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Pakistan In Focus

ECONOMIC TIMES OF PAKISTAN
Government mulls either 5-year or 3-year economic plan

Despite a lapse of almost one and a half year, Pakistan Tehreek-e-Insaf (PTI) government remains unable to launch the country’s 12th five-year macroeconomic plan amid confusion in its ranks whether to give a five-year plan or a three-year economic growth strategy.

Planning Commission Deputy Chairman Jehanzeb Khan on Friday chaired yet another meeting to review preparations for Pakistan’s 12th Five-Year Plan (2018-23). The meeting discussed the issue of whether the government should come up with a five-year plan as one and a half year had already passed.

The PTI government has failed to finalise the plan in the past 16 months despite the fact that the spadework had been done by the previous Pakistan Muslim League-Nawaz (PML-N) government. The 11th five-year plan ended in 2018 and since then the government has not been implementing an integrated economic plan.

The only guiding document is the 39-month Extended Fund Facility (EFF) of the International Monetary Fund (IMF) that largely revolves around quarterly fiscal and monetary targets.

Business community demand easy regulations for exports

The business community has demanded the simplification of complicated regulations and procedures for the documentation related to exports in order to help overcome the difficulties and give a further boost to Pakistan’s exports to regional countries.

Speaking at an awareness seminar on “FX Operations and State Bank Online Portal”, Sarhad Chamber of Commerce and Industry (SCCI) Acting President Shahid Hussain said traders and exporters were facing difficulties due to complicated regulations and lengthy documentation procedures, which adversely affected trade with Afghanistan and Central Asian countries.

The event was jointly organised by the SCCI and the State Bank of Pakistan (SBP) on Friday.

He went on to say that Khyber-Pakhtunkhwa (K-P) had locational disadvantages due to it being far from the port city. Therefore, he said, the rules should be simplified to ensure ease of doing business and promote trade activities.

He pointed out that the SCCI and Small and Medium Enterprises Development Authority (Smeda) had jointly established a business facilitation centre in the chamber premises in an attempt to resolve the issues faced by the business community under the “one-window operation”.

PKR-$ parity – from volatility to stability

The year 2019 has been a bumpy one for Pakistan, with the country entering another International Monetary Fund (IMF) loan programme and making some extremely tough decisions in a bid to boost the economy.

As part of negotiations for the 22nd IMF bailout package, the global lender demanded that Pakistan adopt a free-float exchange rate regime. Hence, after decades of being strictly controlled by the State Bank of Pakistan (SBP), the government consented to put in place a market-based flexible exchange rate system.

Under the new regime, which came into effect in May 2019 onwards, market forces determine the value of the rupee against the dollar with the central bank intervening only in case of wide speculations.

It was a drastic shift and a much-needed one after the currency had been artificially held at a fixed value for around four years. During his tenure as finance minister, Ishaq Dar had opted to keep the rupee at a fixed rate against the US dollar.

Industry barred from tax refund on urea sales

The federal government has promulgated an ordinance that bars fertiliser companies from claiming input sales tax refunds on urea sales to unregistered dealers, prompting an immediate reaction from the industry that has termed it an arbitrary move with serious implications for the fertiliser sector.

The Federal Board of Revenue (FBR) put the presidential ordinance, which made changes to the tax laws, on its website on January 2, according to which the ordinance had been notified on December 28, 2019, said Fertiliser Manufacturers of Pakistan Advisory Council Executive Director Sher Shah Malik.

 

The ordinance restricts fertiliser companies from claiming input sales tax on the retail sale of urea to the unregistered dealers.

The law reads, “A registered manufacturer shall make all taxable supplies to a person who has obtained registration under this Act …… failing which the supplier shall not be entitled to claim credit adjustment or deduction of the input tax as attributable to such excess supplies to the unregistered person”.

Gold hits 5-month high on escalating global tensions

Gold once again came into the limelight on Friday as it soared Rs1,350 per tola (11.66 grams) to a five-month high of Rs89,650 after global investors took refuge in the precious metal – considered a safe haven – due to escalation in tensions in the Middle East.

“A surge in gold price came in Pakistan in the wake of a significant rise of $29 per ounce (31.10 grams) to a five-month high at $1,551 in world markets,” reported All Sindh Saraf and Jewellers Association (ASSJA).

“Gold price shot up following the US air strike in Baghdad that killed a top Iranian military commander,” said ASSJA President Haji Haroon Rashid Chand.

“Next two days – Saturday and Sunday – will be crucial for gold. The world will observe Iranian moves over the two days when the global commodity markets will be closed for the weekend,” commodities analyst Adnan Agar said.

State Bank simplifies non-resident companies’ tax regime

The State Bank of Pakistan (SBP) has announced that amendments have been made to the Income Tax Ordinance 2001 in an attempt to simplify the tax regime for the non-resident companies investing in debt instruments and government securities.

“These amendments will deepen our capital markets, support availability of long-term rupee financing sources, support competition in the local currency debt market and diversify the source of funding for the government,” the central bank said on Thursday.

The existing foreign exchange framework allows non-residents to invest in debt instruments and government securities through the Special Convertible Rupee Account (SCRA) maintained with banks in Pakistan.

However, according to the central bank, the tax structure for the non-residents investing in debt securities was historically complex. Different rates applicable for withholding tax on profit on debt and capital gains tax, penal transaction charges for non-filers, a complex tax filing process and uncertainty about tax applicability were the key impediments to foreign investment in the local debt market, particularly in long-term debt instruments.

Government asks state bank to sell entire stake in HBFC

The federal government has directed the State Bank of Pakistan (SBP) to divest its entire shareholding in House Building Finance Company (HBFC), which will pave the way for the housing finance company’s privatisation, officials say.

At present, the SBP has 90.31percent shareholding in HBFC – a major state-owned housing finance institution in the country.

Last week, the Privatisation Commission board approved MCB Bank, EY Ford Rhodes, Elixir Securities Pakistan (Private) Limited and Haidermota & Co (sub-contractor) as financial advisers for the privatisation of HBFC. The consortium will charge a minimum fee of Rs80.3 million.

According to the Finance Division, HBFC is a public limited company in which the government held 62.50percent shares while the remaining 37.50percent stake was held by the SBP as of December 31, 2016.

In a meeting held on November 7, 2017, under the chairmanship of then finance minister that discussed the long outstanding issue of credit lines extended by the State Bank to HBFC and Zarai Taraqiati Bank Limited (ZTBL), it was decided to convert the credit lines of the central bank into equity in HBFC and ZTBL.

The federal cabinet, in its meeting in November 2017 chaired by then prime minister Shahid Khaqan Abbasi, allowed the SBP to acquire shares in HBFC and ZTBL. The permission was given in a bid to settle the loans owed to the central bank, according to a statement issued by the PM’s media office at that time.

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