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Tag: IMF

  • Key points of Pakistan’s revenue driven fiscal consolidation

    Key points of Pakistan’s revenue driven fiscal consolidation

    KARACHI: The International Monetary Fund (IMF) has highlighted points of Pakistan’s budget 2019/2020 which envisaged a substantial revenue driven fiscal consolidation.

    “The FY 2019/20 budget envisages a substantial fiscal consolidation. The primary deficit is expected to decline to 0.6 percent of GDP, from estimated 1.8 percent of GDP in FY 2018/2019,” the IMF said in the country report on Pakistan issued on Monday after a successful $6 billion loan program for the country.

    The report said that the envisaged fiscal consolidation will be largely revenue driven:

    a) Sales tax measures are mostly focused on simplifying the system by eliminating numerous exemptions and preferential rates and enhancing the sales tax of petroleum products. In particular, exemptions granted to four export-oriented sectors for domestically sold products will be eliminated, together with non-essential food related products exemptions.

    Moreover, preferential rates related to sugar, steel sector, edible oil, medium and large retailers will also be eliminated and aligned with the standard 17 percent sale tax rate.

    b) Income tax measures will aim at widening the tax base and closing the loopholes that are fostering tax avoidance.

    The income tax threshold will be reduced for salaried and non-salaried individuals to PRs 600,000 and PRs 400,000 respectively, and the tax rate at the top of income distribution increased.

    The collection of withholding tax on telecom services that had been stalled in the court will be resumed, and tax credit available for machinery investment and to non-profit organizations will be rationalized.

    The FBR will also align the value of immovable properties with market rates and specify conditions under which the long-term lease hold will be considered as the purchase of property.

    In addition, the minimum tax rate will increase and taxation of gifts from unrelated persons will be introduced.

    c) Federal excise duties on certain products will be introduced or increased (cigarettes, sugary drinks, cement); while

    d) custom duty measures will eliminate the exemptions on import of liquified natural gas and increase the additional custom duty for finished and luxury goods.

    e) Revenue administration measures will support policy implementation. The emphasis will be given to the modernization and digitalization of FBR functions, improvement of the database and the streamlining of legal procedures.

    To strengthen the collection of excises on cigarettes and eliminate illicit trade, the track-and-trace system will we implemented in the second quarter of the year.

  • Pakistan assures IMF of strengthening taxation on real estate, agriculture income

    Pakistan assures IMF of strengthening taxation on real estate, agriculture income

    KARACHI: Pakistan has assured International Monetary Fund (IMF) of removing distortion in taxation system and strengthening taxation on real estate and agriculture income.

    The IMF on Monday issued country report on Pakistan after successful $6 billion loan program.

    The report said that a large deficit would require aggressive revenue collection.

    A multi-year effort will aim to revamp tax policy and tax administration. With less than 1.5 million taxpayers filing tax returns and tax compliance generally very low, tax policy and tax administration measures will center on broadening the tax base while maintaining a low tax rate, aiming to ensure progressivity of the tax system.

    The country has agreed to increase additional 4 to 5 percent tax to the GDP by end of 3-year IMF program in order to bring Pakistan tax ratio in line with peer Emerging Markets.

    Key measures include:

    — Tax policy reforms

    In the near term, measures include removing exemptions and preferential treatment to reduce distortions in the tax system and broaden the tax base.

    These include the removal of General Sales Tax (GST) exemptions and preferential rates, except for basic food and medicines, a measure that will significantly improve revenues.

    Greater inter-provincial harmonization and coordination of GST will also simplify filing procedures and increase compliance.

    Overtime, the Pakistani authorities are committed to taking steps to transform the GST into a broad-based VAT and making the PIT fairer and more progressive by raising the upper-end of the PIT structure and consider eliminating Personal Income Tax (PIT) tax credits and deductions for the higher income brackets.

    In addition, other tax policy measures include:

    (i) further strengthening taxation on real estate and on agricultural turnover or income by provinces;

    (ii) ensuring equivalent taxation of all sources of income; and

    (iii) eliminating distortionary withholding taxes.

    The report said that the tax administration reforms to bolster the authorities’ efforts to collect taxes.

    “Implementation of a full, risk-based audit framework will be facilitated by the recent reversal4 of legal provisions limiting the use of tax audits and will be supported by an increase in legal penalties for noncompliance.

    Moreover, licenses for the track-and-trace system for excises on cigarettes will be issued by end-September 2019 (structural benchmark), with a system roll out by end-March 2020.

    The authorities are also considering options to make Pakistan’s tax administration less fragmented and more business friendly, including through the creation of a new semi-independent national tax authority to collect the main revenue sources.

    Finally, the country has committed to not granting further tax amnesties (continuous structural benchmark).

  • IMF approves $6 billion loan for Pakistan

    IMF approves $6 billion loan for Pakistan

    ISLAMABAD: The International Monetary Fund (IMF) has approved a 39-month extended arrangement for Pakistan under which the country will get $6 billion to support the economic reform program, said a statement.

    After approval of the loan under Extended Fund Facility (EFF) by the Executive Board of IMF, Pakistan is now eligible to immediately receive first tranche of $1 billion, the IMF statement said.

    The fund will quarterly review the performance of Pakistan over 39 months.

    The EFF-supported program would help Pakistan to reduce economic vulnerabilities and generate sustainable and balanced growth.

    The statement added that the programme would focus on a decisive fiscal consolidation to reduce public debt and build resilience while expanding social spending.

    It will also try to ensure a flexible, market-determined exchange rate to restore competitiveness and rebuild official reserves besides eliminating quasi-fiscal losses in the energy sector, strengthening institutions and enhancing transparency.

    Meanwhile, Advisor to Prime Minister on Finance Dr Abdul Hafeez Shaikh said the IMF’s support bodes well for the country and is a testament to the government’s resolve for ensuring financial discipline and sound economic management.

    Welcoming the IMF approval of $6 billion loan for Pakistan, Hafeez Shaikh said in a tweet that structural reform agenda which includes improving public finances and reducing public debt through revenue reforms is key part of the program.

    “Our program supports broad based growth by reducing imbalances in the economy. Social spending has been strengthened to completely protect vulnerable segments”, the advisor added.

  • Stock market gains 589 points on successful IMF deal expectations

    Stock market gains 589 points on successful IMF deal expectations

    KARACHI: The stock market gained 589 points on Wednesday on positive expectations of IMF deal conclusion.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 34,897 points as against 34,307 points showing an increase of 589 points.

    Analysts at Arif Habib Limited said that KSE-100 index increased again by around 631 points during the session that was contributed mainly by Fertilizer and Banking sectors and was further supplemented by Cement sector.

    Positive expectation of IMF deal conclusion today kept the sentiment elevated and helped the investors take bets on O&GMCs, Cement, Banks and Fertilizer. Cement sector dominated the volumes for better part of the day, however, Chemicals took over the ranking in the closing hour, where LOTCHEM generated most volume (11.6 million) followed by TRG (8 million).

    KSEAll shares volume also improved over the day.

    Sectors contributing to the performance include Fertilizer (+140 points), Banks (+135 points), E&P (+81ps), Cement (+75 points), O&GMCs (+48 points).

    Volumes increased from 91 million shares to 130.3 million shares (+43 percent DoD). Average traded value also increased by 58 percent to reach US$ 30.5 million as against US$ 19.3 million.

    Stocks that contributed significantly to the volumes include LOTCHEM, TRG, UNITY, BOP and MLCF, which formed 29 percent of total volumes.

    Stocks that contributed positively include FFC (+69 points), PPL (+48 points), HBL (+45 points), OGDC (+41 points) and MCB (+37 points). Stocks that contributed negatively include POL (-7 points), HMB (-4 points), ICI (-3 points), SYS (-3 points) and KEL (-2 points).

  • Weekly Review: IMF agreement to set market direction

    Weekly Review: IMF agreement to set market direction

    KARACHI: As the governor of State Bank of Pakistan (SBP) is echoing the incumbent governments existing stance of fulfilling IMF’s prior actions, the experts said that the IMF agreement will set direction of the stock market.

    “The upcoming Board agreement expected in July 2019 to be a major trigger for the market as it would set in motion a period of economic recovery,” analysts at Arif Habib Limited said.

    Weakness of the Pak Rupee against USD, unchanged Fitch’s rating and ongoing debate over the Federal Budget 2019/2020 in the Parliament kept the domestic bourse in-check this week. Given lack of triggers and profit taking in large caps, the KSE-100 index closed down by 448 points (1.26 percent WoW) to 35,125.

    Negative sector-wise contributions came from i) Commercial Banks (181 points), ii) Fertilizer (88 points), iii) Cement (49 points), iv) Oil & Gas Marketing Companies (42 points), and v) Pharmaceuticals (29 points).

    Whereas, sectors that contributed positively include Power Generation & Distribution (38 points) and E&P (31 points). Scrip-wise negative contributions came from FFC (62 points), BAHL (43 points), PPL (38 points), LUCK (31 points) and KAPCO (31 points).

    Whereas, positive scrip-wise contributions came from HUBC (83 points), OGDC (54 points), and POL (37 points).

    Foreign selling was continued this week clocking-in at USD 5.7 million compared to a net sell of USD 4.9 million last week. Selling was witnessed in Exploration & Production (USD 4.5 million) and Cement (USD 1.4 million).

    On the domestic front, major buying was reported by Individuals (USD 7.9 million) and Banks / DFIs (USD 3.7 million).

    Average Volumes settled at 125 million shares (down by 8.5 percent WoW) while value traded clocked-in at USD 27 million (down by 21 percent WoW).

  • IMF to provide $6 billion to Pakistan under 39-month Extended Fund Arrangement

    IMF to provide $6 billion to Pakistan under 39-month Extended Fund Arrangement

    KARACHI: International Monetary Fund (IMF) will provide $6 billion under 39-month extended fund facility (EFF) to Pakistan, a statement said on Sunday.

    In response to a request by the Pakistani authorities, an IMF mission led by Ernesto Ramirez Rigo visited Islamabad, Pakistan from April 29 to May 11 to discuss IMF support for the authorities’ economic reform program.

    At the end of the visit, Mr. Ramirez Rigo made the following statement:

    “The Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about US$6 billion.

    “This agreement is subject to IMF management approval and to approval by the Executive Board, subject to the timely implementation of prior actions and confirmation of international partners’ financial commitments. The program aims to support the authorities’ strategy for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending.”

    The IMF said that Pakistan was facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness, and a weak external position.

    “This reflects the legacy of uneven and procyclical economic policies in recent years aiming to boost growth, but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses.

    “The authorities recognize the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty. In this regard, the government has already initiated a difficult, but necessary, adjustment to stabilize the economy, including thorough support from the State Bank of Pakistan.

    “These efforts need to be strengthened. Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path, with stronger private sector activity and job creation.”

    The IMF said that the EFF aims to support the authorities’ ambitious macroeconomic and structural reform agenda during the next three years.

    “This includes improving public finances and reducing public debt through tax policy and administrative reforms to strengthen revenue mobilization and ensure a more equal and transparent distribution of the tax burden.

    “At the same time, a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources.

    “These efforts will create fiscal space for a substantial increase in social spending to strengthen social protection as well as in infrastructure and human capital development. The modernization of the public finance management framework will increase transparency and spending efficiency. Provinces are committed to contribute to these efforts by better aligning their fiscal objectives with those of the federal government.”

    The IMF further said that the forthcoming budget for FY2019/20 is a first critical step in the authorities’ fiscal strategy.

    “The budget will aim for a primary deficit of 0.6 percent of GDP supported by tax policy revenue mobilization measures to eliminate exemptions, curtail special treatments, and improve tax administration.

    “This will be accompanied by prudent spending growth aimed at preserving essential development spending, scaling up the Benazir Income Support Program and improve targeted subsidies, with the goal of protecting the most vulnerable segments of society.”

    The IMF said that the State Bank of Pakistan will focus on reducing inflation, which disproportionately affects the poor, and safeguarding financial stability.

    “A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy. The authorities are committed to strengthening the State Bank of Pakistan’s operational independence and mandate.”

    The IMF said that an ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards.

    “Priority areas include improving the management of public enterprises, strengthening institutions and governance, continuing anti-money laundering and combating the financing of terrorism efforts, creating a more favorable business environment, and facilitating trade.

    “To improve fiscal management the authorities will engage provincial governments on exploring options to rebalance current arrangements in the context of the forthcoming National Financial Commission.”

  • Reza Baqir appointed as SBP governor

    Reza Baqir appointed as SBP governor

    ISLAMABAD: The federal government on Saturday appointed Dr. Reza Baqir as the governor of State Bank of Pakistan (SBP) for next three years.

    A notification issued by the finance division said that President of Pakistan had appointed Dr. Reza Baqir as governor SBP for a period of three years from the date he assumes office.

    The terms and conditions of his appointment will be notified later with the approval of the President of Pakistan.

    Dr. Reza Baqir is currently service for the International Monetary Fund (IMF) and resident representative for Arab Republic of Egypt.

  • IMF, Planning Commission discuss CPEC, PSDP

    IMF, Planning Commission discuss CPEC, PSDP

    ISLAMABAD: Ernesto Rigo IMF Mission Chief called on Secretary Planning, Development and Reform Zafar Hasan to discuss Public Sector Development Program (PSDP), China Pakistan Economic Corridor (CPEC) and other aspects of planning including macro-economic policies, a statement said on Friday.

    Project Director Hassan Daud, Chief Macroeconomic Zafar-ul-Hassan and senior officials of the Ministry were also present in the meeting.

    The two sides exchanged program on the growth targets as well as policy adjustments to keep the growth momentum.

    Secretary planning gave a comprehensive overview of the planning process and on CPEC program.

    The two sides shared measures to create growth through both external and internal balance.

    The role of Pakistan Bureau of statistics was also discussed in the meeting.

  • KSE-100 falls by 242 points on concerns over economy in IMF program

    KSE-100 falls by 242 points on concerns over economy in IMF program

    KARACHI: The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) fell by 242 points on Tuesday due to concerns over economic condition in post IMF program.

    The share market closed at 36,784 points as against 37,026 points showing a decline of 242 points.

    Analyst at Next Capital Limited said that the stock market plunged amid growing concerns on economy post IMF program and concerns over additional taxes to be implemented in the upcoming budget.

    As per news reports, Pakistan and IMF have launched the final round of talks over the $8 billion bailout package for Islamabad, a deal that’s expected to be signed next month.

    The round started on Monday in the capital and is expected to last till May 7.

    Market participation for the 100 index decreased to 82.5 million shares from 132.4 million shares in the previous session (-37.7 percent on d/d basis).

    Major contribution to total market volume came from UNITY, PAEL, and BOP churning 28.0 million shares out of the total market volume of 110.6 million shares.

    Daily traded value for the 100 index decreased to USD28.2 million from USD38.2 million in the previous session.

    Analysts at Topline Securities said that the index extended losses for the second consecutive day as investors remained wary on upcoming events like Budget and Amnesty Scheme.

    Further, IMF technical team is also in town till May 07, which is likely to dictate key revenue measures for upcoming federal budget.

    Consequently, index lost 0.65 percent today, closing at 36,784.

    During the outgoing month, Index lost 4.8 percent – worst April month in last 14 years.

    E&Ps, Cements, and Banking sector remained top laggards with deletion of 887 points from the index.

    Investors sentiments in E&Ps were affected after offshore drilling hit a snag, while cement sector remained under pressure due to slippage in cement prices as difference of opinion still prevails among manufacturers over uniform pricing.

    Volumetric activity witnessed rise of 33 percent MoM, similarly value was up 9 percent MoM.

  • Imran Khan discusses IMF program with Christine Lagarde

    Imran Khan discusses IMF program with Christine Lagarde

    ISLAMABAD: Prime Minister lmran Khan met Ms. Christine Lagarde, Managing Director of International Monetary fund (IMF) on the sidelines of the belt and Road Forum, a statement received here on Friday from Beijing, China.

    The prime minister was assisted by Foreign Minister Makhdoom Shah Mahmood Qureshi, Adviser on Finance Dr. Abdul Hafeez Shaikh and Adviser on Commerce Abdul Razzaq Dawood.

    The meeting reviewed the relationship between Pakistan and the IMF.

    The prime minister identified the areas of reform and initiatives being undertaken by the government to stabilize the economy, control inflation and achieve fiscal balance.

    The two leaders agreed on the importance of the Fund programme and to work towards an agreement for which an IMF delegation is coming to Islamabad.

    The two sides also agreed on the need for a social safety net for the vulnerable groups of the society.