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ECONOMIC TIMES OF PAKISTAN
PIA seeks pkr 10bn more to stay afloat

The government on Friday showed its reluctance to bail out Pakistan International Airlines (PIA) due to its hands being tied by the International Monetary Fund (IMF) loan agreement as the PIA management sought another injection of nearly Rs10 billion to remain afloat.

The PIA management demanded the bailout package in a meeting with Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh. After coming to power, the Pakistan Tehreek-e-Insaf (PTI) government has already given two bailout packages costing the exchequer nearly Rs38 billion.

The fresh assistance was sought to back foreign loans and for the repair of aircraft.

However, the IMF agreement did not permit the Ministry of Finance to extend further sovereign guarantees to help the PIA management borrow money from commercial banks, sources in the Ministry of Finance told.

The IMF has placed a performance criterion to keep sovereign guarantees at Rs1.611 trillion during the current fiscal year. Of this, PIA’s sovereign guarantees stood at Rs212 billion, although the federal cabinet in February this year approved an extension in the sovereign guarantee limit to around Rs222 billion.

Tapi gas wins nod of environmental bodies

Environmental authorities of Punjab and Balochistan have given the go-ahead to the laying of pipelines under the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas supply project.

It was revealed during a meeting between a high-level delegation of Turkmenistan and Federal Minister for Energy Omar Ayub Khan.

The delegation comprised Tapi Pipeline Company Board of Directors Chairman Muhammetmyrat Amanov, Turkmenistan Ambassador Atadjan Movlamov and Tapi Pipeline Company (Pakistan Branch) Manager Batyr Berdiyev.

Delegation members highlighted the significant progress on financing arrangements and procurements for the multibillion-dollar pipeline project and expressed their determination to achieve financial close of the project in early 2020.

“Tapi pipeline is a strategic project that will connect two regions and ensure energy security in Pakistan,” remarked Inter State Gas Systems (ISGS) Managing Director Mobin Saulat told.

He said the pipeline project was at the advanced stage and its construction work in Pakistan would kick off soon, adding that it would also help provide gas for the industries to be set up in the Special Economic Zones under the China-Pakistan Economic Corridor (CPEC).

Pak, China to fast-track industrial cooperation

Pakistan and China have agreed to fast-track industrial cooperation between the two sides under the China-Pakistan Economic Corridor (CPEC).

During a meeting between delegations of the National Development and Reforms Commission (NDRC) and the Board of Investment (BOI), it was noted that Chinese experience would help ensure speedy development of the Special Economic Zones (SEZs) in Pakistan.

Chairing the meeting, BOI Secretary Omer Rasul briefed NDRC members on the steps being taken by Pakistan to ensure deep industrial cooperation between the two countries.

ECNEC accepts 16 projects worth Pkr 579 bn

The federal government on Thursday approved nearly one and a half dozen new development projects costing Rs579 billion amid a narrowing fiscal space that does not provide cushion for spending on new initiatives, particularly on provincial subjects.

The Executive Committee of National Economic Council (Ecnec) also enhanced powers of the central and departmental development committees responsible for project approval. This will reduce the level of scrutiny of these projects but will fast-track their approval.

Ecnec decided that projects costing more than Rs10 billion should only be brought before it for approval as against the current threshold of Rs3 billion. Consequently, the Central Development Working Party (CDWP)’s financial powers for projects were enhanced from Rs3 billion to Rs10 billion and the federal-level Department Development Working Party (DDWP) from Rs60 million to Rs2 billion.

Headed by Adviser to Prime Minster on Finance Dr Abdul Hafeez Shaikh, Ecnec approved 16 projects worth Rs579 billion, according to a statement of the finance ministry.

Ecnec approved the National Programme for Improvement of Watercourses in Pakistan Phase-II, which would be undertaken in all federating units at a cost of Rs154.542 billion. It also approved eight projects in the agriculture sector at a cost of Rs98 billion.

The Pakistan Tehreek-e-Insaf (PTI) government has undertaken Rs249 billion worth of liabilities despite agriculture being a provincial subject and literally no fiscal space for such spending.

The decision to approve the Rs154.5-billion project contradicts the finance ministry’s position that provinces should take responsibility of expenditures due to the thinning fiscal space.

 

Privatisation of steel mills to take longer than expected

The government has received a subdued response to its offer to hire financial advisers for privatising the loss-making Pakistan Steel Mills (PSM), underscoring that it will have to face challenges in completing some major transactions and getting a fair price due to economic slump and political uncertainty.

The lukewarm response underlines the challenges that the government will face in completing one-and-a-half dozen privatisation transactions.

These include divestment of 7percent shares of Oil and Gas Development Company Limited (OGDCL) and 10percent stakes in Pakistan Petroleum Limited (PPL).

Compared with the 2014’s offered share price, the Pakistan Tehreek-e-Insaf (PTI) government would earn Rs40 billion less due to a decrease in share prices of these enterprises.

Till the extended last day, only three consortiums had come forward in response to the Privatisation Commission’s Expression of Interest (EoI) to hire a financial adviser for finding a partner in the closed PSM, the government officials told on Thursday.

Two of them provided complete documentation while one sought more time, they added.

The consortiums of the Topline Securities, Citi Bank, and Pak-China Investment Bank submitted documents.

Economy now capable of absorbing shocks: SBP

Pakistan has achieved the most crucial milestone of economic stability. Improvement in foreign currency reserves, achieved through structural reforms under the International Monetary Fund’s (IMF) loan programme, has helped create a buffer for absorbing internal and external financial shocks, says the central bank chief.

“The State Bank’s policy and our outlook is that we are preparing…for any (financial) shocks,” State Bank of Pakistan (SBP) Governor Reza Baqir said while addressing the business community at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Friday.

He said the improvement had allowed the creation of a financial buffer so that the nation could deal with unexpected events like low revenue collection and volatility in the rupee-dollar parity.

“Similarly, in case we encounter any external shock tomorrow like (international) oil prices suddenly start soaring, which is not the case at present, but we should be prepared for… or any other external shock is encountered as the Kashmir issue these days,” he said.

He defended the policy of letting the rupee depreciate massively against the US dollar and a significant hike in the key interest rate.

The rupee depreciated 32percent to Rs160 to the US dollar in the fiscal year 2018-19 while the key interest rate has risen 7.5 percentage points since January 2018 to an eight-year high at 13.25percent.

PTI Govt issues ordinance to waive over Rs300b GIDC dues

The Pakistan Tehreek-e-Insaf (PTI) government has waived Rs208 billion worth of liabilities of a few industrialists in addition to writing off late payment surcharge for the past seven years through a presidential ordinance, bringing into dispute its claim of a clean government.

President Arif Alvi on Tuesday promulgated the Gas Infrastructure Development Cess (Amendment) Ordinance 2019 to waive half of the outstanding liabilities of fertiliser, textile, power generation and compressed natural gas (CNG) sectors. The ordinance was published in the official gazette on Wednesday.

Through the presidential ordinance, the government also reduced GIDC rates by up to 75percent, which would push down prices of gas and fertiliser for the end-consumers.

The life span of a presidential ordinance is four months, which can be extended for another four months. During this period, the ordinance has to be passed by both houses of parliament or else it will lapse.

According to the Petroleum Division statistics submitted in the National Assembly, as of the end of December 2018, the total principal liabilities of these sectors stood at Rs416.3 billion and half of those were written off by the government.

Cumulative GIDC collection since 2012 stood at Rs701.5 billion till the end of December 2018, of which only Rs285 billion had been deposited.

The government also waived the late payment surcharge, which was supposed to be paid at the rate of 4percent plus three-month Karachi Interbank Offered Rate (Kibor). Three-month Kibor currently stands at 13.7percent, which means the government has written off 17.4percent mark-up, which brings the total to over Rs300 billion.

The ordinance did not address the issue of how to refund 50percent GIDC to those companies that timely discharged their legal obligations and paid the entire amount of GIDC.

Revenue shortfall widens to PKR 70 bn in Jul-Aug

The shortfall in tax collection has widened to Rs70 billion despite a decent growth of 15percent– a ratio that reflects ground realities but is three times lower than what the government needs to meet the annual revenue target of Rs5.5 trillion.

The provisional revenue collection results for July-August 2019 once again indicate that the Rs5.503-trillion target is unrealistic, which has to be revised downwards.

From July through August of the current fiscal year, the Federal Board of Revenue (FBR) received Rs574 billion in taxes against the target of Rs643.7 billion, according to provisional official statistics. This resulted in a revenue shortfall of Rs70 billion, even after ignoring the Rs10-billion discrepancy in July.

Overall, the collection in first two months of the current fiscal year was higher by Rs70 billion or 15percent when compared with the collection of Rs498 billion in the same period of previous fiscal year.

The FBR received a hit of Rs60 billion in August alone as it could collect only Rs292 billion against the monthly target of Rs352.2 billion, said the officials. Still the collection in August was up 18percent or Rs45 billion compared with receipt of Rs247.4 billion in August last year.

The government’s drive to broaden the tax base is not yielding desired results. Although the number of tax return filers has jumped from 1.8 million to 2.6 million, the actual tax contribution by these additional 800,000 filers is just Rs2.4 billion, said the sources. Of that amount, Rs1.5 billion was contributed by the companies.

FBR Chairman Shabbar Zaidi has also found fault in the tax machinery which, according to him, is not effectively utilised to collect maximum revenues. He has sought a new action plan from field formations to increase income tax collection.

The entire income tax force is collecting only 7percent of the total income tax and the rest is being generated automatically, according to a note that Zaidi sent to the field formations on Friday, asking them to redeploy the workforce.

OGRA proposes slashing petroleum rates by 5.8pc

The Oil and Gas Regulatory Authority (Ogra) has recommended the government to slash for the month of September prices of all petroleum products by up to 5.8 percent in line with fluctuation of global oil prices.

The government has also expressed resolve to pass on benefits of reduction in oil prices to consumers“as a step to provide relief to the masses” and not to take benefit of reduction in oil prices globally.

“The second year of the PTI [Pakistan Tehreek-e-Insaf] government under leadership of Prime Minister Imran Khan would bring good news regarding development and welfare of the people for a country,” said Special Assistant to Prime Minister on Information Dr Firdous Ashiq Awan has said in a tweet post.

Minister for Petroleum Omer Ayub Khan also confirmed that the government is going to slash prices of petroleum protects from September 1.

“Government is going to provide complete and immediate benefit of reduction in petroleum products price,” he also wrote on Twitter.

Ogra has proposed the government to reduce the prices of petrol by Rs4.59 per litre (3.9percent) to Rs113.24 per litre from existing Rs117.83 per litre. Petrol is an alternate to the compressed natural gas (CNG).

The consumption of petrol has increased in Punjab where all CNG retail outlets are using imported liquefied natural gas (LNG). Reduction in its price will have a positive impact on common people as almost half (45percent) of all the petrol is consumed by motorcycles.

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