The International Monetary Fund (IMF) on Thursday inquired the Pakistani authorities about the next general elections as well as the functioning of the Special Investment Facilitation Council — the two most crucial issues that affected the country’s political and economic landscapes.
Nathan Porter, the Washington-based lender’s mission chief to Pakistan, raised the points during his maiden meeting with interim Finance Minister Dr Shamshad Akhtar.
Porter set the tone for the 14-day long review talks that are scheduled to end on November 15 — if everything goes according to the plan.
The IMF official praised the government’s performance during the first quarter of the ongoing fiscal year — an area where the finance ministry and Federal Board of Revenue (FBR) had so far exceeded expectations.
The mission chief raised the issues of the next general polls and the SIFC’s functioning, at least two participants of the meeting told The Express Tribune.
They said the interim finance minister said she would arrange the IMF delegation’s meetings with the Election Commission of Pakistan (ECP) and the SIFC secretariat.
Hours after the IMF-Pakistan opening session, President Dr Arif Alvi and the ECP agreed on February 8 as the elections date when they met on the directives of the Supreme Court, clearing the air on the political horizon of the country.
The elections date has direct implications on the next IMF programme review and also on any new deal with the Washington-based lender.
The tentative date for the IMF board meeting for the next review is March 1, implying that the third review for the $1.2 billion tranche should take place in around February next year.
The current $3 billion IMF bailout was given for a period of nine months, ending in April next year on the assumption that the new government would enter into another programme after the elections.
On Thursday, the IMF mission began discussions for the first review of the $3 billion programme, which would pave the way for the approval of a $710 million loan tranche by the Washington-based lender’s executive board in December.
The IMF has imposed a set of conditions in nearly every major area of the budget, with some of them being time-bound and others to be implemented throughout the fiscal year.
The SIFC is a civil-military body set up to attract foreign investment in Pakistan.
According to a recent report by the Policy Research Institute of Market Economy (PRIME), the SIFC may fall short of its mission to attract significant foreign investment because of its lack of focus on structural issues.
The PRIME report cautioned that the inclusion of the military in economic decision-making without the requisite expertise could not only destabilise the country, but also lead to the failure of key initiatives.
However, an SIFC official negated the concerns raised in the PRIME report, arguing that it was too early to make a judgment about the body, which had just started working in June this year.
The sources said the IMF mission chief outlined the energy sector and tax reforms as the primary areas of discussions during the review talks.
The IMF delegation will also review the Circular Debt Management Plan. The plan is being implemented to control the circular debt in the power sector.
The Washington-based lender’s team asked about the government’s policy on the supply of gas to fertiliser plants, while referring to the last meeting of the Economic Coordination Committee (ECC) of the Cabinet.
On Wednesday, the ECC could not agree on the discontinuation of subsidised gas supply to two fertiliser plants and extended it for another two weeks aimed at developing consensus among all stakeholders.
The sources said the IMF team also suggested to the Pakistani government that it should no longer set the fuel prices.
The government fortnightly sets the fuel prices but the IMF is of the view that they should be left to the market forces.
Former finance minister Miftah Ismail had once suggested ending the role of his ministry in determining the fuel prices, but subsequently the proposal was shelved.
The interim finance minister also assured the IMF to arrange a briefing on the Sovereign Wealth Fund, which the government had set up in August and transferred the assets of profitable entities into it.
The mission chief sought details about the implementation of the state-owned enterprises (SOEs) policy, which largely remained on paper with little progress.
A federal minister, adviser, and special assistant to the prime minister are sitting on the boards of some of these companies in violation of rules and regulations.
During the first quarter of this fiscal year, the finance ministry demonstrated a strong performance.
Unlike the previous fiscal year, no new supplementary grants were issued during the first quarter — meeting another important IMF condition.
The ministry also met the conditions of restricting the budget deficit and increasing the petroleum levy to a maximum of Rs60 per litre on petrol as well as high-speed diesel.
There may be an issue about the low federal development spending.
Also on Thursday, US Ambassador to Pakistan Donald Blome called on Senator Ishaq Dar, the leader of the house in the Senate.
“The progress and current status of the ongoing IMF programme were discussed,” a statement issued by the Senate secretariat read.
Senator Dar, a former four-time finance minister, expressed his optimism about the successful conclusion of the second review of the IMF programme.
The four provincial governments have also met the IMF’s condition to ensure a spending of Rs465 billion on health and education during the first quarter. The actual spending exceeded this requirement, totalling Rs482 billion.
The IMF has also placed a condition that the FBR would share the details of asset declarations of civil servants with commercial banks for customer due diligence.
The IMF will receive the status on the implementation of the condition next week.
Read more ‘SIFC faces hurdles in attracting FDI’
The FBR has met the condition to collect Rs1.98 trillion in taxes during the first quarter of this fiscal year.
It has also achieved the target of adding only Rs32 billion to tax refunds during the first quarter, staying within the target of restricting refunds to Rs247 billion.
According to a statement issued by the finance ministry, Porter appreciated the interim government’s commitment to meeting the first quarter targets and commended its measures taken in some critical areas.
He further underscored the importance of continuation of these efforts for staying on track for the economic stability of the country.
The statement read that Interim Finance Minister Dr Akhtar expressed her appreciation for the continued support and assistance of the IMF.
She reaffirmed the government’s commitment to working closely with the IMF to ensure the successful completion of the stand-by arrangement (SBA) and achieve the economic objectives, it added.
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.
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