ECONOMIC TIMES OF PAKISTAN
PKR weakness behind high inflation’
In a rare admission, the adviser to prime minister on commerce has acknowledged that depreciation of the rupee has pushed up the rate of inflation in the country.
Speaking to media on Thursday after inauguration of the Textile Expo, organised by the Trade Development Authority of Pakistan (TDAP), PM Adviser Abdul Razak Dawood said there was no doubt that inflation had surged due to rupee depreciation.
“Inflation increased but exports did not grow at the pace they should have. Though exports increased in first two months of this calendar year, in March we witnessed the same old trend.”
He said, “We are working to fix this issue and the country’s policymakers and economists have assured us that the situation will be under control in the next six months and exports will show a major surge.”
Dawood pointed out that Pakistan was trying to get more access to markets of other nations and once it was achieved, things would start getting normal. He added that the second phase of free trade agreement (FTA) with China was one such step.
Prime Minister Imran Khan is scheduled to visit China on April 28 where he will sign a revised FTA. Pakistan’s economic managers believe that with this step, the huge trade gap between China and Pakistan will contract.
In FY18, the trade gap between the two countries widened to $9.7 billion, which accounted for over 30% of the overall trade deficit of Pakistan.
Dawood said the present government had already taken a step in that direction last year. “We gave a list to the Chinese foreign minister, who visited Pakistan in November 2018, and asked him to give access for Pakistani products to those Chinese markets, which they have opened for the Association of Southeast Asian Nations (Asean).” The adviser voiced hope that things would further improve if Pakistan got access to Chinese markets as Indonesia had already given Pakistan access to its markets.
Dawood emphasised that Pakistan needed to make intensive efforts and do hard work to achieve the dream of becoming an Asian tiger. He, however, did not give any timeline for that.
Government likely to introduce mobile app for GST collection
The federal government has decided to introduce a mobile app for real time collection of general sales tax (GST) charged by hotels and restaurants throughout the country.
The final decision on this matter will be taken after consultation with all the stakeholders.
The app will send consumers an instant receipt confirming tax collection from them and help enhance government’s revenue from food and accommodation sector.
According to source, the finance ministry penned a letter to the Federal Board of Revenue (FBR) in this regard following which, the latter decided to review the recommendation of a mobile app for hotels and restaurants.
The letter observed that all luxury hotels and restaurants in the country collected GST besides their usual bills. Even the restaurants that do not provide computerised bills charged sales tax, the letter continued.
“It is unconfirmed whether the tax, charged by hotels and restaurants, is actually deposited in the national treasury and within prescribed time limit or not,” it added.
Furthermore, the app can be integrated with the tax mechanism so that GST payments are made on real-time basis.
The system would benefit the government by transferring taxes to the national exchequer instantly. On the other hand, it would also ensure the consumers that their payment has entered the national treasury. The regional tax office of Islamabad, an institution functioning under the FBR, has installed a web-based restaurant invoice system throughout the city.
Government working on structural changes in the economy: Asad
Finance Minister Asad Umar on Thursday said Pakistan suffers from lack of reforms and the government is working on structural changes in the economy.
Umar added that previous governments have also turned to the International Monetary Fund (IMF) for financial aid.
“There are issues at the structural level,” said the finance minister in Washington D.C.
“Pakistan has been battling a balance of payment crisis for a long time owing to the mistakes of a few people.”
Elaborating further, the finance minister said that the IMF program will bring improvement in the economy and a delegation of the financial body will visit Pakistan in coming weeks to finalise technical details
Government reviews FBR proposal for rs729b additional taxes
The government is reviewing the Federal Board of Revenue’s (FBR) proposal to impose Rs729 billion new taxes in the federal budget 2019-2020. Rs634 billion will be collected as additional taxes under Inland Revenue and Rs95 billion revenue will be generated through custom duties.
In order to give final shape to the budget proposals, the FBR has started consulting the Economic Coordination Committee (ECC) on Wednesday interacted with the ECC through a video link session to discuss budget proposals for inland tax, income tax, sales tax and the federal excise duty (FED). Recommendations on customs were reviewed on Thursday.
The FBR spokespersons were not available for comment on the matter. However, according to the source, a proposal has been made to increase the holding period for capital gain on immovable property and securities.
Through this step, the federal government will be able to get Rs20 billion. A recommendation for presumptive taxes on offshore assets is also made with the additional revenue promise of Rs5 billion.
There is also a proposal to amend ADCIR mechanism and appeal through which an additional revenue of Rs10 billion is expected. Similarly, an increase of custom duty rate is also proposed to boost the revenue by Rs47 billion.
A recommendation for rationalisation of custom duty slabs is also given to get Rs24 billion. In addition, exemption of custom duty on the LNG export may be withdrawn and replaced by 5 per cent duty after which an overall revenue of Rs95 billion could be generated.
Other proposals include withdrawal of tax exemptions on withholding taxes for cottage industry, imposition of sales tax on retail prices of several goods and introduction of uniform value added taxes through which Rs150 billion could be generated.
According to sources, the FBR and the ECC will have a comprehensive discussion on the draft of the budget proposals and the final shape of the recommendations will come after consultation with all stakeholders. The final shape to the proposals will be given by the fiscal policy board.
In addition to tax reforms committee, the proposals will be discussed in detail also at various other forums. The FBR proposal draft has identified measures for potential revenue targets. As per the draft, changes in sales tax can generate additional revenue of Rs150 billion.
Shanghai Electric interested in rising investment in Pakistan
There exists a huge potential for private and foreign direct investment in the power sector value chain including generation, transmission and distribution, said Federal Minister for Planning, Development and Reform Makhdoom Khusro Bakhtiar.
Talking to a delegation led by Shanghai Electric Power Vice Chief Economist Mingwei Shi on Thursday, the minister reaffirmed that the government was committed to resolving the issues affecting viability of the power sector.
Bakhtiar pointed out that under the China-Pakistan Economic Corridor (CPEC), a number of energy projects were being executed and a handful of more schemes were in the pipeline.
Mingwei stressed that Shanghai Electric’s investment to purchase a majority stake in K-Electric was only the beginning and expressed additional interest in the company to expand its investment portfolio in the power sector of Pakistan.
The minister was briefed about the current status and issues standing in the way of finalising the transaction for the purchase of KES Power’s stake in K-Electric. Mingwei requested the minister to facilitate early completion of the transaction.
Earlier in December 2018, Shanghai Electric Power got a nine-month extension for the acquisition of majority stake in K-Electric from Dubai-based Abraaj Group and had yet to determine the final price at which the long-pending deal would be executed. This marked the fourth time the Chinese firm submitted a public announcement of intention (PAI) to acquire the Karachi-based integrated power company since October 2016.
In October 2016, the Abraaj Group had announced that a deal had been struck at $1.77 billion. Several quarters have speculated a downward revision in the final price after the power-sector regulator made a less-than-expected increase in power tariff for end-consumers.
“The deal may be executed at a 15-20% discount from the earlier price ($1.77 billion) agreed in October 2016,” said an official involved in negotiations on the Shanghai Electric Power and K-Electric deal last year.
UAE firm expresses interest in spending in Pakistan
Pakistan is committed to facilitating foreign investors and efforts are under way to make accelerated improvement in the ease of doing business in the country, said Minister for Petroleum Ghulam Sarwar Khan.
He made the remarks during a meeting with Mubadla Petroleum CEO Musabbeh Al Kaabi on Thursday.
The CEO of the UAE firm reaffirmed his company’s resolve to further invest in Pakistan and undertake expansion of the current facilities and infrastructure in the country.
Al Kaabi shared with the minister recent updates and progress on establishment of the Parco coastal refinery. The coastal oil refinery will be one of the UAE’s major investments in the country.
The minister was also apprised of execution timelines of the coastal refinery and both sides expressed satisfaction over the progress being made on the vital project.
Parco’s plan to set up a deep-conversion state-of-the-art refinery, which will refine 250,000 barrels of oil per day, will be instrumental in making savings in the national exchequer.
The UAE company also expressed interest in liquefied natural gas (LNG) business and hydrocarbon exploration in onshore and offshore blocks. It desired to establish the first propylene plant in Pakistan as well.
The minister pointed out that Pakistan’s downstream oil refining and marketing sector offered lucrative investment opportunities. “Based on forecasts of industry demand, Pakistan needs a new oil marketing and storage network,” he said.
The minister commended the UAE’s continued investment in various sectors of Pakistan’s market. He highlighted the mutual feeling of goodwill that characterised bilateral relations between the two countries and the recent increase in ties marked by regular exchanges between top leadership of both sides.
Envoy asks Pakistani traders to address grievances of US seed companies
Pakistan and the US are enjoying sustained and mutually beneficial relations despite a “temporary political recession” and a visible improvement in ties is expected in coming days, said Ann Mason, Chief of Political and Economic Section, US Consulate General, Lahore.
Speaking to business community at the Faisalabad Chamber of Commerce and Industry (FCCI), she said America was investing in many countries including Pakistan.
Terming agriculture an integral and major part of Pakistan’s economy, she emphasised that the US would continue to assist Pakistan within the given circumstances. However, she said some US seed manufacturing companies had expressed reservations and the local business community must take measures to address their grievances in order to take benefit of the latest American technology that was bringing high-yielding seeds.
The envoy called the M3 Industrial Estate an opportunity for investors to play their role in the overall development of Faisalabad and gave assurances to businessmen that she would persuade the Americans to invest in the estate. She also agreed to cooperate in human resources development in Pakistan.
FCCI President Syed Zia Alumdar Hussain said textile was the real economic strength of Faisalabad, but the city witnessed phenomenal diversification with the addition of many new sectors.
Crescent and Nishat groups are leading yarn manufacturers in the city, which also has a state-of-the-art edible oil manufacturing unit named Rafhan Maize. Similarly, Iqbal Rice, which is a member of the FCCI, is consistently winning the best exporter award.
Hussain revealed that construction of a residential colony had been kicked off in the M3 Industrial Estate and an additional 3,300 acres of land were being acquired on the other side of the motorway for its expansion in future.
He pointed out that work on a car assembly plant of Hyundai was being completed while other industrial units were at different stages of completion.