Government eases offshore shareholding law
The Pakistan Tehreek-e-Insaf (PTI) government has allowed Pakistani and dual nationals to keep secret their less than 10 percent shareholding in offshore companies – a move that is contrary to the political ideology of the ruling party and Prime Minister Imran Khan.
Under the Companies Act 2017, it was legally binding for people who have substantial shares in local companies or officers of local companies to disclose their stakes in offshore companies. However, the government promulgated a presidential ordinance on May 4 to make the disclosure condition less stringent.
In yet another questionable move, the PTI government has allowed companies to launch real estate projects without first securing no-objection certificate to launch a residential or commercial project. It has also allowed companies to take advances from people without first securing necessary approvals.
The Pakistan Muslim League-Nawaz (PML-N) government had made it binding for substantial shareholders of domestic companies to disclose their offshore stakes in the aftermath of Panama Papers leaks.
However, PM Imran’s government that came to power on the promise of ensuring accountability of all and recovering the plundered money has surprisingly relaxed the condition. It has introduced amendments to Section 452 of the Companies Act 2017. The original 2017 Act stated, “Companies’ Global Register of Beneficial Ownership, substantial shareholder or officer of a company incorporated under the Company law, who is citizen of Pakistan within the meaning of the Citizenship Act 1951 (II of 1951), including dual citizenship holder whether residing in Pakistan or not having shareholding in a foreign company or body corporate, shall report to the company his shareholding or any other interest as may be notified by the Commission.”
Consumers prefer to buy digitally during covid-19
The coronavirus pandemic has triggered a drastic change in the purchasing pattern across the world with consumers now preferring to buy digitally rather than physically.
“Online shopping almost doubled on our app and increased further in Ramazan,” said Hysab Kytab CEO Veqar Islam at a webinar on Thursday.
He highlighted that across the world the adoption of budgeting and financial planning was growing. In 2015, the ratio of adoption had been 8 percent, which grew to 10 percent in 2017 and to a massive 29 percent in 2019, he pointed out.
Highlighting that women made up just 15 percent of the total user base of Hysab Kitab, Islam voiced hope that the proportion of females would increase in the near future because a large number of women in Pakistan prepared home budgets.
He stressed that lockdowns caused a drastic change in the buying behaviour of consumers all around the world and Pakistanis were no exception.
“One of the highest spending patterns was seen in the grocery category as the amount spent rose manifold, however, this was only temporary and is now expected to decline as consumers have stocked up groceries in bulk,” he said. On the other hand, 70 percent decline was recorded in the amount spent on eating out after the lockdown was imposed, he said.
According to Pakistan Telecommunication Authority (PTA), the internet usage increased 15 percent during the period under review.
Also present at the webinar, Hysab Kytab Global Head Yasir Ilyas pointed out that the amount spent on fuel and transport during the Covid-19 pandemic decreased 31 percent.
“However, the trend of mobility and fuel consumption saw an increase of 16 percent in the Ramazan season,” he added.
Ilyas highlighted that although ride-hailing services saw a 78 percent plunge in their total transactions after the lockdown was enforced, the same companies registered a 128 percent growth in their delivery segments.
Jaggery (Gur) exporters seek ban lifting
After sugar exporters, jaggery (Gur) and organic brown sugar exporters have sought the lifting of ban on exports, which has been imposed in the wake of investigation into a sugar scam by an inquiry commission.
The government has delayed decision on withdrawing the ban on Gur and organic brown sugar exports.
Sources told that Prime Minister Imran Khan asked about the ban on export of Gur and organic brown sugar in a meeting on April 28. The minister for industries and production told the premier that the decision on lifting the ban had been delayed for two weeks in order to assess the possible impact on sugar prices if the export of Gur and organic brown sugar was allowed.
“No decision has been taken yet and export of Gur as well as organic brown sugar is still banned. The Ministry of Industries took up the issue with the Economic Coordination Committee (ECC) but it was decided to keep the restriction in place till the end of Ramazan,” an official revealed.
Afghanistan is a big market for Gur export. Sugar millers have a monopoly in the market. Farmers of Khyber-Pakhtunkhwa have sought permission for Gur export. In the past, the commodity was exported to Afghanistan as well as Gulf countries.
The inquiry commission is currently investigating the export of sugar that caused price hike in the domestic market and gave a windfall of billions of rupees to the millers. The millers also gained from subsidy on sugar export.
The government gave three more weeks to May 16 to the inquiry commission for completing its probe. Earlier, the commission sought more time as the director general of the Federal Investigation Agency (FIA) was of the view that the scope of the investigation was very vast and a lot of information processed and analysed needed further collaboration and follow-up.
Pakistan, IMF to continue cooperation
The International Monetary Fund (IMF) would continue to cooperate with Pakistan for sustainable economic growth in future, said IMF Resident Representative Teresa Daban Sanchez.
In a meeting with Federal Minister for Economic Affairs Makhdoom Khusro Bakhtiar on Thursday, the two sides exchanged views on the looming global economic crisis, negative impact on communities due to the coronavirus pandemic and cumulative global response to combat the Covid-19 shock. The minister praised the IMF’s support of $1.4 billion under the Rapid Financing Instrument to cushion the socio-economic impact of the Covid-19 outbreak.
He highlighted that the government and IMF were working together for much-needed structural reforms for fiscal consolidation and long-term sustainable growth.
Bakhtiar expressed hope that the IMF and Pakistan would collaborate to mitigate the impact of the pandemic on a regular basis and would address the emerging situation while keeping focus on social safety nets for the vulnerable section of society to navigate through the crucial time.
SBP slashes interest rate by 100bps to 8 pc
In line with market expectations, Pakistan’s central bank has cut the benchmark interest rate by 100 basis points to 8 percent to help people, businesses and the economy fight against the coronavirus pandemic.
The State Bank of Pakistan (SBP) announced the decision taken by its monetary policy committee (MPC) in a meeting on Friday.
A further drop expected in the rate of inflation provided a room to the central bank to having cut the rate.
“This decision reflected the MPC’s view that the inflation outlook has improved further in light of the recent cut in domestic fuel prices. As a result, inflation could fall closer to the lower end of the previously announced ranges of 11-12 percent this fiscal year and 7-9 percent next fiscal year,” a statement issued by the bank stated.
The interest rate is a tool available with SBP to create a balance between the rate of inflation and economic activities in the country.
The MPC highlighted that the coronavirus pandemic has created unique challenges for monetary policy due to its non-economic origin and the temporary disruption of economic activity required to combat it.
While easier monetary policy can neither affect the rate of infection transmission nor prevent the near-term fall in economic activity due to lockdowns, it can provide liquidity support to households and businesses to help them through the ensuing temporary phase of economic disruption.
“In particular, the successive policy rate cuts and sizeable cheap loans provided through the SBP’s enhanced refinancing facilities have helped maintain credit flows, bolster the cash flow of borrowers, and support asset prices.”
This has contained the tightening of financial conditions that would otherwise have amplified the initial necessary contraction in activity.
The coronavirus has badly hit economic activities. The lower interest rate on outlook for low inflation would help the economy to recover by 2-3 percent next fiscal year (FY21) compared to projected negative economic growth in range of 0.5-1.5 percent in the current fiscal year ending June 30, 2020.
Moody’s investors put Pakistan under watch
Moody’s Investors Service – one of top three global credit rating agencies – has put Pakistan under watch for possible downgrade of its long-term local and foreign credit ratings, suspecting that Islamabad may default on debt repayments to “private sector creditors” due to economic mess under the coronavirus pandemic.
“Moody’s has placed the government of Pakistan’s local and foreign currency long-term issuer and senior unsecured B3 rating under review for downgrade,” the US-based rating agency announced on Thursday.
“Consistent with Moody’s approach globally, the review period will allow the rating agency to assess whether Pakistan … would likely entail default on private sector debt,” it said. The rating agency, however, did not mention the duration of the review period, as to how long it would monitor Islamabad’s debt repayment activities and when it would announce its final decision regarding downgrade.
Moody’s said Pakistan had improved its economic indicators well before the outbreak of Covid-19 late in March and was still capable of continuing to pay off the debt on time.
However, the possible deterioration in the country’s current account deficit, likely depletion in its foreign currency reserves and low tax and non-tax revenue collections due to limited economic activities and anticipated contraction in the domestic economy may weaken the government’s ability to continue paying off the debt on time, going forward, the agency said.
Moody’s alert may turn the rupee-dollar exchange rate volatile and may increase cost of new foreign borrowing for the country in international markets, an analyst said.
Moody’s said the decision to place the ratings under review for downgrade reflected its expectation that the government would request for bilateral official sector debt service relief under the recently announced G20 initiative.
“Suspension of debt service obligations to official creditors would be unlikely to have rating implications; indeed such relief would increase the fiscal resources available to the government for essential health and social spending due to the coronavirus outbreak,” it said.
Economic relief stressed to mitigate covid-19 impact
Federal Minister for Economic Affairs Makhdoom Khusro Bakhtiar has stressed the need for efficient economic relief for the masses, especially the vulnerable segment of society, to mitigate the socio-economic impact of the Covid-19 pandemic.
In a video conference between Bakhtiar and State Bank of Pakistan (SBP) Governor Reza Baqir, the two sides discussed the economy and financial health of the country amidst the ongoing crisis. The minister appreciated the key steps taken by the SBP to support the public and small businesses amid the economic crunch.
Bakhtiar and the SBP governor talked about the Prime Minister’s Global Initiative on Debt Relief to coordinate with the international community for compact economic response. They also discussed various announcements made by the multilateral donors that offered initial relief packages of $1.4 billion (International Monetary Fund) and $1 billion (World Bank) to Pakistan.
Both officials agreed on the proposed global initiative that would lay the foundation for an urgent debt relief to the developing countries and the initiative was built on the prime minister’s belief that enhanced fiscal capacity had been fundamental for recovering from the ongoing crisis.
At the conclusion of the meeting, the SBP governor lauded efforts of the ministry to coordinate with the international donors for assistance in order to mitigate the socio-economic impact of the pandemic on the country.