ECONOMIC TIMES OF PAKISTAN
Asad’s exit may delay IMF bailout
The International Monetary Fund (IMF) has decided to consult the new economic czar of Pakistan before sending its mission to Islamabad to negotiate a bailout package, which has left little space for Dr Abdul Hafeez Shaikh to make his first but closely watched move.
If the new adviser to the prime minister on finance takes longer than needed to decide calling the IMF mission, it could delay finalisation of the programme as well as the next budget.
Former finance minister Asad Umar had promised to unveil the budget for fiscal year 2019-20 on May 24.
This time, the IMF’s Executive Board would approve Pakistan’s loan request only after the approval of the new tax measures by parliament, even if both the sides reach a staff-level agreement.
“As it is the case with all IMF missions, the timing of the staff’s visit is decided in consultation with the country’s authorities. We will consult with Pakistani authorities on this matter in the upcoming days,” IMF Resident Representative for Pakistan Teresa Daban told.
She had been requested to comment whether the removal of Umar as the finance minister would affect the upcoming IMF mission’s visit to Pakistan.
On Monday, the IMF had announced to send a mission to Pakistan “before end of April to continue discussions” from where Umar had left during his five-day trip to Washington.
President Dr Arif Alvi on Friday approved the appointment of Dr Abdul Hafeez Shaikh as adviser to the prime minister on finance, revenue and economic affairs, with the status of federal minister, with immediate effect, according to a notification of the Cabinet Division.
Pakistan’s current account deficit contracts 29.5pc to $9.6bn
Pakistan’s current account deficit (CAD) narrowed considerably by 29.5percent to $9.6 billion in first nine months (July-March) of the current fiscal year mainly due to much-needed drop in imports and a significant rise in worker remittances. The current account deficit stood at $13.6 billion in the same period of previous year, the State Bank of Pakistan (SBP) reported on Thursday. On average, the deficit has dropped to $1.06 billion a month so far in the current fiscal year compared to $1.5 billion a month in the corresponding period of last year. The central bank said import of goods shrank 5percent to $39.3 billion in Jul-Mar FY19 compared to $41.4 billion in the same period of last year. The central bank has let the rupee depreciate by 16.4percent to Rs141.39 to the US dollar in the current fiscal year compared to Rs121.49 on June 29, 2018. Moreover, a significant reduction in the government’s development budget – called the Public Sector Development Programme (PSDP) – and completion of Early Harvest projects under the China-Pakistan Economic Corridor (CPEC) also caused a drop in import of machinery and equipment, he said. Remittances from overseas Pakistani workers surged 9percent to $16 billion in the first nine months of FY19 compared to $14.8 billion in the same period of last year, the central bank said. However, the foreign direct investment (FDI) dipped 51.5percent to $1.3 billion in first nine months of FY19 compared to $2.6 billion in the same period of previous year.
FDI plunges 51.5pc to $1.3 bn
The foreign direct investment (FDI) plunged 51.5percent to $1.3 billion in the first nine months (July-March) of the current fiscal year 2019, as investors remained indecisive to establish new projects owing to uncertainty in value of rupee.
Foreign businesses invested $2.6 billion in various productive sectors of the local economy in the same period of last year, the State Bank of Pakistan (SBP) reported on Thursday.
The central bank has let the rupee depreciate by 16.4percent to Rs141.39 to the US dollar in the current fiscal year compared to Rs121.49 on June 29, 2018.
Despite the slowdown, China remained the single largest foreign direct investor in Pakistan.
It invested net $405.8 million in the nine-months, which was, however, 74.4percent lower than $1.6 billion invested in the same period of last year.
During the period under review, United Kingdom remained the second largest investor with $149.8 million, 37.4percent lower than $239.2 million invested in the same period last year.
Hong Kong invested $106.8 million compared to $145.4 million.
On the contrary, Malta divested $104.9 million compared to zero investment/divestment in the same period last year.
Pakistan gets duty relief from China like ASEAN countries
Pakistan now has a level playing field with member states of the Association of Southeast Asian Nations (Asean) in exports to China, which has waived duty on more Pakistani products under second phase of the Pakistan-China Free Trade Agreement (FTA), said Adviser to Prime Minister on Commerce and Textile Abdul Razak Dawood. Speaking at an awareness seminar on the second phase of Pakistan-China FTA, the minister stressed that now it was up to the business community to take advantage of the China duty relief and tap the export potential.
Pakistan will be entering the second phase of the FTA soon under which it will be able to export hundreds of more products to China at zero duty. Dawood emphasised that it was a step in the right direction and no nation could prosper without exports. “We are changing our direction from a consumer-oriented to an export-oriented society.”
Speaking on the occasion, Ministry of Commerce Joint Secretary Shafiq Ahmed Shahzad agreed that there were shortcomings in first phase of the FTA, “which have been rectified now”.
He elaborated that the first phase was reciprocal while the second phase would be inclined more towards Pakistan.
In the ninth round of negotiations for the second phase held in February 2018, China agreed to change the ratio of liberalisation of tariff lines and trade value to 67percent for Pakistan and 90percent for China.
In the 11th round held in March 2019, he said, China agreed to eliminate duty on 313 Pakistani products similar to the concessions given to Asean member countries with an increase of 257 tariff lines.
The priority tariff lines will include articles of food, textile, machinery, vehicles and others. China imports $64 billion worth of these 313 products. Dawood urged exporters to target a share of 10percent out of the $64 billion and called it an achievable target.
On the other hand, out of Pakistan’s total exports, these 313 products bring $9 billion in revenues. “Hence, China has given Pakistan a benefit equal to almost half of its exports,” Dawood said.
At present, China’s total import bill amounted to over $2 trillion, which was expected to rise to $5 trillion by 2023, he added.
In second phase of the FTA, Pakistan succeeded in expanding its own sensitive list from 1,410 to 1,760 items, according to the joint secretary. Such products will not be imported from China and the domestic market will be safeguarded.
In 2012-13, Pakistan exported goods worth $2.4 billion to China, which fell to $1.7 billion in 2017-18. The second phase of the FTA is expected to give a boost to exports.
Farmers avail 1.1pc of Rs50 bn credit facility for fy19
A meeting of the Federal Committee on Agriculture on Thursday was informed that Balochistan lagged behind all other provinces in provision of agricultural credit to farmers.
The farmers of Balochistan have availed only 1.1 per cent of their share in agricultural loans from the Agricultural Development Bank (ADB) and other commercial banks while those of Punjab have taken loans amounting to Rs590 billion or 66 per cent from their available share.
The committee was presented with details of the agricultural loans extended by the ADB and other banks for the current fiscal year till February.
According to the documents available with source, countrywide farmers have taken Rs701 billion agricultural loans against the total allocation of Rs1,250 billion for the fiscal year 2018-19.
In agricultural loans, farmers of Azad Jammu and Kashmir (AJK) have availed the highest amount while those of Balochistan have availed the least.
Of the total allocation of Rs890 billion for Punjab, till February loans of around Rs590 billion were procured by farmers, which constitutes 66.3 per cent of the total amount.
In Sindh, agricultural loans amounting to Rs97.9 billion have been dispersed from the available target of Rs261.5 billion, which is 37.4 per cent of the target.
In Khyber-Pakhtunkhwa, Rs10.2 billion loans of the available credit of Rs43 billion have been released to farmers, which is 23.9 per cent of the total amount.
In Balochistan, Rs0.6 billion has been released to farmers against the available credit facility of Rs50 billion, which is 1.1 per cent of its target.
In AJK, Rs2.3 billion has been dispersed out of the total credit facility of Rs2.4 billion, which amounts to 98 per cent of the total target.
Similarly, the target for Gilgit-Baltistan was Rs3.2 billion of which Rs0.4 billion or 13.4 per cent has been released.
Foreign exchange: SBP reserves dive $1 bn to stand at $9.2bn
The foreign exchange reserves held by the central bank declined 10percent on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
The reserves slipped below the $9.5-billion mark as the country made payments against the Pakistan Sovereign Bond.
Earlier, the reserves had spiralled downwards, falling below the $7-billion mark, which raised concern over Pakistan’s ability to meet its financing requirements. However, financial assistance from the United Arab Emirates (UAE) and Saudi Arabia helped shore up the foreign exchange reserves.
On April 12, the foreign currency reserves held by the SBP were recorded at $9,243.7 million, down $1,028.2 million compared with $10,271.9 million in the previous week.
The decline was attributed to payments on account of external debt servicing, including principal repayment of $1 billion against Pakistan Sovereign Bond, the statement added.
Overall, liquid foreign currency reserves, held by the country, including net reserves held by banks other than the SBP, stood at $16,195.9 million. Net reserves held by banks amounted to $6,952.2 million.
Two weeks ago, the reserves had jumped on account of $2.5 billion in inflows from China.
Earlier, the reserves dipped to $9.06 billion, forcing the central bank to let the rupee depreciate massively and sparking concern about the country’s ability to finance a hefty import bill as well as meet debt obligations in coming months.
PM struggles to muster cabinet’s support for tax amnesty scheme
The majority of the federal cabinet members on Wednesday again opposed giving a tax amnesty scheme due to its clash with core values of the ruling party, but Prime Minister Imran Khan remained optimistic about the enforcement of his first money whitening scheme before the budget.
The federal cabinet met for the second time in less than 24 hours to approve the Pakistan Tehreek-e-Insaf’s (PTI) first tax amnesty scheme, which also raised questions over the motives behind showing such an urgency to introducing the scheme. The meeting once again failed to develop consensus.
Sources in the federal cabinet told that even the Ministry of Finance and Revenue did not wholeheartedly back the scheme that it itself had drafted. They said Federal Board of Revenue (FBR) Chairman Jehanzeb Khan and Minister of State for Revenue Hammad Azhar also did not forcefully defend the scheme.