Business

IMF terms discussions with Pakistan on ninth review ‘productive’

Published

1 year ago

Farwa

Pakistan-IMF talks are underway for ninth review.
Ester Perez says discussions have enabled a revision to macroeconomic outlook post floods.
Govt hopes staff-level agreement will be finalised soon.

ISLAMABAD: The International Monetary Fund’s (IMF) Country Representative Ester Perez has termed the discussions with the Pakistani government on the ninth review “productive”.

“Discussions have enabled a revision to the macroeconomic outlook post floods as well as an in-depth evaluation of fiscal, monetary, exchange rate, and energy policies adopted since the completion of the combined seventh and eighth reviews,” said Perez.

The IMF Pakistan chief said that the global lender is looking forward to continuing dialogue over policies that adequately address the humanitarian and rehabilitation needs from the floods while also preserving fiscal and external sustainability given available financing.

On the other hand, a top Pakistani government official told The News that the talks have been continuing positively with IMF and both sides would be able to strike a staff-level agreement soon.

Pakistan seeking budget deficit increase

On the other hand, sources told the publication that Pakistan has requested the lender to allow an adjuster of Rs320 billion in the budget deficit for the current fiscal year 2022-23 as the said amount was the expenditures on flood rescue and relief.

To boost its tax collection target, the government is considering imposing a flood levy in the ongoing fiscal year and different proposals are under consideration for finalising its exact modalities.

Although the political leadership has agreed in principle to take additional taxation measures but they want to adopt them in such a way there is no extra burden on the common man amid higher inflation and low growth trajectory.

“We are considering imposing flood levy on those in higher income brackets who are earning lofty profits in recent years. We have not yet firmed up modalities but it’s actively under consideration at the moment within the higher functionaries of the government,” a government official confirmed to The News.

The government has informed the IMF of the flood expenditures including BISP and those utilised on relief and rehabilitation during the current fiscal year including the Public Sector Development Programme (PSDP) and Annual Development Plans (ADPs) of the provincial governments. Now the adjuster will be used to hike the budget deficit target envisaged at 4.9% of GDP on eve of the budget for 2022-23.

Differences persist

Pakistan and the global lender continued ongoing talks virtually but differences still persisted over tax collection targets, and non-starter energy reforms including hiking of gas tariff, rising circular debt, and expenditure overrun, making consensus harder to strike on a staff-level agreement for completion of the 9th review under $7 billion Extended Fund Facility (EFF).

The IMF had asked Pakistan for hiking the gas tariff because the government kept the prices unchanged which resulted in an increase in the circular debt of the gas sector.

Although the government made plans for improving the gas sector no progress was witnessed in the power sector. The monster of circular debt in the power sector went up to Rs2.4 trillion and all targets agreed with the IMF for reducing it on a monthly and quarterly basis could not be achieved. The subsidy on tube wells alone would cause an increase of Rs200 billion in the accumulated Circular Debt in the ongoing financial year.

The IMF also raised objections over Kissan Package as well as the government’s decision to grant power and gas tariff reduction for five export-oriented sectors and the agriculture sector.

The decision regarding deferred payment of electricity bills continues to be another bone of contentions among the Ministry of Finance and Ministry of Power if the move was meant for subsidy.

The Finance Ministry argues that it was deferred payment with the understanding that the payment would be recovered during the winter. But there is a difference of opinion on interpretation between the two ministries.

The IMF has also assessed that the FBR would not be able to collect its annual envisaged tax collection target of Rs7.47 trillion so it asked for a revised projection in the wake of import compression and slowing down of the economy.

The Fund staff also inquired when the nominal growth jumped to in the range of 25% to 27% and why it did not reflect in FBR’s collection. The IMF has projected that even if the FBR achieved its annual target of Rs7.47 trillion, the tax-to-GDP ratio would decline in the current fiscal year.

But the FBR argued before the IMF that its collection was on track and they would be able to achieve the desired target.

However, the revenue collection might be staggered in the wake of litigations whereby the stuck-up revenues to the tune of Rs250 billion might be materialised in coming months because currently, the courts granted stay orders.

The FBR has sent out written requests to the chief justice of Pakistan for early disposal of the pending cases before the courts where billions of rupees were involved.

Business

Exchange achieves all-time high: KSE-100 index surpasses 72,500 points

Published

53 mins ago

Farwa

With the benchmark KSE-100 index hitting a record-breaking high of 72,501 points, the Karachi Stock Exchange saw yet another incredible rise.

Within Pakistan’s financial environment, investors demonstrated a strong sense of trust in the market as the bullish trend continued.

As a result of the significant inflow of investment and optimism among market players, the index had an amazing 450-point rise during the trading session.

In their analysis of the market’s remarkable performance, financial analysts pointed to a number of causes for the upward trend, such as encouraging economic data, robust company profits, and the government’s proactive measures to promote economic expansion.

The durability and upward momentum of the market have also been greatly aided by continuous infrastructural investments and efforts meant to boost investor confidence.

In the meantime, interbank rates increased by six paisas, and the US dollar’s value saw a slight rise in the currency market. As a result of the current market conditions and the dynamic nature of foreign exchange swings, the dollar was quoted at Rs 278.45 in the interbank market.

Business

The investment plan for K-Electric will be audited every three months.

Published

1 hour ago

Farwa

In light of K-Electric’s inability to persuade NEPRA with its Rs. 484 billion investment plan, the regulatory body has decided to hold off on making changes to the utility’s Transmission & Distribution Investment Plan until FY 2030.

As stated in the order, the NEPRA will select the terms of reference (ToR) for the third-party audit in addition to announcing the quarterly audit. A report on the company’s investment plan’s progress will need to be submitted every quarter.

A performance report would also be required under the investment plan by K-Electric, Karachi’s only power distribution utility, according to the statement. A secure mechanism to avoid electrical mishaps was also mandated by the authority to the utility.

In the meantime, the power distribution firm stated in a statement that the investment plan will boost the utility’s infrastructure to meet present and future demands, decrease transmission and distribution losses, and increase customer base growth.

With investments totaling Rs. 544 billion, KE has been able to more than halve its T&D losses and quadruple its customer base and power consumption since privatisation, according to the statement.

A hearing in March 2023 was held to inform stakeholders about the projects that KE management had planned for FY2024–FY2030, and the statement claimed that the plan had been presented in compliance with regulatory requirements.

In terms of investment areas including expansion, energy loss reduction, network rehabilitation, maintenance, and safety, KE claimed to have clearly defined priorities and projects for this era.

The plan calls for the construction of transmission lines and grids, which will increase the dependability of KE’s network and make it possible to take on more electricity from the National Grid.

In order to manage the city’s needs through targeted investments and tech-based interventions, CEO KE Moonis Alvi said, “We are looking to invest $2 billion in Transmission and Distribution over the next 7 years.” The work of all the stakeholders who have contributed to this trip and who will help us modernise our infrastructure and get ready for the future is something I’d like to acknowledge.

The investment plan is a supplement to the business’s Power Acquisition Programme, which outlines KE’s goal of having 30% renewable energy in its generation mix by 2030. As part of its efforts to provide everyone with access to reasonably priced energy, the firm has also been granted regulatory permission for its RFPs for 640 MW of renewable projects.

Business

$399 million in airline revenue is being blocked by Pakistan. IATA

Published

2 hours ago

Farwa

Pakistan and Bangladesh have been urged by the International Air Transport Association (IATA) to promptly release airline profits that are being withheld in violation of international agreements.

“Airlines are unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets, resulting in a severe situation,” an IATA statement stated.

“Money-denominated expenses like lease agreements, spare parts, overflight fees, and fuel must be paid for in a timely manner by repatriating revenues to their home countries.”

Delaying repatriation raises exchange rate risks for airlines and violates bilateral agreements’ international commitments. In order for airlines to effectively continue to offer the aviation connectivity that both of these countries depend on, Pakistan and Bangladesh must immediately release the more than $720 million that they are blocking, according to Philip Goh, Regional Vice President for Asia-Pacific at IATA.

Pakistan needs to make the difficult repatriation procedure less complicated. According to the statement, this presently includes the need to present audit certifications and tax exemption certificates, both of which create needless delays.

Approximately 425,000 jobs and $2.8 billion in economic activity were supported by Pakistan’s aviation industry prior to COVID-19. Passenger numbers are predicted to increase by more than 2.5 times by 2040 after returning to pre-COVID levels in 2023, according to the statement.