The government, on Thursday, projected a significant increase in the inflation rate for September, expecting it to reach 31% due to rising electricity and fuel prices. This forecast aligns with recent global publications that have highlighted Pakistan as having the highest inflation rate in Asia.
In its monthly economic outlook, the Ministry of Finance stated that inflation “in September 2023 is expected to be around 29% to 31%.” This projection, as indicated in the report by the economic advisor wing, marks a reversal of the recent downward trend in inflation. In August, inflation had settled at 27.4% after peaking at 38% in the last fiscal year.
Earlier this month, the Asian Development Outlook, the flagship publication of the Asian Development Bank, projected an average inflation rate of 25% for Pakistan in the current fiscal year. This projection positions Pakistan’s inflation rate as the highest among all Asian economies, despite having the fourth-lowest economic growth rate.
The finance ministry stated that the upward adjustment in energy tariffs is likely to further intensify inflationary pressures in the coming months, as these price adjustments are expected to place an additional burden on transportation costs, essential items, and services. Consequently, inflation is anticipated to remain high in the coming month, exacerbated by a significant increase in fuel prices this month.
The Pakistan Bureau of Statistics (PBS) is expected to announce the official inflation reading for September on Monday.
Despite the government’s inflation target set at 21%, it is expected to be missed by a wide margin due to higher inflationary pressures.
The ministry’s report highlighted that the State Bank of Pakistan (SBP) has maintained the policy rate at the previous level due to anchored inflationary expectations. While the double-digit base effect provides some relief to September’s inflation, its impact appears minimised due to the substantial increase in fuel prices in September 2023, it added.
Although international food prices saw some decline last month, this reduction offset the impact of rising rice and sugar prices.
The ministry stated that the government’s strict administrative actions against unlawful foreign exchange dealers and commodity market hoarders are stabilising the exchange rate, providing relief from imported inflation, and easing commodity prices. However, international crude oil prices are heading toward $100 per barrel in the short term.
The report also mentioned a risk to the cotton crop due to pest attacks, but it noted that cotton arrivals are higher compared to last year. According to the Pakistan Cotton Ginners’ Association (PCGA), arrivals of cotton as of September 15, 2023, increased by 80% to 3.93 million bales compared to 2.19 million bales during the same period last year, recovering from the devastating floods that affected cotton production last year.
On the external front, the finance ministry anticipates an increase in foreign remittances due to military-driven actions against speculative activity in the foreign exchange market. This crackdown is expected to have a positive impact on remittances, trade, and the current account balance.
Furthermore, Pakistan’s main export markets, particularly the US, the UK, the Euro Area, and China, are showing positive trends in trade, indicating prospects for export growth in the coming months. However, imports are expected to gradually increase to stimulate economic activities, which may keep the current account within sustainable limits, according to the finance ministry.
The finance ministry expressed satisfaction with the fiscal performance thus far and expects that the economic revival plan and prudent actions, including policies such as Special Investment Facilitation Council (SIFC) and IT policy, will attract new investments, creating a multiplier effect for higher and more inclusive economic growth in FY2024 and beyond.
The current account posted a deficit of $935 million for July-August FY2024, compared to a deficit of $2 billion in the previous year, largely reflecting an improvement in the trade balance.
Published in The Express Tribune, September 29th, 2023.
IHC halts Rs35b tax on banks
The Islamabad High Court (IHC) on Wednesday suspended the government’s decision to impose a windfall income tax on commercial banks for the recovery of Rs35 billion, after lawyers questioned the powers of the interim setup and the constitutionality of the move.
The court’s decision came a day before the last date for the payment of an estimated Rs35 billion tax by those commercial banks that had manipulated the value of foreign currency to make extra profits.
The Federal Board of Revenue (FBR) was betting on the Rs35 billion in revenues to achieve its monthly target of nearly Rs711 billion. It is now left with the goal of collecting over Rs100 billion more today (Thursday) to meet the monthly target, although it may achieve the five-month tax collection target of Rs3.45 trillion.
design: Ibrahim Yahya
design: Ibrahim Yahya
“The submissions (by petitioners) demonstrate not only a prima facie case but also that the ingredients of balance of convenience and irreparable loss operate in favour of the petitioner. Resultantly, the operation of the impugned statutory regulatory order shall remain suspended till the next date of hearing,” reads the short order of the court.
Eight days ago, the FBR, through SRO 1588, had imposed a 40% windfall income tax on income from foreign exchange of banking companies for the preceding two years ended on December 31, 2021, and 2022.
Advocate Supreme Court, Salman Akram Raja, pleaded before the court on behalf of his banking clients.
While the government had anticipated banks to challenge the levy, the financial institutions were finding it difficult to hire lawyers to plead their case.
The government had issued the SRO under section 99D, which the Parliament had inserted into the law in June this year. While the FBR imposed taxes on the banks to get an additional Rs35 billion out of an estimated Rs90 billion windfall income, it conveniently ignored a windfall profit of approximately Rs1.5 trillion made by exporters. The Ministry of Finance has estimated that the exporters made a windfall gain of Rs1.5 trillion due to steep currency devaluation these past few years.
The banks’ lawyers argued that section 99D (through which the federal government could determine a tax rate between 0% and 40%) was tantamount to excessive delegation of power by Parliament and in breach of Article 77 of the Constitution.
The legal team also questioned the power of the caretaker government in imposing the tax, arguing that the function of the caretaker government was only to “attend to day-to-day affairs and (it) cannot extend its authority to a fresh taxation measure.”
The legal team also argued that the SRO was also defective in that the determination of the preconditions under section 99D, namely, the economic factors that led to the windfall income as well as the quantum of the windfall income, are conspicuous by their absence in the impugned SRO.
The team further argued that by reading the SRO, there was only an underlying (but invalidated) assumption that external economic factors have actually operated and led to a windfall income but without these being spelt out in the notification, which would be expected given the letter and spirit of section 99D.
The petitioners also claimed that the charge of additional tax conflicted with entry number 47 in the Legislative List for imposing an additional tax which was not warranted.
The law requires that the notification of the windfall tax has to be placed before the National Assembly within three months –a clause that the banks have now invoked as there is no assembly in Pakistan and the next elections are scheduled for February 8th.
The lawyer argued before the court that the government assumes that the next assembly will validate its action but it is quite possible that the National Assembly does not agree to bless the notification.
If the next assembly rejects the additional tax, banks would be at a disadvantageous position, according to the petitioners.
The court did not accept the arguments of the FBR legal counsel who submitted that the legislation has to remain operative until it is declared ultra vires. The court accepted the banks’ argument that the interim relief is sought in respect of the SRO, which is an executive act and not legislation and, therefore, prima facie not covered by the judgments on the point referred to by the counsel for the FBR.
Published in The Express Tribune, November 30th, 2023.
Growers sound alarm on fertiliser crisis
Growers in Sindh have appealed to the federal and provincial governments, as well as Chief of Army Staff (COAS) General Asim Munir, to take notice and prompt action to curb hoarding, smuggling, counterfeiting, and the black market of Urea and diammonium phosphate (DAP) fertilisers in Sindh immediately; otherwise, food insecurity could ensue.
“After demanding action from the federal and provincial governments on multiple occasions, I had to write a letter [available with The Express Tribune] to the COAS to address the ineptitude of all three fertiliser companies: Fauji Fertiliser Company Limited, Engro Fertilisers Limited, and Fatima Fertiliser Company Limited. Additionally, three Sindh government departments, including Sindh Agriculture Extension, Anti-Corruption Establishment (ACE), and Revenue, are being implicated in hoarding, smuggling, counterfeiting, and the black market of fertilisers due to nepotism, favouritism, and corruption. This is agonising farmers and driving up input costs of agricultural produce,” said Ali Palh, Advocate and President of the Small Growers’ Organisation Sindh Agriculture Research Council (SARC), speaking to The Express Tribune.
He highlighted that the government’s substantial subsidies to fertiliser companies have been in vain, as poor growers are not benefiting from them, leading to an acute shortage of fertilisers in the market. “We have laws, including the Sindh Fertiliser (Control) Act 1994 and Sindh Fertiliser (Control) Rules 1999; however, they are not being implemented to benefit peasants at all,” he emphasised.
Frustrated with the caretaker government, Jawaid Junejo, Chairman of the Farmer Organisations Council Sindh, expressed concern that large farmers are being compelled to purchase fertiliser sacks at almost double rates, while small growers are unable to obtain them, even at higher rates in the market. “We are running a social media trend; those who provide fertilisers at government rates to farmers will garner votes from the people in the upcoming general elections. This is the wheat sowing season, and we are being deprived of fertilisers,” he lamented.
Sindh Chamber of Agriculture (SCA), Senior Vice President, Nabi Bux Sathio highlighted that instead of a controlled Urea price at Rs3,680 per 50kg bag, it is being sold for Rs5,000-5,500 per 50kg in the market. He pointed out that a 50kg sack of DAP, which was sold at Rs9,000 until October 30, is now being sold at Rs15,000 per 50kg bag due to wheat sowing and other Rabi season crops.
“A total of 6.5 million tonnes of Urea are being produced in the country, meeting a local demand of 6.2 million tonnes. We should have a surplus, but no action is being taken. Growers need Urea and DAP fertilisers for better yield, rapid growth of standing crops. I urged the Sindh Chief Minister during a meeting today (Wednesday) in Hyderabad to make the fertiliser portal, set up by the federal government under the Ministry of Industries and Production, public. This way, every farmer can obtain updated information about actual bags of fertilisers sent to authorised dealers in every district. I also proposed forming an agriculture advisory committee to monitor agriculture issues and fix problems through monthly meetings,” he concluded.
Published in The Express Tribune, November 30th, 2023.
Saudi Arabia wins bid for 2030 world fair
The Saudi Arabian capital of Riyadh won the right to host the Expo 2030 world fair, vote results showed on Tuesday, in another diplomatic victory for a Gulf country after last year’s soccer World Cup in Qatar.
South Korea’s port city of Busan and Rome in Italy were also in the running to host the five-yearly event that attracts millions of visitors and billions of dollars in investment.
Riyadh won 119 votes, Busan 29 and Rome 17, results from 182 members of the Paris-based Bureau International des Expositions (BIE) showed. Saudi Arabia needed two-thirds of the votes to win from the first round.
The Italian contestants were scathing in their disappointment.
“This huge result for Saudi was unexpected in those proportions,” Giampiero Massolo, head of the Italian Expo bid, told reporters. “It is no longer about the merits, but about transactions. Yesterday it was a soccer championship, tomorrow it will be the Olympics,” he added.
However, South Korean President Yoon Suk Yeol congratulated Saudi Arabia for winning the bid, calling the Gulf state “a key partner,” and adding that his nation would share the resources and experience gained to help Riyadh hold a successful event.
Riyadh had enlisted soccer star Cristiano Ronaldo, who plays for the Al-Nassr Saudi club, to convince members in a video projected before the vote. Riyadh aims to host the event between October 2030 and March 2031.
The win is the icing on the cake for de-facto ruler Crown Prince Mohammed bin Salman’s ambitious Vision 2030 programme, which aims to wean the country off its oil dependency.
Published in The Express Tribune, November 30th, 2023.
Climate fund hailed, but ‘needs billions rather than millions’
British Gymnastics bans weighing young athletes
‘Some forces’ pull back leaders with progressive vision: Zardari
Pakistan team finally issued visas for World Cup in India
Regional players to meet in Russia on Afghanistan
Attack plots the norm since Danish cartoon crisis: experts
Business4 weeks ago
With larger fall, rupee near 1-month low
Sports3 weeks ago
Thrilling MotoGP title duel goes to Malaysia
Technology4 weeks ago
TikTok CEO to meet top EU chiefs amid disinformation worries
World3 weeks ago
Israel intensifies brutal Gaza strikes despite ceasefire calls
World3 weeks ago
Saudi Arabia to host extraordinary joint Islamic-Arab summit
World4 weeks ago
Woman shouting ‘You’re all going to die’ shot by police in France
World2 weeks ago
Israel warning to Lebanon sharpens amidst cross-border enmity
Pakistan4 weeks ago
US requests Pakistan not to deport 25,000 ‘vulnerable’ Afghans