In Washington meeting, Ishaq Dar to ask IMF to revise macroeconomic framework
- Ishaq Dar to attend IMF/World Bank meetings from Oct 10 to 16.
- Pakistan to formally request IMF to give concessions on loan conditions.
- IMF says policy commitments made by Pakistan to continue to apply.
Amid controversy over the new petrol price announced by the government which has been termed a “reckless” decision, Finance Minister Ishaq Dar will travel to Washington next week and hold meetings with the International Monetary Fund (IMF), seeking to revise the macroeconomic framework.
“Pakistan’s Minister for Finance Ishaq Dar will participate in the upcoming annual meeting of the IMF/WB,” a top official of the Finance Ministry confirmed while talking to The News on Wednesday.
In a surprise move last week, the federal government slashed the prices of petroleum products sparking debate about whether the move is in line with the IMF deal and former minister Miftah Ismail termed it a “reckless” move.
However, Dar responded to his predecessor by saying he knows how to deal with the IMF while state minister for finance Aisha Ghous Pasha added that the announcement didn’t violate the loan agreement.
The IMF had also said that policy commitments made by the Pakistani authorities as part of the seventh and eighth reviews under their support program continue to apply.
The publication, quoting unnamed sources, said that Pakistan will make a formal request to the IMF high-ups for revising the macroeconomic framework for the current fiscal year 2022-23 by lowering the GDP growth rate, hiking inflation and upward adjustments of twin deficits known as the budget deficit and current account deficit.
Islamabad is all set to make a request to the IMF for making the conditions attached to the Extended Fund Facility (EFF) lenient, especially freezing fuel price adjustment of electricity and petroleum development levy on POL products for the next few months to provide some relief to the inflation-stricken masses.
Pakistan, the report said, will also request to relax the budget deficit target for the current fiscal year as severe floods might damage its revenue mobilisation efforts and increase pressures on the expenditure front.
The government has restricted the budget deficit target at 4.9% for the current fiscal year under the IMF programme and throwing a revenue surplus of Rs153 billion till the end of June 2023.
The request for revising the macroeconomic framework will be made for the current fiscal year in the wake of severe floods that have caused devastation and required construction costs of over $30 billion for the struggling economy of Pakistan.
As per the report, Secretary Economic Affairs Division Kazim Niaz had already departed Islamabad for Washington to attend the upcoming meetings of Breton Wood Institutions.
Under the macroeconomic framework, the government has assessed that the country’s GDP growth might hover around 2% for the current fiscal year against the initially envisaged target of 5%.
The economic loss has been estimated at Rs2.4 trillion for the current fiscal year. The government’s projections also show that unemployment projection will increase due to the loss of 1.8 to 2 million jobs and poverty may hike by 4.5 to 5%, implying that 9 to 12 million people will fall below the poverty line.
The agriculture growth is feared to remain negative in the range of -0.7% to -2.1% against the target of plus 3.9% for the current fiscal year. The government has estimated that the growth in major crops was expected to remain negative in the range of 14 to 15.4% for the current fiscal year. Around one million large and small animals have perished. The livestock growth is expected to remain between 2 to 3% against the desired target of 3.7 % for the current fiscal year.
The inflation will hike, to go up in the range of 23 to 25% for the current fiscal year against the initially envisaged target of 11.5%.
The government has not yet firmed up any specific number for the current account deficit but it is feared that it may go up from $9 billion to $12 billion for the ongoing financial year mainly because of decline in exports.
Gold rate declines for second consecutive day
- Rate of gold reaches Rs232,800 per tola.
- International rate up by $11 per ounce.
- The silver price remains unchanged.
Despite an increase in the international rate, gold’s value declined in Pakistan for the second consecutive day Tuesday.
Data provided by the All Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed the price of gold (24 carats) decreased by Rs1,700 per tola and Rs1,458 per 10 grams to reach Rs232,800 and Rs199,588, respectively.
The gold rate cumulatively lost Rs1,100 per tola last week, and a further Rs1,700 on the opening day this week.
Meanwhile, the international price went up $11 to settle at $1,956 per ounce.
The safe-haven bullion’s value has remained volatile in the international market recently. However, it bounced back from its lowest level in over two months Tuesday after the US dollar’s value declined from a high and investors remained anxious about negotiations on the US debt ceiling.
If the debt ceiling — which is currently capped at $31.4 trillion — is not raised in the next few days, it would trigger the first-ever US default.
Investors also remained wary about a possible hike in the interest rate, which would negatively affect gold’s value.
Meanwhile, the gold rate has been volatile in Pakistan recently amid continued political and economic uncertainty, high inflation, and currency depreciation. People prefer to buy the yellow metal in such times as a safe investment and a hedge.
The rupee gained Re0.07 or 0.02% against the US dollar in the interbank market Tuesday, closing at Rs285.35, according to State Bank of Pakistan data.
Data shared by the jeweller’s body showed that the rate of silver remained unchanged at Rs2,850 per tola and Rs2,443.41 per 20 grams, respectively.
France launching electric car battery factory to dent Chinese dominance
Under a plan of reindustrialisation by President Emmanuel Macron, France is to inaugurate a factory for manufacturing batteries for electric cars Tuesday in Billy-Berclau — the first of its kind — challenging the Chinese dominance in the industry, according to an AFP report.
Battery industry buildup is a component of the plan by Macron with a clutch of factories set to emerge in the north of the country over the next three years.
The “gigafactory” is owned by Automotive Cells Company, a partnership between French energy giant TotalEnergies, Germany’s Mercedes-Benz and US-European automaker Stellantis, which produces a range of brands including Peugeot, Fiat and Chrysler.
The inauguration will be attended by French Economy Minister Bruno Le Maire and the country’s energy transition and industry ministers along with German and Italian officials.
The heads of Mercedes, Stellantis and TotalEnergies will also be at the event.
The factory is as large as football pitches in which production will commence this summer.
Elected officials and business leaders intend to turn the Hauts-de-France region into “Battery Valley” — the electric car industry’s answer to Silicon Valley.
AESC-Envision — a Sino-Japanese group — is building a plant near the city of Douai which will supply French automaker Renault from early 2025.
French startup Verkor is scheduled to begin production at a facility in Dunkirk from mid-2025 while Taiwan’s ProLogium has also chosen the coastal city for its first European factory, with output to start in 2026.
Competition between US and China
As European Union (EU) has marked a deadline of 2035 to phase out fossil fuel-run cars, the countries are racing to step up the production of batteries and electric vehicles to meet the target of electric vehicles within the deadline.
In recent years, around 50 battery factory projects have been announced in the EU and the French government has set a target of producing two million electric vehicles per year by 2030, as per the economy ministry.
The ministry said that “the ACC plant will supply 500,000 vehicles per year by then.”
China is the world leader in electric car battery production and also dominates the production of the raw materials needed to make them.
Europe also faces stiff competition from the United States, which is heavily subsidising the sector through the Inflation Reduction Act, which includes $370 billion in clean energy incentives.
Govt mulls slashing duty on mobile phones in budget
ISLAMABAD: The Federal Board of Revenue (FBR) is mulling options to reduce the duty on mobile phones in the federal budget for the fiscal year 2023-24 — which is expected to be unveiled on June 9 — keeping in view the suggestions of Pakistan Mobile Phone Traders, The News reported Monday.
Previously, the government was obliged to raise the duty on mobile phones by 100% to 150%, and resultantly, only Rs5 billion to Rs10 billion were being deposited in the national exchequer instead of Rs85 billion.
The number of mobile phone users in Pakistan has exceeded 186.9 million.
In order to cope with the financial crisis of the current financial year, in the new budget, a proposal for a conspicuous reduction in the rates of duties on cellular phones is under consideration, which is about 100% to 150% at present on small and big mobile phones.
The mobile industry is on the brink of collapse due to an increase in taxes. It not only affected traders but also made the life of millions of people difficult to earn a livelihood.
It has been learnt that a delegation of the Mobile Phones Traders Association has given recommendations to Finance Minister Ishaq Dar and other senior officials.
The delegation ensured that efforts would be made to include the recommendations in the budget. These proposals and recommendations are being reviewed to make them a part of the new budget.
It has been learnt that a 75% duty was imposed on cellular phones in Pakistan as compared to other countries of the region like Singapore, Bangladesh and Turkey where it is not at that level. That is the reason people are using smartphones without paying duties in connivance with FBR.
The additional 100% to 150% duty on cell phones has made it out of reach of the poor, labourers, daily wagers, students, professionals, the lawyer community, and civil society.
All Pakistan Mobile Phones Traders Association General Secretary Munir Beg Mirza said that due to the ban on the import of used mobile phones, smuggling has increased to give favour to a few companies.
Also, people are using smartphones illegally without paying heavy taxes to enjoy all functions of smartphones, which is inflicting a loss on the national kitty.
He said that not only every consumer would pay tax but also the government would get Rs100 billion instead of Rs5 billion on phones if an appropriate duty was imposed in the new financial year.
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