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Category: Business

  • Ishaq Dar to present Rs14.7 trillion budget for FY2023-24 today

    Ishaq Dar to present Rs14.7 trillion budget for FY2023-24 today

    Finance Minister Ishaq Dar is set to reveal the federal budget for the fiscal year 2023-24 today, with a proposed outlay of Rs14.7 trillion. The budget carries a higher consolidated budget deficit, exceeding 6 per cent of the GDP, and includes allocations for various targeted schemes aimed at attracting voters in the upcoming general elections.

    The government has established targets for tax collection by the Federal Board of Revenue (FBR) at Rs9.2 trillion, along with a non-tax revenue target of Rs2.7 trillion. To achieve the non-tax revenue target, the government plans to amend the finance bill, raising the petroleum development levy (PDL) from Rs50 per litre to Rs55-60 per litre. This adjustment aims to collect Rs870 billion in the next budget, as opposed to the revised estimate of Rs550 billion for the outgoing fiscal year.

    The credibility of the budgetary figures remains a concern as they are subject to change throughout the financial year. If a new government assumes power after the general elections, it will likely need to introduce a mini-budget to align economic realities with the International Monetary Fund (IMF) and secure a fresh bailout package.

    The government’s ability to satisfy the IMF on the revival of the stalled programme is yet to be seen. The continuing stalemate may endanger the diminishing foreign exchange reserves, with the State Bank of Pakistan’s reserves falling below $3.9 billion.

    Without establishing a comprehensive budgetary framework with the IMF, signing the staff-level agreement will be impossible. Fulfilling three conditions becomes crucial: securing external financing of $6 billion, presenting the next budget in accordance with IMF guidelines, and ensuring a market-based exchange rate.

    The IMF programme is scheduled to conclude on June 30, making any further extension unlikely, as stated by the finance minister during the launch of the Economic Survey for 2022-23. The need for a realistic budget for the next financial year is evident due to the lack of credibility surrounding the budgetary figures, which frequently undergo changes.

    The tenure of the Pakistan Democratic Movement (PDM)-led government is set to expire on August 12. However, the government has approved an allocation of Rs90 billion for the implementation of the SDGs Achievement Programme (SAP) in the next budget, compared to the revised allocation of Rs116 billion for the current financial year.

    Ensuring external debt servicing, which requires $25 billion, is the primary priority of the government in the next budget. How the government plans to generate such a substantial amount, considering it obtained just under $8.1 billion in the first ten months of the current fiscal year out of the total budgeted figure of $22.8 billion for external loans and grants, remains to be seen.

    The fiscal constraints present significant challenges, as the total net revenue receipts of the federal government are insufficient to meet debt servicing requirements. After transferring resources to provinces and accounting for non-tax revenue, the total net receipts of the federal government are expected to amount to Rs6.5 trillion.

    Meanwhile, total debt servicing will consume Rs7.5 trillion, resulting in a deficit of Rs1,000 billion for the federal government. Therefore, other expenditure categories, such as defense, salaries, pensions, civil government operations, subsidies, and grants to public sector enterprises, will have to be funded through borrowing.

    During the survey launch, the finance minister pledged the government’s commitment to increase salaries, pensions, and minimum wages for workers in the FY24 budget. To finance the substantial budget deficit in the next financial year, Pakistan will need to acquire domestic and foreign loans amounting to Rs7,000 to Rs7,500 billion.

    The challenges ahead do not have easy solutions, and addressing them will require profound structural reforms to navigate the economy out of its crisis mode.

  • Finance Minister rejects idea of coalition govt entering fresh IMF programme

    Finance Minister rejects idea of coalition govt entering fresh IMF programme

    Pakistan’s Finance Minister, Ishaq Dar, has voiced his opposition to the idea of entering into a new International Monetary Fund (IMF) bailout programme without the consent of the incoming government.

    Speaking at a press conference, Dar emphasised the need for democratic fairness and stated that any future IMF agreement should be the prerogative of the government elected after the ongoing programme concludes on June 30.

    The minister also highlighted Pakistan’s efforts in meeting IMF requirements and expressed hope for the successful completion of the ninth review before the programme’s conclusion.

    Government’s efforts and budget transparency

    During the press conference, Minister Dar reassured journalists that the coalition government had provided the IMF with budgetary information and expressed confidence that the budget numbers shared were without objection.

    He revealed that Prime Minister Shehbaz Sharif had agreed to share the numbers, and there were no issues concerning the figures presented. This transparency is a crucial step in unlocking the ninth review and securing the remaining funds from the IMF’s Extended Fund Facility.

    IMF’s conditions and economic challenges

    Under the current IMF programme, Pakistan has been required to implement several challenging measures, including the removal of energy subsidies, allowing the rupee to float against the US dollar, raising taxes and duties, and restricting imports.

    These measures aim to address Pakistan’s balance-of-payments crisis and reduce its external debt burden. However, the country’s economic challenges, combined with political uncertainty and a decline in foreign investment, have made the task more difficult.

    Esther Perez Ruiz, the IMF’s resident representative for Pakistan, stated that there is only enough time for one final board review before the scheduled end of the $6.5 billion Extended Fund Facility.

    Ruiz emphasised the need for Pakistan to restore the proper functioning of the foreign exchange market, present a budget for FY24 aligned with programme objectives, and secure credible financing commitments to close the $6 billion funding gap. These actions will pave the way for the final review and release of remaining funds.

    The call for ‘democratic’ decision-making

    Finance Minister Ishaq Dar emphasised the importance of democratic principles in determining Pakistan’s involvement in any future IMF programmes. He stressed that the decision to enter into a new programme should rest with the government elected after the ongoing programme concludes, rather than being imposed on a new administration.

    Dar’s stance reflects the need to ensure that any commitments made align with the vision and policies of the elected government, fostering a fair and democratic approach.

    Pakistan’s Finance Minister Ishaq Dar has voiced his opposition to the undemocratic imposition of a new IMF bailout programme. He said that any future agreement should be the prerogative of the incoming government, allowing them to shape policies and commitments in alignment with their mandate.

    As Pakistan works towards meeting the IMF’s requirements and unlocking the remaining funds, it is crucial to balance economic stability with democratic decision-making to ensure sustainable growth and development.

  • Pakistan’s foreign exchange reserves dip to $3.91 billion amid IMF agreement delay

    Pakistan’s foreign exchange reserves dip to $3.91 billion amid IMF agreement delay

    In a challenging turn of events for Pakistan’s economy, the foreign exchange reserves held by the State Bank of Pakistan (SBP) have plummeted to $3.91 billion.

    The decline in reserves is primarily attributed to external debt payments, coinciding with the expiration of the country’s International Monetary Fund (IMF) program, which has been stalled for several months.

    The SBP announced on Thursday that the reserves decreased by $179 million during the week ending on June 2, leaving the country with barely enough coverage for controlled imports for just one month.

    Commercial banks, on the other hand, are holding net foreign reserves worth $5.42 billion, $1.51 billion more than the central bank. Consequently, Pakistan’s total foreign reserves stand at $9.3 billion as of June 2.

    This marks the sixth consecutive weekly drop in foreign exchange reserves for Pakistan, signaling a lack of progress in securing external financing. Political instability has played a significant role in the deteriorating economy, and the country has yet to secure much-needed funding to avert the risk of default.

    Pakistan’s $350 billion economy is currently in turmoil due to financial woes and the delay in reaching an agreement with the IMF. The pending agreement would release crucial funds that are essential for stabilizing the economy.

    The government has been engaged in discussions with the IMF since the end of January to resume a $1.1 billion loan tranche, which has been on hold since November 2022. This loan is part of a larger $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019.

    Earlier today, Finance Minister Ishaq Dar revealed that the coalition government has shared its budget numbers with the IMF, aiming to unlock the ninth review.

    He expressed confidence that there are “no issues in the numbers.” Pakistan’s government faces significant pressure from the IMF to implement stringent fiscal measures and unlock the final tranche of a vital bailout package.

    To meet the IMF’s requirements, Pakistan must eliminate subsidies in sectors such as energy, allow the rupee to float against the US dollar, increase taxes and duties, and impose import restrictions. These measures are seen as crucial steps toward stabilising the economy and securing external funding.

    The future of Pakistan’s economy hinges on successful negotiations with the IMF and the implementation of effective economic reforms.

    The government must address political instability and work towards regaining the confidence of international lenders to alleviate the financial strains on the country.

  • Countdown to Pakistan’s budget unveiling: Last IMF review holds the key

    Countdown to Pakistan’s budget unveiling: Last IMF review holds the key

    Pakistan is heading towards a crucial phase as it prepares to unveil its budget on June 9, following an arduous bailout negotiation with the International Monetary Fund (IMF). A Fund official revealed that only one board review remains under the current IMF bailout package, which is seen as a step towards a successful review.

    Esther Perez Ruiz, the resident representative for Pakistan at the IMF, emphasised the need to restore the proper functioning of the foreign exchange market to pave the way for the final review.

    Ruiz outlined additional prerequisites, including passing a budget that aligns with the program objectives for the 2023-24 fiscal year, and securing credible financing commitments to address a $6 billion shortfall.

    Experts suggest that the coalition government is striving to strike a delicate balance between satisfying the demands of the IMF and winning over voters in the upcoming general election. Analysts expect the government to announce populist measures in the budget to appease the electorate while aiming to meet IMF prescriptions.

    The IMF program, which concludes this month, has approximately $2.5 billion in funds yet to be released due to ongoing negotiations between Pakistan and the lender. Pakistan’s economy is grappling with severe challenges, including high inflation, fiscal imbalances, and low reserves.

    The government is hoping that the general election scheduled for November will help alleviate the turmoil stemming from a protest campaign led by Pakistan Tehreek-e-Insaf (PTI) chairman after his removal in a no-confidence vote last year.

    Former finance minister Miftah Ismail stressed the importance of securing IMF funding, highlighting the difficulties Pakistan would face without it. Ismail expressed confidence that the government would present a budget in line with IMF prescriptions to ensure the country’s survival in the next fiscal year.

    A staff-level agreement between Pakistan and the IMF to release $1.1 billion from a $6.5 billion package has been delayed since November, further intensifying the country’s need for funds to avert a balance of payments crisis. Experts believe that even after the current program expires, Pakistan will likely seek another bailout in the upcoming fiscal year to avoid defaulting on its debt obligations.

    Pakistan’s central bank reserves can cover imports for only about a month, underscoring the urgency of securing financial assistance. Inflation in the country, home to 220 million people, has reached a staggering 37.97 per cent in May, marking a record high for the second consecutive month and making it the highest rate in South Asia.

    The planning minister recently announced that development spending targets in the new fiscal year would be set at 1,150 billion rupees ($4.02 billion), while projecting an inflation rate of 21 per cent for the same period. With the general election looming, some analysts anticipate that the government will announce vote-winning measures, even if they have to be scaled back later.

    Pakistan’s budget unveiling tomorrow will be closely watched by the nation, as it not only sets the course for the fiscal year but also represents a crucial step in the ongoing negotiations with the IMF and the government’s efforts to regain stability and boost economic growth.

  • Non-filers beware: Proposed increase in advance taxes on vehicles and utility bills

    Non-filers beware: Proposed increase in advance taxes on vehicles and utility bills

    In an attempt to boost tax revenue and increase non-tax income, the Pakistan Business Council (PBC) has proposed the Federal Board of Revenue (FBR) to impose higher advance taxes on various sectors. The council’s recommendations primarily target non-filers and aim to generate additional funds for the government’s development initiatives.

    One of the key proposals put forth by the PBC is to increase the annual advance income tax amount for owners of vehicles with an engine capacity of 2000cc and above who are non-filers. The council suggests raising the amount to Rs250,000 per year.

    Additionally, the PBC argues for an increase in advance income tax levied on non-filers for the purchase of cars, as outlined in section 231B.

    The proposed changes in advance income tax for different engine capacities are as follows:

    Engine capacity: 1800cc – 2000cc

    Existing tax: Rs600,000

    Proposed increased tax: Rs2,000,000

    Engine capacity: 2001cc – 2500cc

    Existing tax: Rs900,000

    Proposed increased tax: Rs2,500,000

    Engine capacity: 2501cc – 3000cc

    Existing tax: Rs1,200,000

    Proposed increased tax: Rs3,000,000

    Engine capacity: Above 3000cc

    Existing tax: Rs1,500,000

    Proposed increased tax: Rs4,000,000

    Furthermore, the PBC suggests raising the advance income tax from Rs1,200,000 to Rs2,400,000 on the sale of vehicles with an engine capacity of 2001cc and above by non-filers before registration.

    In addition to the proposed changes in vehicle-related taxes, the PBC recommends increasing the advance tax collected from domestic connections in the name of non-filers.

    Currently, non-filers with monthly utility bills of Rs25,000 or more are subject to a 7.5 per cent advance tax. The council suggests continuing this practice and exploring the possibility of imposing withholding tax on withdrawals exceeding Rs50,000 in a single day from non-filer bank accounts.

    According to sources within the FBR, the board has decided to increase the petroleum development levy from Rs50 to Rs60 per unit, which is expected to generate revenue of Rs870 billion. The government aims to increase non-tax income to Rs2.9 trillion through such measures.

    It is worth mentioning that the proposed measures are intended to create additional funds for various government initiatives. One such initiative involves increasing pensions by up to 30 per cent, which would require Rs780 billion in funding.

    The PBC’s recommendations, if implemented, would significantly impact non-filers and luxury expenditures. These proposed changes seek to address the revenue deficit and support the government’s efforts to strengthen the economy and promote sustainable development in Pakistan.

  • Pakistan and Russia aim to strengthen bilateral relations in trade, investment, and energy sectors

    Pakistan and Russia aim to strengthen bilateral relations in trade, investment, and energy sectors

    In an effort to strengthen bilateral relations between Pakistan and Russia, Chairman Senate Muhammad Sadiq Sanjrani engaged in productive talks with Chairman of the Russian Duma, Mr Volodin, during a delegation-level meeting held in Moscow on Wednesday.

    The discussion encompassed various areas of mutual interest and emphasised the significance of parliamentary exchanges in fostering effective diplomacy.

    A press release issued by the Pakistan embassy in Moscow highlighted the consensus reached during the meeting. Both sides expressed their commitment to enhancing parliamentary interaction between the two nations. This step is expected to bolster bilateral ties and pave the way for increased cooperation in trade, investment, and energy sectors.

    Chairman Sanjrani reiterated Pakistan’s dedication to strengthening relations with Russia across all domains of mutually beneficial cooperation. Trade, investment, and energy were particularly emphasised as key areas for future collaboration.

    The significance of continued cooperation in international forums, such as the United Nations and the Shanghai Cooperation Organisation (SCO), was also acknowledged and agreed upon by both parties.

    During the talks, Chairman Sanjrani extended an invitation from the Speaker of the National Assembly of Pakistan to Chairman Volodin, inviting him to visit Pakistan. In a positive response, Chairman Volodin accepted the invitation, reflecting the willingness of both countries to further solidify their ties.

    The meeting between Chairman Senate Sanjrani and Chairman Volodin serves as a significant milestone in the diplomatic efforts between Pakistan and Russia. It highlights the mutual desire to strengthen bilateral relations and lays the groundwork for increased cooperation in various fields, including trade, investment, and energy.

    The forthcoming visit of Chairman Volodin to Pakistan is expected to further enhance the ties between the two nations and open new avenues for collaboration.

  • Google’s technical glitch causes panic with incorrect US dollar rate of Rs186 instead of Rs286

    Google’s technical glitch causes panic with incorrect US dollar rate of Rs186 instead of Rs286

    Late Tuesday night, a technical malfunction on Google Search caused a momentary panic among investors and observers as the value of the US dollar plunged in comparison to the Pakistani rupee.

    The unexpected drop to Rs186.73 bewildered many, especially considering that the local currency hadn’t experienced a significant rebound recently.

    It was later discovered that the decline in currency exchange rates was a result of a technical problem with the search engine on the website, leading to a temporary plummet in the rates.

    This incident is not the first of its kind and has occurred multiple times in the past, leaving users puzzled by massive declines in dollar rates.

    The glitch and its impact

    On Tuesday, June 6, the interbank market closed with the Pakistani rupee at Rs286.56 against the US dollar, while it remained above Rs300 in the open market. However, due to the technical glitch on Google Search, the rates displayed on the platform inaccurately dropped to Rs186.73.

    The sudden decline surprised and concerned individuals who were monitoring the exchange rates, as it deviated significantly from the prevailing values. Fortunately, the issue was promptly identified and rectified, restoring the rates to Rs286.72.

    Recurring glitches on Google Search

    This incident marks yet another occurrence of a glitch affecting the world’s largest search engine and impacting currency exchange rates. In July of the previous year, the rates displayed on Google Search had crashed to Rs207.10, a stark contrast to the rates issued by the State Bank of Pakistan.

    According to the central bank, the rupee had closed at 236.02 against the US dollar in the interbank market. The repetition of such glitches raises concerns about the accuracy and reliability of the information provided by Google Search in matters of global financial significance.

    User Reactions and Social Media Response: The recent glitch on Google Search didn’t go unnoticed by users, with several individuals taking to Twitter to highlight the issue. One user tweeted, “Last night, the dollar crashed on Google,” emphasising the impact the technical malfunction had on the perceived value of the US dollar.

    Such reactions on social media platforms highlight the widespread reliance on search engines for real-time financial data and the potential consequences of inaccuracies caused by technical glitches.

    While the glitch was rectified, it highlights the recurring nature of such incidents on the world’s largest search engine, casting doubts on the accuracy of the financial information provided.

    As reliance on search engines for real-time data increases, it becomes imperative for platforms like Google to ensure the reliability and integrity of the information they display to prevent unwarranted panic or misinformation in the financial markets.

  • PM Shehbaz urges Finance Ministry to ensure strict adherence to IMF guidelines in upcoming budget

    PM Shehbaz urges Finance Ministry to ensure strict adherence to IMF guidelines in upcoming budget

    In a meeting held between Prime Minister (PM) Shehbaz Sharif and Finance Minister Ishaq Dar on Tuesday, it was emphasized that the upcoming budget, scheduled to be presented on June 9, should strictly adhere to the parameters set by the International Monetary Fund (IMF).

    PM Shehbaz Sharif has expressed his optimism about reaching an agreement with the IMF, dispelling media reports suggesting a populist budget typically seen in election years.

    An informed source, who was present during the meeting, highlighted that Pakistan cannot afford to deviate from the IMF’s prescribed principles in the budget. The PM’s resolve to adhere to these guidelines was reinforced after his recent telephonic conversation with IMF Managing Director Kristalina Georgieva. It was during this conversation that PM Shehbaz Sharif personally appealed to Georgieva to revive the stalled $6.5 billion bailout package.

    The discussion between the PM and the IMF Managing Director took place due to the finance ministry’s inability to break the deadlock over loan talks in the past four months. However, the source disclosed that PM Shehbaz Sharif expressed satisfaction after his conversation with Georgieva, leading to an agreement to share the budget details with the IMF.

    Furthermore, the IMF Managing Director indicated the possibility of a revival of the programme. This positive development prompted PM Shehbaz Sharif to inform the Turkish media during his visit to Ankara that Pakistan remains hopeful of finalising a deal with the IMF this month. He assured that Pakistan had met all the required conditions and that the upcoming budget would align with the terms and conditions set forth by the IMF.

    “We are still very hopeful that the IMF programme will materialise. Our ninth review by the IMF will match all terms and conditions, and hopefully, we’ll have some good news this month,” PM Shehbaz Sharif stated during an interview with Anadolu in Ankara, where he was present for President Recep Tayyip Erdogan’s inauguration ceremony.

    According to Geo, the PM further clarified that while some actions are typically met after the board’s approval, this time, the IMF insisted on meeting those actions before granting approval. He affirmed that Pakistan has fulfilled these requirements as specified by the IMF.

    As the budget presentation approaches, all eyes are now on the Ministry of Finance, which has been tasked with ensuring strict compliance with IMF parameters. With the PM’s renewed optimism and the positive signals received from the IMF, there is a growing sense of hope that Pakistan will be able to secure the much-needed financial support to address its economic challenges.

    It remains to be seen how the upcoming budget will reflect the government’s commitment to IMF compliance and whether it will lead to a successful conclusion of negotiations with the international financial institution.

  • Russian crude oil shipment faces delay, expected to reach Pakistan on June 11

    Russian crude oil shipment faces delay, expected to reach Pakistan on June 11

    In a recent development, a Russian cargo vessel carrying 100,000 tonnes of crude oil has experienced delays and is now expected to reach the Omani port of Duqm on June 7. This delay has caused a setback in Pakistan’s plans as the oil was initially scheduled to arrive in Oman on May 27-28.

    According to an official, the crude oil will be transported to Pakistan via smaller ships from the Omani port, which will take approximately two weeks to reach Port Qasim in Karachi. The Russian vessel, loaded with Ural crude on April 21 at a Russian port, encountered a delay of 10 days due to technical issues. Subsequently, it arrived at Egypt’s Suez Canal on May 17, where it faced a lengthy 12-day wait in a queue to cross the canal.

    Following its journey across the Red Sea, the vessel is anticipated to reach Duqm on Tuesday. Upon arrival, the crude oil will be unloaded onto a smaller vessel with a capacity of 50,000 tons. This smaller vessel is expected to reach Port Qasim on June 11. The remaining 50,000 tons of Russian crude will be transported separately and is scheduled to arrive at Port Qasim on June 20.

    According to The News, authorities have assured the safe and smooth arrival of the Russian crude, despite the logistical challenges that caused the delay. The official stated that the transportation cost has already been settled with the Russians, so the delay will not result in additional expenses. However, there is a concern that if the price of crude oil decreases during this period, it could have detrimental effects on the country.

    Pakistan Refinery Limited (PRL) has been entrusted with the responsibility of refining the test cargo of Russian crude oil. PRL will blend this oil with crude imported from the United Arab Emirates and Saudi Aramco. The test cargo will provide valuable data to the government regarding the quality, yields, and commercial viability of the Russian oil. Additionally, it will assist the government in assessing transportation costs, refining expenses, and refining margins for the country’s refineries.

    The government is eagerly awaiting PRL’s test report, which will aid in making informed decisions about future oil imports and refining processes.

  • Rising inflation forces over 80% of Pakistanis to reduce monthly expenses

    Rising inflation forces over 80% of Pakistanis to reduce monthly expenses

    A recent survey conducted by PulseConsultant in the month of May has shed light on the significant increase in downtrading among urban Pakistanis, attributed to the high inflation rate. The study surveyed more than 1,360 respondents across the top 12 cities of Pakistan.

    The findings of the study reveal a notable shift in consumer behavior and attitude towards purchasing and consumption patterns in light of the current inflation wave. As prices continue to soar, many respondents have altered their buying preferences to cope with the economic challenges.

    According to the study, 55 per cent of respondents reported that they have switched from expensive brands to more affordable ones. This percentage represents a considerable increase from the previous month of April, where the trend stood at 45 per cent. This shift highlights the growing financial strain faced by consumers, prompting them to seek cost-effective alternatives.

    Moreover, the data indicates a decline in the phenomenon of purchasing the same brands but reducing the quantity. In April, 46 per cent of respondents claimed to be adopting this strategy, whereas in May, the number dropped significantly to 38 per cent, showing an 8 per cent decrease. This suggests that consumers are finding it increasingly difficult to maintain their previous consumption habits.

    In terms of monthly home purchases, the study reveals that 81 per cent of respondents reported a reduction in May, marking a 3 per cent increase compared to April when the figure was 78 per cent. This indicates that consumers are actively curtailing their household expenses in response to the inflationary pressures.

    To gain a deeper understanding of consumer behavior and attitudes towards the current inflation wave, PulseConsultant invites individuals to join their syndicated research initiative. The study aims to gauge the impact of inflation on purchasing and consumption behaviors across 40+ categories, focusing on five parameters: consumption increase/decrease, brand switching, quantity reduction while retaining the brand, changing the stock keeping unit (SKU) while retaining the brand, and category consumption drop.

    The research methodology involves face-to-face interviews with a sample size of 1,704 individuals across the top 17 cities in Pakistan. The gender distribution comprises 30 per cent males and 70 per cent females, while the age group considered is 22-55 years. The socioeconomic classes targeted range from SEC A-D. The research is scheduled to take place over a period of four weeks.

    As inflation continues to affect the purchasing power of consumers in urban Pakistan, the study by PulseConsultant aims to shed light on the evolving trends and behaviors within the market. The findings will help businesses and policymakers make informed decisions to navigate the challenging economic landscape and cater to the changing needs of consumers.