ECONOMIC TIMES OF PAKISTAN
PKR stable against $
The rupee remained stable against the dollar at Rs159.5/160 in the inter-bank market on Friday compared with Thursday’s close of Rs159.5/160, according to forex.pk. Earlier, the SBP let the rupee depreciate massively in the inter-bank market after finalising an agreement with the International Monetary Fund (IMF) for a loan programme on May 12. The IMF has asked Pakistan to end state control of the rupee and let the currency move freely to find its equilibrium against the US dollar and other major world currencies. Also, the World Bank, which finances some of the infrastructure and social safety net projects in Pakistan, has supported the idea of leaving the rupee free from state control in a bid to give much-needed boost to exports and fix a faltering economy. Cumulatively, the rupee has depreciated almost 49percent since December 2017, according to the central bank.
Furniture-makers to participate US expo
A 25-member delegation of the Pakistan Furniture Council (PFC) will participate in international exhibition Texworld USA. The expo would be held in September, which would help in exploring new markets and strengthening trade ties with the American business community, said PFC Chairman Mian Kashif Ashfaq, while chairing a meeting of furniture exporters at PFC headquarters on Friday. He said Pakistani furniture exporters would avail the opportunity to study latest designs of products and modern technologies in their fields in order to improve their business and compete effectively in global markets. He said such business-oriented tours could play a pivotal role in achieving the furniture export target of more than $1 billion annually. Ashfaq said Pakistan’s major buyers of wooden furniture were Britain, the US, Sri Lanka and Gulf countries like the United Arab Emirates (UAE), Saudi Arabia, Oman and Kuwait.
Discrepancy of up to pkr 24 bn found in tax receipts
At least Rs10 billion worth of discrepancy has been found between figures reported by the Federal Board of Revenue (FBR) and cash deposited in the treasury, underscoring the need for immediately resolving reconciliation issues that can undermine credibility of official figures. The discrepancy highlights the urgency to establish an online interface between the FBR and the State Bank of Pakistan (SBP), which has also been recommended by the World Bank in its latest report on Pakistan’s financial system. Against the FBR’s claim of collecting Rs280.5 billion in revenues in July, the cash deposited in the treasury stood at around Rs270 billion, according to sources in the Ministry of Finance and the SBP. But the FBR’s own data, maintained by the Directorate of Research and Statistics, showed the provisional revenue collection at Rs256.2 billion in July. The three collection figures show discrepancy in the range of Rs10 billion to Rs24 billion. This means July’s revenue collection was either Rs256.2 billion or Rs270 billion. Sources said the collection would end up at Rs270 billion since the SBP’s data was more reliable. After the discrepancy is sorted out, the shortfall in tax collection against a modest target of Rs291.5 billion will range from Rs22 billion to Rs35 billion. Even the Rs270-billion collection would be higher by only Rs19 billion or 7.5percent over last July’s collection – a pace that is far lower than the nominal expansion in the size of economy. The entire discrepancy was on account of the income tax collection figures reported by the FBR and the cash deposited under this head in the treasury, the sources said. This has raised suspicion that the FBR tried to take advance income tax on July 31 – last day of the month, but companies did not deposit cash in the kitty on the same day, they added.
Government plans field survey to ascertain wheat stock
As the country’s economic managers have suspected the fudging of wheat stock data, the government has decided to initiate investigation and conduct an extensive field research and survey in a bid to calculate actual stockpile of the staple commodity.
Sources told that the cabinet, in a recent meeting, took notice of the undue increase in prices of flour and bread apparently because of wheat shortage.
It expressed the desire that the National Food Security and Research Division, in collaboration with provincial agriculture departments, should conduct an extensive field research and survey to ascertain the factual stock position both in urban and rural areas.
Oil sales drop 17pc as economy slows down
Petroleum oil sales dropped 17percent to 10.68 million tons in seven months ended July 2019 due to deceleration in economic activities and shift to imported gas – re-gasified liquefied natural gas (RLNG). Sales of oil marketing companies stood at 12.89 million tons in the same period of previous year, according to data compiled and reported by Shajar Capital. Sale of furnace oil plunged 42percent to 1.86 million tons in Jan-Jul 2019 compared to 3.23 million tons in the corresponding period of previous year. It was followed by high-speed diesel, whose sales decreased 17percent to 4.05 million tons compared to 4.89 million tons in the previous year. Growth in sale of petrol also slowed down significantly. It improved just 3percent to 4.34 million tons compared to 4.23 million tons last year, the brokerage house said. “Economic slowdown and shift to RLNG in the power sector caused the drop in sales,” Topline Securities’ analyst Umair Naseer said. Accordingly, the sale of furnace oil, which remained a major fuel for power production in the past three decades, suffered a massive drop during the period under review, he said.
Government decides to turn CDNS into corporation
The federal government has, in principle, decided to turn the Central Directorate of National Savings (CDNS) into a corporation, under which scrip-less bonds will be issued.
In addition to that, micro-lending, submission of bills and other banking services will also be introduced. Investors will be able to register the bonds, which will help them avoid loss or theft as the bonds will be kept with the Central Depository Company (CDC).
Following the conversion of CDNS into a corporation, an independent board of directors will be formed in which professionals from the departments concerned will be included.
In the first phase, the complete digitisation of Karachi and Faisalabad regions has been completed for the national savings department. In the second phase, the process will be completed in Islamabad and Lahore regions in October while formal launch will be done in November 2019.
Inflation skyrockets to 68-month high at 10.3pc
Inflation skyrocketed to 10.3percent in July – the highest in the past five and a half years – due to surge in prices of housing, transport and food items, which are the driving factors but are difficult to control by increasing interest rate.
Measured by the Consumer Price Index (CPI), the average rate of increase in prices of 40 dozen items stood at 10.34percent in July, reported the Pakistan Bureau of Statistics (PBS) on Thursday.
It was the highest inflation rate in the past 68 months. Last time in November 2013, the inflation had soared 10.9percent. In July last year, the pace of inflation was 5.83percent.
Increase in prices of petroleum products, food and beverages, utility charges, housing and devaluation of rupee against the US dollar fuelled inflation in the country. But these elements may not be neutralised by the State Bank of Pakistan (SBP) through monetary tightening.
On the demand of the International Monetary Fund (IMF), the SBP Monetary Policy Committee raised the policy rate by one percentage point to 13.25percent with effect from July 17, 2019. In its statement, the central bank said the decision was taken while keeping in mind the upside inflationary pressures from exchange rate depreciation and likely increase in near-term inflation from the one-off impact of recent adjustments in utility prices and other measures in the budget.
The central bank expects average inflation to stay in the range of 11-12percent in the current fiscal year, which is higher than the previous projection. Core inflation, measured by excluding food and energy goods from the basket, picked up slightly to 7.8percent in July, according to the PBS. But this level of core inflation did not warrant 13.25percent interest rate.
FBR plans to bring small traders into tax net
The Federal Board of Revenue (FBR) on Thursday unveiled drafts of simplified income tax schemes to address traders and small shopkeepers’ concerns that had compelled them to remain outside the tax net. The FBR issued the rules for Income Tax Special Procedure for Traders, Income Tax Special Procedures for Small Shopkeepers and Obtaining and Issuance of Business Licences. These rules will be enforced after seeking the approval of the federal cabinet. The rules have been issued two weeks ahead of the traders association’s three-day strike call against the FBR’s new taxation measures. These businesses and people have been excluded from the normal income tax regime. All those people and traders who are registered with the FBR but did not submit their annual income tax returns have also been declared eligible for the new scheme for traders. There are nearly 4.8 million registered income tax persons in Pakistan but only 2.2 million filed their annual income tax returns for tax year 2018. The traders have been offered five key benefits. They will be exempted from audit, they would not be bound to submit income tax returns to a particular tax office, they will not act as withholding agents for the FBR and their income tax returns and wealth statements will be simplified. However, the traders will pay normal income tax, unlike small shopkeepers who have been offered to pay only 2percent of turnover or up to Rs40,000 fixed annual income tax.