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Saudi Arabia mulls increasing Pakistan deposit amount to $5b

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  • Sigh of relief for Pakistan as Saudi Arabia announces support.
  • Riyadh vows to help Islamabad steer crisis.
  • Develoment comes after Gen Munir’s meeting with Mohammad Bin Salman.

RIYADH: In a major boost to Pakistan’s efforts to strengthen its forex reserves amid the worsening currency crisis, Saudi Crown Prince Mohammad Bin Salman Tuesday directed the authorities to study increasing the amount of the deposit by $2 billion to reach $5 billion.

Last month, the Saudi Fund for Development (SFD) extended its term for the $3 billion deposit in the State Bank of Pakistan which was set to mature on December 5.

The SBP had signed an agreement with the SFD in November 2022 to receive $3bn, to be placed in the central bank’s account with an aim to improve its foreign exchange reserves.

According to a Saudi Press Agency (SPA) report today, Crown Prince Mohammad Bin Salman has directed the SDF to study increasing the amount of the deposit which has previously been extended on December 2, 2022 to hit a $5 billion ceiling, confirming the kingdom’s position supportive to Pakistan’s economy and its people.

“This came within the framework of the existing communication between HRH the Crown Prince and Muhammad Shehbaz Sharif, Prime Minister of Pakistan,” the SPA added.

The state news agency added that the Saudi leader has also directed to study augmenting Riyadh’s investments in Pakistan which have previously been announced on August 25, 2022 to reach $10 billion.

The announcement comes a day after Chief of Army Staff General Asim Munir’s meeting with Crown Prince Mohammad Bin Salman during his first overseas official visit to the country.

Pakistan is facing a currency crisis due to dwindling forex reserves which have slumped to $4.5 billion — enough for three weeks of imports.

On the other hand, Islamabad is making hectic efforts to revive the International Monetary Fund’s (IMF) loan programme stalled for months.

A Pakistani delegation held a meeting with the IMF officials in Geneva on Monday on the sidelines of the donors’ conference and reiterated its commitment to completing the programme.

Finance Minister Muhammad Ishaq Dar and IMF officials “discussed challenges to regional economies in the wake of climate change,” according to a Finance Ministry statement following the meeting’s conclusion.

“(The) finance minister reiterated the commitment to complete the Fund program,” it added.

The lender is yet to approve the release of $1.1 billion originally due to be disbursed in November last year, leaving Pakistan with only enough foreign exchange reserves to cover one month’s imports.

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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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