the next five years, including the establishment of an investment fund, to boost support for private infrastructure projects and promote public infrastructure development.
Developing quality, reliable, sustainable, and resilient infrastructure is one of the Sustainable Development Goals (SDGs) agreed at the UN summit in September.
“Support for quality and sustainable infrastructure has been a central feature of our operations since ADB’s foundation in 1966 to achieve poverty reduction and sustainable development in Asia and the Pacific,” said ADB President Takehiko Nakao.
“Through its assistance for urban transport, renewable energy, and other infrastructure, the partnership will also contribute to the expansion of climate financing to developing countries, in line with the expected outcome of the COP21 meeting in December.”
First, in order to stimulate investment in quality and sustainable private infrastructure in Asia and the Pacific, including through public-private partnerships, ADB will establish a trust fund under the partnership with Japan by March 2016.
The fund will be managed by ADB’s Private Sector Operations Department and capitalised with $1.5 billion in equity from the Japan International Cooperation Agency (JICA). Combined with ADB’s own capital and that of commercial cofinancing partners, the fund is expected to provide financing of at least $6 billion and will enable ADB to expand large-scale private infrastructure operations by leveraging JICA’s official development assistance resources and risk-bearing capacity.
Second, in order to promote quality and sustainable public infrastructure development in the region, ADB and JICA will provide a total of $10 billion ($5 billion each) in co-financing to sovereign borrowers over the 5 years.
The two parties will collaborate to support long-term investment plans using ADB’s Multi Tranche Financing Facility. They will also provide necessary technical assistance for preparing and implementing projects, leveraging the comparative advantages of each institution.
ADB and JICA will soon sign a Memorandum of Understanding on the partnership. ADB and the Government of Japan have agreed to hold regular high-level policy dialogues to effectively implement infrastructure investments under the partnership.
http://tribune.com.pk/story/996034/adb-japan-ink-16-billion-development-partnership/
.RBI ASKS IMF TO STOP APPLAUDING MONETARY EASING POLICIES
Dawn, October 20th, 2015
MUMBAI: The head of India’s central bank on Monday called for the International Monetary Fund to stop “applauding” the monetary easing policies of many developed countries.
Reserve Bank of India governor Raghuram Rajan said in a speech that the IMF should be doing more to assess the knock-on effects of stimulus measures on the global economy.
“The IMF is supposed to be looking at these sorts of issues… but it is sitting on the sidelines and applauding such policies,” he told a G20 consultation meeting in Mumbai.
A number of developed economies, most notably the United States, have engaged in significant monetary easing to boost their economies as global growth slows.
But Rajan said some of the policies had been “extreme” and ultimately detrimental to emerging markets, which struggled to cope with large inflows of capital which then disappeared when the easing stopped.
Rajan, the former IMF chief economist, said in his address that the policies initially encourage growth but the effect quickly wears off, leading to a “musical (chair-like) crisis”.
“We are in dangerous territory,” he said in the speech, which comes ahead of the G20 summit in Turkey next month.
India, whose economy is expanding at around seven per cent, is presently the best performer of the group of emerging markets known as the BRICS, which is also composed of Brazil, Russia, China and South Africa.
Last month, Rajan said Brazil’s current economic malaise stemmed from trying to grow too quickly by “overemphasising old and ineffective methods of stimulus”.
GOVT FULFILS IMF’S CONDITION, DISBURSES RS23.6B AMONG BISP BENEFICIARIES
http://tribune.com.pk/story/975851/meeting-target-govt-fulfils-imfs-condition-disburses-rs23-6b-among-bisp-beneficiaries/
The Express Tribune, October 20th, 2015.
ISLAMABAD: Amid thin chances of an increase in the monthly cash stipend of Rs1,500, the government has disbursed Rs23.6 billion among the beneficiaries of the Benazir Income Support Programme (BISP) in the first quarter of this fiscal year.
The amount enabled it to meet an important condition of the $6.2-billion International Monetary Fund (IMF) bailout programme. Under the requirements, the IMF had said that Rs23 billion needed to be distributed from July through September this year, according to officials.
The Finance Ministry is in the process of reconciling the BISP disbursement figures with its database.
The progress report will be shared with the IMF during the upcoming talks, scheduled for October 26 to November 6 in Dubai under the ninth review of the economy.
The IMF portrays the BISP spending as a measure to protect the poor from some of the decisions taken under its programme to consolidate budget deficit, particularly increase in electricity and gas tariffs.
The number of beneficiary families also slightly increased to 5.14 million in the first quarter of this fiscal year, according to the officials.
Besides protecting cash flows to existing beneficiaries, the government is also considering further increasing the monthly cash stipend of Rs1, 500 aimed at helping the lowest strata to offset inflationary impacts on their purchasing powers. However, any further increase is subject to financial assistance from international development partners, as the government faces tight budgetary restrictions.
In fiscal year 2015-16 budget, the government had frozen the monthly stipend at Rs1,500 but promised to add 300,000 more families in the social safety net.
In the Memorandum of Economic and Financial Policies, Finance Minister Ishaq Dar has assured the IMF that the government would protect the real purchasing power of people with additional support from development partners.
The timing and amount of increase remains unclear, as the government looks towards other countries for enhancing the cash limit, according to Ministry of Finance officials.
While the government achieved the BISP indicative target, it missed another IMF target on tax collection by the Federal Board of Revenue. As against the IMF target of Rs640 billion, the actual collection from July through September remained at Rs584 billion – Rs56 billion short of the goal.
For the last fiscal year 2014-15, the government had missed the unconditional cash transfers disbursements target of Rs95 billion by a small margin. It had attributed the shortfall to savings in administrative costs.
However, in the last fiscal year that ended on June 30, the government had reached its goal of supporting 5 million beneficiary households.
http://www.dawn.com/news/1214208/rbi-asks-imf-to-stop-applauding-monetary-easing-policies
BISP, PITB TO STRENGTHEN MONITORING MECHANISM
The Express Tribune, October 20th, 2015
LAHORE: Traders and industrialists are being held responsible for their part in the economic downturn and for further aggravating the situation by demanding for unfeasible concessions.
It is a well known fact that large scale corruption breeds with the connivance of public and private sector. The economic distortions occur mainly due to this corruption while petty corruption in law enforcing agencies tends to further marginalise the poor without broadly impacting the economy, they added.
“Distortions in the economy are impeding sustained growth,” said social worker Kishwar Dhingra. She said the country suffers from low revenues, as tax collectors look the other way when their palms are greased by tax evaders. The amount they get as bribe is very small compared with the avoided tax. However, she added the kitty of the tax collector fattens as he collects similar gratifications from many others.
Similarly, she said the country periodically faces foreign exchange crisis but billions of dollars enter the country through hundi operators as someone with influence is protecting them. All creditable global institutions estimate that remittance potential of Pakistan is $22 billion to $24 billion. She said this gap of around $5 billion is keeping foreign exchange low besides financing under invoicing.
Market analyst Benish Toor said traders account for 16 per cent of the GDP. They however contribute only 4 per cent in tax revenue. All attempts to bring them under the tax net have failed, she regretted. Yet they are most vocal when the rates of gas, petrol or electricity increase. Transporters account for 12 per cent of GDP and contribute only 2 per cent in tax revenue. “This tax avoidance is crowding out resources for development and increasing poverty,” she added
She said though agriculture accounts for 23 per cent GDP yet it makes a poor contribution to the national exchequer. It should be contributing at least Rs35 billion in taxes according to all leading economists of the country, she added. This, she added would be a huge improvement from the current collection of around Rs1 billion per year.
Social worker Sofia Asif said the stock market has produced scores of very low tax paying billionaires during the past decade, when poverty in the country increased to a historic high. Stock market trading is outside the ambit of taxation. The government of Pakistan is protecting the most affluent sector of economy from taxation. She said the principle of same tax on money earned from any source would increase the revenues by billions.
She said all attempts to tax real estate on capital gain have failed in the past. Most of the black money is parked in property. Government inaction in this regarded has promoted land mafias in the country. These mafias cannot flourish without state protection. The connivance of mafia with state machinery certainly benefits both.
Sofia said smugglers too were a force to reckon with in our society. Smuggling is a termite that has thrown the productive sector of the country out of business. She wondered why the government shied away from facilitating the manufacturing of smuggling prone items in the country. She said it would stop the smuggling of prone items that can be packed in briefcases.
“The turmoil in the economy in the economy is the result of the above distortions being practiced for a decade,” she said.
Sofia spoke of how businessmen increase the rates of their products as the cost of production increases or the rates rise in the international market. “They want the government to reduce the rates of petroleum products because the crude oil prices have declined in the world market,” she said. But on the other hand, when the price of a raw material falls internationally or locally, they do not reduce the rates of their product.
“The edible oil industry has kept the rates high despite reduction in palm oil rates. The cement manufacturers have kept cement rates high despite sharp decline in imported coal prices,” she added.
For the current fiscal year, the government has promised the IMF that it would increase the number of beneficiary households to 5.3 million. Although, the government has allocated Rs102 billion in the budget for disbursements under the BISP, a recent report of the IMF shows that the unconditional cash transfers would be Rs95 billion in the current fiscal year as well.
IMF TO WEIGH IN AS PAKISTAN MULLS SINGLE-STAGE SALES TAX
The Express Tribune, October 24, 2015
Shahbaz Rana
ISLAMABAD: The International Monetary Fund (IMF) has agreed to send a mission to Pakistan to review the possibility of replacing the existing value addition-based General Sales Tax (GST) with a new single-stage tax, in a bid to stop leakages and enhance revenue.
The IMF’s experts in taxation and fiscal affairs would arrive a month after the ninth review talks are completed. The review talks will begin in Dubai from Monday and will continue for 10 days, said officials privy to the discussions.
Pakistan has requested the IMF to give its views on the possibility of implementing a single-stage sales tax from next fiscal year.
Taxation and energy will remain the top concerns of the IMF during the ninth review talks as well, as the government has remained unable to improve performance in these critical fronts, according to officials. A major issue for the IMF and Pakistani teams would be how to bridge the growing shortfall in tax revenues and one of the likely options could be the introduction of more mini-budgets.
Introduced in 1990s under the influence of international financial institutions, the value-added based GST system could not achieve desired results after successive governments created many distortions by giving tax exemptions and concessions to influential lobbies.
The main thrust of the existing system is to capture the whole supply chain of goods and services, which has been broken due to sector-specific exemptions.
The GST system was fully exploited by both the Federal Board of Revenue (FBR) and the businessmen to their own benefits. On one hand, billions of rupees in fake refunds were given, while on the other, the FBR blocked payments of even genuine sales tax refunds to artificially inflate its tax revenues.
At present, sales tax refunds worth Rs100 billion are treated as FBR’s revenue collection.
The Tax Reforms Commission (TRC) last year gave the idea of replacing the existing system with a new single-stage tax mechanism. In its interim report, the TRC termed the present system of sales tax “cumbersome” and full of leakages and abuses.
One obstacle in working out the single-stage sales tax is the FBR itself that has been denying access of requisite data to tax experts, said officials.
“We heard some proposals on the single-stage sales tax and we are in the process of formulating our own opinion on it,” said IMF’s Resident Representative Tokhir Mirzoev.
The IMF Mission would also be open to review any other option, which may help enhance revenues.
Despite massively increasing sales tax rates, the FBR’s tax collection remained dismal. From July through September this year, the FBR pooled Rs247 billion in sales tax, which was Rs11 billion or 4.3% less than the collection in the comparative period of the last fiscal year.
For the first quarter of the fiscal year, the IMF had set Pakistan Rs640 billion tax collection target, but actual collection remained at Rs584 billion.
For the second quarter, the IMF has given Rs750 billion as an indicative target, but the tax machinery has set Rs633 billion target for itself, suggesting that taxation would be one of the contentious issues during the ninth review talks.
Options on the table would be to further increase tax rates, reduce the full-year collection target from the existing level of Rs3.104 trillion and cut development spending, said the officials.
During upcoming talks, the second most continuous issue will be progress in the energy sector, as the government remains unable to reduce circular debt and ensure uninterrupted power supply.
For addressing problems in the energy sector, there is a need to simultaneously work on improving the performance of power distribution companies, bridging the gap between cost of power generation and revenues and privatisation of distribution companies, said Mirzoev.
He said strengthening the regulatory framework was also equally important. The implementation of one element of this strategy alone would not resolve the sector’s problem, he emphasised.
Unlike the IMF’s recipe, the government’s focus solely remains on increasing end-consumer prices by enforcing various kinds of electricity surcharges. Yet the circular debt is hovering around Rs650 billion including Rs335 billion arrears parked in a holding company, showed a recent report of the IMF.
Mirzoev also emphasised on the privatisation of loss-making, state-owned enterprises on a priority basis.
WTO SEES $3.6TR BOOST TO TRADE FROM GLOBAL DEAL
Dawn, October 27th, 2015
GENEVA: The benefits of a treaty that will cut red tape at borders and standardise customs procedures are much larger than previously thought and could add $3.6 trillion to annual global exports, the World Trade Organization (WTO) said in a report on Monday.
The WTO’s trade facilitation agreement (TFA), struck at a ministerial conference in Bali in December 2013, will do more to boost trade than if all the world’s import tariffs were removed, cutting costs 9.6 to 23.1 per cent, the WTO calculated.
“You could say that it’s global trade’s equivalent of the shift from dial-up internet to broadband,” said WTO Director-General Roberto Azevedo.
Once the new rules come into effect, which Azevedo hoped would happen by the end of 2016, it will cut waiting times at customs, lessen the potential for corruption and hasten foreign direct investment into weaker economies.
The TFA had previously been expected to add $400 billion to $1tr to trade, according to various economic studies.
Many trade experts had shied from using the upper end of those forecasts, but the WTO’s own research found they were on the low side.
“Overall, the simulations confirm that the trade gains from speedy and comprehensive implementation of the TFA are likely to be in the trillion dollar range, contributing up to almost one per cent to annual GDP growth in some countries,” the report said.
The agreement, which was created in December 2013, will come into force when two-thirds of WTO members have ratified it. Fifty have ratified it so far, out of 161 current WTO members.
The report used two main models for estimating the gains from the agreement: a “computable general equilibrium” (CGE) simulation — which makes assumptions about “what if” certain barriers are removed — and a “gravity model”, based on historical evidence of removal of trade barriers.
The CGE model predicts exports will rise by at least $750 billion to well over $1tr per year, adding 0.34 to 0.54 percentage points to annual global economic growth, it said.
Gravity model estimates put the annual export gains at $1.1tr to $3.6tr, the report said. It did not estimate the impact on GDP under the gravity model.
http://www.pakistanpost.pk/2015/10/wto-sees-3-6tr-boost-to-trade-from-global-deal.html
LAHORE, ISLAMABAD: ADB’S NUDGE PUSHES GOVT TO SMART METERS, NEW BILLING SYSTEM
The Express Tribune, October 27th, 2015.
ISLAMABAD: Driven by a major push from a foreign lender, the government has decided to clear two projects of installing advanced electricity meters and implementing a new billing system valuing over $470 million, endeavours it had so far withheld due to high pricing and objections over technology.
The projects to install smart electricity meters and a new centralised billing system in Lahore and Islamabad will be taken up by the Central Development Working Party (CDWP) in its upcoming meeting for approval, according to Ministry of Planning and Development officials.
The PC-1s of both projects have been pending in the Energy Wing of the Planning Commission since January this year. The energy wing has decided to table the projects in the CDWP meeting amid growing pressures from the Asian Development Bank, said officials.
The latest push came just a month ago when the Director General of ADB for Central and West Asia Department, Sean O’Sullivan, took up the issue with Finance Minister Ishaq Dar during his visit to Islamabad. Earlier, in May, ADB’s Vice President Wencai Zhang urged Pakistani authorities to obtain the $1 billion loan for the installation of smart meters.
Dar had promised that he would look into the matter, agreeing that the energy wing’s objections should not stall projects, said officials of the Ministry of Finance.
The CDWP has a mandate to recommend projects valued at over Rs3 billion for final approval of the Executive Committee of National Economic Council, which is headed by the finance minister. Minister for Planning and Development chairs the CDWP meeting.
The ADB is eager to provide the $1 billion loan for the smart metes and billing system projects. In the first phase, the ADB has offered $400 million for installing smart meters in Lahore and Islamabad electricity distribution companies, officials added.
In current year’s Public Sector Development Programme (PSDP), the government has put the estimated cost of each project at Rs30.6 billion, bringing the total price of both projects to Rs61.2 billion or roughly $590 million. This includes Rs47.6 billion or roughly $455 million foreign loan.
However, revised estimates show the cost of Islamabad Electricity Supply Company (IESCO) project at Rs18.6 billion, including Rs8.8 billion in foreign loan. The cost of Lahore Electricity Supply Company (Lesco) project is kept at the same level of Rs30.6 billion, but its foreign loan component has been reduced to Rs13.1 billion.
The cumulative revised cost is Rs49.1 billion or $470 million but an official of the Planning Commission said that the final estimated price may vary. The cost of smart electricity meters is high, which will be roughly 80% of the total cost.
The Energy Wing of the Planning Commission has been opposing taking the loan, saying that the government should not invest in power distribution companies that have been advertised for privatisation. It has taken a position that the ADB should instead fund transmission expansion projects.
There were also differences over the use of technology for tracking purposes. The Planning Commission wanted that mobile-phone tracking application should be used while the ADB was pushing another tracking system, said Planning Commission officials.
The smart metering and billing system is the way forward for reducing lines losses and improving recovery of electricity bills, said Secretary Water and Power, Younus Dagha, while talking to The Express Tribune. He said there should be competitive bidding in a transparent manner.
The Planning Ministry officials said that the ADB has assured that besides giving loan for smart meters projects it would also fund transmission line projects aimed at addressing the concerns of the Commission.
The LESCO, IESCO and Faisalabad Electricity Supply Company are on the government’s active privatisation list.
ADJUST POLICIES TO FIGHT SLOW GROWTH, IMF TELLS AFRICA
Dawn, October 28th, 2015
JOHANNESBURG: The IMF on Tuesday called on sub-Saharan Africa, one of the world’s fastest growing regions in recent years, to start adjusting policies in line with new economic realities of slowing growth.
The rate of expansion is forecast to drop from 5 per cent in 2014 to 3.75pc this year, the lowest since the region suffered from the impact of the global economic meltdown in 2009.
“Economic activity in sub-Saharan Africa has weakened markedly,” the International Monetary Fund (IMF) said in a bi-annual report titled ‘Dealing with the Gathering Clouds’.
To counter the drag on growth the Fund urged the region to adopt realistic fiscal and monetary policies and address the high income and gender inequalities levels.
The policies could include allowing currency depreciation as a shock absorber, especially in commodity exporting economies, and “striking an appropriate balance between debt sustainability considerations, on the one hand, and addressing development needs, on the other”.
“Reducing inequality could deliver significant growth payoffs for the region. Income inequality appears to be markedly higher at all levels of income in the region than elsewhere, with gender inequality being just one of the factors driving that result,” said the IMF.
The reasons for the economic slowdown included a sharp decline in commodity prices and tough financing conditions in several countries.
“The outlook for the region is clearly much less favourable than in the recent past,” the IMF report said, while predicting that economic activity will start “strengthening somewhat to 4.25pc in 2016 on the back of the gradual pickup in global activity”.
Economies that had in previous years grown rapidly on the back of raw commodity exports, largely driven by demand from China, had been hardest hit by the fall in commodity prices.
“After a steady rise in prices since the early 2000s, the decade-long commodity cycle seems to have come to an end.”
“This represents a formidable shock for many of the sub-Saharan African countries that are still substantial commodity exporters, as it cuts into export values and fiscal revenues.”
Reduced demand for commodities has jolted countries such as mineral-rich Angola, South Africa, Sierra Leone and Zambia.
http://www.dawn.com/news/1215817
PAKISTAN RATIFIES WTO DEAL
Dawn, October 28th, 2015
SLAMABAD: Pakistan has become the 51st member of World Trade Organisation (WTO) to ratify the Trade Facilitation Agreement (TFA).
Pakistan’s Ambassador to WTO Syed Tauqir Shah presented Pakistan’s instrument of acceptance to Director General Roberto Azevêdo, an official announcement said on Tuesday.
Concluded at the WTO’s 2013 Bali Ministerial Conference, the TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit.
It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs’ compliance issues. It further contains provisions for technical assistance and capacity building in this area.
The TFA will enter into force once two-thirds of the WTO membership has formally accepted it.
The TFA broke new ground for developing and least-developed countries as for first time in WTO history, the requirement to implement the TFA was directly linked to the capacity of the country to do so.
In addition, the TFA states that assistance and support should be provided to help them achieve that capacity.
A Trade Facilitation Agreement facility was also created at the request of developing and least-developed country members to help ensure that they receive the assistance needed to reap the full benefits of the TFA and to support full implementation of the new agreement by all members.
Implementation of the TFA has the potential to increase global merchandise exports by up to $1 trillion per annum, according to the WTO’s flagship World Trade Report released on Monday.
The report also found that developing countries will benefit significantly from the TFA, capturing more than half of the available gains.
http://www.dawn.com/news/1215829
DAR BEGINS CRUCIAL TALKS WITH IMF IN DUBAI
Dawn, November 3rd, 2015
KHALEEQ KIANI
ISLAMABAD: Finance Minister Ishaq Dar joined crucial talks with International Monetary Fund (IMF) in Dubai on Monday which would determine whether or not the beleaguered textile industry be extended a bailout package.
The country’s textile exports declined 5.4 per cent in the first quarter (July-September) of the current fiscal year amid global slowdown and rising input costs, and the industry has been demanding government support to reverse the trend.
The staff level talks have been in progress since Monday last in Dubai for the ninth review of the $6.4 billion bailout package that the fund extended to Pakistan in September 2013 for 36 months. Pakistan’s side has, so far, been led by Finance Secretary Dr Waqar Masood Khan in talks with IMF, led by Herald Finger, the IMF mission chief to Pakistan.
Policy level talks from Islamabad would now be led by the finance minister to resolve major issues of the fund programme that has seen over 12 waivers on non-performance of programme criteria in two years.
Informed sources said hitches in structural reforms in the energy sector, shortfalls in revenue collections and lack of progress in improvement of public sector entities were also figuring prominently in talks that required finance minister’s push to move forward but a bailout package for the textile industry was the government’s key focus in these talks.
An official statement said the minister had an in-depth update of the staff level talks held so far from his team soon after his arrival from Islamabad and discussed strategy for the policy level part of the talks.
The sources said the finance minister would take the IMF mission into confidence over a recent government decision to impose regulatory duty on import of yarn and fabric despite shortfall in domestic cotton production target.
He would try to convince the fund mission how important the textile sector was for Pakistan’s balance of payments position given negligible support from the foreign direct investment. Although remittances from Pakistani workers abroad have, so far, extended a helping hand, a further slide in the country’s exports, if allowed to remain in-competitive, would lead to depletion of foreign exchange reserves that were so important for IMF’s loan repayment and stable exchange rate.
Therefore, the two sides are expected to agree on a staggered support to the textile industry that was getting non-competitive with regional peers in the global market, provided the finance minister is able to convince the fund that the budgetary support to textiles would be offset by some other tradeoff to remain within committed fiscal deficit limits.
The talks are expected to conclude on Nov 4 and the two sides are expected to make a joint announcement of the conclusion of talks in Islamabad on Nov 5.
Before leaving for talks last week, Tokhir Mirzoev, the IMF country representative in Islamabad had said the fund would seek explanations on the proposed textile and agriculture package, besides focusing on taxation and energy.
He had said that progress on structural reforms in energy and taxation were crucial to build on stability achieved so far and creating jobs, improving business climate and putting economy on a sustainable growth path.
Based on data in these areas, “the mission would evaluate if end-year targets could be achieved”, he had said.
The government announced a Rs341bn incentive package for agriculture sector recently and has been in talks with textile industry for a bailout package for quite some time.
Mainly because of shortfalls in tax collections in the first quarter (July-September) of the current fiscal year, the IMF has already scaled down its projections for development expenditure by around Rs378bn – around Rs64bn cut in federal and over Rs314bn cumulative shortfall in provincial development expenditure against budgetary announcements.
The IMF believes that Pakistan has achieved a reasonable stability in fiscal and monetary indicators, but it would be ‘unfortunate’ if it failed to take its benefit pushing through structural reforms, hampering job creation, investment and economic growth.
Also it understood energy challenge was affecting all sectors of economy because of inability of the distribution companies to recover their bills and could not pay their suppliers, including fuel providers and private power producers.
Resultantly, the power sector was facing working capital shortfalls, leading to downward spiral migrating across the sector and failing to invest in loss reduction programmes and theft control despite repeated tariff increases and imposition of various surcharges on honest paying consumers.
Pakistan has, so far, completed eight reviews of the extended fund facility (EFF) programme with total disbursements of about $4.54bn.
A total of four more quarterly reviews and around $1.6bn disbursements would complete the programme in August 2016 before the two sides consider a follow-up programme.
http://www.dawn.com/news/1217168
TWO AUTHORITIES EMPOWERED TO LEVY WORKERS FUND
Dawn, November 3rd, 2015
PARVAIZ ISHFAQ RANA
KARACHI: All industrial establishments owned or run by the federal government in Sindh are obligated to deposit Workers Welfare Fund (WWF) to the province after the promulgation of the Sindh Workers Welfare Fund Act, 2014.
The federal government that was collecting the fund earlier has yet to repeal the Federal WWF Ordinance, 1971.
This would lead to duplication of a tax. The issue was taken up by the Karachi Tax Bar Association (KTBA) with the Sindh Revenue Board (SRB). The association has demanded that necessary amendments be made in Sindh WWF Act so that exemption from WWF could be allowed to industrial establishments owned by the federal government as they are covered by the Federal WWF Ordinance.
The tax bar further pointed out that under the Sindh WWF Act, every industrial establishment located in Sindh is required to pay WWF. The term ‘located in Sindh’ has not been elaborated and issues will arise in computing the WWF in different situations.
The KTBA elaborated that in case an industrial establishment has a registered or principal office in the province, but has factory, outlet or branch in other provinces or vice versa , how such an industrial concern will compute and pay WWF.
The biggest issue would arise with regard to bank branches spread all over the country having either registered or principal office located in the province or outside Sindh, how such a bank will compute and pay WWF on profit attributable on branches located in Sindh.
Under the federal WWF Ordinance, WWF is payable at the rate of 2 per cent on profit before tax as per accounts and declared income as per the return of income.
The definition of ‘total income’ given in Section 2 (i) of the Workers Welfare Ordinance, 1971 clearly states the phrase ‘whichever is higher” of the two incomes.
But unfortunately, the definition of ‘total income’ given in Section 2(i) of the Sindh WWF Act, however, is missing and does not include such phrase which is an anomaly and has to be clarified and amended.
Furthermore, under section 60A of the Income Tax Ordinance, 2001, a taxpayer is entitled to a deductible allowance in respect of WWF paid under the Workers’ Welfare Fund Ordinance, 1971.
Although as per Section 5 of the Sindh WWF Act, the amount paid as WWF is declared claimable as a deductible expenditure for income tax purposes, no such corresponding deduction has yet been provided in the Income Tax Ordinance, 2011.
The KTBA suggested that both SRB and FBR need to coordinate on the issue to make necessary amendments in 60A of the Income Tax Ordinance, 2001, thereby allowing the taxpayer to claim the WWF payable to SRB as a tax deductible.
It has been further pointed out that under the FBR circular No 4(33)-Rev-Bud/99 (Feb 17, 2000) and as an established practice, income tax refunds can be adjusted against Federal WWF liability.
The taxpayers’ concern is whether they would be able to adjust the WWF payable to SRB against their income tax refunds in a similar manner unless both the SRB and FBR agree on the same.
http://www.dawn.com/news/1217163
IMF APPROVES $502 MILLION TRANCHE
Dawn, November 6th, 2015
KHALEEQ KIANI
ISLAMABAD: Despite three missed targets, the International Monetary Fund (IMF) cleared on Thursday Pakistan’s economic bailout package for disbursement of next instalment of around $502 million by mid-December.
“The mission and Pakistani authorities have reached staff-level agreement on the completion of the ninth review under the Extended Fund Facility arrangement,” IMF’s mission chief to Pakistan Harald Finger said at a press conference which was attended also by Finance Minister Ishaq Dar.
About $502m would be made available to Pakistan, Mr Finger added.
He said Pakistan needed to work hard on four weak areas — taxation, energy sector reforms, restructuring and privatisation of public sector enterprises and improvement in investment climate.
Mr Dar said the IMF executive board was expected to approve disbursement of next tranche of $502m in its meeting on December 15.
He said the fund had revised its inflation forecast to 3.7 per cent for the current year against its previous estimate of 4.7pc and kept economic growth rate projection at 4.5pc but the government would get close to its target of 5.5pc GDP growth rate.
He said Pakistan had met foreign exchange reserves target for end-September as they stood above $20.073 billion with minor subsequent movements. Also, the government has met targets on net international reserves, including forward swaps and borrowing from the central bank.
However, Mr Dar conceded that the government had missed revenue target by Rs40bn in the first quarter of the fiscal year and consequently the target for fiscal deficit. He said the shortfall had been reduced to Rs23bn with expenditure management — the specifics of which he declined to divulge.
The government, he said, would achieve fiscal deficit limit of 4.3pc.
He said the country had also missed targets for net domestic assets. The good thing, he said, was that revenue collection posted a 22pc growth in October, compared to the same month of last year with the tax machinery having collected Rs223bn.
The government had also met targets on policy rate corridor, revised audit policy and conversion of Computerised National Identity Card number into national tax number and on improving recoveries and reducing losses of the power sector.
He said the government was able to restrict circular debt growth to Rs26bn against a permissible limit of Rs36bn.
The minister said Pakistan had completed talks on development policy credit (DPC) on energy with the IMF, the World Bank and the Asian Development Bank. He said the World Bank was expected to approve disbursement of $500m loan under international development assistance window on November 12. Likewise, the ADB board is scheduled to meet on November 21 for disbursement of $400m under the DPC.
Replying to a question, the IMF mission chief said economic activity continued to improve in Pakistan while challenges also remained. “Real GDP is expected to grow by about 4.5pc, helped by lower oil prices, planned improvements in energy supply and investment related to the China Pakistan Economic Corridor.”
http://www.dawn.com/news/1217777
REFORMS REDUCE RISKS TO PAK REFORMS ECONOMY: IMF
The News, November 07, 2015
WASHINGTON: The International Monetary Fund (IMF) on Thursday welcomed the commitment of the Pakistan government to economic reforms which has significantly reduced the short term risks to the economy.
“The authorities are making progress with consolidating macroeconomic stability and tackling structural obstacles to growth with several important structural reforms in various stages of preparation or implementation,” said Harald Finger who headed the IMF team to discuss the ninth review of economic performance under the IMF programme.
Announcing a staff level agreement with Pakistan after the conclusion of talks in Dubai, Harald Finger described the discussion as productive.
The IMF team met with the Pakistani team headed by Finance Minister Ishaq Dar and including State Bank Governor Ashraf Wathra and other senior officials. The meetings were held both in Islamabad and Dubai from October 26 to November 5.
After productive discussions, the mission and the Pakistani authorities have reached staff level agreement on the completion of the ninth review under the EFF arrangement, he added.
The agreement is subject to approval by the IMF management and the Executive Board. Upon completion of this review about $502 million will be made available to Pakistan he added.
“Economic activity continues to improve while challenges remain. Real GDP is expected to grow by about 4.5 percent in FY 2015-16 helped by lower oil prices, planned improvements in the supply of energy and investment related to the China Pakistan Economic Corridor (CPEC),” Finger said.
At the same time, he added, the slowdown in private credit growth and weakness in exports and imports are weighing on growth prospects.
Headline consumer price inflation is expected to increase to around 4.5 percent by end of the fiscal year due to a likely bottoming out of the effects of low commodity prices but to remain well anchored by continued prudent monetary policy.
Gross international reserves reached $15.2 billion by the end of September 2015 up from $13.5 billion at end of June 2015 and covering close to four months of prospective imports.
End September 2015 quantitative performance criteria on the SBP’s net international reserves, government borrowing from the SBP and foreign currency swap forward position were met and so were the indicative ceiling on accumulation of power sector arrears and the indicative floor on social spending under the Benazir Income Support Programme (BISP).
However, the performance criteria on net domestic assets (NDA) and the fiscal deficit were missed as was the indicative target on tax revenue.
The mission welcomed the authorities’ plans to take action to attain the budget deficit and tax revenue targets for FY 2015-16 and to bring NDA in line with programme targets.
Article IV discussions focused on the reform agenda to increase the structural resilience and competitiveness of the economy and generate a stronger and sustainable growth momentum which remains an important medium term challenge, the official said.
He said the government is making progress with consolidating macroeconomic stability and tackling structural obstacles to growth.
Completing this agenda is critical for Pakistan to achieve its broader economic objectives and continued effort will be important in the period ahead.
In this context reform efforts should continue to focus on strengthening public finances and external reserve buffers and on accelerating steps to widen the tax net to create space for more infrastructure investment and social assistance.
In addition, key priorities for growth include restructuring or privatising loss making public enterprises, advancing energy sector reform, improving the business climate, promoting gender equality and further expanding coverage under the BISP to protect the most vulnerable.
http://www.thenews.com.pk/Todays-News-13-40595-Reforms-reduce-risks-to-Pak-economy-IMF