Business

Pakistan striving to rebound strongly from current economic challenges: SBP chief

Published

1 year ago

Farwa

SBP chief briefs investors, fund managers on current challenges, way forward.
Says challenges largely driven by “adverse global shocks, domestic developments”.
Inflation expected to ease in coming months; financing uncertainty to end after IMF deal.

State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that the country was striving to rebound strongly from the current economic challenges, including external financing woes and record inflation.

He stressed that Pakistan’s economy had “always rebounded strongly after undergoing severe shocks”.

“No doubt, this time, we have faced not one but a series of domestic and global shocks. But we strive to rebound strongly from the current challenges as well.”

He made the remarks while addressing international investors and fund managers at an event organised by Barclays in Washington, United States on Pakistan’s economic challenges and the way forward.

A statement issued by the central bank said Ahmad briefed the attendees about the challenges Pakistan is facing, the policy responses and the way forward.

The SBP chief noted that the economic challenges, including high inflation and balance of payments pressures, were largely driven by “adverse global shocks and domestic developments”.

Even though global commodity prices had fallen from the peak reached in 2022, they were still “significantly high” and thus, were taking a toll on domestic inflation and the current account, he elaborated. The rupee has depreciated sharply over the last few months, which has increased the cost of living for consumers in the heavily import-dependent country.

At the same time, the SBP chief said, tightening global financial conditions have made it harder for emerging markets such as Pakistan to access international financial markets. Consequently, this put stress on the country’s foreign exchange reserves, which have fallen to critically low levels in recent months, and the exchange rate. The devastating floods of 2022, which caused damages of $30 billion, had worsened the country’s economic distress, he pointed out.

Ahmad also spoke about the country’s external balance of payments situation, noting that Pakistan had met all its obligations in a timely manner contrary to earlier market expectations.

“The country’s debt repayments have been rather front-loaded, whereas inflows have been gradual,” he explained.

He said the country was receiving fresh financing in addition to loan rollovers ahead of the expected revival of a loan programme with the International Monetary Fund (IMF).

Policy response

Elaborating on the central bank’s policy measures, the SBP chief said it had raised the benchmark interest rate by 1,400 points to 21% in the last 18 months and tightened regulations to rein in inflation and reduce the current account deficit.

In addition, the exchange rate had adjusted over the last few months, which he termed the “first line of defence against emerging external imbalances”.

The fiscal deficit had reduced due to the government’s contractionary fiscal policy, despite flood rehabilitation-related expenditure. The primary balance was also in surplus so far compared to a deficit last year, he noted.

“The country is on its way to achieving macroeconomic stability, as the impact of policy measures is already playing out in the economy. The current account deficit has narrowed and foreign exchange reserves, albeit low, are increasing,” he remarked.

Inflation was expected to decrease in the coming months while the revival of the IMF programme would remove uncertainties regarding external financing, Ahmad added.

Business

FBR Reforms: PM Leading Reforms Process with Law Minister as Top Priority

Published

8 hours ago

Farwa

According to Federal Law Minister Azam Nazir Tarar, Prime Minister Shehbaz is leading the entire reform process, and the Federal Government has made the reforms at the Federal Board of Revenue its top priority.

According to the law minister, who was speaking at a press conference in Islamabad, there are presently one billion rupees worth of tax cases pending in court. The parliament has for the first time passed legislation on tax tribunals in an effort to streamline and accelerate the legal process.

He stated that, strictly according to merit, there have already been a few postings and transfers in the FBR and that more are anticipated in the next few days.

Federal Information Minister Atta Tarar, who accompanied the Law Minister, stated that Prime Minister Shehbaz Sharif is spearheading an effective foreign policy through productive meetings with world leaders.

He declared the premier’s trip to Saudi Arabia, where Shehbaz Sharif met with government representatives and corporate executives who indicated interest in investing in Pakistan, a success.

Atta Tarar also declared that a commercial team from Saudi Arabia would be visiting soon.

Business

Pakistan will host an IMF team in May to discuss a new loan.

Published

8 hours ago

Farwa

According to sources, negotiations on a fresh loan program have been set between Pakistan and the foreign lender. There will be two stages to the meetings: technical discussions and policy-level conversations.

Prior to the upcoming negotiations, Pakistan must overcome formidable economic obstacles, including the collapse of an IMF-proposed tax amnesty program.

Although it hasn’t worked, the federal government had promised to include 3.1 million merchants in the scheme’s tax net. The recent turnover of senior officials has placed the Federal Board of Revenue (FBR) in an atypical position.

The negotiation process with the IMF will be difficult for the new and inexperienced FBR team. The significant drop in FBR’s tax collections would likely worry the IMF.

A day prior, Pakistan obtained the eagerly awaited $1.1 billion last installment from the IMF as a component of the $3 billion standby agreement.

Special Drawing Rights (SDR) 828 million, or $1.1 billion in worth, were given to the SBP “after the successful completion of the second review by the Executive Board of IMF under Stand By Arrangement (SBA),” according to the SBP.

Finance Minister Muhammad Aurangzeb stated Islamabad might obtain a staff-level agreement on the new program by early July. Pakistan is seeking a new, longer-term, and larger IMF loan.

Although Aurangzeb has neglected to specify the specific program in question, Islamabad has stated that it is seeking a loan for a minimum of three years in order to support macroeconomic stability and carry out long-overdue and difficult structural reforms. Should it be approved, Pakistan would receive its 24th IMF bailout.

Business

In FY2024, SRB tax revenue soars to Rs 185.2 billion.

Published

9 hours ago

Farwa

In a statement released here, the SRB’s chairman, Wasif Memon, stated that he briefed Sindh Chief Minister Syed Murad Ali Shah about the organization’s revenue collections during their meeting.

In comparison, the tax collection during the same period of the previous financial year 2022–2023 stood at Rs143.3 billion. This achievement represents a 29 percent year-over-year growth, according to the Sindh Revenue Board (SRB), which recorded record revenue of Rs185.2 billion during the first nine months of the fiscal year 2023–2024.

The CM stated at the time that the SRB has shown tenacity and efficiency in revenue collection in spite of facing a number of difficulties, including the general economic downturn.

According to the statement, SRB’s monthly tax collection for April 2024 was Rs18.8 billion, a 23 percent increase from the Rs15.2 billion collected in the same month the previous year.