Banks exploit private sector borrowers
The government’s increasing reliance on borrowing to remain afloat has allowed commercial banks to exploit private-sector borrowers as the banks have started charging a premium on lending to the private sector despite an overall low demand for credit, reveal minutes of the last Monetary Policy Committee (MPC) meeting.
The minutes showed that economic growth would remain low this year due to the agriculture-sector supply shocks and the Federal Board of Revenue (FBR) would not be able to achieve even the downward-revised tax target of Rs5.238 trillion. The federal cabinet has not yet endorsed the revision in the FBR’s target from Rs5.5 trillion.
The MPC had met on January 28 and decided to keep the policy rate unchanged at 13.25 percent with a majority decision of 7-2. The central bank released the minutes of the meeting days before the next MPC meeting on Tuesday to review the monetary policy.
This week, Prime Minister Imran Khan has twice said that the central bank is going to cut the interest rate.
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SECP holds sessions on risks and scope of capital market
The Securities and Exchange Commission of Pakistan (SECP) has said that, through its investor awareness and protection programme, it has been interacting with audiences to educate them about risks and scope of the capital market, insurance and non-banking financial sectors.
During these interactive sessions, according to the SECP, it aims to create awareness of how to protect the public from financial fraud and scams.
In the fiscal year 2018-19, the Investor Education Department signed seven memorandums of understanding (MoUs) with the private and public sector universities and institutions.
Following the MoUs, the SECP has conducted 110 awareness seminars in many cities including Islamabad, Lahore, Karachi, Peshawar, Quetta, Swabi, Gujranwala, Faisalabad and Multan, according to an annual report issued by the SECP.
These events included classroom awareness sessions, mentoring women entrepreneurs and start-ups, incentives-based stock trading competition among groups of university students, etc.
Awareness sessions were also conducted for far-flung areas such as Skardu, Khuzdar and Gilgit through video conferencing.
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Government orders release of rs15b in blocked tax refunds
The federal government on Thursday ordered tax authorities to release the stuck Rs15 billion worth of exporter refunds as parliamentarians sought a reversal of the 17 percent sales tax imposed on the export-oriented sector due to mishandling by the tax machinery.
At least three meetings were held during the day at the finance ministry, Prime Minister’s Office and Parliament House to find solutions to the growing problems faced by the exporters after the Federal Board of Revenue’s (FBR) FASTER system was “halted due to technical glitches”.
International Monetary Fund (IMF) Resident Representative Teresa Daban also met with a delegation of exporters to find out why the FBR failed to timely release the tax refunds.
The FBR had developed the FASTER (Fully Automated Sales Tax E-Refund) system to clear exporters’ refunds within 72 hours. But the statements given by the exporters in meetings of parliamentary panels suggested that the FBR was taking seven to eight months in clearing the refunds.
Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh met with a delegation of Pakistan Textile Exporters Association (PTEA).
“Prime Minister Imran Khan has taken note of the situation and Shaikh has also given directives for the release of Rs15 billion in refunds,” said PTEA Patron-in-Chief Khurram Mukhtar.
Mukhtar said about 9,000 refund claims could not be filed due to the problems in the FASTER system. Even after the clearance of Rs15-billion refunds, about Rs35 billion would still be outstanding, he added.
Headed by Pakistan Tehreek-e-Insaf’s (PTI) Faizullah Kamoka, the National Assembly Standing Committee on Finance also took stock of the situation.
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Customs dept to give maximum import, export facilities
Sincere efforts are being made by the customs department to provide maximum import and export related facilities, said Generalised System of Preferences (GSP) Adviser Kamal Shehar Yar, adding that in this connection, 44 different government departments are threshing out viable solutions under National Single Window (NSW) programme.
While addressing a consultation session jointly organised by the Faisalabad Chamber of Commerce and Industry (FCCI) and Trade Development Authority of Pakistan (TDAP) on the post-Brexit scenario and new GSP scheme of UK for Pakistan, he said that Pakistan customs is the lead agency for implementation on it under the supervision of a high-level steering committee.
“The NSW is a quantum jump from the current silo and paper-based management of Pakistan’s external trade involving 44 different government departments responsible to regulate different aspects of imports, exports and transit trade,” he apprised.
Elaborating further the adviser said that the current system is inefficient and opaque, which creates complications for traders and economic operators leading to increased costs and delays as well as lax government controls in carrying out cross border trade.
While quoting World Bank’s report on ease of doing business, he informed that the business community in Pakistan has incurred more than $400 million in extra costs as compared to the average cost for imports and exports in South Asian region, during the last one year. “Competitiveness of Pakistan to facilitate trade, attract investment, get integrated into global value chains and be a regional hub for trade and transit is seriously undermined,” he added.
Moreover, he said that the good news is that as the leading agency for NSW implementation; Pakistan customs, has not only made substantial progress on NSW implementation but, is also successfully improving cross border trade facilitation.
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SBP asked to ensure adequate dollar supply
Currency dealers have approached the State Bank of Pakistan (SBP) to make sure local commercial banks supply dollars in the open market by accepting other foreign currencies, which are not in high demand in the country.
The dealers asked the central bank to act to make sure the open market continued to operate in case the UAE temporarily suspended flight operations to Pakistan to limit the spread of coronavirus.
Pakistan purchases US dollars in exchange for other foreign currencies from Dubai, the UAE, on a daily basis.
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“On an average, we exported around $10-12 million equivalent of other foreign currencies to import US dollars in the past 5-10 days. This is all legal. We do this with the permission of the central bank. The currency trade is strictly monitored and documented on local airports on a daily basis,” Exchange Companies Association of Pakistan (ECAP) Chairman Malik Bostan told after attending a meeting at the central bank on Thursday.
The meeting was chaired by SBP Exchange Policy Department Additional Director Zulfiqar Ali Khokhar. ECAP, which is the representative body of currency dealers, is scheduled to formally table the proposal on the advice of the central bank.
“Banks may provide rupee (the local currency) in exchange for other foreign currencies as well. But they will have to make sure the exchange takes place as per international rates of currencies being quoted by Reuters and Bloomberg,” he said.
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Government raises wheat support price to rs1,400
The federal government on Thursday approved an increase in the wheat support price to Rs1,400 per 40 kilogram and also reiterated to pass on benefits of fast dipping oil prices to the consumers.
In a meeting of the party’s parliamentary committee, Prime Minister Imran Khan said that the benefits of reduced oil prices will be passed on to the consumers. The global crude oil prices have nosedived due to the impact of coronavirus on world economy and price war between Russia and Saudi Arabia over reduction of crude production.
After dragging feet for three months, the Economic Coordination Committee (ECC) of the cabinet finally came to terms with the Ministry of National Food Security and Research that had recommended Rs1,400 support price in November last year.
The ECC fixed the minimum support price of wheat at Rs1,400 per 40kg to ensure parity in wheat prices throughout the country, according to a statement issued by the Ministry of Finance. The ECC also set up a high-level Wheat Procurement Monitoring Group to ensure smooth procurement of wheat by the public sector departments in the upcoming harvest season, it added.
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Rupee continues to decline, reaches 159.13 against dollar
The rupee depreciated by an additional 0.45 percent or Rs0.71 against the US dollar on Thursday and closed at 159.13 in the inter-bank market.
According to the State Bank of Pakistan, the rupee had closed at 158.42 on Wednesday. The latest drop brings the four-day fall in rupee to 3.17 percent as it had been at 154.24 on Friday.
“The main reason for the drop in rupee value is hot foreign selling (of government securities),” remarked Forex Association of Pakistan President Malik Bostan while talking to source. “As foreigners continue to sell the securities, the rupee is dropping and the dollar is rising.”
He added that the country had begun payments to foreigners as three-month treasury bills were maturing. Foreigners were refraining from reinvesting money and some were pulling out, undermining the value of the rupee. Bostan pointed out that foreign selling was also being noted in the stock market for the past many weeks due to which the rupee had been further hurt.
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Turkey seeks sustainable and long lasting FTA with Pakistan
Turkey wants a sustainable and long-lasting free trade agreement (FTA) with Pakistan to have a win-win situation for both the countries, said Turkish Ambassador to Pakistan Mustafa Yurdakul.
Talking to business community at the Islamabad Chamber of Commerce and Industry (ICCI) on Thursday, he said the leadership of Turkey and Pakistan was aiming to raise annual bilateral trade eventually to $5 billion through the free trade pact.
He was hopeful that Islamabad would finalise its list of goods to be included in the FTA this month.
“The existing two-way trade between Pakistan and Turkey amounts to around $800 million, which is far from the true potential keeping in view that both countries have a common market worth billions of dollars,” he said. The envoy added that Turkish companies had invested around $1.5 billion in Pakistan while many additional firms were eager to pour capital.
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Centre, provinces accept on body for uniform taxation in Pakistan
The Centre and the provinces on Thursday agreed to set up a National Tax Council to devise uniform taxation policies – a major development that would pave the way for the approval of two budgetary support loans worth $750 million by the World Bank.
The National Finance Commission’s (NFC) Monitoring Committee in its meeting chaired by Adviser to the PM on Finance Dr Hafeez Shaikh gave the nod to the establishment of the council.
The finance ministers of Khyber-Pakhtunkhwa and Balochistan also attended the meeting while Punjab and Sindh were represented by their finance secretaries.
According to a handout issued by the finance ministry, the committee approved the composition of the council and its terms of references.
The formation of the council was a major condition set by the World Bank for the approval of the two loans.
The loans were originally scheduled to be approved on March 19 but the international lender delayed giving the green light to them because of a lack of consensus between the Centre and the provinces over the matter.
The finance ministry said the provinces were represented in the council and “it shall enable them to decide collectively the rate of sales tax for both goods and services”.