State Bank announces additional relief for exporters
The State Bank of Pakistan (SBP) has announced additional relief measures for exporters in the backdrop of challenges being faced by the export sector due to the COVID-19 pandemic.
A six-month extension in the shipment period has been allowed for those part-one loans for which shipment is falling due from January to June 30, 2020.
In case of non-shipment after January 1, 2020 to date, the fine already charged shall be retained by the SBP BSC offices till the submission of Annexure-F (the application form used for refund of non-shipment fine) within the extended period of six months.
However, in cases where the delayed shipment fine has already been charged against the shipment falling due from January 1, 2020, the same shall be refunded.
Currently, the exporters availing subsidised loans under the Export Financing Scheme (EFS) under Part-II are required to show at least two times matching export performance against the financing availed during FY 2019-20 on a daily average product basis.
“This has been reduced to 1.5 times. Likewise, the export performance requirement for FY 2020-21 will also be 1.5 times,” the SBP said in a notification.
Furthermore, an additional period of six months has been allowed to the exporters for meeting the required export performance against financing of EFS/IERS-II for the monitoring period of FY 2019-20.
Accordingly, eligible entries showing shipments and export proceed realisation up to December 31, 2020 are allowed to be included in the export performance of FY 2019-20. This export performance of extended period will also be considered for the entitlement of limit for FY 2020-21.
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Exporters: tax refunds to be released in March
Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh on Friday assured exporters that the government would clear general sales tax (GST) refund claims in the current month while export rebate would be given in April.
In a meeting with a delegation of exporters, the adviser expressed the government’s resolve to do everything possible to address the exporters’ problems and provide them relief with early release of rebate, duty drawback and GST refund.
“The government has no desire or policy to keep the money that belongs to the exporters even a day longer nor do we find any reason to delay the repayment,” he said, while discussing varying proposals with the exporters.
He directed the finance secretary and the Federal Board of Revenue (FBR) chairperson to hold meetings with the relevant stakeholders and provide relief as much as possible to the exporters.
Shaikh also appreciated the decision taken by the All Pakistan Textile Mills Association (Aptma) that it would not lay off employees in the time of crisis and advised them to take care of their workers as the government was taking care of them.
Earlier, the exporters discussed with the finance adviser various issues that they were facing after the outbreak of coronavirus, the evolving situation of global economies and its impact on the export sector of Pakistan.
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IMF to give tax break to businesses hit through Corona
The International Monetary Fund (IMF) has agreed with Pakistan to give tax breaks to businesses being affected by the global coronavirus pandemic but Islamabad does not feel the need to renegotiate the $6 billion package, which may also make next year’s tax collection target unrealistic.
“The IMF has agreed to give tax concessions to industries and individuals, who are being affected by the coronavirus,” said Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh on Friday. He was responding to a question during Prime Minister’s media interaction.
But the adviser ruled out the possibility of declaring force majeure to renegotiate the deal saying “nobody thinks that we are there”.
Shaikh said in case of need, Pakistan can ask the IMF for additional support while the Asian Development Bank (ADB) and the World Bank have also agreed to give concessional loans to fight the spike in cases being affected by the global pandemic.
The IMF has already announced $50 billion package for the economies being hit by the contagion.
The adviser said the government would announce a comprehensive relief package for people, industries, exporters, construction, tourism and small and medium enterprises on coming Tuesday.
Shaikh said the economy had started stabilizing before coronavirus contagion hit it. He said besides exports the foreign remittances are also affected. The IMF has already agreed to relax the budget deficit ceiling to the extent of COVID-19 related spending.
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Hotel industry requires relief package
No sector seems to be safe from the novel coronavirus that has enveloped the entire world. The COVID-19 pandemic has particularly devastated the global tourism and hospitality industry.
Local travel in Pakistan has also been limited due to the persistent increase in infection cases across the country, which has directly impacted the travel and tourism industry.
Hotel and travel operators in Pakistan are facing huge losses. Pakistan Hotels Association has demanded that the federal government come up with a relief package for the hospitality industry.
The measures taken to prevent the spread of coronavirus are affecting the flow of guests into hotels. Around 90 percent of rooms in Pakistan’s hotels are empty, which is causing financial distress to the sector.
Pakistan Hotels Association Chairman Zubair Baweja said, “Hotels are an important pillar of the hospitality industry and in order to save them the government must announce a relief package as soon as possible.”
He said the hotel industry business in the current summer season had been threatened by the virus, adding the industry’s revenue had vanished and its members were facing trouble in paying salaries to staff as well as utility bills.
“The hotel industry can be provided with immediate relief by delaying payment of utility bills and by doing away with government taxes and duties,” Baweja stressed.
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Steel producers request relief measures
Following the outbreak of coronavirus in the country, Pakistan Association of Large Steel Producers (PALSP) has requested relief measures from the government, citing the global economy seems to be heading towards recession.
“It is an extraordinary situation, which calls for extraordinary measures,” remarked PALSP Secretary-General Syed Wajid Bukhari in a statement on Friday. “Governments and central banks all over the world have introduced fiscal and monetary measures to counter the disruption caused by the pandemic.”
With the Pakistani economy already struggling to leap forward, the coronavirus outbreak is expected to cause a cash crunch and drastic reduction in demand, which may leave many businesses bankrupt and workers unemployed.
To avoid a complete meltdown of the economy, the interest rate must be slashed to 5 percent for the next 12 months on an immediate basis as an extraordinary measure, suggested Bukhari while pointing out that the US had recently reduced its policy rate to near 0 percent.
He lamented that Pakistan had one of the highest interest rates in the world.
“There are companies which have paid more than Rs1 billion in interest in the last one year alone,” he pointed out. “Due to the economic slowdown in the country, the cost of raw material has risen up to 35 percent, which the industry cannot pass on to customers because of their lower purchasing power.”
He demanded that all principal loan repayments in the long and short term should be deferred for the next 12 months while the industry could try to pay mark-up at a reduced rate of 5 percent.
Bukhari stressed that the minimum turnover tax for the industry and retailers should be reduced to 0.25 percent with immediate effect. He urged the government to reduce the regulatory duty and other import duties on the meltable steel scrap to 0 percent as it was a primary raw material for the steel industry.
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Government revises public debt projection upwards
The Pakistan Tehreek-e-Insaf (PTI) government has revised the public debt projection upwards, estimating now that the debt in absolute terms will swell by 100 percent within five years to Rs47.6 trillion or over three-fourths of the size of national economy.
The revised projection has been approved by the federal cabinet this week as part of the Budget Strategy Paper 2020-23.
The Ministry of Finance said the public debt projection had been revised upwards due to a higher budget deficit and higher-than-anticipated devaluation of the currency in last fiscal year 2018-19.
There has been criticism against the Ministry of Finance for its inability to make a realistic projection just 15 days before the end of previous fiscal year, which created a hole of Rs800 billion.
The public debt, which stood at Rs24.2 trillion or 72.1 percent of gross domestic product (GDP) at the end of Pakistan Muslim League-Nawaz (PML-N) government, may surge to Rs47.6 trillion or 77 percent of GDP by 2022-23, showed the Budget Strategy Paper. The revised estimate was higher by 7 percent of GDP as compared to the nine-month-old projection.
There will be an increase of Rs23.4 trillion or 97 percent in public debt during the PTI’s five-year term as compared to the debt level left behind by the PML-N. About one-third addition to the public debt during the PTI government’s tenure has been projected on account of devaluation of the rupee against the US dollar. During its first year in power (2018-19), an increase of roughly Rs3 trillion in the public debt came because of currency devaluation.
Prime Minister Imran Khan has remained critical of Pakistan Peoples Party (PPP) and PML-N’s economic policies that, according to him, led to a huge increase in the country’s debt burden. In February last year, PM Imran vowed to bring the public debt down to Rs20 trillion by the end of his government’s term.
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Pakistan plans to draw up oil hedging plan
As a tug of war between Saudi Arabia and Russia over oil production, coupled with the rapid spread of coronavirus, has sent crude prices crashing to a 17-year low in the global market, Pakistan has decided to come up with an oil hedging plan.
Experts are of the view that crude oil prices in the international market will crumble to $15 per barrel as big producers and exporters Saudi Arabia and Russia seem to be nowhere near ending their price war.
The battle between the two giants has added to the woes of oil market where demand has gone down sharply in the wake of coronavirus outbreak that has caused lockdowns in many countries.
Sources told that the cabinet, in a recent meeting chaired by Prime Minister Imran Khan, directed the Finance Division to expeditiously finalise a proposal for hedging petroleum products and bring it to the cabinet, through the Economic Coordination Committee (ECC), for formal approval.
Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh told the cabinet meeting that prices of petroleum products had plummeted in the international market following the collapse of an agreement between Saudi Arabia and other oil producers, led by Russia, on limiting crude production.
He said the Finance Division was working on various hedging options to take advantage of the current low oil prices, which would slash the import bill and leave a positive impact on the national economy.
Cabinet members emphasised that the hedging proposal should be finalised at the earliest and presented to the cabinet for approval.
Crude prices hit a 17-year low below $26 per barrel on Wednesday amid fears that the coronavirus pandemic and containment measures could trigger a global recession.
A debate has kicked off in the global market as to where the oil price slump will stop. Experts believe several companies will be washed away and industries will be hit hard by the virus, resulting in low demand for energy across the world.
Oil experts in Pakistan were of the view that the government should draw up a plan to fill the available storages by importing petroleum products for future needs.
They also suggested that Pakistan could explore the possibility of renting storages in different countries to keep cheaper petroleum products there for meeting its future needs.