Explore finance-related stories with Pakistan Revenue, your source for the latest updates on Pakistan’s economy, financial trends, and market insights. Stay informed with real-time economic developments.
ISLAMABAD: The customs authorities, in collaboration with other law enforcement agencies, have sealed approximately 192 illegal fuel stations selling smuggled petroleum products, the federal cabinet was informed on Tuesday.
(more…)
ISLAMABAD, July 12, 2024 – In a significant move aimed at managing fiscal responsibilities, the federal government of Pakistan has launched an initiative to evaluate and assess liabilities pertaining to its retirement benefit schemes.
(more…)
ISLAMABAD: The government on Saturday said it will present the federal budget 2021/2022 before the Parliament during the first week of June 2021.
According to the budget call circular issued by the finance ministry, the presentation of budget to the cabinet and the parliament would be in the first week of June 2021.
The finance division shall complete all budget documents, schedules and summaries for the cabinet by end of May 2021.
The ministry issued timelines for budget preparation process under which by March 15, 2021 PAOs would provide revised estimates for current fiscal year and budget estimates for 2021/2022 for federal government receipts. On the same date PAOs will also be required to forward budget proposals relating to tax and non-tax revenues for inclusion in Finance Bill 2021/2022.
The PAOs will also comply March 15, 2021 for submission of current and development expenditure budget estimates.
The finance division shall finalize development of budget strategy paper by second week of March 2021. The budget strategy paper shall be submitted to the cabinet by first week of April 2021.
APCC and NEC may hold meeting in April 2021.
Submission of NO/NIS forms for current budget shall be by April 26 to May 14, 2021.
Submission of BO/NIS Forms by ministries / divisions for development budget during May 10 –21, 2021.
KARACHI: The inflows of workers remittances have registered 25 percent growth during first half of the current fiscal year. This is the highest half yearly growth since FY07, the State Bank of Pakistan (SBP) said on Friday.
On a cumulative basis, workers’ remittances reached an unprecedented level of $14.2 billion during the first half of FY21, 25 percent higher than the same period last year.
Workers’ remittances maintained their strong momentum for the seventh consecutive month in December. Remittances rose further to $2.4 billion, growing by 16.2 percent on a year-on-year basis and 4.2 percent on a month-on-month basis.
Remittance inflows have been well-diversified. Most of the inflows during H1-FY21 were sourced from Saudi Arabia ($4.0 billion), United Arab Emirates ($3.0 billion), United Kingdom ($1.9 billion) and United States ($1.2 billion).
This strong growth in workers’ remittances is attributable to the increased use of formal channels on the back of sustained efforts by the government and SBP to encourage inflows through official channels as well as limited cross-border travel due to the second wave of the COVID-19 pandemic, together with favorable foreign exchange market dynamics.
ISLAMABAD: Bank account of a pensioner shall become inoperative if the person drawing pension fails to undergo biometric verification or is not drawing pension for consecutive six months.
The Finance Division in a letter to the governor of State Bank of Pakistan (SBP) on Thursday informed that that if a person drawing pension fails to submit a life certificate or fails to undergo biometric verification during the months of March and October or a pensioner does not draw pension for consecutive six months, the account shall become dormant.
The finance division said that following clarification for payment of pension through Direct Credit System (DCS):
(i) The pension shall be paid to a pensioner through a bank account either current or PLS maintained in his own name.
(ii) For payment of pension through bank account as mentioned at (i) above, a joint account shall not be valid.
(iii) Dedicated pension bank account shall not be mandatory for drawl of pension.
(iv) The requirement of indemnity bond from a pensioner, as laid down in para 3(f) and 9(xii) of the Revised SOP 2014 issued on July 14, 2014 is discontinued.
It said that the through a letter September 08, 2020 the finance division had already decided that no separate bank account is required for draw/disbursement of pension for all new retirees and that it may be ensured that the pensioner starts receiving pension payment on the date it falls due, in the same bank account, he or she was receiving the salary before retirement, if he or she desires so.
The finance division said that after necessary amendments in the relevant rules, the federal government is going to launch a system which would cater for all the requirements/documentations digitally to further facilitate the pensioners.
Salient features of the system are as under:
(a) A pensioner drawing pension under clause iii of sub rule (6) of Federal Treasury Rules shall be facilitated to undergo biometric verification from any branch of a bank maintaining his pension account, every year in the months of March and October. If the pensioner is unable to under biometric verification due to incapacitation by bodily illness, infirmity or if his fingerprints do not exist due to old or a genetic condition, he will provide a life certificate signed by a person authorized under rule 343 every six months.
(b) The declaration shall be obtained yearly from pensioner who pension is terminable by their marriage or remarriage and shall be attached to the pension bill paid in September instead of December and June.
(c) Further, submission of declaration regarding marriage or remarriage will be dispensed with after the widow or daughter of the pensioner attains the age of sixty year.
(d) If a person drawing pension fails to submit a life certificate or fails to undergo biometric verification during the months of March and October or a pension does not draw pension for consecutive six months, the account shall become dormant.
ISLAMABAD: The country’s trade deficit has widened by 6.44 percent during the first half (July – December) of fiscal year 2020/2021 owing to uptick in imports during past two months.
According to trade data released by Pakistan Bureau of Statistics (PBS) on Thursday, the trade deficit was recorded at $12.42 billion during July – December of fiscal year 2020/2021 as compared with the deficit of $11.67 billion in the corresponding period of the last fiscal year.
The exports of the country witnessed a growth of five percent to $12.1 billion during the first half of the current fiscal year as compared with $11.52 billion in the corresponding half of the last fiscal year.
Similarly, the total import bill of the country registered an increase of 5.72 percent to $24.52 billion during the first half of the current fiscal year as compared with $23.2 billion in the corresponding half of the last fiscal year.
The trade deficit was widened sharply by 32 percent in December 2020 to $2.68 billion as compared with the deficit of $2.03 billion in the same month of 2019.
The exports have witnessed 18.31 percent growth to $2.35 billion in December 2020 as compared with $1.99 billion in December 2019.
Meanwhile, the import bill during December 2020 registered a growth of 25.25 percent to $5.04 billion as compared with $4.02 billion.
KARACHI: The liquid foreign exchange reserves of the country increased to $20.512 billion by year-end 2020, State Bank of Pakistan (SBP) said on Thursday.
The foreign exchange reserves of the country increased by $258 million to $20.512 billion by week ended December 31, 2020 as compared with $20.254 billion by week ended December 24, 2020.
The official reserves of the central bank increased by $261 million to $13.412 billion by week ended December 31, 2020 as compared with $13.151 billion a week ago.
The foreign exchange reserves held by commercial banks were flat at $7.1 billion by week ended December 31, 2020 as compared with $7.103 billion by week ended December 24, 2020.
ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet on Wednesday approved removal of additional customs duty at 2 percent on import of raw material of 152 tariff lines.
Dr. Abdul Hafeez Shaikh Federal Minister for Finance and Revenue chaired the ECC meeting. Federal Minister for Interior Sheikh Rasheed Ahmed, Minister for Privatization Mohammad Mian Soomro, Minister for Planning, Development and Special Initiatives Asad Umar, Minister for Industries and Production Hammad Azhar, Adviser to the PM on Commerce Abdul Razak Dawood, SAPM on Revenue Dr. Waqar Masood, SAPM on Petroleum Nadeem Babar and Minister for National Food Security and Research Syed Fakhar Imam participated in the meeting.
Governor State Bank of Pakistan Reza Baqir also participated through video link.
Ministry of Commerce presented a summary regarding removal of additional 2 percent customs duties on 152 tariff lines, mostly raw material, on horizontal basis under National Tariff Policy 2019-2024.
The ECC approved the summary with a direction that budget cycle must be observed while planning important incentives for businesses and industries for smooth planning and subsequent implementation during the financial year.
Ministry of Maritime Affairs tabled a summary for awarding contract regarding infrastructure facilities, sewerage system and water supply system in Gulshan-e-Benazir Township Scheme (GBTS) at Port Qasim Authority, Karachi. The ECC approved the projects in conformity with the PQA Act-1973, in principle, and directed Ministry of Maritime Affairs to settle the modalities for the award of contracts as per rules.
Ministry of National Food Security and Research presented a detailed summary regarding provision of additional quantities of wheat to KPK, AJ&K and Utility Stores Corporations (USC). The Additional Secretary, M/o NFS&R gave a detailed presentation regarding availability of wheat stocks across the country. The ECC approved additional wheat allocation of 200,000 MT for KPK 80,000 MT to AJ&K and 220,000 MT to USC from PASSCO as requested. ECC also approved the import of additional wheat to buffer up stocks till the arrival of fresh crop after seeking detailed input from all concerned.
The summaries related to the Textile and Apparel Policy (2020-25) and National Freight and Logistics Policy (NFLP) were deferred to next ECC for comprehensive consultation process with key stakeholders.
ECC approved the following Technical Supplementary Grants during the meeting: a) Rs. 30 million for the Ministry of Defence for the purchase of spare parts for Helicopters for the government of Khyber Pakhtunkhwa (KPK). b) Rs. 400.020 million for the Ministry of Law and Justice to establish additional courts in compliance with the orders of the Supreme Court. c) Rs. 2.268 billion for the Higher Education Commission for completion of various Disbursement linked Indicators (DLIs) under the IDA credit facility.
KARACHI: State Bank of Pakistan (SBP) has recommended increase in retirement age in order to reduce average coverage period of retirement benefits.
“The increase in level of standard pension age may reduce the average coverage period of retirement benefits,” the SBP said in a report issued on Tuesday.
The pension system follows two eligibility criteria for retirement: the qualifying service of 25 years and the threshold of 60 years of age.
Interestingly, most of the employees in federal, provincial and defense service join their departments in early- to mid-twenties, and complete 25 years of services during their early- to mid-50s and therefore become eligible for early retirement.
It is pertinent to mention here that the retirement age of 60 years is already markedly lower than many other countries, and so the early withdrawal after completion of qualifying service puts further strain on fiscal sustainability of pension expenses.
In this regard, the increase in level of standard pension age may reduce the average coverage period of retirement benefits.
In addition, the delayed retirement age will support in increasing the contribution period once the government opts for a funded system in the subsequent round of reforms.
The government can use one or multiple approaches to reduce the early retirement incentives.
For instance, measures such as restricting early retirement eligibility, reducing the marginal benefits below a threshold retirement age, and marginalizing the disincentive to work can all help achieve this objective.
The SBP also suggested rationalizing the survivorship benefits.
In contrast, rise in family pension due to increased applicable benefits and inclusion of large set of family members has become a major cause of concern in Pakistan.
To address this, the first and foremost reform should be to exclude all family members other than minor children and widows from the list of eligible survivorship beneficiaries.
Any delay in such reform will cause family pension to grow manifold in the coming years due to the probable increase in time span of pension benefits in each individual case.
In the case of widows, the survivorship benefits can be rationalized in accordance with the increasing labor force participation rates of women.
In the last few years, many countries have downsized the survivorship benefits by limiting the adjustment period or by eliminating the mandatory benefits for survivors.
For instance, in Japan, widows (with no children) under the age of 30 were entitled to receive permanent earnings related survivor pension, which were reduced to five years after comprehensive pension reforms in 2007.
Similarly, in Sweden, widows were entitled to receive the flat survivorship benefit, which after reforms was switched by the minimum income guarantee, eligible for a shorter period than the earlier facility.
The SBP said that the computation of commuted benefits involves a particular factor assigned to each year after retirement which determines the advance payment amount for each retiree.
The commutation table laid out by the Ministry of Finance incentivizes early retirement with excessively high commutation factor applied to the younger cohort.
This is in stark contrast to the traditional pattern followed in most other countries.
For example, in the UK, the commutation facility is only offered to retirees after attaining a certain age for different employee groups (48 years in the police department, for example).
Whereas, the Indian pension structure offers minimal variance in commutation factor to different age groups. The growing fiscal burden due to high commutation expenses calls for a restructuring of the commutation mechanism, with rationally designed factors and revision in eligible age profile to make the overall pension structure actuarially fair: the lifetime benefits enjoyed by those who retire early or choose to avail commutation and those who opt out of such facilities.
KARACHI: State Bank of Pakistan (SBP) on Tuesday said that public pension expenditure in Pakistan is on the path to becoming unsustainable.
The central bank prepared a study report on rising expenditures of pension which is worrisome.
“ … limited fiscal space is a major reason why increasing pension spending is worrisome, improvements in the pension framework can substantially help make future payments manageable,” the SBP said.
Eliminating the generous retrospective increments and reducing the list of dependents eligible for pension payments appear as quick and easy-to implement measures.
However, the policy recommendations mentioned in the special section are intended to suggest a general direction.
The concerned authorities must carry out specialized evaluation exercises at their own end and implement the required legislative reforms accordingly.
Finally, it is important to undertake periodic review of implemented reforms in order to ensure long-term sustainability of the pension structure.
The SBP said that in Pakistan the absolute level of old-age income support coverage is on the lower side.
“For instance, the pensions to GDP ratio stands at just 2.2 percent, while the proportion of the population participating in programs that provide old-age contributory pensions, health and/or social security insurance is only 5.9 percent – much lower than the developing economies average of 20.3 percent.”
The old age dependency ratio – the number of people aged 65 and above compared to the number of working age people – is 8.5 percent, and is expected to rise only marginally to 11.2 percent by 2040.
But even with such a low pension coverage in the country, reforms to public pensions have become unavoidable in Pakistan in the face of the worrying acceleration in the associated public sector spending witnessed over the last decade.
“This is principally because public pensions are of an unfunded nature and thus are burdening the already tight fiscal revenue situation.”
Specifically, the pension expenditure at the federal level has risen by a CAGR of 18 percent in Pakistan during FY11-21.
Provincial pension expenditure has also witnessed a similar surge.
Within consolidated pension expenditures, civil pensions (including federal and provincial) constituted 63.2 percent, whereas military pensions made up around 36.8 percent on average during the last 5 years.
The overall pension spending as a share of tax revenue has reached 18.7 percent as of FY20, almost double the level a decade earlier.
“If this proportion continues to grow, it could result in the crowding out of other valuable spending avenues: pension spending as percent of total budgeted expenditures for FY20 exceeded health and education spending on both federal and provincial fronts and is almost half the level of consolidated development expenditures.”
In this regard, International Financial Institutions (IFIs), such as the World Bank and the International Monetary Fund (IMF) have also started flagging the rising pension expenditure as a pressing concern for Pakistan’s debt sustainability.
What is even more concerning is the fact that pension expenditure is expected to rise further going forward, given the increase in both retiree headcount and the lifespan of future retirees. If fiscal revenues continue on their existing trajectory, the rising pace of pension-related spending would become worrying from the sustainability point of view.
According to the World Bank’s projections, civil service pension payments would overtake wage expenditures by 2023 and 2028 in Punjab and Sindh, respectively, and come near to their level in the federal government by around 2050.
Within this context, this special section intends to: (i) describe the existing public sector pensions and benefits system in Pakistan; (ii) highlight major factors that are making pension expenditures unsustainable; and (iii) provide a set of policy recommendations to make the growing postretirement expenditures sustainable going forward.
Here, it is important to mention that structural factors, such as the size of the civil government and the military, the unfunded nature of pensions, and disproportionally high share of non-gazetted employees (95.3 percent of total federal government employees), are all important factors governing the overall level of pension expenditures in the country.
However, these factors are beyond the scope of this section; here, we intend to highlight system-bound aspects that explain the steady rise in these expenditures over the last decade.