PML-N paid PKR 72bn illegally to power producers: AGP
The Auditor General of Pakistan (AGP) has told the new Pakistan Tehreek-e-Insaf (PTI) government that the previous Pakistan Muslim League-Nawaz (PML-N) administration had made illegal payment of Rs72 billion to power producers in an attempt to wipe out the circular debt.
After coming to power in June 2013, the PML-N government paid Rs480 billion to the power producers without any pre-audit in a bid to clear the circular debt immediately. However, of the total payment, according to the AGP, Rs72 billion was given illegally to the power producers.
Now, the PTI government has decided to examine the issue thoroughly and settle the AGP observations.
The Economic Coordination Committee (ECC), in its recent meeting, also took up the matter, noting that it required a comprehensive examination.
The committee directed the power minister to hold a meeting with the attorney general of Pakistan as well as the AGP in order to assess the auditor general’s report and submit viable recommendations for settlement of the audit paras.
During the ECC meeting, the Power Division recalled that the Public Accounts Committee had discussed the report and it was also taken up in a huddle of the Senate Standing Committee on Finance and Privatisation in 2017. The committee referred the report to NAB for further inquiry.
The meeting was told that the sub-committee on circular debt had termed unlawful the non-adjustment of liquidity damages by the Ministry of Water and Power against claims of independent power producers (IPPs) amounting to Rs22.91 billion.
It emphasised that such payment should have been adjusted instead of being set aside prior to clearing the circular debt.
President emphasises on meeting Karachi’s electricity needs
All necessary measures should be taken to meet electricity requirement of the main port city, said President Arif Alvi while emphasising the importance of Karachi as a financial and commercial hub.
The president was meeting a delegation of K-Electric at the President House to discuss the city’s electricity situation and incoming projects. The delegation was led by K-Electric Chairman Tayyab Tareen who was accompanied by Chief Executive Officer Moonis Abdullah Alvi.
The president stressed that in addition to power generation, attention should also be paid to improving the power transmission system, reducing line losses and curbing theft in order to provide maximum electricity for domestic and commercial consumers, as it was one of the priorities of the government.
The chairman and CEO briefed Alvi on all incoming projects for power generation, transmission and distribution, which remained in line with K-Electric’s commitment to ensuring uninterrupted supply of electricity to the city.
The delegation stressed the importance of the Shanghai Electric deal, which would ensure timely completion of future power projects.
It also shared the steps taken to improve the system as per requirement along with investments already made in the generation, transmission and distribution network.
Karachi’s electricity demand has surpassed 3,100 megawatts and continues to grow every year. K-Electric’s management has invested around $2 billion whereas the transmission and distribution losses have been brought down from more than 36% to below 20%.
According to sources, a 900MW power project at Bin Qasim is in the pipeline, which is facing delay due to revision in the multi-year tariff by the National Electric Power Regulatory Authority.
PKR hits 2-month low on depreciation fears
Pakistani rupee weakened to a two-month low against the US dollar at Rs126 in the open market on Friday on speculation that the International Monetary Fund (IMF) had recommended further depreciation of the rupee, dealers said.
“The rupee loses value whenever Pakistan holds meeting with the IMF,” Pakistan Forex Association President Malik Bostan said.
The rupee closed in the range of Rs126.10-126.80 against the US dollar at various currency exchange companies compared to the previous day when it was in the range of Rs125.50-125.80.
The rupee remained below Rs126 for around two months in the open market.
The Pakistani currency, however, remained stable at Rs124.24 to the US dollar in the inter-bank market, according to the State Bank of Pakistan (SBP).
Bostan said the rupee lost value the very next day after “a private TV channel reported that the IMF had recommended Pakistan to let the rupee depreciate to Rs150 (to the US dollar) and our authorities have agreed to take it down to Rs135.”
“The controversial report sparked panic buying in the market (from individuals) which dragged the rupee down against the US dollar and other major currencies,” he said.
An IMF team is present in Islamabad these days which is holding meetings with Pakistani authorities to review the country’s economic performance.
Many are seeing the meeting as a prelude to negotiations for a new bailout for Pakistan, which is facing growing pressure on its external sector.
Finance Minister Asad Umar said recently that his government would decide whether it is going back to IMF within six weeks. And if Pakistan opts for a fresh bailout, IMF would lend money on stringent conditions.
Currency dealers demanded the government remove uncertainty by disclosing its plans regarding IMF.
FBR likely to miss three-month target by PKR 30bn
The government’s tax revenues and the number of income tax return filers have plunged in first quarter of the current fiscal year amid a delay in enforcement of new tax measures and finalisation of a fresh action plan to deal with tax evaders and plug loopholes.
Provisional revenue collection figures suggested that the Federal Board of Revenue (FBR) may miss its first three-month target by at least Rs30 billion, said officials.
They pointed out that the main reason for falling short of the Jul-Sept target of Rs890 billion was the adverse impact of the Rs35-billion tax relief given by the last government. A slow release of funds for the Public Sector Development Programme also impacted the tax revenues.
The new Pakistan Tehreek-e-Insaf (PTI) government has presented a mini-budget in parliament to recoup some of the losses caused by the tax relief. The National Assembly is currently debating the mini-budget.
Similarly, with only two days left in the current month, so far less than 300,000 people and entities have filed annual income tax returns. These dismal figures suggest that the government has not been able to focus on areas that require immediate attention.
“There is a high possibility that the government is going to give a one-month extension in the deadline for filing income tax returns,” an official said.
The matter has also been discussed with Finance Minister Asad Umar who has given the FBR the go-ahead for the extension.
“A reasonable time has not been given for filing tax returns and statements,” the Pakistan Tax Bar Association (PTBA) complained to FBR Chairman Jahanzeb Khan.
The association stated that without providing time for preparing and filing tax returns, it was not legal to ask people to file returns by the statutory deadline of September 30.
The association argued that various amendments and fundamental changes had been made from time to time and even after introduction of the Income Tax Return and Wealth Statement Forms 2018, which were finalised on August 17, 2018.
It also pointed out that the draft of corporate tax return had not yet been finalised.
The association called for extending the deadline for filing returns till November 16, 2018 – three months from the date of notification – in order to maximise the number of filers and facilitate existing taxpayers.
In fiscal year 2017-18, about 1.4 million people and entities had filed annual income tax returns.
After achieving the first two-month target, the FBR is facing problems in meeting the revenue target for September.
In September last year, the FBR had collected Rs321 billion. In the first 28 days of this month, it received about Rs275 billion. However, tax authorities hope that they could collect another Rs80 billion in the remaining two days.
The State Bank of Pakistan has also instructed banks to facilitate tax payments at the weekend.
A substantial shortfall in tax revenues may weaken Pakistan’s negotiating position with the International Monetary Fund (IMF). An IMF staff-level team is currently visiting Pakistan.
Although the finance minister has announced additional tax measures of Rs183 billion to achieve the revised annual target of Rs4.398 trillion, actual tax measures are not more than Rs91 billion.
Dr Ikramul Haq, an eminent tax expert, has recently shared a plan with the finance minister for broadening the tax base and plugging loopholes to enhance revenue collection.
Haq emphasised that the FBR should ensure compulsory filing of tax returns by all taxpayers who paid substantial tax in advance through the withholding tax mechanism but did not file returns.
He argued that there were 84,000 registered companies with the Securities and Exchange Commission of Pakistan (SECP), but less than 30,000 filed their returns. All companies which had not filed returns should be issued notices and assessments should be finalised before the end of current fiscal year, he said.
In order to plug revenue leakages on the Customs side, Haq suggested that the FBR should ensure scanning of each and every incoming and outgoing container. “Once this is done, the Inland Revenue Service should recover evaded sales tax and income tax on the value of consignments.”
Haq said the Customs wing collected Rs606 billion in the last fiscal year even after the increase in regulatory duty on over 300 items. His assessment showed that even if 2% duty was levied on all items, the Customs’ revenue should be at least Rs1.2 trillion.
IMF request for CPEC agreement details declined
The International Monetary Fund (IMF) is looking for contract details of the China-Pakistan Economic Corridor (CPEC) projects amid the West’s deepening interest in the strategic arrangement between the two “all weather” friends.
The visiting IMF delegation raised the issue of CPEC deals during a meeting with the officials of the Ministry of Planning and Development, according to the sources.
The Pakistani side was led by Federal Minister for Planning, Development and Reform Makhdoom Khusro Bakhtiar.
“The ministry gives an overview of the macroeconomic outlook and progress on the CPEC initiative to the IMF team,” said the sources.
The IMF staff-level delegation is visiting Pakistan to assess the country’s macroeconomic situation. Its Washington-based Mission Chief, Harald Finger, is leading the delegation that comprises officials from the fund’s Lending Policy Division.
The sources said the IMF delegation inquired about the contract agreements of the energy projects of CPEC. However, the ministry did not provide any information, arguing that only the Ministry of Energy has the details.
The sources said the government was under no obligation to provide details of the CPEC contracts to a third party, particularly when there was no formal arrangement with the IMF at this stage.
“The disclosure of Chinese financing deals under CPEC has been described as one of the disadvantages of going for an IMF bailout programme during a briefing to Prime Minister Imran Khan,” said the sources.
The PTI government is currently assessing its options to arrange about $11 billion loans to deal with the external-sector problems. Among the options are IMF programme, Chinese financial assistance and oil on deferred payments from Saudi Arabia.
The issue of the progress on CPEC projects and official bilateral flows from China also came up for discussions during the plenary meeting between the IMF and Finance Minister Asad Umar, which was held on Thursday, the sources said.
CPEC has remained a matter of interest for international financial institutions and the western countries since its launch in 2014. Initially, the size of the CPEC portfolio was $46 billion which, after the inclusion of some new projects, has grown to $60 billion.
The US embassy officials also raised the issue of transparency in CPEC deals during their interaction with the Ministry of Finance officials on Friday.
Pakistan has already brushed aside criticism on growing indebtedness of the country due to CPEC, saying the share of the CPEC loans was only $6 billion or 6.3% in total outstanding external debt of $95 billion as of end June this year.
“The CPEC deals are open and transparent,” said Noor Ahmad, a spokesman for the Ministry of Finance.
“The IMF delegation was informed that at present, 22 projects worth $28.6 billion were under various phases of implementation in CPEC,” said Hasaan Daud Butt, the CPEC project coordinator.
The planning minister informed the IMF delegation that Pakistan was exploring the possibility of completing the $9 billion mainline project of Pakistan Railways on the build-operate-transfer (BOT) basis.