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  • PKR falls sharply by Rs2.26 to dollar in interbank midday trading

    PKR falls sharply by Rs2.26 to dollar in interbank midday trading

    KARACHI: The Pakistan Rupee (PKR) fell sharply by Rs2.26 against the US dollar on Tuesday during midday trading at interbank foreign exchange market.

    The dollar is currently trading at Rs184.80 from last day’s closing of Rs182.54 in interbank foreign exchange market.

    READ MORE: Dollar ends PKR recovery spree; closes at Rs182.54

    The rupee made significant recovery for seven consecutive trading sessions after the central bank announced a sharp increase in key policy rate.

    The SBP on April 07, 2022 announced 2.5 per cent increase in interest rate to enhance the key policy rate to 12.25 per cent from 9.75 per cent. The rupee was at all-time low Rs188.18 to the dollar on the day of monetary policy announcement.

    READ MORE: Dollar plummets against PKR for seven consecutive days

    However, following the announcement the rupee rallied for seven straight days and recovered Rs6.63 against the dollar.

    The rebound in dollar value on Monday may be attributed to the further depletion in foreign exchange reserves of the county.

    Pakistan’s foreign exchange reserves hit a 22-month low after falling for nine consecutive weeks to $17.03 billion.

    READ MORE: Dollar retreats for 6th straight day; falls to Rs181.58

    According to data released by the State Bank of Pakistan (SBP), the foreign exchange reserves of the country fell by $449 million to $17.028 billion by week ended April 08, 2022 as compared with $17.477 billion a week ago.

    The foreign exchange reserves were at $17.971 billion by week ended June 26, 2020.

    READ MORE: Rupee up 13 paisas to continue recovery against dollar

    Pakistan’s foreign exchange reserves have declined by $10.23 billion in the past seven months owing to extreme pressure of dollar demand for import payments and external repayment of government debt.

    The country’s foreign exchange reserves hit an all-time high of $27.228 billion on August 27, 2021.

  • FBR urged to align corporate tax rate for banks

    FBR urged to align corporate tax rate for banks

    KARACHI: Federal Board of Revenue (FBR) has been urged to bring corporate tax rate for banking companies at par with the other sectors.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2022/2023 pointed out towards higher effective tax of banking sector.

    It recommended that corporate tax rates for the banking sector should be aligned with other sectors. Super Tax relief, as granted to other industries, should be given to banking sector as well.

    The OICCI also pointed out enhanced rate of tax on income from investment in Federal Government Securities (Rule 6C of Seventh Schedule). It recommended that the banking sector is already burden with higher tax rates as compared to other service sectors. Incremental tax applied under Rule 6C (6A) of seventh schedule of Income Tax Ordinance, 2001 should be deleted, whereby enhanced rate is applied on banks total income ratio (ADR).

    Alternatively, enhanced tax shall be reverted to the previous condition, i.e. incremental tax shall be applicable on Additional income from additional investment in government securities rather than total income.

    The overseas chamber further recommended the original provisions of the Seventh Schedule should be restored where provision for bad debts as per the Prudential Regulations of SBP and supported by an Auditors certificate was allowable as a tax deduction to the banks.

    Alternatively, threshold for allowing provision for bad debts should be increased to 2 per cent of gross advances to corporate customers without the categorization of loss, doubtful or substandard and delete the Explanation inserted through Finance Act, 2019 along with the Clauses 1(d), (e) and (f).

    Overriding Provision in Seventh Schedule to Income Tax Ordinance, 2001. The rule 9 of the Seventh Schedule of ITO 2001 should be deleted as it is being misused and leading to unnecessary litigation.

    Regarding Islamic banks, the OICCI said Rule 3 (1) & (2) of Seventh Schedule of Income Tax Ordinance, 2001 should be replaced with the following text under Rule 3(1):

    “The audited financial statements of Islamic Banks and Disclosure related to Islamic window operations of the conventional banks as contained in the audited financial statements submitted to the State Bank of Pakistan shall form the basis for the calculation of income tax liability as provided in this Schedule.”

    The OICCI pointed out withholding tax on all modes of Islamic financing and recommended that tTo provide tax neutrality for assets financed by Islamic banks and Islamic windows of conventional vis- a vis conventional banks. Following clarification be inserted after clause 153(7)(iii):

    “For the removal of doubt, it is clarified that any goods delivered under an Islamic modes of financing by a bank or financial institution approved by the State Bank of Pakistan or the Securities Exchange Commission of Pakistan, shall not be considered as sale of goods for the purpose of this section.”

  • Sri Lankan default impact on Pakistani banks

    Sri Lankan default impact on Pakistani banks

    KARACHI: Pakistani banks operating in Sri Lanka will have adverse effect on their books due to declaration of Sri Lanka for failure to repay its foreign debt.

    In a recent development, Sri Lanka announced that it would be defaulting on its external obligations due to dwindling foreign exchange reserves.

    Sri Lanka’s total external debt currently stands at $51 billion, i.e. 60 per cent of GDP.

    As per foreign news agency, Sri-Lanka has to make a foreign repayment of $4 billion, including $1 billion sovereign bond maturing in July 2022.

    Insight Securities said that its banking universe including UBL, MCB, HBL, and BAHL holds Sri Lanka sovereign instruments in their investment book (both USD denominated & Local currency), may result in revaluation loss or provision charge.

    Sri-Lanka’s central bank governor said that this suspension of payment would be placed until the country reaches an agreement with creditors and alongside with the International Monetary Fund (IMF).

    The analysts believed that this declaration of default will only affect USD denominated bonds while the CBSL (Central bank of Sri Lanka) will continue to honor domestic bonds i.e. T-bills. However, disclosure of local and USD-denominated sovereign bonds is not available in respective banks financials.

    It is worth mentioning that these above abstracts are based on the CY21 financial statement, and there is a possibility that these banks have already reduced their exposure before the default announcement.

    Analysts at Arif Habib Limited said that the economic crisis in Sri Lanka seems to be worsening with the authorities announcing temporarily default on its foreign debts.

    With more than $50 billion in external debt and foreign exchange reserves hovering around $1.9 billion (last month), the country is currently struggling to make payments on its international sovereign bonds.

    Media sources suggest, this week $36 million interest payment is due on a Sri-Lanka’s 2023 dollar bond as well as $42.2 million on 2028 note.

    Moreover, a $1 billion sovereign bond is maturing on July 25th, 2022.

    The extraordinary measure taken by the Sri-Lankan authorities to halt payments on foreign debt is to preserve its dwindling reserves for the purpose of importation of essentials such as food, fuel and medicine.

    Going forward, the analysts believe, the options available to the Sri-Lankan government include: negotiation of a settlement in which bondholders are given new bonds that are worth less but help provide some partial compensation, or restructuring of the current one with the support of IMF which media sources claim to be likely Sri Lanka’s strategy.

    It is pertinent to note here that some of the Pakistani banks are exposed to the Sri-Lankan economy either through branch banking or investments in the government debt securities.

    Amongst our AHL coverage banks, MCB has eight branches in the Lankan territory while HBL operates with three branches in the country.

  • Dollar ends PKR recovery spree; closes at Rs182.54

    Dollar ends PKR recovery spree; closes at Rs182.54

    KARACHI: The US dollar on Monday ended gaining spree of the Pakistan Rupee (PKR) and rebounded with a gain of 99 paisas.

    The rupee ended Rs182.54 to the dollar from previous last Saturday’s closing of Rs181.55 in the interbank foreign exchange market.

    READ MORE: Dollar plummets against PKR for seven consecutive days

    The rupee made significant recovery for seven consecutive trading sessions after the central bank announced a sharp increase in key policy rate.

    The SBP on April 07, 2022 announced 2.5 per cent increase in interest rate to enhance the key policy rate to 12.25 per cent from 9.75 per cent. The rupee was at all-time low Rs188.18 to the dollar on the day of monetary policy announcement.

    READ MORE: Dollar retreats for 6th straight day; falls to Rs181.58

    However, following the announcement the rupee rallied for seven straight days and recovered Rs6.63 against the dollar.

    The rebound in dollar value on Monday may be attributed to the further depletion in foreign exchange reserves of the county.

    Pakistan’s foreign exchange reserves hit a 22-month low after falling for nine consecutive weeks to $17.03 billion.

    READ MORE: Rupee up 13 paisas to continue recovery against dollar

    According to data released by the State Bank of Pakistan (SBP), the foreign exchange reserves of the country fell by $449 million to $17.028 billion by week ended April 08, 2022 as compared with $17.477 billion a week ago.

    The foreign exchange reserves were at $17.971 billion by week ended June 26, 2020.

    READ MORE: Rupee continues recovery to dollar for 4th straight day

    Pakistan’s foreign exchange reserves have declined by $10.23 billion in the past seven months owing to extreme pressure of dollar demand for import payments and external repayment of government debt.

    The country’s foreign exchange reserves hit an all-time high of $27.228 billion on August 27, 2021.

  • FBR allocates quota for industries in erstwhile FATA/PATA

    FBR allocates quota for industries in erstwhile FATA/PATA

    ISLAMABAD: The Federal Board of Revenue (FBR) on Saturday allocated quota of raw material import on free of duty and taxes for industries located in erstwhile FATA/PATA.

    The FBR issued Sales Tax General Order (STGO) No. 14 dated April 16, 2022 regarding quota for import of raw materials for industries located in erstwhile FATA/PATA.

    The FBR said that import of plant and machinery and inputs by industrial undertakings located in erstwhile FATA/ PATA are exempt under S. No. 151 of Table-1 of the Sixth Schedule to the Sales Tax Act, 1990 till 30th day of June, 2023.

    READ MORE: Erstwhile FATA/PATA units to get exemption on quota

    To prevent misuse of said exemption, a number of significant amendments have been introduced in the Sales Tax Act, 1990 including section 40D and S. No. 74 of Table-1 of the Eighth Schedule to the Sales Tax Act, 1990.

    Different administrative measures are also being taken by FBR including escort of containers from Azakhail Dry Port to the location of the concerned unit.

    READ MORE: FBR explains taxation of erstwhile FATA/PATA industries

    In order to ensure further transparency and prevent leakage of revenue, the FBR has decided that industrial units located in erstwhile FATA/PATA shall be allocated import quota of raw materials as determined by Directorate General IOCO-Inland Revenue in consultation with the Regional Tax Office (RTO), Peshawar on the basis of installed capacity of these units.

    The annual import quota as per the attached Annex-A shall be apportioned equally in 12 equal parts on monthly basis and that shall be duly entered in the WeBOC against each manufacturer/ industrial unit.

    After each updation, the balance available quota for the remaining year shall also be clearly mentioned.

    The FBR said that the STGO shall come into effect immediately until further order.

    READ MORE: FBR issues procedure for availing exemption certificate by erstwhile FATA/PATA residents

  • Dollar plummets against PKR for seven consecutive days

    Dollar plummets against PKR for seven consecutive days

    KARACHI: The US dollar plummeted against the Pakistan Rupee (PKR) for the last seven consecutive trading sessions on Saturday.

    The foreign currency is losing value to the local currency since sharp increase in policy rate announced on April 07, 2022.

    READ MORE: Dollar retreats for 6th straight day; falls to Rs181.58

    The exchange rate ended at Rs181.55 to the dollar on Saturday as compared with previous day’s closing of Rs181.58 in the interbank foreign exchange market.

    The local currency has made sharp recovery against the dollar since the significant raise was announced in the policy rate on April 07, 2022.

    The State Bank of Pakistan (SBP) announced an unprecedented increase in policy rate by 250 basis points to 12.25 per cent. The massive rise in interest rate surprised the market and trade and industry are in state of shock. The massive hike in policy rate also resulted in a sudden decline in demand for dollar.

    READ MORE: Rupee up 13 paisas to continue recovery against dollar

    This is the reason behind five consecutive gain in rupee value during past five trading sessions.

    The rupee hit all-time low of Rs188.18 to the dollar on April 07, 2022. Since then the rupee recovered Rs6.63 against the dollar during past six straight trading sessions.

    The SBP noted that the recent developments necessitated a strong and proactive policy response.

    Accordingly, the Monetary Policy Committee (MPC) decided at its emergency meeting today, to raise the policy rate by 250 basis points to 12.25 percent.

    READ MORE: Rupee continues recovery to dollar for 4th straight day

    This increases forward-looking real interest rates (defined as the policy rate less expected inflation) to mildly positive territory. The MPC was of the view that this action would help to safeguard external and price stability.

    The MPC also noted that SBP is in the process of taking further actions to reduce pressures on inflation and the current account, namely an increase in the interest rate on the export refinance scheme (EFS) and widening the set of import items subject to cash margin requirements. These items are mostly finished goods including luxury items and exclude raw materials.

    The announcement of these measures is expected soon and will complement the action taken by the MPC on interest rates.

    READ MORE: Rupee makes recovery to dollar for third straight day

  • Notification issued to raise 10% in pension

    Notification issued to raise 10% in pension

    ISLAMABAD: The Finance Division has issued a notification to implement the decision of the government to raise 10 per cent increase in pension to pensioners of the federal government.

    Prime Minister Shahbaz Sharif has sanctioned an increase of 10 per cent of net pension with effect from April 01, 2022 until further orders to all civil pensioners of the federal government including civilians paid from defence estimates as well as retired armed forces personnel and civil armed forces personnel.

    READ MORE: SBP’s instructions on pensioners biometric verification

    The finance division explained that for the purpose of admissibility of increase in pension sanctioned the term ‘Net Pension’ as pension being drawn minus medical allowance.

    The increase will also be admissible on family pension granted under the pension-cum-gratuity scheme, 1954, Liberalized Pension Rules, 1977, on pension sanctioned under the Central Civil Services (Extraordinary Pension) Rules as well as on the Compassionate Allowance under CSR-353.

    READ MORE: EOBI to launch self assessment scheme for employers

    The finance division said that if the gross pension sanctioned by the federal government is shared with any government in accordance with the rules laid down in Part-IV of Appendix-III to the Accounts Code, Volume-I, the amount of the increase in pension will be apportioned between the federal government and the other government concerned on proportionate basis.

    READ MORE: Mandatory biometric verification restored for pensioners

    “The increase in pension sanctioned will not be admissible on special additional pension allowed in lieu of pre-retirement orderly allowance and monetized value of a driver or an orderly,” it said.

    The benefit of increase in pension sanctioned will also be admissible to those civil pensioners of the federal government who are residing abroad (other than those residing in India and Bangladesh) who retired on or after August 15, 1947 and are not entitled to, or are not in receipt of pension increase under the British Government’s Pension (increase) Acts.

    The payment will be made at the applicable rate of exchange, it said.

    READ MORE: Pensioners living abroad require presenting life certificate

  • New government keeps petroleum prices unchanged

    New government keeps petroleum prices unchanged

    ISLAMABAD: The new government – formed by leading political parties – on Friday decided to keep the prices of petroleum products unchanged for next fortnight.

    The previous PTI government had decided to freeze the price of petrol at Rs150 per liter till June 30, 2022.

    Prime Minister Muhammad Shehbaz Sharif has rejected the Oil and Gas Regulatory Authority’s (OGRA) proposal to hike prices of petroleum products in the country.

    READ MORE: Pakistan cuts petroleum prices amid Russia-Ukraine War

    It was announced by the Prime Minister while addressing an Iftar Dinner at Prime Minister House in Islamabad on Friday tonight.

    The previous government on February 28, 2022 decided to reduce the prices of petroleum products despite the high international oil prices in the wake of Russia-Ukraine war.

    The finance division had issued the notification to cut the prices of petrol and diesel by Rs10 per liter each from March 01, 2022.

    READ MORE: Pakistan raises petrol price to record high at Rs160/liter

    According to a statement issued by the finance division, the global prices of petroleum products are tracking the Ukraine-Russia war and resultantly surged to $100 per barrel. “The unprecedented increase is very risky for the domestic fuel prices and inflation,” it added.

    The situation leaves very few options for the government, it said, adding that prior to review on February 28, 2022, the government had left more than Rs70 billion per month to keep the prices lower and providing relief to the masses.

    READ MORE; Petroleum prices kept unchanged for next fortnight

    In the fortnightly review on February 28, 2022, the Oil and Gas Regulatory Authority (OGRA) recommended Rs10 per liter increase in the prices of petroleum products.

    According to the statement the new prices of the petroleum products effective from March 01, 2022 are:

    The price of petrol slashed by Rs10 to Rs149.86 per liter from Rs159.86.

    The rate of high speed diesel has been reduced by Rs10 to Rs144.15 per liter from Rs154.15.

    The price of kerosene oil has been brought down by Re1 to Rs125.56 per liter from Rs126.56.

    Similarly, the rate of light diesel oil has been slashed by Rs5.66 to Rs118.31 per liter from Rs123.97.

    READ MORE: Pakistan’s petrol price rises to record high at Rs147.83

    While retaining the prices at current level, Shahbaz Sharif said the government will bear burden of increase in prices of petroleum products itself instead of shifting it to the masses.

    He said that the Prime Minister Office will now be working as Pakistan House where officers from across the country will serve.

    The prime minister said consultation is underway over formation of federal cabinet and it will soon be fianlized.

  • FBR announces prize winners of 4th POS invoice draw

    FBR announces prize winners of 4th POS invoice draw

    ISLAMABAD: The Federal Board of Revenue (FBR) on Friday conducted fourth draw of invoices issued through Point of Sales (POS) and announced prize winners.

    According to the computerized balloting, the bumper prize of Rs1,000,000 has been awarded to Muhammad Ali on the invoice issued by Carefour.

    READ MORE: FBR announces winners of third POS invoice draw

    The FBR announced winners of two second prizes of Rs500,000 each to Syed Tahir Ali Rizvi on the invoice issued by Shan Super Market and Hussain Raza Bhatti on the invoice issued by Jalal Sons.

    Similarly, the four winners of third prize amounting Rs250,000 each are Abdul Waheed Shaikh, Mishal Zohaib, Sher Allam Khan and Mansoor Mehmood.

    The FBR conduct computerized balloting of invoices issued by Tier-1 retailers on every 15th day of a month. This was fourth draw as it was started in January 15, 2022.

    READ MORE: FBR announces prize winners in second POS invoice balloting

    The FBR encouraged people to actively participate in the balloting to win prizes after buying from POS integrated retailers.

    The FBR previously issued a procedure for participating in the prize scheme.

    The revenue body said that the customers of the integrated tier-1 retailers, whose names and CNICs are notified through random computerized draw shall be entitled to prizes in respect of their purchases from the integrated tier-1 retailers.

    READ MORE: FBR announces winners of first POS prize draw

    The customers shall verify the electronically generated invoice of integrated retailers either through the “tax asaan” application or by sending SMS to number 9966.

    The application shall notify the customer regarding the status of the invoice either as “verified” or “unverified”.

    In case of a verified invoice, the customer shall furnish one time, the following detail to the online system, namely:- Name; CNIC; and Mobile number.

    Names and CNICs of the customers shall be included in the random computerized draw upon fulfillment of the requirement.

    READ MORE: Prize scheme on invoices issued by retailers

    In case of an unverified invoice, the customer shall report the same through the system. The Board shall conduct inquiry and take appropriate action under the relevant provisions of law.

    The computerized draw for the prizes shall be held in the first week of every month at the FBR Headquarters and the invoices of the immediately preceding month shall be entered in the draw.

    Draw winners shall be required to perform biometric verification, at the nearest e-sahulat facility of NADRA and submit a scanned copy on the “tax assan” application. After successful biometric verification, winners shall be required to provide their IBAN through a “tax asaan” application.

    The total prize money and the denomination of the prizes shall be decided on month to month basis by the Board.

  • E-banking transactions up 23% in Jul-Dec: SBP

    E-banking transactions up 23% in Jul-Dec: SBP

    KARACHI: The e-banking based transactions have increased by 23 per cent to Rs33.38 trillion during the quarters of October – December 202 as compared with Rs27.19 trillion in the previous quarter (July – September 2021), the State Bank of Pakistan (SBP) said on Friday.

    The SBP issued quarterly report stating that the volume of e-banking recorded 10.7 per cent to 400 million transactions as compared with previous quarter of 361.6 million.

    READ MORE: Banks approve Rs180 bn for low-cost housing loans

    E-banking includes transactions conducted via electronic channels including real-time online Branches, ATMs, mobile banking, internet banking, call center banking, POS and e-Commerce.

    It would be pertinent to note that the growth in e-banking transactions is much steeper relative to paper based transactions, albeit the value of transactions is higher in the case of later.

    The volume and value of paper based transactions increased by 3.4 per cent and 12.2 per cent respectively.

    READ MORE: Banks approve housing loans worth Rs7.4 billion in event

    While the volume of e-banking transactions is almost four times higher at 400 million than paper based transactions at 101.4 million, the value of transactions of the former stands at Rs33.4 trillion compared with Rs41.6 trillion paper based transactions.

    All around growth in e-banking included expansion in both mobile and internet banking with a double-digit increase in value and volume of transactions during the second quarter. The number of mobile banking transactions amounted to 94 million, while the value reached Rs2.2 trillion, which comes to 18.8 per cent and 35.4 per cent growth respectively on QoQ basis. Meanwhile, number of mobile banking users grew by 5 per cent on QoQ basis, reaching a total of 11.9 million users. The internet banking users reached 6.9 million, conducting 33.8 million transactions, amounting to Rs2.4 trillion, which translate to a strong 13.9 per cent progress in terms of volume and 28 per cent increase in the value of these transactions compared to preceding quarter.

    READ MORE: Financing for Mera Pakistan Mera Ghar gains momentum

    Retail sector also continued its upswing in adoption of digital payments. During the quarter, a total of 31.4 million transactions amounting to Rs178.1 billion were processed via 92,153 Point-of-Sale (POS) terminals. This shows an impressive double-digit QoQ growth of 11.8 per cent by volume and 32.1 per cent by value. Similarly, the number of e-Commerce merchants also increased by 32.6 per cent reaching a total of 3,968. Onboarding of QR merchants largely added to this growth. These merchants processed 13.6 million transactions worth Rs26.7 billion, showing QoQ growth of 7.2 per cent by volume and 19.8 per cent by value.

    READ MORE: State Bank amends regulations for housing loans

    As of end-December 2022, there were 5.4 per cent more cards than the preceding quarter, reaching 48.6 million cards in circulation which mainly comprised of Debit Cards (63.5 per cent), Social Welfare Cards (22.8 per cent), ATM only Cards (9.9 per cent), Credit Cards (3.6 per cent), and Prepaid Cards (0.3 per cent). During this quarter, paper based transactions showed relatively slower growth of 3.4 per cent in volume and 12.2 per cent in value on QoQ basis. In Large-value (wholesale) payments segment, SBP’s Real-time Inter-Bank Settlement Mechanism (PRISM) processed a total of 1.1 million transactions amounting to Rs161.3 trillion, showing QoQ growth of 5.9 per cent in volume and 1.4 per cent in value.