Pakistan Economy - News & Updates - Archive

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ADVISORY BOARD: There shall be 'Advisory Board' comprising Minister for Finance and Revenue or Advisor to Prime Minister on Finance and Revenue, as the Chairman; CBR Chairman and three more members from public and private sectors.

A member appointed by the federal government shall be a person who is known for his integrity, expertise, experience and eminence in any relevant field including, without limitation, finance, law, accountancy, taxation or economics. Chairman of the Advisory Board will also be member of 'FBR'.

The Advisory Board may be referred matters relating to fiscal policies, revenue targets, budget expenditure, human resources development and policy issues, goals, and targets, and matters relating to creating enabling environment to achieve vision and mission of the 'Board'.

The 'Board' may obtain approval of the Advisory Board in all matters relating to broader aspects of finance and administration.

The Advisory Board shall consider for advice only such matters as are referred to it by the 'FBR'. In its advisory capacity, the 'Board' may issue necessary advice from time to time. In case the Advisory Board is not formed or cannot function, for any reason, the Secretary Revenue Division will carry out the functions of the 'Board' with the assistance of Secretary Finance and Secretary Establishment Division.

'FEDERAL BOARD OF REVENUE': The draft stated that the 'Federal Board of Revenue' shall continue to operate without interruption. The head office of the 'Board' shall be in Islamabad. The 'Board' may establish and close down offices, re-locate the offices according to the stream of the taxes, at other places in Pakistan.

The federal government would appoint any suitable person as its chairman for a tenure of 3 years, which may be extended on eligibility for another 3 years. The chairman shall be the chief executive officer of the 'Board' and shall, together with other members, be responsible for administration of the affairs of the 'Board'.

POWERS AND FUNCITONS OF 'FBR': The 'Board' shall have all necessary powers as may be necessary to perform its duties and functions under 'FBR Act 2006'. It will prepare, with the advice of the Advisory Board, the revenue expenditure budget for each financial year.

It will give opinion on any policy matter referred to it by the federal government; perform such other functions as are conferred on the 'Board' by any other law as may be delegated to it after enforcement of the 'FBR Act, 2006'; oversee the performance of the 'Board' and its employees; appoint and prescribe terms and conditions of the employment of experts, specialists, trainers, consultants; allow additional allowance or pay on regular basis as remuneration for performance of such job and/or the office or to all the employees which shall be available to such employee or employees or the member or members of the 'Board'; take administrative/disciplinary actions against employees/members; specify fees, penalties and other charges chargeable by the 'Board'; regulating the issues of taxes, duties, levies, charges, fees, CVT, surcharges etc through implementation of rules/regulations; regulating and implementing the income tax, sales tax, customs and central excise and any other relevant legislation of this 'Act' relating to the tax and relevant appeals, and the disputes resolution methods; supervising and monitoring the activities of the tax departments and the 'FBR' would be empowered to conduct investigations relating to the taxation matters and the relevant departments.

The 'FBR Board' shall be responsible for the regulation, administration, assessment and collection of taxes, whether federal or provincial, if so provided by law. It will be empowered to conduct research and frame a code of conduct for employees to enforce accountability.

The 'Board' may in consultation with the Advisory Board, calculate taxes and duties, adopt streams of taxes and duties and/or make it identifiable as inland revenue and customs duties, or internal taxes and duties. It will identify matters to make policy decisions and may also make recommendations regarding policy to the federal government for its consideration.

The 'Board' may adopt best international practices followed in other countries for improving collecting of duties/taxes.

POWER TO COLLECT REVENUE: The 'Board' may, from time to time, and with the approval of the federal government, collect revenue from sources within Pakistan or from abroad as the case may be, as envisaged in the various legislation to the extent applicable.

BUDGET ALLOCATION: The Ministry of Finance will provide budget for revenue and/or current expenditure and lump sum funds, based on the requirement of the 'Board' to achieve its goals and targets. The 'Board' shall frame financial rules and implement the same on approval of the Finance Division.

ANNUAL REPORT: Within 90 days before the end of each fiscal year, the 'Board' shall prepare a report on its activities including investigations/inquiries and release it to the general public. The 'Board' shall, within 120 days before the end of each financial year, send the statement of accounts and its annual report to the Parliament.

HUMAN RESOURCE MANAGEMENT: The 'Board' may, with the approval of Advisory Board, formulate human resources development and management policies which may include career planning, evaluation for retention in service, and other job and service related matters like posting with the companies or trust formed by the 'Board'.

The 'Board' will prescribe selection criteria of employees for postings and transfers in general, and for postings against positions where additional allowances or pay is allowed on regular basis.

It will be empowered to appoint non-service persons having the requisite standards of honesty, integrity and skill in business administration, economics, business law, taxation, accountancy and management information system. Besides other powers, it can ask the CBR employees to disclose the assets owned directly or indirectly by them or their family members.

 

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ESTABLISHMENT AND MAINTENANCE OF COMPANIES OR SUBSIDIARIES: The 'Board' may on need basis, get incorporated and maintain companies for training needs of the 'Board' and its employees, the field offices, organisations or institutions or for the stakeholders; research and development in the relevant fields; campaign to create, awareness and to educate the taxpayers; upgrade skills of the employees and automation purposes. It may transfer or post or place any of its employees to work for the company.

The management of such companies will be with the serving or retired members or officers of the 'Board'.

The CEO will be appointed from senior serving or retired officer with suitable qualification. The company will have principal office at Islamabad and branch office at Karachi. A committee of the members of the 'Board' shall supervise the functions of such companies.

EMPLOYEES WELFARE FUND: A fund called, 'FBR Employees Fund' will be set up for the welfare of 'Board' employees. The fund will be launched with an initial contribution of Rs 500 million. It will also get contribution from the employees of the 'Board' and federal government.

The fund will also collect a certain percentage of tax on concealed income, amount realised from sale or additional levies on confiscated goods, proceeds of auctions in recovery proceedings.

The fund will meet medical, transport and education and other welfare expenses, and also arrange recreational activities for the officers, employees and their families.

REPRESENTATION BY PUBLIC: Any person, organization or entity may make a representation to the 'Board' to point out any anomaly, tariff discrepancy, interpretation etc under relevant legislation. They may make a representation against any hardship or delay relating to the tax matters.

The 'Chairman' shall have the powers to issue orders keeping in view the taxpayer's grievances.

RULES AND REGULATIONS: The Federal Government may, by notification in the official Gazette, make rules for all or any of the matters in respect of which it is required to make rules to carry out the purposes of the 'FBR Act 2006'. It will be empowered to make rules in the matters relating to the imposition and levy of taxes, duties, and procedures.

This shall be subject to the condition of previous publication and before making any rules the draft shall be published in the official Gazette for eliciting public opinion within a period of 30 days from the date of publication.

ASSISTANCE TO THE BOARD: The federal divisions, attached departments, wings, offices, corporations and all the provincial government departments, attached departments, wings and FATA, NA administrations shall assist the 'Federal Board of Revenue' to carry out its functions smoothly.

STATUS OF EXISTING AGREEMENTS WITH CBR: All existing contracts and agreements made by CBR would continue even after promulgation of the 'FBR Act, 2006' and rules/regulations/SROs issued/adopted by CBR would remain intact.

 

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LMM merged with LTF-EOP scheme

KARACHI (July 15 2006): The existing scheme for financing locally manufactured machinery (LMM) is being merged with scheme for long term financing for the Export-Oriented Projects (LTF-EOP) to provide a level-playing field to exporters for setting up and balancing, modernisation and replacement (BMR) of Export Oriented Projects/Units.

The new proposed scheme titled as "Long Term Financing Scheme for Imported & Locally Manufactured Machinery" is being finalised and would be issued shortly replacing the existing LTF-EOP and LMM schemes, said the Governor, State Bank of Pakistan (SBP), Dr Shamshad Akhtar at a news conference here on Friday.

She said that in the meantime the LTF-EOP Scheme has also been modified. Giving the details she said that the SBP is lowering the spread on new scheme, which allows financing coverage for both imported & local machinery, by one percentage point, thereby reducing banks spread from three percent to two percent.

To meet the growing financing demand of the borrowers, the procedure for limits allocation is being revised, in particular more allocation is being provided to the Participating Financial Institutions (PFIs). Instead of present practice of allocating LTF-EOP limit as sub-limit of EFS, the PFIs will be allocated separate limits, which would be aligned, to their demand.

The utilisation of at least 50 percent of the total limits by PFIs for SME sector is being withdrawn. However, PFIs are advised to give preference to meet the financing needs of the SME borrowers.

Only SME borrowers, as defined in Prudential Regulations for SMEs, are allowed to purchase plant, machinery, equipment and accessories ffrom the commercial importers

To meet the energy requirements of the export oriented projects, the import of generators shall also be eligible for financing under the scheme.

Where sponsor(s) of the project have already invested share of equity in the project in the form of land, construction of building and procurement of local machinery etc, the same shall be treated as 'equity' of the sponsor and the condition of maintaining an escrow account may not be required provided overall prescribed debt/equity ratio of 80:20 is met. The lending PFI should place a certificate on record in this regard in the relevant credit file for subsequent inspection by our BID.

The Banks/DFIs are allowed to sanction and disburse the loan strictly in terms of criteria laid down in scheme directly and no prior approval of SBP will be required.

The borrowers may import plant & machinery required for their projects under the scheme irrespective of its being locally manufactured.

Dr Shamshad Akhtar announced a reduction in spread by 0.5 percent of banks and a reduction in the rate of refinance under EFS to 6.5 percent per annum. The final rate of EFS will not exceed '7.5 percent as against prevailing rate of 9 percent. With this adjustment, the refinance rate for EFS is now 2 percent below the T-bills rate of 6-months, which will remain the benchmark for EFS.

The end-user rate for EFS is now aligned to the regional competitors of Pakistan - in line with the exporters demand. The financing facilities under Part B (Export Sales) of the Scheme for financing Locally Manufactured Machinery will have the similar mark up rate structure, the Governor added.

The Governor underscored that this is a temporary measure and the EFS scheme will remain under regular review and banks have been instructed to enhance vigilance on use of export refinance to ensure effective use of funds.

 

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Shaukat rejects MoC's eight percent increase in exports target

ISLAMABAD (July 15 2006): Prime Minister Shaukat Aziz has rejected Commerce Ministry's projections showing only 8 percent increase over the last fiscal year, and directed the officials to fix a reasonable exports target for 2006-07.

Sources said that the Prime Minister was disturbed over Commerce Ministry's exports estimates and visibly expressed it during a meeting the other day to give him a presentation on upcoming trade policy to be announced on July 17.

The Prime Minister asked of Commerce Ministry's officials on what basis they were projecting only 8 percent increase in exports for 2006-07, when all other economic indicators were showing healthy trend. He counted overall economic growth, increase in remittances FDI, enhanced revenue target and several other factors.

He said that the Ministry should take into account all these factors before finalising the exports target for the current fiscal year.

Sources said that Commerce Ministry supported textile industry's demand for a special package of incentives, and strongly argued that such a treatment was inevitable for enhancing textile related items exports to subsequently push the net exports to the new height in 2006-07.

Sources said Commerce Ministry officials took the same position during the presentation and tried to persuade the Prime Minister that he should grant some special incentives for the textile industry.

Sources said the Prime Minister did not agree that the textile industry only could help the government achieve a reasonable exports target for 2006-07, if it got some special treatment in terms of incentives. He said the government would provide all possible measures to facilitate all sectors engaged in exports, but it was difficult for it to single out anyone of them for incentives.

It may be noted that the textile industry has been demanding a Rs 50 billion package. The government is yet to respond to the industry for the demand.

 

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Government worried over lack of growth in remittances

ISLAMABAD (July 15 2006): The government is worried over almost the stagnant trend in the remittances Pakistan receives from expatriates working abroad and is desperately looking for some remedial measures, sources said here on Friday.

With the persistent downtrend in Pakistan's manpower export during the past three years, fears are mounting that inflow of remittances might also decline further considerably.

Remittances from overseas Pakistanis are stagnant at around $4 billion per annum for the past three years. After a one-time boost when remittances touched all time high of $7 billion in 2002, a year after 9/11, there has been no upward movement.

At the heart of this stagnation is the decline in Pakistan's manpower export by more than 100 percent during past three years, from 225,000 in 2003 to just 91,000 in 2005.

The issue was discussed at the meeting of a subcommittee of the Public Accounts Committee (PAC) to review the audit report of Labour Ministry for 1990-91. Presided over by Khalid Younas, the panel was told that the matter was discussed during a recent meeting of Pakistan's ambassadors.

"We (government) did discuss with them (ambassadors) what the reason was behind this sluggish inflow of remittances," Overseas Pakistanis Division Secretary Aslam Sanjrani said.

The statement came within a week after Prime Minister Shaukat Aziz had decided to form a task force to streamline the transmission of remittances from those countries where Pakistani banks or foreign exchange companies do not operate.

Aslam said the issue was of a grave concern and the government at all levels must look into it seriously. He did not suggest any remedial measure, though.

Later, Labour Ministry Secretary Asif Hayat complained that the Finance Division did not release sufficient amount to his Ministry out of the collections from Workers Welfare Fund (WWF).

Asif said only Rs 3 billion, out of the total collection of Rs 7.63 billion, was released to the Ministry during last year. Industries across the country contribute to the WWF. Central Board of Revenue (CBR) acts as collection agency, and the money goes to federal consolidated fund. In the past, there had been reservations from the workers' bodies about government's policy of transferring WWF to the national consolidated fund and not handing it over to the Labour Ministry. At the moment, Rs 25 billion, collected under the head of WWF, is lying with the federal government.

 

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Efforts on for development in Balochistan: President

ISLAMABAD (July 15 2006): President General Pervez Musharraf asserted on Friday that the government would continue to make all-out efforts for accelerating pace of development activities in the whole of Balochistan province.

He categorically stated that no leniency would be shown towards such few miscreants who try to disrupt these development activities by creating law and order situation.

The President made these remarks during a meeting to review law and order situation and the ongoing development projects in Balochistan. Prime Minister Shaukat Aziz was also present on the occasion.

The President said that efforts would continue for accelerating development activities, mega and micro schemes in Balochistan, whether under the Federal Government, Khushal Pakistan Programme, or planned by senators, MNAs or district governments. During this review meeting, both the President and the Prime Minister were updated on matters pertaining to security of foreign workers and government installations, foreign direct investment (FDI) and status of ongoing development projects.

They were also informed that the government's timely and appropriate steps in parts of the two affected districts of Kohlu and Dera Bugti had started showing positive signs.

The residents of the affected areas have shown full support and confidence in government's commitment to develop the backward areas of Balochistan.

The President and the Prime Minister were also apprised of a number of projects that are being implemented in Balochistan for the prosperity of the people and to bring the province at par with other parts of the country.

These projects will bring about a quantum change in the lives of the people resulting in their socio-economic uplift through creation of greater job opportunities.

The President and the Prime Minister expressed satisfaction over the improvement of law and order in Balochistan and directed the officials to recruit more locals in police, Frontier Constabulary and other government departments. It was also a matter of satisfaction to view that more than 6000 personnel from Balochistan were in the army and the number was gradually increasing for which recruitment standards have been relaxed.

Minister for Information and Broadcasting Muhammad Ali Durrani, Balochistan Governor Owais Ahmed Ghani, Chief Minister Jam Muhammad Yousaf and Deputy Chairman Planning Commission Dr M. Akram Sheikh also attended the meeting.

 

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Importers begin placing orders for black matpe in Burma

KARACHI (July 15 2006): Commercial importers have started placing orders in Mianmar (Burma) for the import of black matpe (Mash whole), with shipment due in August, sources said.

Sources said that the private importers a last month, initiated correspondence with their respective parties in Burma and booked some 5,000 tonnes of the commodity, aimed to plug demand and supply gap in the country.

They said that the booked commodity would reach Karachi port sometime in August, which would then be processed and made into Mash pulse. "Some of the importers had placed fresh orders of around 200 containers or 5,000 tonnes of black matpe in Burma last month (June), which is due here in the month of August," said an importer.

He added that the black matpe is barely available in Burma because of crop shortage around the world. Commenting on the prices, one importer said that the commodity has been booked at an average price of $675 per tonne, adding that fluctuation in prices of black matpe could be seen due to shortage of this commodity and tremendous demand world over.

He said that the commodity was earlier tagged at around $600 per tonne, however when the importers of India and Pakistan approached the Burmese market, the commodity touched its peak at around $700 per tonne.

However, he said when the demand decreases, the prices went down by $25 per tonne, which made the trade viable for the local importers and they immediately booked 5,000 tonnes of black matpe. Traders pointed out that the imported commodity of $675 per tonne would be tagged at around Rs 54 per kg at the local wholesale market.

"The black matpe would cost around Rs 44 per kg when it would arrive at the Karachi port, however, Rs 10 per kg would be added in making it into Mash pulse," he added. Sources said that the importers have booked orders of black matpe despite rise in the international prices.

"Albeit, the international prices are higher, we had placed some orders in Burma after studying the local market trend where this commodity is being tagged at Rs58 per kg," importers said. The importers have also hinted of more placements of huge orders of black matpe in Burma. "Our market analysis indicates that the country still needs 55,000 tonnes of this commodity for consumption during the current fiscal (2006-07)," they added.

Senior traders said that the importers would place big orders for black matpe in October for the November crop through 'forward deals'. The country's black matpe consumption stands around 75,000 tonnes and its local production is estimated around 18,000 tonnes to 20,000 tonnes, while the remaining demand is filled through import of around 60,000 tonnes mainly from Burma

 

[Owais]

Oil surges to record $78

NEW YORK (July 15 2006): Oil surged to record highs above $78 on Friday on fears the conflict between Israel and Hizbollah guerrillas could escalate and spread to more Middle East countries.

Iran's nuclear stand-off with the West, fears over oil supply in Nigeria due to militant attacks, an influx of fund buying and falling US crude supplies also buoyed the price of oil, which is up nearly 30 percent this year.

US crude soared to as high as $78.40 a barrel in intraday trading before settling up 33 cents at $77.03. Crude oil on the New York Mercantile Exchange rose $2.94, or 4 percent, this week. London Brent rose 58 cents to $77.27 a barrel, after jumping to a record of $78.03 a barrel earlier in the session.

"The speculators are out there panicking about Israel because they think it's going to spread through the Middle East," said Mike Barry, director at London's Energy Market Consultants.

Israel struck Hizbollah targets and devastated a wide array of Lebanese civilian installations on Friday. Israel has drawn world criticism of its tactics since the Shi'ite fighters seized two soldiers and killed eight.

Hizbollah, which wants to trade its captives for prisoners held in Israel, fired more rockets across the frontier. The group's chief, Sayyed Hassan Nasrallah, pledged open war on Israel after it bombed his Beirut home on Friday

Iranian President Mahmoud Ahmadinejad on Thursday warned that any Israeli strike on Syria would be considered an attack on the whole Islamic world that would provoke "a fierce response." Both Iran and Syria support Hizbollah.

Neither Israel nor Lebanon are oil producers. But both lie at the heart of the Middle East, which collectively pumps nearly a third of global output. The situation has made oil traders nervous.

"Rarely has this market been as jittery," said Anthony Sabino, professor at St. John's University in New York.

Opec sought to calm the market, saying there were sufficient supplies to meet global demand.

"The market remains well-supplied with crude," the cartel said in a statement. "Geopolitical developments, over which Opec has no influence, have been behind this sudden rise in volatility."

EYES ON $80 OIL:

Illustrating the market's sustained strength, prices for oil futures contracts to be delivered further ahead were trading above $80, from December 2006 to August 2007.

"There is nothing to stop prices at the moment with the stream of headlines that are coming in. All we need now is a big hurricane," Barry said.

In Iran, Ahmadinejad said on Thursday the world's fourth-largest oil exporter would not abandon its right to nuclear technology. Tehran's case was referred back to the Security Council after it delayed accepting incentives aimed at stopping it from developing nuclear weapons.

"With Israel and Nigeria, Iran completes the triumvirate of key tensions supporting prices," said Mark Pervan, a resources analyst at Daiwa Securities.

Analysts have expressed concerns about the effects of high energy prices on global economic growth. But US Energy Secretary Sam Bodman said on Friday the economy of the world's top energy consumer has held up against rising fuel costs.

"We have found that the US economy has been surprisingly resilient, surprisingly able to manage the increase in prices that we have already seen," Bodman said at a news conference with Canadian government energy officials. "I am hopeful that it will continue to do so."

Oil prices averaged $67.67 so far this year, but were still substantially below the inflation adjusted $87.65 average of 1980, hit during the second oil shock that followed the 1979 Iranian revolution.

Some experts noted that much of the money chasing oil was speculative, and said prices could easily fall if tensions ease.

"There's a lot of new financial investment coming into the market," said Michael Wittner of Calyon investment bank. "Some of that will be hot money, so profit-taking could take us below $75 in a heartbeat."

 

[Owais]

Defaulting on re-lent loans: EAD to quiz Wapda officials today


ISLAMABAD (July 15 2006): The Economic Affairs Division (EAD) will quiz the Water and Power Development Authority (Wapda) for defaulting in payment of re-lending loans, due to be returned by June 30 last.

Sources in EAD told Business Recorder here on Friday that Wapda officials have been asked to reach Islamabad on July 15 and clarify why the organisation did not clear its re-lending loans of Rs 20.5 billion as per the schedule agreed with the federal government at the time of signing the agreements.

They said that the officials of Ministry of Water and Power, which is responsible to press the utility for debt servicing, and Finance Ministry, have also been invited in the meeting to settle the issue.

They said that Finance Ministry had directed the EAD to take up the matter with the Ministry of Water and Power and the Wapda for early payment of its re-lent loans, which the concerned Division had to return as per the agreement with the lending countries and financial institutions.

According to sources, EAD had asked Wapda to deposit the outstanding amount in the State Bank of Pakistan (SBP) account immediately, but nothing has been done by the loanee in this regard.

The GoP has already converted Wapda's Rs 4.2 billion loan into equity in February last, keeping in view its financial position, but delaying tactics in payment of re-lent loans is not acceptable, said an official.

The EAD has launched an internal inquiry to fix responsibility for leaking the information regarding Wapda's default in payment of re-lent loans, which is in progress.

Sources said that EAD would also charge additional interest on the loans whose payment has been delayed, but the actual amount to be charged would be finalised in the meeting.

The Economic Co-ordination Committee (ECC) of the Cabinet has already directed the EAD to revise the re-lending policy, after Wapda refused to avail loans due to higher interest rate.

"Wapda is of the view that it is better to borrow from the local market on prevalent rates rather than taking costly loans from the EAD," sources said.

According to the utility, the prevailing rate is 11 percent (Kibor 9.07 percent, plus exchange risk coverage 2 percent) while GoP's current re-lending rate is 17 percent, which is not acceptable.

The decision was taken in the backdrop of two project loans, namely upgradation of load dispatch system Phase II, and transmission arrangements for power dispersal of Ghazi -Barotha Hydropower Project (GBHP), which the government intends to re-lend to Wapda.

Sources said that loan and project agreements were signed between KWF, a German financial institution, GoP and National Transmission and Dispatch Company (NTDC), the project executing agency, on July 15, 2004 for Euro 51,129,188.12 for supply and erection of the 500 kV, 220 kV and 132 kV substation at Ghakkar (Gujranwala).

According to the agreement, the borrower would channel the loan to the project executing agency under a separate agreement, which must reflect prevailing market conditions in Pakistan, subject to approval of the ECC.

EAD had agreed with the proposal, but Planning Commission opined that re-lending terms could not be changed merely for one organisation.

According to sources, Planning Commission even said that if Wapda did not fulfil the terms and conditions, it was free to approach private banks.

The Ministry, however, argued that the much-delayed project should not be held up for want of a general decision, particularly when agreement has already been signed with the JBIC.

The ECC had directed the EAD in April to revise re-lending policy, and table it in the next meeting, but the decision has not been implemented.

 

[Owais]

July-April domestic debt rises to Rs 2.233 trillion: Rs 67.72 billion withdrawn from NSS

ISLAMABAD (July 15 2006): Pakistan's total outstanding domestic debt rose from Rs 2.133 trillion at end June 2005 to Rs 2.233 trillion at end of April 2006, showing an increase of Rs 100.29 billion (4.70 percent), according to provisional data issued by the State Bank of Pakistan (SBP) on Wednesday.

However, compared to March 2006, when the total debt amounted to Rs 2.249 trillion, it declined by about Rs 16 billion to Rs 2.233 trillion in April, indicating that the government had retired some domestic debt, or it was the effect of withdrawal from some saving schemes which remained unattractive due to low rates of profits.

The increase in the domestic debt during the ten months of FY06 was mostly from rise in the stocks of floating and unfunded debt. The permanent debt declined rapidly during the period under review.

During these ten months, the floating debt increased by Rs 114.74 billion, and unfunded debt by Rs 5.24 billion, whereas the permanent debt declined by Rs 19.68 billion.

The permanent domestic debt, comprising medium and long-term market loans, federal government loans, special government loans, federal instruments and prize bonds, stands at Rs 481.2 billion, which was Rs 500.87 billion at the end of FY05.

The floating domestic debt, mainly comprising short-term debt instruments and market treasury bills, maintaining a rising trend, was recorded at Rs 778.16 billion at the end of June 2005. And, during the following ten months, it went up to Rs 892.90 billion.

The data further shows that the unfunded domestic debt comprising National Saving Schemes (NSS) stood at Rs 859.28 billion. It grew by Rs 5.24 billion from Rs 854.04 billion at the end June 2005.

However, it shows that the net mobilisation under all instruments of the NSS were once again negative during this period, except relatively new instruments ie Bahbood Saving Certificates, Postal Life Insurance and Pension Benefit Accounts and Mahana Amdani accounts, which increased.

Net investment in NSS fell primarily because their rates of return had become too low for investors to make fresh investment as a result of gradual slashing of profit during the last few years.

But, it is expected that as a result of government decision (in June 2006) of increasing profit rates on these instruments would attract depositors. Of these three most popular instruments of the NSS ie 10-year Defence Saving Certificates (DSCs), five-year Regular Income Certificates (RICs) and three-year Special Saving Certificates (SSCs), net withdrawals were Rs 67.72 billion in ten month of the fiscal year.

It also shows that the erstwhile popular instruments-DSCs, SSCs, and RICs-were less attractive for investors during the period under review. Besides, withdrawals from savings accounts, special savings accounts and general provident (GP) fund during the period under study were Rs 3.0 billion, Rs 983.1 million and Rs 309 million respectively during the period.

The SBP data shows that Bahbood Saving Certificates, Pensioners Benefit Accounts and Postal Life Insurance attracted net fresh investment of Rs 54.25 billion, Rs 15.05 billion and Rs 7.94 billion, respectively.

 

[Owais]

EDB refuses to approve Hannover Messe expenses: setback to industries ministry

ISLAMABAD (July 15 2006): The Ministry of Industries and Production suffered a setback as the Engineering Development Board (EDB), which met recently, refused to give approval for the expenses incurred in connection with Hannover Messe.

Sources said that some Board members described participation in the exhibition as 'picnic party', and wanted to know the details of the orders which Pakistan's engineering sector had received so far, as a result of its participation.

The meeting expressed annoyance at the composition of the committee, headed by Nabeel Hashmi of private sector, which had approved the expenses while keeping the GM (Finance) out of the whole process. The meeting also changed the composition of the committee, and included GM (Finance), two members of the board, and one official of Export Promotion Bureau (EPB) as members of the committee.

The member representing Commerce Ministry in the board demanded that a note of dissent that composition of delegations to fairs involving government funds, as per rules of business, fall under the purview of Commerce Ministry. It may be recalled that a 220-member contingent was taken to Germany for participating in Hannover Messe 2006 for second successive year despite little response was received in 2005.

The delegation was headed by Jahangir Khan Tareen, Minister for Industries, Production, and Nabeel Hashmi, head of Business Development Committee.

Sources said that never before such a big delegation had attended the fair, and added that this would have allowed a joy ride to many participants. The contingent included dozens of officials of the Ministry of Industries and EDB, besides favourites from private sector. Last year, Pakistani participants in the fair had received no significant orders of engineering goods but again the officials spent over Rs 70 million--twice as compared to last year's Rs 35 million. Prior to last year's participation, private sector itself used to bear the expenses.

It is learnt that Rs 60 million was spent in Germany and Rs 11.3 million in Pakistan. Of the total expenditure abroad, the Ministry and EDB had paid Rs 25 million on acquiring 1100 sq metre space for private companies, Rs 3 million for pavilion utilities and Rs 2.4 million were paid to 22 translators/assistants and hostesses hired for the fair.

Besides, Rs 20 million had been spent on the construction of stands/decor and other contingencies and Rs 2.5 million on entertainment of the delegation during its stay in Hannover

 

[Owais]

CBR to incur Rs 2.9 billion loss for cut in corporate tax rates

ISLAMABAD (July 15 2006): The Central Board of Revenue (CBR) will overall suffer a loss of Rs 2.9 billion due to reduction in the corporate tax rates in budget 2006-07. The withdrawal of capital value tax (CVT) on air tickets would cost Rs 750 million.

The withdrawal of minimum tax @ 0.5 percent on Murabaha turnover, covered under the Islamic Banking Transactions, would cause a loss of Rs 106 million in 2006-07.

Sources told Business Recorder on Thursday that the corporate tax rates for the banking companies would be 38 percent, for private companies 37 percent and public companies 35 percent for the 'tax year 2006'. The overall revenue implications would be Rs 2.9 billion following the applicability of these revised rates.

The simplification of salary taxation would cost Rs 1.07 billion, whereas the simplified tax regime for non-salaried taxpayers would result in revenue loss of Rs 1.64 billion in the fiscal 2006-07. Special tax concessions for women would result in revenue loss of Rs 40 million and rebate for teachers and researchers posted in government institutions would cost around Rs 20 million.

The amendments introduced in the Companies Profit (Workers Participation) Act, 1968 and Workers Welfare Fund Ordinance, 1971 would result in revenue loss of Rs 2 billion. The reduction in tax rate for Inter-Corporate Dividends would cost Rs 250 million, whereas the waiver from minimum tax in case of 'trading houses' would cost Rs 15 million to the national kitty.

Moreover, the income tax exemption on the import of Radio Navigational Aid Apparatus by airports would result in revenue loss of Rs 58 million.

On the other hand, the withholding tax on exempted and reduced rates imports would generate an amount of Rs 580 million, rationalisation of withholding tax on services Rs 470 million and withholding tax on commission and brokerage would generate around Rs 41 millions.

 

[Owais]

SBP sells Rs 11,650 million treasury bills

KARACHI (July 15 2006): The State Bank of Pakistan (SBP) sold a total of Rs 11,650 million of Market Treasury bills on Friday in a one-day and six-day repo operation to mop up funds from the money market. Rs 2,000 million of Market Treasury Bills were sold in a one-day repo operation at 7.00 percent while Rs 9,650 million Market Treasury Bills were sold in a six-day repo operation at 7.50 percent.

 

[Owais]

Banks, DFIs to disclose lending, deposit rates

KARACHI (July 15 2006): In order to create awareness and to facilitate the public in making informed decisions, it has been decided that henceforth banks/DFIs shall make complete disclosure of the lending and deposit rates of all consumer products offered by them.

This information would be posted on their website as well as prominently display on entrance/ or window of their branches. In order to facilitate comparison, banks/DFIs would also disclose annualised percentage rates on all consumer products.

In case of deposits, the expected rate of return under the PLS system will be clearly indicated for each tenure. For lending products, Banks/DFIs shall also clearly indicate whether the rate is fixed or floating. In case of floating rate, in addition to mentioning the existing rate, the information regarding the tenure of the benchmark (KIBOR or any other rate plus a pre-defined spread) used and periodicity of re-pricing should also be disclosed.

The banks/DFIs, in addition to the above, will also take adequate measures to inform their customers about the intricacies of ATM, Credit Card and their charges as well as the cardholders' obligations.-PR

 

[Owais]

SPI registers increase

ISLAMABAD (July 15 2006): The Sensitive Price Indicator (SPI) for the week ended on July 13, 2006 for the lowest income group up to Rs 3000 has registered 0.35 percent increase over previous week. The SPI for the week under review in the above-mentioned group was recorded at 144.68 as against 144.17 recorded in the previous week, according to Federal Bureau of Statistics (FBS).

During the week under review, average prices of 6 items registered decrease, while those of 19 items increased with the remaining 28 items' prices unchanged.

The items, which recorded decrease in their average prices during the week under review, included tomatoes, bananas, LPG (11kg cylinder), egg (farm), red chillies powdered and masoor pulse washed.

The items, which registered increase in their prices, included gas charges up to 3.3719 MMBTU, chicken farm, onions, garlic, moong pulse washed, sugar, gram pulse washed, vegetable ghee (loose), shirting, mash pulse washed, rice Irri-6, gur, tea (packet), wheat flour (average quality), mutton, rice basmati broken, potatoes, coarse latha and milk powdered (Nido).

The items with no change in their average prices during the week under review included wheat, beef, bread plain med. size, milk fresh, curd, vegetable ghee (tin), mustard oil, cooking oil (tin), salt (powdered), tea (prepared), cooked beef (plate), cooked dal (plate), cigarettes K-2, lawn, voil printed, sandal gents (Bata), sandal ladies (Bata), Chappal Spng. (Bata), kerosene, firewood, Elec. bulb (60-Watts), match box, washing soap (nylon), bath soap (Lifebuoy), electricity charges 1-100, petrol, diesel and telephone charges.