Blaze News - Pakistan

The government has proposed seeking powers to seal shops and business premises for issuing three non-certified electronic receipts in a single day, as it introduces a slew of new streamlining measures to raise Rs70 billion in taxes in the next fiscal year. These special powers have been sought under the Sales Tax Act, said the chairman of the Federal Board of Revenue (FBR) in a briefing to the Senate Standing Committee on Finance and Revenue. The committee met for the second consecutive day to deliberate and finalise recommendations on the Finance Bill, 2024. The meeting was presided over by Senator Saleem Mandviwalla of the Pakistan Peoples Party (PPP). The standing committee also proposed the mandatory acceptance of debit and credit cards by shops to discourage the cash-based economy. The FBR chairman hinted at reversing the budget proposal to impose a 10% sales tax on stationery and books after the standing committee asked him to withdraw the proposal. However, the chairman said tha...

The National Economic Council on Monday approved one-fourth higher national development budget outlay of Rs3.5 trillion amid support by the four provinces, including Khyber-Pakhtunkhwa, for the International Monetary Fund (IMF) programme. In a baby step towards federal fiscalism and consensus decisions on major national economic matters, Prime Minister Shehbaz Sharif also set up a committee under his trustworthy Economic Affairs Minister Ahad Cheema to prepare a mechanism under the NEC to involve provinces in major decisions. However, the NEC revived the budget for the parliamentarians’ schemes and allocated Rs75 billion for the next fiscal year in addition to setting aside more financial resources for provincial nature projects in the federal budget 2024-25. These decisions were in contradiction to the decisions made by the NEC in January this year when the parliamentarians schemes had been discontinued and the provincial nature new projects were banned from the federal Public Sector ...

In a major development, the Federal Board of Revenue (FBR) on Tuesday issued legally-binding instructions to the relevant departments to block mobile phone connections of over half-a-million non-filers, as its campaign to voluntarily register retailers also falls apart with only 75 retailers availing the scheme. The tax machinery also faced another setback on Tuesday when its 10-month tax collection fell short of the goal by around Rs40 billion. Against the July-April target of Rs7.414 trillion, the FBR provisionally collected over Rs7.38 trillion. There was a 31% increase in the collection during the 10 months period. The developments came on the heels of growing resentment within the tax machinery over the government’s decision to remove 25 allegedly corrupt and inefficient officers. The general body of the customs officers met on Tuesday and the 450 officers from grade 17 to 22 considered the options to either go on strike or file en masse applications to go on leave. The FBR has is...

A government think tank has opposed public debt restructuring despite serious questions about the sustainability of the debt burden and external financing requirements, which are projected to be a minimum of $72 billion for the next three years. The Pakistan Institute of Development Economics (PIDE), funded by the government, has voiced its opposition to debt restructuring, deeming it difficult and time-consuming, as stated in its reforms agenda unveiled this week. The government has long avoided this path, despite significant challenges such as low foreign exchange reserves, rising interest payments, and subdued economic growth prospects under the International Monetary Fund (IMF) programme. Pakistan’s gross official foreign exchange reserves remain at $8 billion, with the country set to spend around Rs8.5 trillion on interest payments, while economic growth is expected to remain muted under the new IMF programme. According to the PIDE report, Pakistan’s external financing requirement...

An independent think tank has criticised the State Bank of Pakistan (SBP) for its role in implementing fiscal expansionary policies by indirectly providing loans to the federal government, a move that has rendered the International Monetary Fund (IMF)-guided changes in the central bank law ineffective. In its report titled “Pakistan Economic Freedom Audit: The Sound Money,” the Policy Research Institute of Market Economy (PRIME) has underscored the adverse implications of the central bank-finance ministry nexus, which has led to high inflation and contributed to debt accumulation. While the amended SBP Act has curtailed the government’s capacity to issue debt directly to the SBP, monetary expansion has persisted. The PRIME report indicates that the SBP has supplied liquidity to banks, which subsequently lend it to the government. The report was authored by Dr Wasim Shahid Malik. The PRIME stated that the SBP has mainly supplied liquidity to scheduled banks through Open Market Operation...

The federal government has decided to hire a new head of Pakistan’s Export-Import (Exim) bank amid a disclosure of discrepancy in the age of the incumbent president, which should have made him ineligible for the appointment four years ago. Sources in the Ministry of Finance told The Express Tribune that a decision has been made to expedite the process for the appointment of the chief executive officer and the president of the Exim Bank of Pakistan. This decision was taken after it surfaced that the incumbent chief executive did not meet the eligibility criteria at the time of his appointment in December 2019, according to officials. In July last year, the federal cabinet had extended the tenure of the chief executive of the Exim Bank for a period of six months or until a new appointment, whichever is later. But the Ministry of Finance was now considering stopping the president from attending the office, said the sources. The advertisement for the appointment of the CEO of EXIM Bank had...

Pakistan has fulfilled one of the main conditions of the International Monetary Fund (IMF) for the last loan tranche of $1.2 billion by collecting more than Rs4.44 trillion in taxes during the first half of this fiscal year. The tax authorities have also decided to start disconnecting the utility and mobile phone connections of non-filers of income tax returns from next month, aiming to enhance the tax base to more than six million individuals in this fiscal year. The IMF had set the Rs4.425 trillion indicative tax collection target for the July-December period of this fiscal year. It is among one and a half dozen conditions that Pakistan must meet to qualify for the last loan tranche of $1.2 billion, to be negotiated in February or March. Until the last working day of the month, the Federal Board of Revenue (FBR) has so far collected Rs4.440 trillion, showing an increase of Rs1.15 trillion or 35% over the collection made during the same period of the previous fiscal year. The FBR offi...

The European Union has expressed concerns over forced disappearance, torture and restrictions on media freedom in Pakistan in violation of international treaties, urging Islamabad to implement laws in their true spirit for protection of the economic, social and political rights. The joint monitoring report of Pakistan’s Generalised Scheme of Preference, known as GSP plus, has also raised questions on “pervasive corruption”, and use of anti-corruption rhetoric and legal cases for political purposes. The report, released on Tuesday also underlined that “despite continuous civilian rule since 2008, the military has played an outsize role in politics and the economy” of Pakistan. ❗️#UPDATE EU has released 4️⃣th GSP Report! Report evaluates the implementation of 27 intl core conventions in beneficiary countries,incl 🇵🇰 for sustained benefits. It 📌 points areas where progress is needed. Since award of GSP+🇵🇰’s exports to EU ⬆️ by 108% 🔗 Link to report 👇 pic.twitter.com/TU49n6KgPM — EU...

The International Monetary Fund (IMF) said on Thursday that Pakistan’s external financing needs remain large but its foreign exchange reserves coverage is precarious at only 70% of the country’s short-term foreign debt. In its Middle East and Central Asia Economic Outlook, the global lender highlighted the risks Islamabad was facing due to a thin foreign exchange cover for debt repayments. The report warned about the growing risk to Pakistani banks from a substantially large exposure to the government debt. “External financing needs will remain large, and reserve coverage is forecast to remain precarious in several countries, averaging about 70% of short-term external debt in Egypt, Pakistan, and Tunisia,” stated the report released on Thursday. Commenting on the government’s high gross financing needs, the IMF said that elevated public sector gross financing needs are still a significant challenge, which will reach “21% of GDP by 2024 for Pakistan” (or over Rs22 trillion). It said tha...

The International Monetary Fund (IMF) on Wednesday projected Pakistan’s budget deficit at 7.6% of the size of its economy, or a record Rs8.2 trillion, which was far higher than the official target and would keep the government dependent on lenders to remain afloat. In its global Fiscal Monitor Outlook, the lender also made some adjustments in revenue and expenditure forecasts for the current fiscal year compared to the ones given in the staff-level report for a $3 billion Standby Arrangement in July. The overall budget deficit – the gap between government’s expenditures and revenues – is estimated at 7.6% of gross domestic product for this fiscal year, according to the Fiscal Monitor released during the second day of the annual World Bank-IMF meetings taking place in Morocco. The government had set the overall budget deficit target at 6.5% of GDP, or Rs6.9 trillion, for FY24. The 7.6% deficit means that Pakistan will need to borrow Rs1.3 trillion more than what it had planned in June t...

The World Bank on Saturday retracted its recommendation regarding taxing monthly salaries below Rs50,000, as fresh data reveals that the highly marginalised salaried class again paid more taxes than the combined taxes paid by the richest exporters and the real-estate sector in the past three months. Salaried individuals paid Rs70.6 billion in income tax during the July-September period of the current fiscal year, a sum larger than the combined contribution by the richest exporters and the influential and unregulated real estate sector, according to government statistics. There is no match between the wealth and income of exporters and real-estate sector players in comparison to the marginalised salaried persons. The combined taxes paid by exporters and real-estate players were just Rs65 billion in three months, nearly Rs6 billion less than what was paid by salaried persons, many of whom come to the office on public transport or motorcycles. WB retracts recommendation The World Bank on ...

A senior official from the finance ministry claimed, on Wednesday, that a 1% increase in the interest rate adds a whopping Rs600 billion in annual debt servicing costs. If accurate, this figure could have a significant impact on this fiscal year’s budget. This revelation was made during a session of the Senate Standing Committee on Finance, which also requested a report from the central bank regarding the relationship between interest rate increases and a slowdown in the inflation rate. Chaired by Senator Saleem Mandviwalla of the Pakistan Peoples’ Party, the standing committee criticised the central bank’s policy of curbing inflation by raising the monetary policy rate as “ineffective,” citing heavy losses incurred by businesses. The government’s debt servicing cost increases by Rs600 billion with a 100 basis point increase in the monetary policy rate, said Amjad Mehmood, the additional secretary of the Ministry of Finance. While these figures appear on the higher end, earlier estimat...

Pakistan on Tuesday deferred a decision on changing its benchmark rate for foreign borrowing to finance power projects due to the absence of crucial information about the financial impact of the decision on electricity prices. The Economic Coordination Committee (ECC) of the cabinet did not endorse a proposal of the Ministry of Energy about replacing the existing London Interbank Offered Rate (Libor)-based borrowing with a new benchmark – the Secured Overnight Financing Rate (SOFR). The ministry proposed to replace the key debt rate with effect from July this year, both for new and existing projects. Headed by interim Finance Minister Dr Shamshad Akhtar, the ECC approved the release of a six-month salary for 3,100 employees of the closed Pakistan Steel Mills (PSM). The factory has been closed since June 2015 but the government is paying salaries and the cost of gas for running the boilers. The last two governments were not able to make a final decision on the fate of the mill, which re...

In a fiscally imprudent decision, the interim federal government on Monday took back the responsibility of a $1.8 billion polio eradication programme and also brought back two United Nations agencies for its implementation by reversing a two-month-old decision. The newly reconstituted Executive Committee of the National Economic Council (Ecnec), in its maiden meeting, undone the decision of the previous Ecnec in which the role of the federal government had been limited to just one year in implementation of the national polio eradication programme. Under the constitution, health is a provincial subject but the federal government is spending in this area despite having no fiscal space. Interim Finance Minister Dr Shamshad Akhtar said last week that there was no fiscal space available with the federal government to give any subsidies. Read Business confidence plummets as default looms Ecnec considered and approved the Emergency Plan for Polio Eradication at a cost of $1.78 billion inc...

The last Pakistan Democratic Movement (PDM) government illegally replaced five independent directors of Sui Northern Gas Pipelines Limited (SNGPL) towards its fag end without holding their elections, creating a legal challenge for the firm. The matter suddenly got attention this week after the Lahore High Court (LHC) granted an interim injunction a day earlier and the Securities and Exchange Commission of Pakistan (SECP) on Tuesday sought an explanation from the company. The decision to allow nominee directors of SNGPL to take over its board without following due process was not only in violation of the Companies Act 2017 but also against the spirit of the federal cabinet’s decision, showed documents. The LHC on Monday instructed that “subject to notice and till the next date of hearing, the election process for the board of directors of SNGPL will continue, however, the same shall remain subject to final outcome of this petition”. The company has fixed September 11 for the election of...

Pakistan’s federal budget deficit skyrocketed to a record Rs6.7 trillion in the last fiscal year, breaching the target by a wide margin, as spending on debt servicing and defence needs was 59% more than the net income of the centre. The federal government spent over Rs7.4 trillion on debt servicing and defence compared to its net income of Rs4.6 trillion, a gap of Rs2.76 trillion between just two heads. The coalition government not only missed its budget targets but it also failed to restrict fiscal operations to the level agreed with the International Monetary Fund (IMF) in February this year, when it had slapped new taxes on people in the name of narrowing the deficit. Another alarming fact was that the finance ministry did not know the source of Rs425 billion worth of spending, which was shown as “statistical discrepancy” in the fiscal operations summary the ministry released on Thursday. The federal government exceeded the budget deficit target by 47%, or Rs2.1 trillion, which skyr...

The much-trumpeted Reforms and Resource Mobilisation Commission (RRMC) was unceremoniously sent packing by the last government without giving it time to complete a final report, adding another name to a long list of failed attempts to reform the outdated and shallow taxation system. The RRMC could not make its impact in the absence of political backing and its recommendations, some of them having potential of generating huge revenue, were simply thrown in the bin by the Pakistan Democratic Movement (PDM) government. Former finance minister Ishaq Dar had set up the commission in December last year to review budget proposals, reduce size of the informal economy and consider the possibility of making the Federal Board of Revenue (FBR) an autonomous entity. However, a day before leaving office, Dar gave the go-ahead to de-notify the commission, headed by Ashfaq Tola, who had been given the status of minister of state. “The Reforms and Resource Mobilisation Commission was constituted by the...

Pakistan has appointed a new deputy permanent delegate to the United Nations Educational, Scientific and Cultural Organisation (Unesco) in Paris in violation of merit. A day before the end of its 16-month term in office, the previous government gave approval to the appointment of a person as Pakistan’s deputy permanent delegate to Unesco who was at 10th position in written test and third in a panel of three. In a summary sent by the Ministry of Education to former prime minister Shehbaz Sharif, the ex-premier selected a person who was not even among the top five candidates in a merit-based exam conducted by the Lahore University of Management Sciences (LUMS), showed official documents. Sources said that after an interview conducted by a panel constituted by the ex-PM, the person was pushed to the third place to make her eligible for inclusion in a summary sent to the premier for approval. “The Departmental Selection Committee conducted interviews of 12 candidates on 8th July this year ...