Editorial Note: The following news reports are summaries from original sources. They may also include corrections of Arabic names and political terminology. Comments are in parentheses. Share the link of this article with your facebook friends

 

Macroeconomic Stability in Pakistan Forthcoming After IMF Program Resumption, Says Finance Minister, Miftah Ismail

Dawn, August 11, 2022

 

Pakistani Finance Minister Miftah Ismail, August 10, 2022

Miftah says macroeconomic stability forthcoming after IMF programme resumption by end-August

Dawn.com Published August 10, 2022  Updated a day ago     6

Finance Minister Miftah Ismail has said that macroeconomic stability is forthcoming in view of the International Monetary Fund (IMF) programme resuming by the end of the month as all conditions in this regard have been met.

He made the remarks during a meeting with Pakistan Stock Exchange officials, authorities and businessmen, according to a press release issued by the PSX on Tuesday.

According to the press release, the meeting discussed Pakistan’s macroeconomy, capital markets, taxation and non-tax measures.

Ismail assured that the country’s balance-of-payments position was “well under control” and it may even have a surplus in the coming months because of increased hydel power, lower energy demands and lower oil prices.

“Fiscal discipline will be strictly followed and all additional expenditures will be fully funded by tax measures. [The] 10 per cent super tax is only imposed for one year while alternative revenue streams are developed,” he said.

He also iterated that advances-to-deposits ratio-linked tax on banks will not be imposed retrospectively and tax revenues from the retail sector are expected to be significantly higher compared to last year.

The minister also formed three committees — of which the first one would share the private sector’s stance on interest rates with the SBP’s Monetary Policy Committee, the second would coordinate with the Pakistan Business Council and the PSX on all tax issues and the third would review the listing of development finance institutions (DFIs), debt and Sukuk issuance, reform of the National Savings Scheme, and explore the development of a market for exchange rate forward dealing which all market participants can access.

Ismail committed to review the progress and meet the stakeholders again in two weeks, the press release stated.

For his part, PSX MD Khan told the finance minister the situation in the capital markets needed to be addressed on a “war footing”. He noted that while state-owned enterprises (SOEs) were “extremely profitable, their payout ratio is a meagre 18pc”. The participants asked that the payout ratio be raised to 50pc.

Ismail then directed the relevant ministry to immediately hold a meeting with stakeholders to discuss the matter.

The meeting’s participants said the income of listed companies was subject to double tax while unincorporated businesses were subject to substantially lower taxes. They also expressed concerns about the capital gains tax (CGT).

“The finance minister was highly receptive to all the points discussed. In particular, he asked the FBR to immediately review any discrepancies in the CGT regime and the issue of tax credit for newly listed companies. He asked SECP to review the investment limit and AML (anti-money laundering) requirements for Sahulat Accounts,” the press release stated.

Miftah says macroeconomic stability forthcoming after IMF programme resumption by end-August - Business - DAWN.COM

***

SBP chief says Pakistan will bridge $4bn financing gap soon

Dawn.com, Published August 8, 2022     33

State Bank of Pakistan (SBP) Acting Governor Dr Murtaza Syed has assured that Pakistan will bridge an external financing gap of $4 billion soon and that the economy is “not close to recession mode”.

He made the remarks in an interview with The News that was published on Monday.

Dr Syed said Pakistan had already arranged external financing of $34-35bn while it was trying to confirm inflows of $4bn from friendly countries, including Saudi Arabia, Qatar and the United Arab Emirates.

“These additional dollar inflows will be materialised for increasing foreign currency reserves’ position to create a buffer in case of a crisis-like situation,” he told The News.

He did not tell the publication when the inflows were expected but said that the government and the International Monetary Fund (IMF) were both trying to get confirmation of the inflows from friendly countries and the financing gap would be bridged “soon”.

Sources had earlier told Dawn that the IMF had asked Pakistan to get assurances from Saudi Arabia and the UAE that they would give an expected $4bn loan to the country after the IMF releases its tranche.

Inflation

The SBP chief said global supply disruptions had led to a “supercycle of commodities” internationally and Pakistan had no choice but to increase its agricultural productivity in order to ensure food security.

Inflation would remain in the higher range for the next 11 months to a year and the central bank was keeping its target between 18-20 per cent on average in the current fiscal year, he said.

Dr Syed said there was no magic wand to control inflation immediately and people would have to face a difficult situation for some time. “We know it is a difficult phase but there is no other choice.”

‘Not close to recession’

“We are not close to recession mode but there is a need to handle the economy in a careful manner,” he cautioned.

Dr Syed said Pakistan would continue to go through boom and bust cycles unless the structural problems in the economy were fixed. He noted that the GDP growth during the last fiscal year came in at 6pc, which led to “overheating” and caused imbalances.

The country would have to increase its exports and foreign direct investment to avoid the boom and bust cycles. “This boom and bust cycle cannot be overcome until the private sector attracts dollar inflows. Currently, the IMF helps to manage the external financing gap. When the Fund programme ends, there is no binding force to [make] the country stick to the path of the reform process.”

The country had faced external and internal economic imbalances because of the reversal of structural reforms in the past, he added.

Pakistan’s external financing gap was “not huge”, he said. However, it became a problem because unlike other countries where the private sector stepped in to help, in Pakistan, it was the government that was solely responsible for bridging the gap, he added.

The country’s economy would be stabilised through a “slowdown”, he said.

The SBP chief denied that the country was facing a debt crisis, stating that its overall debt was “manageable”.

When he was asked how the latest crisis had come about, Dr Syed said the previous government’s decision to subsidise fuel had “irked” the IMF. In addition, last year’s budget had led to an expansionary policy and the monetary policy had adapted with a “time lag”.

There was also a lag in the availability of data that resulted in policymakers taking a longer time to respond to emerging economic realities, he added.

Exchange rate

The acting governor denied that the IMF had set a specific target for the exchange rate. He noted that the State Bank had intervened recently and would do so again in the future if it observed “disorderly movements”.

He also referred to the SBP’s recent crackdown on exchange companies in the light of findings from ongoing inspections and mystery shopping.

The rupee would not be managed artificially, he asserted. “However, speculators could not be allowed to do whatever they wanted to do, so the central bank would remain vigilant in taking action to stop the disorderly movement of the exchange rate,” he told The News.

Dr Syed said he hoped the pressure on the exchange rate would end in the next two months.

SBP chief says Pakistan will bridge $4bn financing gap soon - Business - DAWN.COM

***

Share the link of this article with your facebook friends