Door left Ajar for IMF-Islamabad contract
In a first serious challenge to keep the $6 billion extended fund facility on track, Pakistan and the International Monetary Fund on Friday could not reach a staff-level agreement on contentious issues but kept the doors open for the possibility of attaining one in coming days.
The issues that stopped both the parties from reaching an agreement include the need for a mini-budget, new tax collection target for the Federal Board of Revenue and hike in electricity prices.
The IMF mission remained engaged in hectic negotiations with Pakistani authorities for 11 days but returned to Washington without reaching a staff-level agreement.
“The mission and the authorities made significant progress in the discussions on policies and reforms. In the coming days progress will continue to pave the way for the IMF Executive Board’s consideration of the review,” according to a statement issued by the IMF at the conclusion of its mission’s visit to Pakistan.
The IMF said that steadfast progress on programme implementation would pave the way for the review.
The IMF would release the third loan tranche only after a staff-level agreement is reached and approved by the IMF Executive Board.
“Pakistan’s case will go to the IMF board only when Islamabad fulfils the conditions,” said Dr Zubair Khan, an economist, while talking at The Review Programme – the prime time economic and national security affairs talk show. He said that it was an opportunity for Pakistan to renegotiate the programme.
The wording of the IMF handout was unusual, affirming that Pakistan and the IMF would have to cover a lot of ground before reaching a staff-level agreement.
The title of the IMF’s second review mission statement was ‘the conclusion of the IMF mission to Pakistan’.
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Inter-bank market: Pkr stable against $
The rupee remained stable against the dollar at Rs 154.35/154.85 in the inter-bank market on Friday compared with Thursday’s close of Rs 154.35/154.85, according to forex.pk.
Earlier, the SBP let the rupee depreciate massively in the inter-bank market after finalisation of an agreement with the International Monetary Fund (IMF) for a loan programme on May 12, 2019.
The IMF has asked Pakistan to end state control of the rupee and let the currency move freely to find its equilibrium against the US dollar and other major world currencies.
Also, the World Bank, which finances some of the infrastructure and social safety net projects in Pakistan, has supported the idea of leaving the rupee free from state control in a bid to give much-needed boost to exports and fix a faltering economy.
Cumulatively, the rupee has depreciated almost 49 percent since December 2017, according to the central bank.
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Govt to supply power to exporters at lower tariff
The government is striving to revive the country’s economy by working to ensure energy supply at concessionary rates, which is the topmost priority, said Punjab Governor Chaudhary Muhammad Sarwar.
Talking to a delegation of businessmen on Friday, the governor said that the government was taking all steps to ensure a business and investment-friendly environment as it was imperative for economic progress and prosperity of the country.
“We are aware of the problems being faced by the trade and industrial sectors, and are undertaking every possible measure to provide a level playing field to the business community,” he said.
Sarwar added that the government was also striving to reduce the cost of doing business by ensuring energy supply at concessionary tariffs to the export-oriented industry.
He appreciated the role being played by the private sector in the country’s economic development. He stressed that at present, tough economic conditions called for taking difficult decisions but the government was committed to improving the economy.
He urged industrialists to focus on export-oriented products as an increase in exports was essential for economic stability. “The country has been facing numerous challenges for the past few years, which has also affected the business community.”
The governor voiced hope that the business community would continue to play a proactive role in order to uplift the economy.
Meanwhile, the business community appreciated the governor’s efforts for getting the GSP Plus status from the EU, which resulted in doubling of Pakistan’s exports to EU member states from $3.6 billion in 2008 to $6.8 billion in 2018.
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Large industries register healthy growth of nearly 10 pc
The large industries bounced back last month and posted a healthy growth of nearly 10 percent, breaking a cycle of constant contraction in past over one year, reported Pakistan Bureau of Statistics (PBS) on Friday.
The large-scale manufacturing (LSM) output increased 9.66 percent in December over the same month of the last year, according to the national data reporting agency.
This helped to bring the overall cumulative contraction in the LSM sector down to 3.4 percent during July-December period of fiscal year 2019-20. During five months, the contraction in LSM sector was close to 6 percent, which significantly came down to 3.4 percent due to better performance in large industries in December.
Large businesses were bearing the brunt of very high interest rate, documentation drive by the Federal Board of Revenue (FBR) and high energy prices. The growth in the LSM will also help to create jobs if the trend continues in coming months.
In its first quarterly report, the central bank noted that while large export-oriented and import-competing industries remained bullish on fundamentals, they refrained from taking a long-term view.
PBS data showed that out of 15 major industries, eight recorded some growth while the output in seven industries contracted in the July-December period.
Data collected by the Oil Companies Advisory Committee (OCAC) showed that 11 types of industries registered on an average 0.7 percent negative growth in the July-December period of the current fiscal year. But in December alone, the OCAC-monitored industries reported 0.1 percent growth.
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Interest payments swallow 57pc of tax revenues
The federal government’s efforts to consolidate its budget have been overshadowed by a 46 percent increase in interest payments that ate up Rs 1.3 trillion or 57 percent of tax revenues in first half of the current fiscal year, showed the Ministry of Finance’s latest data.
From July through December of fiscal year 2019-20, the overall budget deficit contracted both in absolute terms and in relation to the size of national economy, primarily due to savings of Rs 323 billion by provinces and hefty profit of Rs 426.5 billion by the central bank.
The overall budget deficit – gap between total expenditures and revenues – stood at Rs 994.7 billion or 2.3 percent of gross domestic product (GDP) in first half of the current fiscal year, according to the federal fiscal operations summary that the Ministry of Finance released on Friday.
The deficit was over Rs 1 trillion or 2.7 percent of GDP in the same period of previous fiscal year.
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Umar directs ministries to monitor food condition
Minister for Planning, Development and Special Initiatives Asad Umar directed the Ministry of Food Security, utility stores and other provincial ministries to regularly monitor the demand and supply situation, especially of 18 essential edible items to keep their prices under control.
Chairing a review meeting on Friday to control food inflation, Umar emphasised on strengthening the monitoring system of the 18 necessary commodities including wheat, sugar, flour, edible ghee/oil, potatoes, onions and pulses in all the provinces.
A number of measures for overcoming the crisis of high prices of food items were also discussed during the meeting.
The meeting was informed that the government was taking every possible step to reduce food inflation. Umar added that Prime Minister Imran Khan’s top priority was to provide essential commodities to the people at reasonable prices.
According to the PM directive, in the next cabinet meeting, the prime minister will be given further recommendations to reduce the prices of commodities.
Moreover, he instructed the officials to maintain regular supply of wheat from public-sector stocks. He also directed Utility Stores Managing Director Umar Lodhi to check prices of pulses. The minister also instructed food ministry to formulate strategies to increase local production of food products.
He also ordered that a close watch be kept on the sale and purchase situation of onions and potatoes. Umar assured that the high prices will start to decline this month (February) and inflation was expected to drop significantly.
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Exports have fallen in current fiscal, NA said
The National Assembly was informed by the Ministry of Finance on Friday that the exports of the country had decreased during the current fiscal year.
The written reply submitted to the lower house of parliament reveals that exports during the fiscal year 2018-19 declined to $22.98 billion as against $23.20 billion in FY 2017-18. Similarly, the imports also slumped by 24.7 percent to $45.80 billion in FY 2018-19 as compared with $60.86 billion in FY18, it added.
Parliamentary Secretary for Commerce, Industries and Production Aliya Hamza Malik said with the decrease in imports, Pakistan’s trade deficit has also declined considerably in the first half of the current fiscal year.
She said that Pakistan has benefitted by obtaining the GSP Plus status as trade with EU has improved.
“The government is continuing bilateral talks with the EU countries to promote trade while trade exhibitions are also being organised in various countries,” she said. “The GSP Plus status is in our interest for which necessary measures are being taken.”
The PM House, in its written reply to the National Assembly, revealed that collection from auction of the PM House vehicles totalled to Rs 217.5 million. On the other side, the finance ministry informed that the country’s current account deficit, which was $8.6 billion in the last fiscal year, had reduced to $2.2 billion.
The finance ministry disclosed that sales tax on sugar has been increased to 17 percent for the current fiscal year from the previous 8 percent. The tax impact on sugar price is Rs 3 per kilo, while sugar manufacturers are paying taxes as per the price of Rs 60 per kilo.
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Pakistan, Turkey: businessmen discuss how to increase trade
Pakistani and Turkish business people gathered in Islamabad on Thursday to discuss ways to enhance bilateral trade and investment.
The gathering was held at a special networking session, which was organised by Pakistan’s commerce ministry during the two-day visit of Turkish President Recep Tayyip Erdogan, said a statement issued by the ministry.
Accompanying Erdogan in his visit, the Turkish business delegation comprised leading business representatives from engineering, energy, tourism, construction, defence, automotive, chemicals, information technology and other sectors.
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Borrowing by private sector dips 68 pc
Apparently most of the industries and businesses have little faith in the government’s tall claims of improvement in the national economy as they keep avoiding new investment projects in anticipation of a visible positive change in the country.
Businesses operating in the private sector borrowed only Rs 175.23 billion in first seven months (Jul-Jan) of the current fiscal year, which was 68.25 percent down compared to Rs 552.01 billion borrowed in the same period of previous fiscal year, the State Bank of Pakistan (SBP) reported on Thursday.
“The prevailing high interest rate has discouraged businesses from borrowing a higher amount…and initiating new investment projects,” BMA Capital Executive Director Saad Hashmi told.
Fresh borrowing by businesses was mostly meant for running their day-to-day operations under a tough economic environment. “When we interacted with businessmen, they said it was not feasible to do business at such a high interest rate,” he said.