Pakistan's Economy - News and Updates

[Abu Zolfiqar]

cant we just ignore the next IMF loan program

i mean if we or the new govt increase the tax to gdp ratio to atleast 15%..i dont think we will need the loan from imf than

That's the big IF!

 

[Argus Panoptes]

That's the big IF!

That "if" is closer to a "never" than a "maybe".

 

[Donatello]

We need to make quality exports. Like technology, engineering, IT etc. This is 21st century, we can no longer ride on making towels and garments and exporting onions and mangoes.

 

[opportunist86]

We need to make quality exports. Like technology, engineering, IT etc. This is 21st century, we can no longer ride on making towels and garments and exporting onions and mangoes.

If business conditions remain the same and government doesn't take interest in the betterment of trade and business, we'll contiue exporting lolly pop, chewing gum, raw material and human trafficking. Can you imagine how much does the Chinese government supports the factory owners in China?

 

[Abu Zolfiqar]

That "if" is closer to a "never" than a "maybe".

well it can change if there's accountability on where the money is spent and on tracking down tax absconders (regardless of their wealth and political connections)

again - a big IF

and unfortunately, i dont see any sudden changes so you could be right

 

[Argus Panoptes]

well it can change if there's accountability on where the money is spent and on tracking down tax absconders (regardless of their wealth and political connections)

again - a big IF

and unfortunately, i dont see any sudden changes so you could be right

It is easier to go begging IMF for more money than to do what you mention above. Wrong, but convenient, isn't it?

 

[muse]

FBR: Revamp it!
April 04, 2013
RECORDER REPORT


The last month of this year appears to have been a good month for revenue collectors. FBR has claimed that collection is up by 22 percent despite a pronounced economic slowdown as well as a dip in inflation to 6.57 percent. The provisional figures of collection over last nine months reflect an increase of 6.7 percent. Improvement in withholding collection tax due to administrative changes and focused ongoing enforcement to plug leakages in customs duty and sales tax against some major sectors like textile have contributed to this praiseworthy performance.

This is a result of marked improvement in capabilities of PRAL - FBR's technological arm - to unearth glaring omissions and misdeclarations in various returns filed by taxpayers. Using the databank and undertaking risk analyses will bear fruit only if FBR is given the autonomy that it truly deserves to operate freely and honestly to successfully thwart unwarranted political pressures. Systems, process and governance are a key to improve tax collection from existing taxpayers without hiking rates.

Earlier in a presentation to caretaker Prime Minister, the Chairman FBR had highlighted some of the reasons behind a profound lack of progress in improving the tax-to-GDP ratio. According to him, sales tax collections have declined by 10 percent for two reasons namely (i) federal-provincial agreement enshrined in the National Finance Commission award allowed provinces to collect sales tax on services as per the constitution, which naturally accounted for a decline in sales tax collections from key revenue generating sectors for example telecommunications and other services sectors; and (ii) a decline in collections under fertiliser and sugar mainly due to a massive decline in output due to electricity loadshedding and gas curtailment.

Collection under federal excise duty declined by 16.6 percent was expected due to a reduction in the rate of duties on certain items. Taxes at the import stage dipped due to slow economic growth (a decline of two percent in GDP growth on account of electricity shortage). Poor law and order conditions also contributed to lower industrial output. Finally, customs collection also declined by 4.7 percent on five major import items namely: iron and steel, paper and board, plastic, staple fibres and textiles. This also contributed towards lower sales tax collection at the import stage.

There is no doubt that in spite of a poor tax-to-Gross Domestic Product ratio (under 10 percent) any economy would suffer lower tax collections in the event that growth is stalled. Pakistan's growth rate has not been able to compete with other regional countries including India and China in recent years and this has led to lower-than-budgeted tax collections from all those sectors that have a strong linkage between taxes payable and output.

However, what reflects disjointed budgetary exercise, in the briefing to the caretaker Prime Minister, was the admission that direct tax collections had declined by 10 percent as a consequence of the enhancement of the exemption limit from 350,000 to 400,000. Surely the budget makers should have taken account of this fact. The FBR indicated its shortfall was around 768 billion rupees.

The FBR identified four policy measures that would enable it to meet its target notwithstanding a decline in collections during the first nine months of 2013 which are: (i) widening tax base for direct taxes through administrative measures (computer ballot for FY2011 has been undertaken and audit commenced, while for FY2012 ballot is still awaited) and policy measures like the implementation of the tax Amnesty Scheme and merging the cigarette slabs from three into two. Now only the caretaker Finance Minister can recommend issuance of a Presidential Ordinance for both measures; (ii) abolition of domestic zero rating on export oriented and other domestic sectors (including textiles whose zero rating was abolished and 2 percent sales tax levied and an amnesty scheme offered to those evading taxes in the sector with the option to pay two instead of five percent and all cases against them to end), (iii) standardising withholding tax rates on imports at five percent as well as a dedicated department to deal exclusively with withholding tax, and (iv) enforcement of ADRC/litigation is under way. So far, the luxury car amnesty scheme has net over Rs 9 billion and sales tax amnesty to textiles has roped in Rs 4.5 billion and collection is rising. Both these measures are a result of technology improvements in data comparison. We hope FBR would continue this laudable effort in other major tax paying sectors as well.

A number of studies are available which show that a combination of administrative measures and widening of tax base would enable us to improve tax collection by at least 50 percent. The challenge is whether our political leadership is willing to back these recommendations, which involve providing political cover and giving autonomous status to FBR. The tax collecting body had more autonomy in terms of posting and transfers under a military regime prior to 2002 than during the five-year tenure of a civilian-led parliamentary system.

Prime Ministers as well as Chief Ministers openly entertain requests from MNAs and MPAs for posting and promotion of lower cadre inspectors and other field staff besides higher posts such as commissioners and collectors. FBR's policy board as well as Member (Administration) are a mere rubber stamp; they are there to carry out orders from top bosses to issue SROs and announce and effect postings. The World Bank-funded TARP programme failed due to the fact that political forces at the helm are not willing to let go of power they presently enjoy over FBR; nor is there a clear move to change the system of governance in the revenue collection mechanism. Mere tinkering and just taking policy decisions on the basis of monthly numbers will not be enough. Leakages have to be plugged, final tax regime has to be eliminated. Moreover all taxpayers are to be successfully persuaded to file proper tax returns.

Policy of treating deduction of withholding tax or advance tax as a final liability needs to come to an end. Be that as it may, there is a need for FBR to undertake measures to plug in all leakages estimated at around 500 billion rupees per annum. It is also required to proactively undertake audits to improve its collections. If political parties' election manifestos are taken as a guide they are most disappointing on taxation. There appears to be no consensus on an integrated VAT system or on improving collection of tax. There is also no policy outlook on taxing agriculture and the retail sectors. One must not lose sight of the fact that retail sector includes all the shops that sell goods to the ultimate customer. It encompasses all kinds of shops, from kiosks to big groceries, etc. Fiscal deficit cannot be brought down without substantial improvement in tax-to-GDP ratio. Some political parties seek to raise the tax-to-GDP ratio to 15 percent but they lack blueprint for tax reforms.

 

[ShehryarQureshi]

Anyone heard about "CDA Crackdown Against Squatter Settlements"?

 

[ejaz007]

MCB Bank posts highest-ever PBT of Rs 8.67 billion in Q1 FY13
Staff Report

KARACHI: Despite the challenging operating environment, MCB Bank has posted highest quarterly profit before tax (PBT) in its history of Rs 8.677 billion and declared cash dividend of Rs 3.5 for the first quarter ended March 31, 2013.

Board of Directors of MCB Bank met under the chairmanship of Mian Mohammad Mansha to review the performance of the Bank for the quarter ended March 31, 2013.

The Bank in contrast with the industry results, posted an increase of 2 percent and 4 percent in profit before tax and profit after tax respectively. Net markup income of the Bank was reported at Rs 9.723 billion whereas non-markup income was reported at Rs 2.350 billion. Administrative expenses (before pension fund reversal) of Rs 4.338 billion witnessed a decrease of 2 percent over the corresponding period last year. Due to strengthened risk management framework and policies adopted by the Bank, a reversal in provisioning charge of Rs 840 million was reported for the quarter ended March 31, 2013 as compared to a provision charge of Rs 75 million for corresponding period last year.

MCB Bank’s earnings per share (EPS) for the period under review came to Rs 5.70 compared to Rs 5.51 for March 31, 2012. Return on assets improved to 3.02 percent whereas return on equity was recorded at 25.51 percent with book value per share improving to Rs 90.95.

The Bank’s total asset base was reported at Rs 759.116 billion, which decreased by 1 percent over Rs 767.075 billion as of December 31, 2012. Net investments increased by Rs 664 million to Rs 402.733 billion. Gross advances were reported at Rs 262.360 billion while the infection ratio of the Bank further improved to 9.41 percent (Dec 2012:9.74 percent).

On the deposit front, the Bank continued with its strategy of shifting its base to low cost current and saving accounts, each growing by 5 percent over December 31, 2012 and taking the total CASA base to an all-time high of 86 percent.

Convergent with the declining interest rate scenario, the decrease in high cost fixed deposits can be marked over a series of quarters, with a 4 percent decline in the quarter ended March 31, 2013.

Daily Times - Leading News Resource of Pakistan

 

[ejaz007]

Lucky Cement registers Rs 7 billion profit

KARACHI: Lucky Cement (LUCK) posted yearly increase of 49 percent in profit to Rs 7.0 billion in nine months of current Fiscal Year (FY) as against of Rs 4.7 billion in the same period last FY, according to results announced on Monday. The profit translates into Earnings per Share (EPS) of Rs 21.59 in nine months of this FY, depicting 49 percent increase as in opposition to EPS of Rs 14.49 of the corresponding period of last FY. An analyst at JS research said the result was above our expectations (EPS of Rs 20.44) while this growth mainly due to lower effective tax on account of deferred tax. The Company’s revenues increased by 16 percent on yearly basis in nine months of current FY, on the back of a 14 percent Year on Year (YoY) jump in net retention price, said an analyst. Local cement dispatches of the Company rose 2.8 percent YoY to 2.77 million tonnes while export sales declined by 1.1 percent YoY to 1.66 million tonnes. Hence total dispatches stood at 4.43 million tonnes, up by 1.3 percent YoY. COGS/tonne on the other hand only increased by 3 percent YoY allowing the Company to record a gross margin of 44 percent as against 38 percent recorded in the same period last year. In third quarter alone, the Company posted a Profit after Tax (PAT) of Rs 2.7 billion (EPS:Rs 8.32), translating into a growth of 18 percent Quarter on Quarter (QoQ) and 61 percent YoY. Moreover the Economic Coordination Committee of the Cabinet has approved LUCK’s investment in DR Congro, while the contract for the supply of plant and machinery for the Iraq project has also been signed, added analyst. staff report

Daily Times - Leading News Resource of Pakistan

 

[ejaz007]

IPPs face financial crunch

Circular debt cripples power generation capacity

* Narowal Plant, Hubco unable to generate power due to non-payment of dues

By Razi Syed

KARACHI: The circular debt situation is worsening day by day and crippling the power generation capacity of the country as the independent power producers (IPPs) are operating below their capacity while some of them have even closed down.

Talking to Daily Times on Wednesday, an official of an IPP said, IPPs have requested the Ministries of Water and Power and Petroleum and Natural Resources to help the power plants in their due role of producing maximum possible electricity.

The country is going through the worst load shedding of 12 to 20 hours in different cities of Punjab besides Sindh. The caretaker government should take notice of the issues being faced by the IPPs of the country due to unending circular debt quagmire, he added.

The biggest hurdle in production of electricity from some of the state-of-the-art power plants is the overdue amount, which has exceeded by billions of rupees and amount overdue to oil supplier companies for fuel.

For instance Narowal Plant, which had been partially operational since the first week of January 2013, is now fully shutdown since March 26, 2013 on account of fuel shortage.

If this 225 megawatts (MW) plant runs at its full capacity, it can reduce electricity load shedding in Punjab province for over 45 minutes a day.

Narowal plant has exceeded Rs 19 billion and the amount overdue to oil supplier for the fuel is Rs 3.2 billion. “How can an IPP continue its activity under such conditions,” he maintained.

How can a private sector oil supplier continue to provide oil without getting its billions of rupees dues, asked the official.

Receivable of Narowal Plant is thrice the receivable of other similar IPPs and the official hoped ministers for petroleum and water and power would take notice of this discriminatory practice and would take immediate actions to solve this problem to bring this efficient power plant of 214 MW on line.

At the moment some IPPs who went to Supreme Court last year against non-payment by the government, have been receiving partial payments on orders of Supreme Court and were able to generate fully while other plants were either running at their minimum throughput or are closed due to huge unpaid over dues by the government.

According to a Hubco official, the IPPs demanded equitable treatment for all the IPPs regarding their pending dues.

The official informed the reduced fuel supply has also affected the full operation of Hub plant in Balochistan during the third quarter of fiscal year 2012-13. The fuel supplier has reduced supply below requirements for daily operations and fuel stock is at an alarming level.

Daily Times - Leading News Resource of Pakistan

 

[haviZsultan]

Pakistan's economy is in shambles after 5 years of misrule. #Pakistan had the second highest gdp growth rate in 2005. We miss those days. Power generation and education should be top priorities along with the terrorism situation.

 

[fatman17]

KESC, Engro team up to build 600MW power plant at Thar

09 May, 2013

KARACHI: Karachi Electric Supply Company and Sindh Engro Coal Mining Company (SECMC) inked a memorandum of understanding to construct a power generation project capable of producing 600 megawatts (MW) at Thar coal field.

KARACHI: Karachi Electric Supply Company and Sindh Engro Coal Mining Company (SECMC) inked a memorandum of understanding to construct a power generation project capable of producing 600 megawatts (MW) at Thar coal field.

According to the agreement, SECMC – a joint-venture between Engro Powergen and the Government of Sindh – will develop a 600MW Mine Mouth Power Plant in Thar field's block 2, whereas KESC will purchase power from the plant to meet the rising power demand in Karachi and adjoining areas of Sindh and Balochistan, according to a press statement on Wednesday.

Both the parties believe that the agreement will serve as the base for a mutually beneficial partnership for future progress and development of one of largest coal reserves of Pakistan.

The two companies acknowledged that coal from Thar had the potential to address the country's severe power shortages and bring energy security which is indispensable for economic growth.

The Thar Coal Power Project aims to provide affordable and sustainable electricity to consumers using domestic resources. Reliance on indigenous fuel is likely to save billions of dollars in foreign exchange currently spent on import of the expensive alternative furnace oil, cutting the overall cost of power generation.

Beginning of power generation from coal-based plants at Thar will start a new era that will not only enhance availability of electricity but also make it easier for industrial, agricultural and commercial sectors to boost production. Additionally, availability of Thar coal for coal-fired power generation will help create new jobs and achieve energy security.

The memorandum was signed by KESC CEO Nayyer Hussain and SECMC CEO Shamsuddin A Sheikh.

Speaking on the occasion, Hussain said the MoU was of strategic importance for Pakistan and both the companies. “We are keen to work together to realise the potential of Thar coal reserves which could be the major indigenous fossil fuel resource for Pakistan's present and future energy needs. We are confident that together we WILL do the ground breaking work in coal exploration and coal-fired power generation in the Thar region, paving way for other developers to embark upon major infrastructure development projects.”

After the signing ceremony, Sheikh said, “Thar coal is a project of national security as it will bring much-needed energy security to propel the nation into an era of prosperity and development. SECMC's Thar block 2 alone can produce 5,000MW for the next 50 years, amounting to an estimated foreign exchange savings of $50 billion throughout the life of the project. This project will demonstrate maturity and capability of corporate sector to join hands and synergise on national level.”

End.

 

[2ndslip]

Pakistan's rulers govern for the privileged 1/6th or about 30 million who make up the 'middle class' Pakistanis. That has to change. We need to raise all Pakistanis as high as possible.

 

[ejaz007]

Pakistan’s reserves stand at over $11.86bn


ISLAMABAD: The total liquid foreign reserves held by the country stood at $11,863.1 million on May 3. Giving the break-up of the foreign reserves position a statement of the State Bank of Pakistan (SBP) said foreign reserves held by the it stood at $6,772.4 million while the net foreign reserves held by banks (other than SBP) stood at $ 5,090.7 million. app

Daily Times - Leading News Resource of Pakistan

Tractors production up by 61% in eight months

ISLAMABAD: The production of tractors increased by 60.94 per cent during the first eight months of the current fiscal year over the corresponding period of last year.

As many as 33,193 tractors were manufactured during July-February 2012-13 against 20,624 during July-February 2011-12, according to the data of Pakistan Bureau of Statistics (PBS).

The production however witnessed negative growth of 53.47 percent in February 2013 when compared to February 2012, the data revealed.

Tractor production during February 2013 was recorded at 2,665 units against 5,728 units during February 2012.

The country’s Large Scale Manufacturing (LSM) registered positive growth of 2.93 percent during the first eight months of current fiscal year over the corresponding period of last financial year.

The LSM grew by 3.84 percent during the February 2013 when compared to the same month of last year. app

http://www.dailytimes.com.pk/default.asp?page=2013\05\10\story_10-5-2013_pg5_14