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Pakistan inches closer to IMF deal as UAE ‘confirms’ $1bn support

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  • SBP is now engaged in needful documentation, Dar says.
  • Last week, IMF indicated it has received assurance from Riyadh.
  • IMF is securing confirmation from international partners.

Finance Minister Ishaq Dar on Friday announced that the United Arab Emirates (UAE) authorities have informed the International Monetary Fund (IMF) about their plans of providing $1bn support to Pakistan.

The move will pave way for Pakistan to unlock the critical $1.1 billion loan tranche from the IMF as the Fund was securing confirmation from international partners to meet the financing gap requirements of Pakistan.

“UAE authorities have confirmed to IMF for their bilateral support of [$1] billion to Pakistan,” Dar announced on Twitter.

The finance minister added that the State Bank of Pakistan (SBP) is now engaged in needful documentation for taking the said deposit from the UAE authorities.

Last week, the Washington-based Fund conveyed to Pakistan that it had received confirmation from Saudi Arabia on $2 billion in additional deposits.

“The IMF has indicated it has received the assurance from Riyadh”, State Minister for Finance Aisha Ghaus Pasha told reporters in Islamabad last week.

Saudi Arabia’s $2 billion and UAE’s $1 billion pledged in external financing support to Pakistan is one of the final conditions for an IMF deal that Islamabad needs to avert a default.

Pakistan has less than a month’s worth of foreign exchange reserves and is awaiting a bailout package of $1.1 billion from the IMF that has been delayed since November over issues related to fiscal policy adjustments. 

‘Pakistan had not reached default level yet’

A day earlier, IMF Managing Director Kristalina Georgieva said that Pakistan had not reached the default level yet.

Georgieva, while addressing a news conference on the spring meeting of Breton Wood Institutions at the Washington-based Fund headquarters, said the Fund was securing confirmation from international partners to meet the financing gap requirements of Pakistan.

In response to a question regarding the looming default risk facing Pakistan, she said: “Pakistan had not yet reached that level and it would not but the country required a sustainable policy framework to avert such risks”.

She said the lender has been working very hard with the authorities in Pakistan within the context of the current programme to make sure the country has the policy framework in place to prevent reaching the point of unsustainable debt.

“My hope is that with the goodwill of everyone, and the implementation of what has been already agreed by the Pakistan authorities, we can complete our current programme successfully,” Georgieva maintained.

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Bulls Reenter PSX: The KSE-100 Rises More Than 886 Points

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As the market surged more than 800 points in the early morning trade, bulls grabbed control at the Pakistan Stock Exchange.

During the first trading session, the benchmark KSE-100 index increased by 886 points to 61,350.48 points.

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Pakistan’s steel prices are rising; get the latest figures here

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Another increase in steel prices has resulted in higher construction expenses in Pakistan. The economic downturn and continuous shipping delays have resulted in sharp price increases for building supplies, which has an effect on those who are planning to construct homes.

Due to increased manufacturing costs and supply chain interruptions brought on by the Middle East crisis, the price of iron, commonly known as steel rebar, has increased by Rs5,000 per ton. Local and imported steel rebar now costs between Rs240,000 and Rs260,000 per ton as a result of this most recent rise.

The cost of branded iron went from Rs255,000 to Rs260,000 per ton, while the cost of local iron climbed from Rs236,000 to Rs240,000. Furthermore, the cost of scrap or unprocessed iron has increased to Rs160,000 per ton inin the iron and steel markets.

The impact of the skyrocketing steel prices will be exacerbated by any more interruptions in the raw material supply chain. The cost of cement, on the other hand, has somewhat decreased and is at Rs 1,246 per bag.

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Up 30% to Rs 5.1 trillion by mid-February, FBR collected

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The total increase in domestic taxes has been around 40%, whilst import duties and associated levies increased by 16% between July 2023 and January 2024.

With the recovery of the GDP and increased inspection of FBR collection, the growth in revenues accelerated.

Up to mid-February, FBR receipts increased by 30% to Rs. 5.1 trillion. Nevertheless, decreases in import tariffs over time and, more recently, import license limits implemented by the State Bank of Pakistan (SBP) to manage the country’s balance of payments in the aftermath of foreign exchange shortages, were mostly responsible for the decline in the rise of import taxes.

However, the impact of improvements in import valuation, which resulted in collections of Rs 151 billion, as well as the anti-smuggling campaign, which saw a surge of about 69% in the current fiscal year over the previous one, are also included in the income collected from imports.

The statement said that there was room to improve anti-smuggling operations by considering expanding Baluchistan’s customs force, which now only has 378 anti-smuggling employees out of 20,000 total.

The mobilization of domestic tax income, which accounted for more than 64% of all revenues received in the current fiscal year, was hailed in the statement as a welcome change.

In parallel, the percentage of import duties has decreased to 36% from over 50% just three years prior. The main drivers of this increase in revenue were the several taxes sources. From Rs. 1,751 billion to Rs. 2,447 billion, income tax receipts increased significantly—by 40%.

Banks, the petroleum and oil lubricants (POL) business, the textile industry, the electricity sector, the food industry, and a number of service industries were among the major income tax payers. Up to mid-February, FBR receipts increased by 30% to Rs. 5.1 trillion. Notable rise was also seen in sales tax receipts, which increased by 19% from Rs. 1,480 billion to Rs. 1,766 billion.

POL, the electricity sector, the food sector, the automobile sector, the iron and steel sector, and the chemical sector were important growth drivers.

The amount collected in federal excise taxes increased significantly by 61%, from Rs. 190 billion to Rs. 307 billion.

Taxes on tobacco goods, the cement industry, drinks, airlines, fertilizers, and the automobile sector were the main causes of this increase. The amount collected in customs duties increased by 14%, from Rs. 552 billion to Rs. 629 billion.

The POL, automobile, iron and steel, electronics, and food industries were among the main donors to customs duties.

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