Business

Debt servicing up by 74% in first five months of FY24

Published

4 months ago

Farwa

Revenue surplus generated by the provinces declines as well.
Increasing markup payments a challenge for govt.
SBP’s Monetary Policy Committee is scheduled to meet next week.

ISLAMABAD: Amid high policy rates, Pakistan’s debt servicing in the shape of mark-up on principal and outstanding loans increased by 74% in the first five months (July-November) of the ongoing fiscal year compared to the same period of last fiscal year, reported The News on Thursday.

Furthermore, another challenge that has emerged on the fiscal front is the decline in the revenue surplus generated by the provinces. The revenue stood at Rs107.9 billion in the first five months of the current fiscal year against Rs 202.5 billion generated in the same period of the last financial year.

The main challenge confronting the government is the increasing markup payments in response to high policy rates that have led to an increase in the current expenditures significantly. However, the government is putting all efforts into controlling the non-mark-up spending which is evidenced by the rise in primary surplus during Jul-Nov FY24.

The SBP’s Monetary Policy Committee is scheduled to meet next week and if it increases the interest rate then debt servicing will eat more revenues in the months ahead and create difficulties for the Ministry of Finance.

During Jul-Nov FY2024, total expenditures grew by 43% to Rs4,831.0bn against Rs3,367.4bn last year. The current spending grew by 46% mainly due to a significant rise in markup payments that increased by 74 % during the first five months of the current fiscal year, while non-markup spending witnessed just a growth of 20% on account of the government’s curtailed spending.

The overall fiscal deficit stood at 1.3% of the Gross Domestic Product (GDP) equivalent to Rs1,375.4 billion in the July-Nov period of CFY2024 against Rs1,168.6 billion (1.4% of GDP) for the same period of the last financial year. However, the overall primary balance remained surplus to the tune of Rs1,542.1 billion in the first five months of the current fiscal year against Rs511 billion in the same period of the last financial year.

The government had agreed with the IMF to restrict the primary surplus at Rs397.2 billion or 0.4% of the GDP for the current fiscal year.

The fiscal deficit was slashed to 1.3% of the GDP (Rs1,375.4bn) in Jul-Nov FY2024 from 1.4% of the GDP (Rs1,168.6bn) last year. The overall fiscal deficit for FY2024 is budgeted at 6.5% of the GDP. The primary surplus improved owing to contained growth in non-markup spending. It posted a surplus of Rs1,542.1bn (1.5 % of GDP) during Jul-Nov FY2024 against the surplus of Rs511.0 billion (0.6 % of GDP) last year. During Jul-Nov FY2024, net revenue receipts have improved by 68 % to reach Rs3,347.7bn against Rs1,996.5bn last year. This performance is largely attributed to a sharp rise in non-tax collection by 114% (Rs1,757.2bn against Rs822.4bn last year) and tax collection by 30% (Rs3,484.7bn against Rs2,688.4bn last year).

The FBR tax collection increased by 30.3% to Rs4,469bn during Jul-Dec FY2024 against Rs3,429bn last year. During the period, the FBR collected more than the assigned target of Rs4,425bn, thus exceeding Rs44bn. The revenue performance indicates that tax policy and administrative measures are paying off in terms of continuous improvement in revenue collection.

Business

The World Bank and Pakistan reach consensus on a new partnership framework for reforms.

Published

10 hours ago

Farwa

Meetings between Prime Minister (PM) Shehbaz Sharif and a delegation headed by Martin Raiser, Regional Vice President of the World Bank for South Asia, resulted in the agreement.

Praiseing the World Bank’s role in Pakistan’s growth, Prime Minister Shehbaz welcomed Martin Raiser.

After the floods in Pakistan in 2022, the prime minister expressed gratitude for the Bank’s cooperation in constructing climate-resilient infrastructure. He gave the delegation an overview of the government’s reform programme, which included ending child stunting, improving per acre production in agriculture, reforming the power sector, and digitising the entire tax system.

Martin Raiser expressed appreciation for Pakistan’s determined reform programme and stated that the World Bank was prepared to work with the nation to improve its economy in order to achieve sustainable development.

A new Country cooperation Framework with an annual review mechanism to evaluate progress and guarantee results was reached was agreed upon by both parties to initiate a long-term, targeted cooperation.

In order to accommodate future course corrections, the technique will be flexible. On a chosen list of crucial development goals for Pakistan, the new alliance aims to produce transformative effects over a ten-year period.

Structural economic reforms, including tax policy changes and domestic resource mobilisation, mainly through digitalization, were among the first set of goals that were discussed during the summit.

It was also explored how to improve basic learning and reduce child stunting through human capital development.

Reforms pertaining to the energy sector, such as broadening the role of the private sector in transmission and distribution, and shifting to renewable energy sources to make energy more affordable, environmentally friendly, and financially viable, were also deliberated.

Both sides stressed the need for cooperation in climate adaptation in order to effectively handle the increasing scarcity of water and shocks due to climate change.

Pakistan can gain from the Bank’s experience in leveraging digital transformation, building institutional capacity, mobilising global expertise and best practices, and engaging the private sector through the International Finance Corporation, Multilateral Investment Guarantee Agency, and the World Bank’s private sector arm to enhance economic opportunities, including in the agriculture sector.

The federal and provincial governments, as well as academic institutions, legislators, members of civil society, development partners, and the commercial sector, will all be consulted throughout the establishment of the new Country Partnership Framework, the parties agreed.

In order to discuss partnership priorities that are appropriately aligned with the Government of Pakistan’s strategy and top development priorities, the World Bank will work with relevant stakeholders.

Najy Benhassine, the country representative of the World Bank, and Dr. Kazim Niaz, the secretary of the Economic Affairs division, signed a joint communique in this regard, which the prime minister saw.

Business

Pakistan will “seek” to have a $12 billion loan from friendly nations rolled over.

Published

10 hours ago

Farwa

According to information, Pakistan will require Rs23 billion in foreign funding for the upcoming FY2024–2025. In light of this, Islamabad has apparently chosen to pursue the rollover of a $12 billion loan from friendly nations, such as Saudi Arabia, the United Arab Emirates, and China.

According to information provided by sources inside the finance ministry, rollovers for loans totaling $5 billion from Saudi Arabia, $4 billion from China, and $3 billion from the United Arab Emirates would be pursued in order to cover the external funding requirements for the upcoming year.

Budgetary allocations also take into account the new funding from the World Bank, Asian Development Bank, and other financial organisations.

On May 2, it was revealed that the government of Pakistan had made the decision to “finalise” the FY2024–25 budget targets before to the arrival of an IMF team in Islamabad.

Pakistan has scheduled the arrival of the IMF team on May 15th for negotiations on the new loan programme that it is requesting to meet its financial demands.

According to sources, the government hurried budget target preparations prior to the IMF mission’s arrival. The relevant ministries have been instructed by the Ministry of Finance to meet their targets as soon as possible.

Business

Pakistan’s lunar mission ‘ICUBE-Q’ reaches the moon orbit.

Published

1 day ago

Farwa

Pakistan’s lunar mission (ICUBE-Q) entered orbit around the moon on Wednesday.

Pakistan’s historic lunar mission (ICUBE-Q) launched from Hainan, China, on Friday aboard China’s Chang’E6 spacecraft.

According to the IST, the satellite ICUBE-Q was planned and developed in partnership with China’s Shanghai University SJTU and Pakistan’s national space agency SUPARCO.

The ICUBE-Q orbiter is equipped with two optical cameras to image the lunar surface. ICUBE-Q has now been integrated into the Chang’e6 mission after successfully qualifying and testing it.

Chang’e6 is the sixth lunar exploration mission launched by China.

The launch event was streamed live on the IST website and social media platforms. Chang’6, China’s Lunar Mission, will land on the Moon’s far side to collect surface samples before returning to Earth for further research.