Pakistan’s central bank has deployed the person-to-merchant (P2M) online payment option on its instant payment system, Raast, which is a step forward towards reducing the use of cash, documenting and digitalising the economy.
The State Bank of Pakistan (SBP) is expected to formally launch the new payment option in the next couple of weeks. Six entities including five banks have already become part of the new journey.
P2M enables people to pay directly to merchants for shopping, dining and pay monthly utility bills through the QR code.
Speaking at the 21st Conference on “Future Banking Summit 2023” on Tuesday, SBP Director at Payment Systems Policy and Oversight Department Qazi Shoaib Ahmad said “P2M has also been deployed on September 3, 2023.”
Raast is an initiative of the SBP that enables instant end-to-end digital payments among individuals, businesses and government entities.
“P2M will be a game changer in terms of adoption of Raast at the industry level,” he said, adding that the six entities were Bank Alfalah, MCB Bank, Allied Bank, JS Bank, Easypaisa and 1Link.
The State Bank is working to bring more banks on board on the P2M journey. Few of them are in pilot stages.
A leading bank told The Express Tribune that people were already making payments through the QR code worth Rs500 million a month, indicating that a hassle-free and seamless payment system was already in place. The addition of P2M may increase the quantum of financial transactions through online banking.
He pointed out that there were around 3 to 4 million merchants in the country, who would be the potential beneficiaries of the instant payment system.
Earlier, according to SBP Director Ahmad, the central bank launched two options on Raast namely person-to-person (P2P) and bulk payment transfers.
The central bank has already issued standards on the interoperable QR code. The QR code has been part of the P2P and P2M use cases of Raast.
“We believe that this is the way forward and QR payment will be a game changer. It would be the most useful utility for the unbanked population,” he said.
The initial adoption of Raast has been wonderful. So far, more than 32 million account holders had been registered with Raast and 225 million transactions had been done through the platform amounting to more than Rs4.6 trillion, Ahmad said.
In its Payment System Review for the quarter ended March 31, 2023, the central bank reported that the circulation of physical currency rose by almost 5%, reaching Rs8.06 trillion in the Jan-Mar quarter compared to Rs7.69 trillion in the previous quarter.
Experts said that the increasing use of cash was causing high inflation and supporting growth of the undocumented economy. The parallel economy was not letting the documented economy stabilise and achieve sustainability, they said.
Ahmad revealed that the SBP was working on a project to prevent digital frauds through deploying artificial intelligence (AI).
“We are working on two initiatives. One is in-house and the other … we are working with an international vendor. So, we are basically working on the model for predicting frauds.
“Once this model is developed, we plan to embed it on the Raast platform. It will certainly be quite helpful in terms of protecting customers from potential frauds.”
He said that another area in new technology was the use of blockchain and its use in terms of developing the central bank digital currency (CBDC).
The central bank is keenly learning how digital currencies are working globally. The initiative may help it to develop CBDC in future.
Globally, interest has been seen in digital currencies. The SBP is keen on learning from other central banks and is in touch with the international financial institutions (IFIs) such as the World Bank and the International Monetary Fund.
“We are trying to understand different dimensions of CBDC. So, we are creating this path quite cautiously. The State Bank has also taken industry consultation on this front specially,” Ahmad said.
Coach at Planet N and Raqami Bank Nadeem Hussain said that the five digital banks which got the SBP’s licence in principle last week were going to revolutionise the lending landscape in Pakistan.
“Lending would remain the key to success for digital banks. They are expected to lend more than conventional banks in five years. They, however, would remain dependent on their partners to generate deposits.”
Digital banks are expected to reduce the bank account opening duration for corporate entities to around one day compared to around one month required at present. Similarly, they will be lending funds to industries in one-day duration compared to around one month these days, he said.
P@SHA Chairman Zohaib Khan urged banks to facilitate IT and software freelancers in freely moving their foreign earnings inside and outside of Pakistan. The increased facilitation would help accelerate foreign currency inflows in the country, he added.
Published in The Express Tribune, September 27th, 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.
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