Govt restricts budget deficit to Rs3.4tr
The Pakistan Tehreek-e-Insaf (PTI) government has managed to restrict overall budget deficit to below Rs3.4 trillion or 8.1 percent of the size of the economy in its second year in power due to steep cuts in expenditures and provincial cash surpluses.
The budget deficit of 8.1 percent of the gross domestic product (GDP) was far better than the International Monetary Fund’s (IMF) forecast of Rs3.9 trillion or 9.2 percent of the GDP and independent assessments of close to 10 percent due to adverse impacts of the deadly coronavirus on the economy.
It cut the federal development expenditures by one-third or Rs233 billion to contain the deficit, far steeper than the IMF’s assessment and expectations of Federal Minister for Planning and Development Asad Umar.
However, the budget deficit exceeded the original target of 7.1 percent of the GDP, which the National Assembly had approved last year for fiscal year 2019-20 that ended on June 30.
The statistics of the Ministry of Finance showed that the deficit was Rs3.376 trillion or 8.1 percent of the GDP in fiscal year 2019-20.
The primary deficit – total revenues minus interest payments – also beat the IMF forecast and stood at Rs757 billion or 1.8percent of the GDP. The IMF had expected the primary deficit equal to 2.7 percent of the GDP.
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Govt may okay $125mn for Roosevelt
The Economic Coordination Committee (ECC) of the cabinet, which is scheduled to meet on Wednesday, is expected to approve funding of $125 million to enable Pakistan International Airlines Investments Limited (PIAIL) to rescue Roosevelt Hotel that has fallen into a debt trap and its assets are at risk.
Sources told that the PIAIL chairman, in its letter sent on August 4, 2020, informed the Aviation Division that the financial health of PIA Corporation Limited (PIACL) neither permitted repayment of $50 million to PlAIL in the near future nor could it borrow any funds on account of a lack of cash flow and already pledged assets.
Therefore, according to the letter, the government of Pakistan has been requested to provide a financing of $125 million urgently, enabling them to secure PIAIL’s most valuable asset.
The Aviation Division had earlier informed the economic decision-making body that in the backdrop of Covid-19 pandemic, the hotel industry had been severely impacted across the globe. PlAIL-owned Roosevelt Hotel in Manhattan, New York has also experienced extreme cash flow constraints since March 2020.
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In Pakistan, ADB may be allowed bond float
The Economic Coordination Committee (ECC), which is meeting on Wednesday, is likely to allow the Asian Development Bank (ADB) to launch Offshore Pakistan Rupee (PKR)-Linked Bonds worth $200 million for non-resident investors.
Earlier, the minimum tenor for the bonds was expected to be three years. However, in its terms and conditions sent to the government, the State Bank of Pakistan (SBP) said the bond float would be restricted to a maximum notional value of the equivalent of $200 million with minimum tenor of two years.
Pakistan has said proceeds of the bonds will be used by the ADB for project financing in priority sectors in the country. The ECC, in its meeting held on July 15, 2020, granted in principle approval to a summary prepared by the Finance Division for allowing the ADB to issue Offshore PKR-Linked Bonds to non-resident investors with some directives.
According to the directives, terms and conditions, as suggested by the SBP for the proposed bond programme, will have to be followed and the case should be resubmitted to the ECC for consideration before launching the proposed programme.
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Growers shift away from cotton
Farmers are shifting from cotton to other crops due to low prices and to address overall imbalances in cotton industry, effective policy initiatives need to be undertaken, Federal Minister for National Food Security and Research Syed Fakhar Imam told participants of a webinar on Monday.
Speaking at the webinar titled “Problems faced by the cotton industry in Pakistan”, the minister said due to high contamination rate in the cotton produced in Pakistan, the export of the commodity was affected.
He added that the most important factor which affected cotton quality in Pakistan was the seed quality. He was of the view that to address the imbalances, effective policy initiatives should be taken.
The event organised by the Centre for Global and Strategic Studies (CGSS) discussed production challenges, cotton quality deterioration and limited varieties of cotton seeds.
Speaking on the occasion, CGSS President Syed Khalid Amir Jaffery said to improve cotton production, linkages between the agriculture sector and industries needed to be enhanced.
He mentioned that there was a need to boost the overall condition of the cotton industry through modernisation and technology upgrade.
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Dr. Hafeez paints rosy picture of economy
Adviser to the Prime Minister on Finance Dr Abdul Hafeez Sheikh has wrapped up the economic performance of the government before the federal cabinet, saying the fiscal and primary deficit were lower than expected, central bank’s reserves increased and the current account deficit was slashed from $20 billion to $3 billion in two years.
While giving a rundown of the Pakistan Tehreek-e-Insaf (PTI) government’s two-year economic performance, the PM’s adviser said that the fiscal deficit post-Covid was expected at 9.1 percent but it was recorded at 8.1 percent and the primary deficit expected at 3.1 percent, was recorded at 1.8 percent – “the lower the primary deficit, the better”.
Sheikh said that the current account deficit was brought down from $20 billion to only $3 billion while the reserves of State Bank of Pakistan had increased from $8.5 billion to $12.5 billion.
Briefing the media about the cabinet meeting, chaired by Prime Minister Imran Khan, Federal Minister for Information and Broadcasting Senator Shibli Faraz shared details of Sheikh’s briefing and touched upon other important issues discussed in the cabinet.
The information minister said that Sheikh informed the cabinet that the policy of encouraging exports and discouraging unnecessary imports has paid rich dividends. Under the Ehsaas programme, the minister said, financial assistance was given to some 15 million families in a transparent manner and subsidy was given to the Utility Stores Corporation to ensure supply of daily use items at affordable prices.
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ECC to review cancelled LPG contract
The Economic Coordination Committee (ECC), which is scheduled to meet on Wednesday this week, will take up for review a liquefied petroleum gas (LPG) extraction deal between Jamshoro Joint Venture Limited (JJVL) and Sui Southern Gas Company (SSGC).
It was revealed by Ministry of Energy (Petroleum Division) Secretary Asad Hayauddin while briefing the Senate Standing Committee on Petroleum on Monday.
Hayauddin stressed that LPG was part of the national energy security plan and any disparity in pricing structure for domestic LPG production and LPG imports was being addressed by a special committee, led by the Planning Commission deputy chairman. The Senate Standing Committee on Petroleum directed SSGC to review its decision and restart domestic LPG production in the national interest.
SSGC had stopped natural gas supply to JJVL on June 21, 2020. As a result, about 9,000 tons of LPG and 4,000 tons of natural gas liquids (NGL) disappeared from the market, triggering price volatility and putting an additional burden on the current account deficit with an increase in LPG imports, which would cost an estimated $50 million this year.
“SSGC must review and revisit its decision keeping in mind the full utilisation of national assets and local resources in the national interest,” remarked Senator Mohsin Aziz, Chairman of the Standing Committee on Petroleum. “SSGC is a national flag carrier in the oil and gas sector and has the responsibility to serve consumers.”
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Tax measures needed to support country’s textile sector
The Federal Board of Revenue (FBR) has the potential to support exporters in these difficult times, said World Bank’s Programme Lead Public Sector Specialist Clelia Rontoyanni.
Addressing a consultative dialogue on “Textile sector’s competitiveness amid Covid-19” on Tuesday, she highlighted various aspects of support for competitiveness in textile businesses.
Experts from public and private sectors, who participated in the dialogue, remarked that facilitation and appropriate taxation measures could play an instrumental role in enhancing the competitiveness of textile businesses and boosting exports.
“In the recent past, several new measures have been introduced by the FBR including the reduction in sales tax rate, customs duty and ease in filing tax returns that may help in improving the cash flow of exporters,” said Rontoyanni.
“Tax authorities need to realise that two-thirds of imports are inputs for the manufacturing sector and therefore tariffs on inputs should be lowered.” The World Bank official added that the tax system should be predictable and responsive to needs of the private sector.
Sharing his observations, FBR’s former member Mohammad Raza Baqir said the textile sector was transitioning towards production of value-added goods. Covid-19 had adversely impacted the sector, hence, measures should be taken to facilitate it and overcome the unprecedented challenge, he said.
Another former FBR member Raana Ahmed suggested that in view of Covid-19, the FBR could consider relaxing the burden of direct taxes on the textile sector.
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Egypt envoy ready to ‘go extra mile’ to raise trade with Pakistan
Egypt is keen to further enhance bilateral trade relations with Pakistan as both countries have a good potential to export many high-quality products to each other at competitive rates, said Ambassador of Egypt to Pakistan Tarek Mohamed Hussein Dahroug.
Addressing the business community during his visit to the Islamabad Chamber of Commerce and Industry (ICCI) on Tuesday, the Egyptian envoy said he was quite ambitious and ready to go the extra mile in order to promote trade relations between Egypt and Pakistan as it would bring more beneficial results for economies of both countries.
He said, “By enhancing trade cooperation with Egypt, Pakistan can get easy access to many markets of Africa including Libya, Morocco, Sudan and Algeria.”
He suggested that Pakistan and Egypt should focus on promoting direct exports that would be more competitive in terms of prices for each other.
Pointing to a memorandum of understanding (MoU) signed a long time ago for setting up the Pak-Egypt Business Council, he said no progress had been made and urged both the countries to make target-oriented efforts to achieve mutually beneficial outcomes.
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Nepra increases power tariff for Aug, Sept
The National Electric Power Regulatory Authority (Nepra) has increased electricity rates by Rs0.9573 per unit for the ongoing month in line with fuel adjustment charges and Rs1.0982 per unit for the next month, but the raise will not be implemented for lifeline consumers.
The delayed decision by the electric power regulator over calculating the Fuel Cost Adjustments (FCAs) has benefited consumers with limited increase in electricity tariffs for the months of August and September.
The regulator notified the adjustment in approved tariff on account of variations in fuel charges for eight months – from November 2019 to June 2020 – for all power distribution companies.
The calculations have been delayed partially due to the lockdown and limited working hours during the last several months in the wake of the Covid-19 pandemic.
According to the Nepra notification, fuel cost was high during December 2019 when the FCA was calculated at Rs1.8779 per unit. It was Rs1.1108 per unit in January 2020 and surged to Rs1.2051 per unit in February 2020.
A senior official of the regulatory body said that the notification of fuel adjustment from November 2019 to January 2020 was delayed deliberately to prevent extraordinary increase in electricity rates.
“It was expected that oil prices would drop in the international markets; therefore, the impact would eventually be less on consumers,” the official added.
The FCAs pertaining to January 2020, February 2020, March 2020 and May 2020 will be charged in the electricity bills for the month of August 2020 that is Rs0.9573 per unit.
While the fuel adjustment charges for the months of November 2019, December 2019, April 2020 and June 2020 will be charged in consumer bills of September 2020 which will be Rs1.0982 per unit.
The impact of the FCAs will be applicable for all consumer categories except for the lifeline ones.