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Budget 2022-23
  • Updated 22 Jun, 2022 12:05am

    Balochistan presents Rs612bn budget with ‘no new taxes’

  • Published 21 Jun, 2022 07:06am

    Balochistan budget to be presented today

  • Published 21 Jun, 2022 06:58am

    RCCI for ending double taxation, removing anomalies

  • Published 21 Jun, 2022 05:51am

    A constrained budget

  • Published 21 Jun, 2022 05:51am

    FBR employees’ strike enters 3rd day

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Balochistan presents Rs612bn budget with ‘no new taxes’

  • Province expects to earn Rs540bn and spend Rs612.79 bn in 2022-23
Published June 21, 2022 Updated June 22, 2022
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The government of Balochistan on Tuesday presented the provincial budget 2022-23 with an outlay of Rs612 billion and announced that no new taxes have been imposed. The theme of the budget is “fostering sustainability and inclusive growth”.

While presenting the budget, Balochistan Finance Minister Sardar Abdul Rehman Khetran said that Rs367 billion have been earmarked for non-development expenditure while Rs191.5 billion have been set aside for development expenditure. The province expects to earn revenue of Rs540 billion in 2022-23 and spend Rs612.79 billion.

The finance minister also announced 15% increase in the salaries of government employees and underlined that the provincial leadership would create 2,851 new jobs for the youth in fiscal year 2022-23.

He highlighted that Rs38 billion have been allocated for health while education expenditure will amount to Rs70 billion in 2022-23.

“The government has set aside Rs44 billion for safety and security and Rs450 million have been allocated for irrigation,” he said. “Out of Rs450 million grant announced for irrigation, Rs3.47 million will be spent on non-development schemes and Rs29 billion will be spent on development initiatives.”

Balochistan govt postpones budget announcement at the last minute

In the agriculture sector, Rs2.9 billion have been set aside to provide interest free loans to farmers for wheat procurement.

According to him, Rs2.5 billion will go towards Balochistan Pension Fund and Rs1.75 billion will be spent on Food Security Revolving Fund. In addition, Rs2.9 billion have been earmarked for provision of food subsidy.

Moreover, the provincial government will spend Rs2.5 billion for land revenue management information system and Rs1.48 billion for Gwadar Safe City Project Phase 1.

Additionally, Rs250 million have been allocated for establishment of Hub Special Economic Zone and Rs500 million for development of Ziarat town.


On Monday, the government of Balochistan postponed the budget 2022-23 announcement to Tuesday June 21 as lawmakers of the province failed to reach a consensus, reported Aaj News.

According to reports, the government was unable to finalise the budget as lawmakers demanded development schemes for their respective areas.

But the CM secretariat said the reason was that Chief Minister Mir Abdul Quddus Biznejo is busy with the Balochistan Awami Party council session.

The Punjab government presented Rs3.226 trillion provincial budget for the fiscal year 2022-23 after much delay at Aiwan-e-Iqbal instead of Punjab Assembly as the treasury and opposition benches failed to reach a consensus on convening a session.

Punjab budget presented in parallel session

Sindh Chief Minister Murad Ali Shah presented Rs1,714-billion budget for fiscal year 2022-23 and announced that no new taxes have been imposed while some previous ones have been rationalised.

Sindh unveils Rs1,714-billion budget with ‘no new taxes’

The Khyber Pakhtunkhwa government presented Rs1,332 billion budget for financial year 2022-23 with allocation of Rs1,108.9 billion for the settled districts and Rs223.1 billion for the newly merged districts comprising areas of the former Federally Administered Tribal Area (FATA).

KP govt presents Rs1,332bn budget


Balochistan budget to be presented today

Published June 21, 2022
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QUETTA: Due to personal engagement of Chief Minister Abdul Quddus Bizenjo, the presentation of Balochistan budget for the fiscal year 2022-23 which was due to be presented on Monday has been deferred. A notification regarding rescheduling of the budget session has been forwarded to the acting governor.

The presentation of provincial budget has been deferred till June 21 due to Chief Minister Bizenjo’s engagement in the council session of Balochistan Awami Party (BAP).

Business & Finance

RCCI for ending double taxation, removing anomalies

Published June 21, 2022
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RAWALPINDI: The business community has demanded that the double taxation and anomalies be removed from the fiscal budget 2022-23. The procedure for fair-value assessment to collect tax on deemed income from an unused property and deemed rental income is not clear.

Litigation between landlord and tenant will increase manifold and caution that since more powers were given to Inland officers, the authority may be misused and likely to increase blackmailing and corrupt practices.

Tax slabs in proportion to the electricity bill are not realistic. Addressing a post-budget session at the Rawalpindi Chamber of Commerce and Industry (RCCI) President Nadeem Rauf said that the government must introduce incentives to broaden the tax net.

The Session was chaired by President Nadeem Rauf while on this occasion group leader Sohail Altaf, vice president Talat Awan, convener of tax affairs committee Faraz Fazal, Shehzad Malik, president of small chamber Sheikh Asif, representatives of Anjuman-e-Tajiran, Sheikh Hafeez, Tariq Jadoon, Tahir Taj Bhatti, Raja Jawad, executive members, and chamber members were also present.

Faraz Fazal, Convener of the Tax Affairs Committee, gave a detailed briefing on the key provisions and changes in the Income Tax and Sales Tax sections of the Fiscal Budget 2022. Group leader and former president Sohail Altaf said that no concessions or incentives have been given to the overseas Pakistanis who send billions of dollars in remittances to Pakistan every month.

At present, the country needs dollars, he added. The fixed tax regime for small traders is a welcome step; however, there is ambiguity in some cases which needs to be removed. The finance minister in his budget speech announced that there will be no audit for the next four years, but it has not been included in the budget document. We demand that the policy regarding tax audit be clarified, he said.

In the post-budget meeting, the 0.25 per cent tax imposed on the IT sector was opposed and it was demanded that the tax exemption for IT be maintained. The establishment of ADRC for resolving tax disputes is welcome but the limit of Rs100 million should be abolished, the moot said.

Copyright Business Recorder, 2022


A constrained budget

Published June 21, 2022
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The federal budget of 2022-23 has been presented in a difficult and uncertain economic and political environment in the country. Foreign exchange reserves are at a very low level of just under $9 billion and fiscal policy must be contractionary to suppress aggregate demand and thereby limit the level of imports. This is reflected in the concerns of the IMF which has insisted that the federal budget be framed in such a way that a primary surplus is generated in 2022-23.

As opposed to this, the coalition government will want to ensure that a budget with high additional taxation and restraints on expenditure, especially in the form of relief at a time of high inflation, does not jeopardize its prospects in the next elections. The fundamental question is how the federal budget reconciles these competing objectives?

The first area of focus is on the targeted reduction in the size of the budget deficit to determine the extent to which it is contractionary in nature. The year 2021-22 is likely to close with a large budget deficit approaching 6.6 percent of the GDP, when the target was lower at 5.4 percent of the GDP. There is likely to be a large primary deficit of almost 1.7 percent of the GDP, as compared to the target of a small primary surplus.

The budget deficit presented to the National Assembly is targeted at 4.9 percent of the GDP for 2022-23. This implies a big reduction of 1.7 percent of the GDP in relation to the likely level in 2021-22.

Success in this big fiscal deficit reduction will lead to a primary surplus of 0.2 percent of the GDP, as asked for by the IMF. This extent of improvement in key public finance magnitudes has seldom been seen before and somewhat stretches the limits of credibility.

The key budgetary magnitudes for 2022-23 are presented in Table 1 and a comparison made with the likely outcome in 2021-22.

                           Table 1
               Key Budgetary Magnitudes - 2022-23
                                                  (% of GDP)
                           2021-22              2022-23
                       (Revised Estimate)   (Budget Estimate)
Revenues                      11.0                       11.5
Tax Revenues                   9.0                        9.0
Non-Tax Revenues               2.0                        2.5
Transfer to Provinces         -5.2                       -5.2
Net Revenue Receipts           5.8                        6.3
Total Expenditure             13.3                       12.2
Current Expenditure           12.5                       11.1
Development Expenditure        0.8                        1.1
Federal Budget Deficit        -7.5                       -5.9
Provincial Cash Surplus        0.9                        1.0
Consolidated Budget Deficit   -6.6                       -4.9
Primary Surplus/Deficit       -1.7                       +0.2
Source: Federal Budget Documents

The strategy for deficit reduction is very clear from Table 1. While there appears to be no significant additional fiscal effort in FBR revenues which are projected to remain at 9 percent of the GDP, the level of non-tax revenues is expected to rise significantly by 0.5 percent of the GDP.

Evidence of proposed economy in current expenditure is clearly visible. It is to be brought down from 12.5 percent of the GDP to 11.1 percent of the GDP. This type of reduction has seldom been achieved before. A modest increase of 0.3 percent of the GDP is proposed in development expenditure in relation to the depressed level in 2021-22 of only 0.8 percent of the GDP.

The bottom line is federal budget deficit reduction of 1.7 percent of the GDP, a one-third due to higher revenue-to-GDP ratio and a two-thirds because of containment of expenditure. There is need to assess the feasibility of these targets. This is attempted below.

The lack of change in the tax-to-GDP ratio even in the presence of a number of taxation proposals is appropriate. The underlying elasticity of the tax system is likely to be hampered by efforts at restricting imports to bring down the current account deficit, which will adversely affect import- based tax revenues.

However, the 49 percent increase in non-tax revenues is bordering on the very ambitious. It is based primarily on a phenomenal increase in revenues from the petroleum levy from Rs 135 billion in 2021-22 to Rs 750 billion. This implies that from the start of the next financial year this levy will have to be brought back at a very high rate of at least 30 Rs per liter. Such a large petrol levy is likely to raise the price of motor spirit and HSD oil close to Rs 300 per liter. This could be politically infeasible as it will contribute to a quantum jump in the rate of inflation and possibly lead to widespread public protests.

The pressure on raising tax revenues and the levy on petroleum products is partly attributable to the likely slump in SBP profits by Rs 174 billion in 2022-23. This is after the shortfall of Rs 178 billion in 2021-22. The question is why has such a low level of SBP profits of Rs 300 billion been targeted for in 2021-22? Is this the consequence of the change in relationship of the central bank with its owner, the federal government, following the granting of virtually total autonomy to it?

Turning to the big economy in current expenditure, the proposed growth rate in 2022-23 is of only 2 percent. This also looks infeasible, especially when there will be pressure on operating costs due to the on-going high and rising rate of inflation.

The big proposal is to reduce subsidies by Rs 815 billion, equivalent to a massive cut of 54 percent. This is predicated largely on a big phasing out of subsidy by Rs 500 billion to WAPDA/PEPCO. Presumably, the big jump in electricity tariff by almost Rs 8 per kwh will contribute to a sizeable reduction in the circular debt. However, if power loadshedding persists due to shortage of fuel, then IPP revenues will be significantly reduced. Therefore, the Rs 500 billion reduction in subsidy may not be fully forthcoming.

There is a proposed jump of 45 percent in the size of the PSDP. However, if the big growth in non-tax revenues or/and the large cut in subsidies is not achieved, then as happened this year there will be a sizeable truncation in PSDP allocations in 2022-23.

Finally, there is the expectation of a large provincial cash surplus of Rs 800 billion in 2022-23. As of the end of May 2022, this surplus is Rs 371 billion and the assumed surplus of Rs 570 billion by the end of 2021-22 is unlikely. This raises doubts also about the very big jump next year.

Overall, the budget of 2022-23 has been formulated in a politically constrained environment while under pressure from the IMF to show a primary surplus next year. A number of problematic targets have been identified above. Given the continuing negative developments in the global economy, especially the big jump in oil and other commodity prices, we hope that the IMF will show some understanding and support Pakistan at a time when the country is in a very fragile economic situation.

Copyright Business Recorder, 2022

Dr Hafiz A Pasha

The writer is Professor Emeritus at BNU and former Federal Minister


FBR employees’ strike enters 3rd day

Published June 21, 2022
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LAHORE: The employees of Federal Board of Revenue (FBR) continued their strike on third consecutive day. The strike began on last Friday after the federal government ignored the proposal of a meaningful increase in the salary of FBR employees in the federal budget 2022-23, besides freezing of the performance allowance, thus setting a discriminatory example.

The FBR employees through their representatives had submitted their demands regarding de-freezing of performance allowance and demanded an executive allowance on the pattern of provincial government and several other federal government departments and threatened to observe pen down strikes. In continuation of their announcement, a strike was observed on Friday which was followed by more aggressive show of strength on Saturday. It continued even on Monday after the weekly day-off.

Tax offices were locked by staff and rallies were held across the country. Young officer of Inland Revenue service also joined the staff members. Sources have confirmed that core group of officers and officials are determined to continue their strike till their demand is met by the government.

It may be noted that the FBR employees have started their strike in the crucial month of June, as any functional logjam at this moment may compromise government’s revenue targets for the ongoing year and beyond. All major formations observed strike while locking their offices taking out rallies in major cities.

The country’s top revenue body was assigned the target of Rs 6,100 billion early this year. Estimates show that the organization is well placed to achieve this gigantic revenue target. This target, if divided over twelve months, becomes Rs500 billion per month.

Meanwhile, sources from the Large Tax Office (LTO) Lahore told this scribe that main tax compliances have already been addressed as the deadline set for depositing of sales tax is 15th of every month and the strike took off from 17th June onwards. Similarly, payments under the income tax have also been materialized and only negotiations against penalties are underway with the taxpayers. The sources said only the small field formations are carrying full-fledged strike against the demands. Otherwise, so far as major field formations are concerned, routine working is being carried out due to the importance of the month of June in terms of tax collection. Accordingly, no major revenue loss is expected due to the ongoing strike, they added.

Copyright Business Recorder, 2022

Business & Finance

Budget 2022-23: Mandviwalla hails govt for not imposing indirect taxes

Published June 21, 2022
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ISLAMABAD: Chairman of the Senate Standing Committee on Finance, Senator Saleem Mandviwalla Monday appreciated that the government has not imposed any indirect taxes on the masses in the federal budget (2022-23).

Talking to the media at the conclusion of the Senate Standing Committee on Finance meeting, Mandviwalla stated that for the first time, the committee has seen a budget without any imposition of indirect taxes. Within direct taxes, taxes have been imposed on banks, companies, and the wealthy.

He said that the relief on taxation for salaried and business individuals by increasing the threshold for taxation. This would increase the take-home salary of the lower-salaried class.

About the taxation on deemed income, he endorsed the tax on deemed income from an unutilized property above Rs25 million including luxury farmhouses and exclusive of one self-occupied house.

The government has taken the right decision to develop the open plots and check the buying and selling of files of such plots. The productive investment should be done in the open plots. There were reservations over the budgetary proposal that many housing societies are not developed or others have not obtained the requisite NOCs from the concerned departments. People have objected that the societies are not developed but the government is imposing multiple taxes on the real estate sector.

The government has committed that the taxation on deemed income would be enforced only in cases where there is possession of plots or other forms of immovable properties. The cases of immovable properties would only be taxable in cases where necessary formalities are completed after taking possession of the property, Mandviwalla added.

Copyright Business Recorder, 2022


Sindh Assembly budget session: Treasury, opposition members speak more about political issues

Published June 21, 2022
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KARACHI: Debate on fiscal budget 2022-23 on Monday resumed, as the treasury and opposition members spoke more on the political issues than the next financial plan during the Sindh Assembly session.

Dua Bhutto, a female legislator of the main opposition party, PTI, accused the ruling PPP lawmakers of “removing” her shawl.

Pointing out at treasury benches, she said that “these unashamed removed my shawl and those do such acts, who don’t have their mothers and sisters”.

The assembly session consumes between Rs4 million to Rs4. 5 million but “people (legislators) use abusive language at each other,” she said adding that the ruling PPP stands no more as a party of former premier late Benazir Bhutto rather it has become a “mafia”.

MQM’s female minority lawmaker, Mangla Sharma asked the Sindh government to establish hostels for working women in big cities like Karachi to house those coming for jobs from small towns.

She also clamoured over “forced” marriages of girls from minorities, saying that “none bothered to heed on what we have been saying on the forced marriages of minority girls but now the issue has spread the other way around”.

She also discussed the cases of Nimra Kazmi and Dua Zehra, saying that they were shown over-aged in reports. She cast doubts over the reports’ authenticity.

Sindh Energy Minister Imtiaz Shaikh said that his party’s government has presented “the best” budget for the next fiscal year keeping in view the country’s economic condition. The budget projects “no new taxes”, he said adding that the people of Sindh appreciate the PPP rule.

He announced that about 1300 megawatts of electricity will start coming into the country’s system from next months. The Sindh government is also setting up a solar park to cope with energy needs in the province, he added.

PTI’s minority legislator, Sanjay Gangwani condemned the Sindh government, saying that his party’s lawmaker named Shabbir Qureshi was arrested by police who was blindfolded strolled for hours.

He also demanded of the government to introduce a law to ban the “forced” religious conversion. He said that the Sindh government failed to implement schemes announced for minorities, saying that the pre-budget session was also skipped.

GDA’s Arif Mustafa Jatoi appreciated the quality of budget books, saying that Sindh government complains every year about funds shortage from the federal government but this year there is increase of Rs40 billion.

He questioned whether the education system of Sindh is competitive to that of the entire country. Only 1200 candidates could pass the exam for teaching jobs, he said that it manifests the poor education quality of the province. He alleged that the PPP government gave jobs against merits.

Mir Tariq Talpur of the PPP claimed that the Sindh government has appointed 4700 new teachers and all of them on “merit”. He demanded of his party’s government to sanction a medical university for Mirpurkhas, besides providing a facility of the natural gas to the area residents.

Copyright Business Recorder, 2022


Economy: the best case scenario

Published June 20, 2022
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The worst case economic scenario has already been shared with the public: be ready for more hikes in electricity and gas rates as well as in the price of petroleum products; and in the event that the international price of fuel declines then be ready for the government to begin to rely on these low hanging fruits as a revenue source – a charge supported by the 750 billion rupees budgeted as petroleum levy for next fiscal year which, the public needs reminding, can, under existing legislation, be upped to as high as 30 rupees per litre.

The best case scenario however has not yet been openly shared though it is doing the rounds in the federal capital. Foreign inflows, at an advanced stage of negotiations, constitute roll-overs by friendly countries (China, Saudi Arabia and the United Arab Emirates) which, incidentally is also a key International Monetary Fund (IMF) condition under the ongoing 6 billion-dollar Extended Fund Facility.

Additional support from friendly countries, read loans at concessional terms as well as deferred payment on oil imports has been agreed - some contingent on the success of the IMF’s seventh review as per reports emanating from the capitals of the friendly countries (subsequent to Prime Minister Shehbaz Sharif’s visit to Saudi Arabia and a stopover in the UAE) and some maybe not subsequent to the Chief of Army Staff’s visit to China with a delegation comprising of all three armed services. Reports in the federal capital also suggest that the government is in negotiations with Qatar for deferment of gas imports payment.

The total amount of rollovers is estimated at around 8 billion dollars while additional support of the same amount has been finalized by the friendly countries at relatively easy monetary terms and conditions, relative to loans procured earlier. However, as none of the friendly countries that are being engaged by the civilian-military leadership are known to be supportive of publicly declaring the amount, timing or indeed the terms of their assistance hence the official silence that accounts for the sustained erosion in the rupee value and the dwindling foreign exchange reserves to 8.9 billion dollars.

Two observations on the state of the economy today are in order. First, in 2018 the current account deficit was 20 billion dollars, a historic high, however the prices of Pakistan’s major import item, petroleum and products, was much lower than at present.

The price of Brent crude was 71.34 dollars in 2018, dropped to 64.3 dollars in 2019, 41.96 dollars per barrel in 2020, and rose to 71.68 dollars in 2021. In February 2022 the price of Brent rose to 97.13 dollars per barrel which prompted Prime Minister Imran Khan to announce a 10-rupee per litre reduction with the reduced rate to be applicable till end June 2022 (an untargeted and unfunded subsidy). In March the Brent price per barrel rose to 117.25 dollars, declined in April to 104.55 dollars, rose again in May to 113.34 dollars and in June has risen to a 126.7 dollars per barrel.

So what are the options for the government today – options that would have to be faced by any administration, be it civilian, military, Imran Khan’s, or Shehbaz Sharif’s. There is no fiscal space to extend any subsidies, targeted or otherwise, with the projected budget deficit for the outgoing year at an unsustainable negative 7.1 percent. In addition, the budgeted expenditure and domestic resources for next year necessitate, as per finance minister Miftah Ismail, borrowing of between 36 to 37 billion dollars next year – a target that entails the success of the seventh IMF review as it would enable the government to borrow from other multilaterals/bilaterals and equity debt market at reduced (affordable) interest rates.

The austerity measures much touted by the eleven-party coalition government are at par with reducing current expenditure by the Khan administration (sale of water buffaloes/old cars and no tea/biscuits on offer by ministries to guests) given that during the Khan’s tenure current expenditure nonetheless rose from 4.3 trillion rupees in 2017-18 to 7.5 trillion rupees in 2021-22 while next fiscal year it has been further raised to a whopping 8.6 trillion rupees.

Second, the need to protect the poor and vulnerable from the global rise in oil prices with a consequent impact on the general price level has been acknowledged by most governments. Britain’s Conservative government has imposed a 25 percent windfall tax on profits of oil and gas firms – profits that Chancellor Rishi Sunak said are not because of changes to risk taking, innovation or efficiency – money that would help support the 19 billion dollars’ assistance envisaged to low income households with at least 1500 dollars support to almost 8 million Britain’s most vulnerable households.

Pakistan’s oil and gas companies, largely state owned, are facing a circular debt of over 2.6 trillion rupees and are in no position to be taxed. And instead the budget for next year envisages a fixed tax for retailers as final tax liability on income and sales tax, fully supported by the retailers but which then puts the onus on those who already pay income tax, while the tax on deemed income, poverty alleviation tax on income above 300 million rupees and capital value tax on foreign property owned by resident Pakistanis (projected to net around 75 billion rupees) are expected to be successfully challenged in the courts as in the past. The government has raised tax on banks — from 39 percent to 45 percent — however this raise may have cost implications on government and private sector borrowing.

The budget for next year however has raised Benazir Income Support Programme (BISP) allocation from 260 billion rupees in the outgoing year to 360 billion rupees next year – a 39 percent raise and envisages extending subsidies for wheat, sugar and cooking oil. So the question as to where the money is to come from can be simply answered: the government envisages over 3.2 trillion rupees in domestic borrowing (an amount at par with the annual borrowing of the previous administration — an inflationary policy) and borrow a whopping 36 to 37 billion dollars from external sources, already stated by Miftah Ismail, with only around 16 billion dollars expected from friendly countries on easy terms while the rest would be borrowed at high rates of return from commercial banks abroad, issuance of sukuk/Eurobonds etc.

The US Central Bank raised its interest rate from 1.5 to 1.75 percent, the biggest rate rise in 30 years to fight soaring prices, a decision that would fuel its imports. The question is whether Pakistani exports would benefit from the US rate rise? Pakistanis are currently struggling to cope with: (i) a 13.75 percent discount rate, expected to be further raised in the next Monetary Policy Committee meeting scheduled by for 7 July, that in turn would further raise the cost of capital to a prohibitive level dampening all economic activity with a rise in unemployment.

The rate is, on average, double that of our regional competitors’ and is designed to contain imports to reduce the burgeoning trade deficit; and (ii) the fast eroding rupee (due to dwindling foreign exchange reserves, at present no more than 1.5 months of imports) and the continuous rise in domestic inputs including electricity and transport costs. However, the projected assistance inflows, if and when realized would strengthen the rupee, as happened subsequent to the 11 to 12 billion dollars’ aid inflows from friendly countries in 2018, and with it imports including petroleum and products would become cheaper in rupee terms.

To conclude, the budget as presented in parliament on 10 June is unlikely to retain even a vague semblance of its original form and one would hope that current expenditure is slashed rather than, as has been the usual practice in the past, slashing development expenditure (which in any case appears to be overstated by 250 to 300 billion rupees), and the politically motivated revenue measures that are unlikely to be implemented with court stay orders and/or IMF opposition are abandoned in favour of structural changes that would render the tax structure fair and equitable (including needed structural changes to the appallingly run energy sector).

Copyright Business Recorder, 2022


Blaming IMF is easy

Published June 20, 2022
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EDITORIAL: Fuel prices have been raised for the third time, effective 16 June, in exactly three weeks — this time by 24.03 per litre petrol and 59.17 per litre high speed diesel (HSD); on 27 May and then again on 3 June petrol and HSD prices were raised by 30 rupees per litre each time.

Few economists would challenge the need to raise the prices of petroleum and products, given the significant rise in the international prices of oil: Brent (crude) was traded at 87.77 dollars per barrel in January 2022 against 74.10 dollars in December 2021.

By February 2022 prices had jumped to 97.13 dollars per barrel which prompted the then Prime Minister, Imran Khan, to announce a 10-rupee per litre reduction with the reduced rate to be applicable till end June 2022 — a populist measure designed because of the threat of a no-confidence motion facing his government, in utter disregard of the consequence of this decision on the country’s finances by the substantial rise in “unfunded” economically unfeasible subsidies.

By March Brent was being sold at 117.25 dollars per barrel, with a decline in its price in April to 104.55 dollars; however, prices rose again in May to 113.34 dollars and this month prices have risen to as high as 126.7 dollars per barrel. The difference between the subsidies projected in the relief package announced by Imran Khan were, therefore, grossly understated in subsequent months and ignored was the fact that Pakistan’s economy did not have the fiscal space to fund these subsidies — a situation exacerbated by 610 billion rupees budgeted for petroleum levy in 2021-22, an amount which was not realised.

The rupee’s erosion is ongoing at a brisk pace, with reserves dwindling to 8.9 billion dollars. This accounts for the rising rupee cost of imported petroleum and products and consequently contributes to the rise in the cost per litre for domestic consumers. Within a macroeconomic context, it needs reminding that each rupee loss vis-a-vis a dollar adds a 100 billion rupees to the budgeted markup payments and given that the budget 2022-23 took 183 as the rupee-dollar parity, which is over 20 rupees lower than the current interbank rate, the budget itself is out of synch even before it has been approved by parliament.

Three observations are in order. First, the Shehbaz Sharif-led government took oath on 19 April and instead of spacing out the fuel price rise over 9 weeks there was an inexplicable delay leading to, unadvisedly, concentrating the rise to just three weeks that accounts for severe public discontent with obvious political ramifications. Second, the Khan administration was dismissed in the early hours of 10 April (soon after midnight) and hence the “unfunded” subsidies effective 1 March 2022 should have been effective latest till 19 April when the cabinet was sworn in; however, the subsidies were allowed to continue and the budget for 2022-23 indicates that petroleum price differential cost the exchequer a whopping 250 billion rupees.

And third, and even more disturbingly, the budget 2022-23 envisages 750 billion rupees from petroleum levy — a target that presupposes a rise in consumption in spite of a massive rise in prices, and a decline in the international prices of oil to a level that would enable the government to not only begin levying the petroleum levy again (which would raise input costs making our products uncompetitive internationally) but to reach the maximum allowed limit of 30 rupees per litre. These are serious flaws in the incumbent government handling of a crisis situation that it simply cannot lay at the doorstep of the Khan administration or to the deal made with the International Monetary Fund (IMF).

Sadly, it is fairly evident that the government’s justification and the Pakistan Tehreek-e-Insaf (PTI) government’s indictment for raising rates is only partly economic but mainly political point-scoring.

In a recent statement, Prime Minister Shehbaz Sharif argued that the rise in fuel prices is due to the IMF deal; however, he and his team members need to acknowledge that the Fund’s advice is sound as, leave alone not having the fiscal space to fund subsidies, this government has presented a budget that is dependent on foreign borrowing to the tune of 36 to 37 billion dollars with 21 billion dollars earmarked for interest/repayment of past loans as and when due, 4 to 5 billion dollars to strengthen the foreign exchange reserves, and the rest for budget support.

Clearly, more austerity measures were required and higher revenue targeted by the Federal Board of Revenue (FBR) than was envisaged in the budget. This scapegoating of the IMF for our economic ills must stop because it is the proclivity of successive governments to continue to spend beyond their means is in fact the root cause of our present predicament and the dire straits that our economy is in.

Copyright Business Recorder, 2022


Balochistan budget to be presented today

Published June 20, 2022
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QUETTA: The Balochistan government would unveil its balanced, relief-oriented and pro-people budget for the upcoming fiscal year, with a total outlay of more than Rs 620 billion.

The Balochistan government, led by Balochistan Awami Party (BAP), will present its budget for the fiscal year 2022-23 in the Provincial Assembly on June 20.

Provincial Finance Minister Sardar Abdul Rehman Khetran would present the budget for the year 2022-23 in the Balochistan Assembly.

The government is expected to announce over Rs 250 billion development budget under Public Sector Development Programme and the outlay of non-developmental funds for the next fiscal year 2022-23 is likely to be more than Rs 350 billion.

According to finance department sources, more than 5,000 new posts would be created in the new budget.

QCCI describes budget as ‘tough’: More allocations for highways expansion, scholarships demanded

A major chunk of budget would allocated for health, education, agriculture, food, rural development, communication, law and order, irrigation and drinking water and other sectors which will change the destiny of the people of Balochistan.

More money would be allocated for clean water schemes. Education, health, law and order are among the priorities of the government.


KP approves budget for 22 public sector universities

Published June 20, 2022
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PESHAWAR: Annual budget for 22 public sector universities, out of 32 universities of Khyber Pakhtunkhwa has been approved for the fiscal year 2022-23 while the budget of the remaining 10 universities would also be approved by the end of the current month.

The budget has been approved in the meeting held in the Governor House, chaired by acting Governor Mushtaq Ahmad Ghani and Provincial Minister for Higher Education Kamran Bangash.

It is pertinent to mention here that due to various reasons, the budget of most public sector universities could not be approved before the beginning of next fiscal year due to which the universities had to face severe financial crisis and financial disorder.

In this regard, former Governor Khyber Pakhtunkhwa Shah Farman, on the advice of his team, for the first time in June 2021 approved the budget for the fiscal year 2021-22 for all public sector universities to end this false tradition and eliminate financial disorder. Following the same procedure this year, acting Governor Mushtaq Ahmad Ghani, issued special instructions to all public sector universities to prepare budgets and present them in their respective Senate which would be implemented.

Like last year, this year too, all the universities are being given the best guidance and instructions regarding the budget, due to which the financial discipline of the universities has improved considerably, as evidenced by the fact that most of the universities are approving the budget surplus till now.

In light of the guidelines issued this year, most of the universities have also set up various funds to avoid financial deficit and unfavorable conditions which have proved to be useful for financially stabilizing the universities.

Copyright Business Recorder, 2022

Business & Finance

New employees: KP govt develops framework for rolling out CPF

Published June 20, 2022
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PESHAWAR: The government of Khyber Pakhtunkhwa in collaboration with Securities & Exchange Commission of Pakistan (SECP) has developed a framework for rolling out of a contributory provident fund for all new employees, said the White Paper of the provincial government on budget 2022-23.

The initiative is being considered a major step towards the sustainability of pensioner benefits and transition towards a contributory provident fund for new recruits. Under the scheme, participants will contribute 10% of basic pay towards their provident fund for the duration of their qualifying service. This will be matched 150% by the employer-in this case, the government- resulting in a total contribution of 25% in basic pay.

This is a critical step in managing the pension liability, which has ballooned to 15% of the annual budget based on actual expenditure. Unfunded pension systems are relics of the past and can no longer be sustained-one does not need to look far for examples, as the financial security of retired Pakistan Railways employees has been robbed due to the unfunded nature of its pension scheme.

The contributory pension model being introduced will have all the features prevalent in international pension systems in developed countries, as well as being tailored to local norms and requirements. Shariah compliant fund options will be made available to all recruits alongside the conventional fund option. The participants will have the flexibility of adapting the fund investment allocations based on their individual risk profile, similar to the prevailing pension models worldwide. Upon retirement, participants will be made able to choose between receiving the entire benefit as a lump sum payment or allocating some or all of the retirement benefit in a long-term annuity ranging in duration from 20 years to the reaming life of retiree.

The pension bill for FY 2022-23 of the KP government is estimated to be Rs.107 billion, including Rs.1 billion for the newly merged areas (NMAs), with the number of pensioners increasing to around 177,693. Overall, Khyber Pakhtunkhwa has a 4:1 proportion between current employees and retirees. This wage bill is projected to grow at 16.6 % in actual terms in 2020-21, while forecast growth rate for 2022-23 is 24.6%.

With this trend continuing, salaries and pensions will surpass all provincial receipts in 2027. Pension is one of the major expenditures for the provincial government, making up around a quarter of the wage bill. The significant rate of the increase comes at the cost of squeezing the development budget, and critical non-salary and service delivery expenditure. This includes initiatives such as the flagship Sehat Insaf Card Programme, infrastructure expansion, civil work, maintenance and repair of schools, sports and health facilities, provision of medicines, and social welfare projects.

To mitigate the increasing pension burden, a comprehensive pension reforms strategy has been approved by Cabinet and series of corresponding changes have been passed in existing legislation by the provincial assembly. Through these effects, the provincial government has executed short and long term measures like increase of minimum voluntary retirement age to 55 years, which has resulted in estimated annual savings of Rs.12 billion.

The provincial assembly has also approved the KP Civil Servants Pension Rules 2021 to rationalize pension beneficiaries to direct dependents and parents, while also limiting each beneficiary to obtaining only a single pension, whether self or family person. In addition, active employees will no longer be eligible to draw family pension. All these amendments have removed multiple pensioners and therefore reduced the province’s pension burden. These changes in the family pension rules and restrictions on the dual pensioners will save the government an estimated Rs.12 billion in the coming 10 years, as well as streamline the beneficiary’s hierarchy and pensioner’s v/s inflow ratio.

Copyright Business Recorder, 2022

Business & Finance

Registration as Tier-1 Retailers: Furniture industry seeks help of LCCI

Published June 19, 2022
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LAHORE: The furniture industry has sought help of the Lahore Chamber of Commerce & Industry (LCCI) to get the issue of wrong treatment of furniture small shops as Tier-1 Retailers resolved.

During a meeting with the LCCI Vice President Haris Ateeq at LCCI, a delegation of furniture industry, led by the President of Pakistan Furniture Association Punjab Chapter Jafar Hussain said that furniture industry comprises workshops which employ artisans and annual labour except few entities which import and resell modular furniture to retailers on a large scale.

The delegation said the tax authorities and field officers are therefore issuing notices to Small Furniture shops/showrooms to register as Tier-1 Retailer which is unjust and not practicable for this industry.

LCCI Vice President Haris Ateeq urged the government to resolve the reservations of the furniture industry at the earliest as this sector is not only a major source of the income for the government but is also providing employment to a large number of people. He said that the Lahore Chamber of Commerce & Industry will take up this issue in the upcoming meeting of the Anomaly Committee for the Federal Budget 2022-23.

The delegation members said that furniture small retailers do not fall in definition of sub-section 43 A of section 2 of Sales Tax Act, 1990. They said that Furniture small retailers purchases furniture from unregistered manufacturers of cottage industry (5AB) so input invoices cannot be provided.

They said that those retailers who occupied even one sq feet less area than 2000 sq feet are exempted which constituted anomaly. Furniture does not fall in the category of Fast Moving Consumer Goods (FMCG).

They said that the furniture shops are meant for display of the bulky pieces of furniture and get order from the consumer rather than for retail sale. Furniture Shops/Show rooms require area more than 2000 Square feet hence an anomaly is there that the furniture shops/show rooms are considered retailers center are required to be registered as Tier-1 Retailer vide sales Tax Act, 1990 ibid and wrongly classifies as Tier-1 Retailer.

The delegation members said that the furniture shops/showrooms which are not part of national or international chain of stores nor or they located in air conditioned malls as such they should be excluded from the category of sub-section of 43-A of section 2 of Sales Tax Act, 1990.

They said that all small furniture shops/show rooms may be declared as cottage industry (5AB). They said that the condition of covered area should be removed and small furniture retailers should be brought in the category of fixed tax as proposed in the budget whereby fixed tax shall be charged.

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PDP leader assails Sindh govt for ‘neglecting Karachi in budget’

Published June 19, 2022
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KARACHI: Chief organiser of the Karachi chapter of Pasban Democratic Party (PDP) Tariq Chandiwala has said that the Sindh budget is nothing but a jugglery of figures.

He said Karachi has been neglected badly in the budget of the province. The pace of work on the lone mega-project underway in the city, K-4, is very slow. He asked why last year Rs 73 billion was not spent on uplift projects.

Expressing dismay over the cold shoulder given yet again to Karachi, Mr Chandiwala said the mega-city that provides huge revenue to the national kitty itself is facing huge problems. Although the city plays the role of a backbone of the national economy, it is being treated unfairly.

He was of the opinion that heaps of garbage, overflowing gutters, broken roads, poor healthcare facilities, shortage of electricity, water and gas and numerous other problems in the city are a slap across the face of the government and the administration.

Infrastructure of the country’s commercial and economic hub is in a shambles and its basic civic issues stand unresolved, which puts a big question mark over the performance of the provincial and local governments, he said.

Mr Chandiwala regretted that the federal, provincial and local governments are not ready to take responsibility of the mega-city. He said the main hindrance in this regard is the PPP leadership which controls the resources of Sindh, including Karachi.

The PDP leader said the mega-city is neglected in every budget. The administrative and financial control of KMC, KWSB, KDA and Solid Waste Management Board is in the hands of Sindh government.

The politicians controlling the provincial and local governments instead of resolving issues of public are busy in power struggle. There is no system in place to resolve the problems of the mega-city.

Karachiites are always fooled in the name of local government system. If funds are allocated for progress and prosperity of other parts of the country from the revenue generated by Karachi why these same funds are not allocated for the mega-city as well.

He said allocation of only Rs 23 billion for healthcare is utterly sufficient. He was of the view that setting aside Rs 34 billion for education is unnecessary as parents don’t send their children to government schools. This budget is simply embezzled. He said giving subsidy to poor farmers is welcome but asked why tax has not been levied on feudal lords.

Copyright Business Recorder, 2022

Business & Finance

FY22-23: Punjab debt service estimates amount to Rs82.4bn

  • Proportion of fixed-rate debt, ATR, and share of debt stock remain the key indicators
Published June 19, 2022
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LAHORE: With interest payment of Rs 18 billion and principal repayment of Rs 64.4 billion, Punjab debt service estimates for FY 2022-23 is Rs 82.4 billion. As per the budget document made available to the Business Recorder, Punjab’s ratio of debt service to average revenue is 4.6% for FY 2022-23 which is not high and indicates low risk. A number of indicators are used to monitor and control risks associated with the government’s debt risk indicators and act as a guideline to devise future borrowing strategies.

Highlighting risk indicators, financial experts told this scribe that refinancing/ rollover risk refers to the risk of being either unable to raise new debt to repay the portion of existing debt that is maturing or to raise such debt at a much higher cost. Debt maturing in a year, and average time to maturity (ATM) are two indicators used to measure this risk. ATM means the average time-to-retirement of the entire debt stock, they said.

They added that the interest rate risk refers to the exposure of the debt portfolio to changes in the interest rate. The proportion of fixed-rate debt, ATR, and share of debt stock exposed to interest rate re-fixing in one year are the key indicators. Fixed-rate debt is considered less risky as it is not exposed to interest rate fluctuations during its life.

On the other hand, external debt outstanding on 30 June 2022, has an average borrowing cost of 1.57% and average maturity of 8.4 years. External debt of the government is denominated mainly in US dollar (72%), followed by special drawing rights (18%), Japanese Yen (6%), and other currencies (4%).

External debt of the government comprises mainly concessional, long-term, foreign currency-denominated loans obtained from multilateral creditors such as World Bank and Asian Development Bank. These loans are borrowed by the federal government and on-lent to the Punjab government.

Copyright Business Recorder, 2022


Teaching hospitals: Miftah urged to rectify ‘anomaly’ in finance bill

Published June 18, 2022
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ISLAMABAD: Hospitals have approached Finance Minister Miftah Ismail to rectify a major ‘anomaly’ in the Finance Bill 2022 by restoring the sales tax exemption to the hospitals in its original form by including “teaching hospital” within the scope of the exemption.

According to a joint representation of the hospitals to the finance minister, hospitals are grateful for the restoration of the sales tax exemption, which was deleted vide the Finance (Supplementary) Act, 2022 dated January 15, 2022.

In this connection, hospitals would like to highlight that the sales tax exemption to hospitals, which has been proposed through the Finance Bill, 2022, is slightly different from the exemption, which was available during the last tenure of your government. In order to highlight the difference, we would like to reproduce below the exemption clause, which is proposed to be inserted in 6th Schedule vide the Finance Bill, 2022: Goods excluding electricity and natural gas supplied to hospitals run by the federal or provincial governments or charitable operating hospitals of 50 beds or more or the ‘teaching hospitals’ of statutory universities of 200 or more beds.

The hospitals understand the omission of the words ‘teaching hospital’ of statutory universities of two hundred or more beds, while restoring the exemption is an anomaly.

Govt earmarks Rs12.651bn for health

The government may appreciate teaching hospital are the main pillar of generating future resource and generations of healthcare professionals to assure the country’s health and well-being for years to come. It also plays pivotal role in developing new and better ways to care for patients through outcomes-based research and the development of new technologies.

In view of the above, it is requested to kindly restore erstwhile exemption to the hospitals in its original form by including “Teaching Hospital” within the scope of exemption as available prior to Jan 15th 2022 and to also omit the words “excluding electricity and natural gas in order to restore the position as prevailed prior to July 2019, they added.

Copyright Business Recorder, 2022


Cellular mobile operators for reducing customs duty on fibre-optic cable, taxes

  • Say situation would result in the closure of mobile phone service for hours and ATM services might also face disruption
Published June 18, 2022
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ISLAMABAD: There might be hours long connectivity issues in the country next fiscal year subsequent to the shutdown of mobile phones if the government did not reduce customs duty on the fibre-optic cable and other taxes.

This was forewarned by the mobile operators to the government here on Friday during a meeting of the Senate Standing Committee on Finance which was chaired by Saleem Mandviwala to discuss the finance bill.

The mobile operators said that they would convey this scenario to the government as duty and taxes proposed in the budget for the next fiscal year on fibre-optic cable would result in connectivity issue, if these were not reduced.

They apprehended that that situation would result in the closure of mobile phone service for hours and ATM services might also face disruption as fibre-optic cables are critical for ensuring connectivity, stated the representatives of three major telecos including Jazz, Telenor, and Ufone while briefing the Senate Standing Committee on Finance here on Friday afternoon.

They stated that the customs duty on fibre-optic increased from 10 to 20 percent. There is additional customs duty of six percent and a regulatory duty of 10 percent. They demanded to reverse it at the rate of 10 percent.

Minister of State for Finance, Aisha Ghaus Pasha, and the FBR Chairman, Asim Ahmad, told the committee that the National Tariff Commission (NTC) increased the duty on the import of fibre-optic in order to promote local industry. The industry representatives also asked the government to reduce advance tax on the prepaid card from 15 to 10 percent.

ICTs in the budget

The FBR high-ups informed the Senate panel that a new section has been added in the Income Tax Ordinance to provide data sharing mechanism with the NADRA to expand the tax net. Irregularities in the procedure for issuance of the audit report by the Commissioner have also been rectified.

The penalty for non-submission of income statement within the due date has been made more comprehensive.

The process of linking all major retailers with FBR’s POS system has been started. Penalties for sales tax evasion by not using the POS system and shutting down the system have also been imposed.

The FBR chairman said that at present the number of first-tier retailers in the country is around 30,000.

We strive to integrate them all into the FBR’s POS system as soon as possible. The Committee members opposed the imposition of withholding tax on overseas payments by credit/debit or prepaid cards and recommended amendments to the relevant section.

Secretary Railways, appearing before the Committee, recommended that the Railways be included in Schedule 5 for the import of locomotives, passenger cabins and spare parts on the analogy of the Aviation department. The committee members unanimously directed the officials of the ministry to sit down with the railways and resolve the issue.

The representatives of the Pharmaceutical Association apprised the committee of the difficulties faced by the sector.

They said that a tax has been imposed on the import of raw materials used in medicine which will lead to the decline of the industry. Minister of State for Finance Dr Pasha assured the officials of the association that their problems would be considered and resolved as soon as possible.

The representatives of the beverage industry argued that there should be no discriminatory taxation on any sector and stated that there were many items where more sugar was mixed to make their products.

Copyright Business Recorder, 2022


Budget debate: GDA lambastes govt over fuel price surge

Published June 18, 2022
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ISLAMABAD: A dissident of Pakistan Tehreek-e-Insaf (PTI) Noor Alam Khan on Friday demanded the government to present the “unfair deal” signed with the International Monetary Fund (IMF) – either by the previous PTI or the incumbent coalition governments – before the parliament.

Speaking on a point of order in the National Assembly, he said that the agreement signed with the IMF, which triggered hyperinflation in the country, must be tabled in the parliament so that the people would know who is the culprit.

He was of the view that the present wave of inflation had affected the life of the masses due to the unrealistic deal signed by either the PTI or the incumbent regime.

The Grand Democratic Alliance (GDA) – the lone opposition party in the National Assembly – lambasted the government for the unprecedented fuel price surge, and said the regime which came into power with a pledge to give relief to the masses, is bent upon snatching the bread and butter from the people.

Saira Bano of the GDA said that the never-ending fuel price hike by the experienced lot of the rulers had badly affected the life of the common man, particularly, the underprivileged segments of society.

Referring to protests by auto-rickshaw drivers in Nawabshah, she said that they burnt down their auto-rickshaws in protest against the continued POL price hike, adding these rickshaws were their sole source of income.

However, while participating in the budget debate, the MPs from the treasury had nothing except heaping praise on the government, and expressed confidence that the coalition government would soon be able to improve the fragile economy soon.

Shahnaz Saleem Malik of the Pakistan Muslim League-Nawaz (PML-N) termed the next fiscal plan balanced and people-friendly, saying the coalition government would steer the country out of the economic crisis.

She said that the previous government of the Pakistan Tehreek-e-Insaf (PTI) was responsible for the sky-rocketing inflation due to its wrong economic policies and agreements signed with the IMF.

She said that the coalition government had taken sufficient measures by providing relief and incentives to the farming community to promote the agriculture sector, which was considered the backbone of the national economy.

She appreciated the government for increasing the pay and pension of the government and retired employees as it would help lessen their financial problems to a great extent.

Chaudhry Ashraf of the PML-N said that although the country was passing through a critical time, but pinned high hopes on the government that it would effectively tackle all the confronted challenges with collective wisdom.

He asked for paying special attention to the development of the agriculture sector on a strong footing and introducing innovative ways of cultivation, besides reducing the input cost and ensuring the appropriate rate of agri-produces to growers.

He called for providing special incentives to growers for the installation of renewable energy generation plants for tube-wells and hybrid tractors to bring down the cost of inputs making agricultural produces more competitive.

He highlighted the importance of establishing industrial units for manufacturing hybrid batteries used in tractors and the installation of solar panels that would help reduce the cost of inputs and save energy.

Copyright Business Recorder, 2022


Leghari says Punjab Budget aimed at to give relief to poor

Published June 18, 2022
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LAHORE: Punjab Finance Minister Sardar Awais Leghari has said that during the preparation of the Punjab Budget 2022-23, the overall strategy was to give relief to the poor people, invest in the annual development program and ensure economic growth in the province.

He expressed these views while addressing a post-budget press conference here on Friday; he was flanked by Punjab Law Minister Malik Ahmed Khan and senior officials.

While highlighting the salient features of the Punjab Budget, Leghari said this government made a record allocation of Rs 685 billion for the Annual Development Program; “in addition to that a big relief based on subsidies was provided to the poor people who were burdened with high prices of essential commodities. The biggest relief will be given on atta (flour), which was available at a subsidised rate,” he added.

“The Chief Minister’s Rs 200 billion facility package under which a bag of flour sold to the people for Rs 650 was available for Rs 490. In addition, the Rs 142 billion concessional package, which will ensure the provision of food items to the poor and needy people at affordable rates was the result of individual efforts of the government,” he added.

“The government also focused on the development of infrastructure in Punjab; a huge investment was proposed on roads and transport. In the budget, visible allocations were made on the social sectors and the health sector will receive the biggest allocation,” he said.

According to him, the government intends to provide free medicine in government hospitals and improve its service delivery. A huge amount of money was allocated for the Universal Insurance Card, which was PML-N’s project launched during its previous government before the Pakistan Tehreek-e-Insaf government hijacked it in the form of the Insaf Card.

He pointed out that the wealthy segment of the society has no right to the facility of the health card since they can afford the healthcare from their pocket. “Hence, the government has decided to exclude this class from this scheme and subsequently the money that would be saved will be spent on the working and middle class. In this connection, a revised plan will be unveiled next week,” he added.

He observed that the development of provincial human resources was imperative and it linked with Punjab’s economic future, and hence the government had decided to invest in this vital sector.

While highlighting the importance of women’s rights, he said that the government has increased development expenditure by 40 percent for women empowerment whereas significant money was allocated for jail reforms to improve the conditions of inmates.

The finance minister said that they were revamping the solid waste management in the province, which was ruined by the previous government. “At present, there is no proper system for the disposal of waste. We will introduce a self-sustainable system that will keep Punjab clean permanently for which they have made a significant allocation,” he added.

“The Punjab government is introducing an integrated solid waste management system to provide a cleaner environment in the province, under which the services of private companies will be sought for cleaning the entire Punjab from villages to cities. The cost of which will be met by the local governments,” he added.

According to him, one of the major challenges facing the country at present is food shortage. To meet this challenge, the government was ensuring an increase in agricultural production. Farmers will be provided facilities according to the capacity of their land to ensure the cultivation of profitable crops. Innovative schemes for providing an adequate amount of water to crops were being introduced along with research in the field of irrigation related to agriculture.

He told the media that the government was committed to increasing the salaries and pensions of government employees by 15 percent from July 1; this will safeguard the middle class against inflationary conditions.

“On the technology side, the government plans to invest in artificial intelligence to exploit its potential; the youth will be trained with this latest technology, which will enable them to earn a livelihood while the government will benefit from remittance,” he added.

To a question, Leghari said that they will make up most efforts to get Punjab’s share of the Net Hydel Profit; “if the Khyber Pakhtunkhwa can get their share then why not Punjab. We are not responsible for the previous government if they compromised Punjab’s share,” he added.

On the occasion, Punjab Law Minister Malik Ahmed Khan said that three years of the previous government has ruined Punjab; “no one has paid attention to cleanliness or repair of inter-district roads. It was the worst form of governance that the province ever saw,” he added.

Copyright Business Recorder, 2022


Development projects: Sindh govt criticised for ignoring Hyderabad

Published June 18, 2022
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KARACHI: The Sindh Assembly on Friday began its post-budget 2022-23 debate, as treasury members lauded their government for placing no new taxes for the next fiscal year, but opposition criticised the financial plan. Syeda Marvi Rashdi, a ruling PPP’s female legislator, condemned the India’s BJP member for sacrilege against Holy Prophet (PBUH) in her speech.

Of budget, she lauded Chief Minister Sindh, Syed Murad Ali Shah for proposing no-new taxes during next financial year. She said that it is the second consecutive year that budget was presented without new taxes. She said that the budget allocates a separate pro-poor relief package of Rs26.850 billion. “This package will help the poor,” she said adding amid soaring inflation resulting from the PTI government’s deal with the IMF.

MQM’s Nasir Hussain Qureshi criticised the Sindh government for ignoring Hyderabad development and healthcare sector in budgets every year. “It seems Hyderabad is located in Japan and not on Pakistan’s map,” he said.

At Faizabad Hospital, he said, there is not a single ambulance. The Sindh government cannot see this hospital’s problems, as it lacks doctors, cardio ward, medicines etc., he said during budget speech.

“I have been raising the issue with Sindh Health Minister but it remained unnoticed,” he said.

Dr Sohrab Khan Sarki of the PPP called the fiscal budget “balanced” under the circumstances. He claimed that the healthcare facilities, which his province provides to patients, no other province offers. Waseem Qureshi of the MQM called the fiscal budget a “brainchild” of the Sindh’s bureaucracy. He said that the legislators were not given an opportunity to have a pre-budget debate in the house.

“Sindh needs more corruption free budget than tax free one,” he said and clamoured for water scarcity in Karachi.

PTI’s Bilal Ghaffar said that the budget is mere a “copy paste” exercise, which was well designed. He questioned whether the budget will benefit the poor.

He said that literacy rate in Khyber Pakhtunkhwa province is growing but what holds back Sindh to make a headway in this sector.

“We reject the imported government’s budget,” he said and added that the Sindh government has failed to meet its revenue and taxation targets.

PTI’s Adeel Ahmed demanded for membership suspension of PPP’s Munwar Wassan, Kulsoom Chandio and Riaz Sherazi from the house for misbehaving with his party’s female legislator, Dua Bhutto. He condemned the incident.

He said that the coalition federal government has increased petrol price by Rs84 per litre, triggering inflation to hit the poor. He said that the Sindh budget is not different from the federal one.

MQM’s Rashid Khilji said that the NICVD of Hyderabad lacks primary facilities for the patients. The city hospitals also has no facilities to carry out heart surgery. The fire brigade department has rundown extinguishers.

The house stands adjourned till Monday morning at 11am.

Copyright Business Recorder, 2022


PYMA draws FM’s attention to budget anomalies

Published June 18, 2022
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KARACHI: Saqib Naseem, Chairman Pakistan Yarn Merchants Association (PYMA), and Muhammad Junaid Teli, Vice Chairman, Sindh & Balochistan region, have drawn attention of Minister for Finance & Revenue, Miftah Ismail over anomalies in federal budget 2022-23.

They elaborated that polyester filament yarn (HS Code 5402.3300, 5402.4600, 5402.4700 and 5402.5200), also known as man-made yarn, is the basic raw material for Pakistan’s textile industry. The share of cotton in global fiber consumption has fallen from nearly 70 percent back in 1960, to only 27 percent by end-2020. Its place has now been captured by synthetic or man-made yarns.

“A very large SME sector of Pakistan’s textile industry (more than 500,000 looms and knitting machines) consumes polyester filament yarn. The commercial importers of polyester filament yarn act as financiers to this SME sector and entertain the requirements of this SME sector using their own capital and resources”, they said.

Saqib Naseem, Junaid Teli added that we have seen in the past that whenever the difference in WHT is more than one percent on commercial imports v/s industrial import, majority imports of polyester filament yarn shift towards industrial imports which leads to corruption and misuse of this facility and to the exchequer.

They further said that polyester filament yarn falls under the category of raw materials (SRO 1125) and in the previous budget FY 2021-22, the government imposed WHT at import stage one percent for industrial importers and two percent on commercial. However, in the federal budget 2022-23, the government has kept WHT at one percent for industrial imports falling under SRO 1125 whereas commercial importers shall be charged WHT at 3.5 percent with MTR and at 4 percent with FTR. Polyester filament yarn tariff already exists in the cascading system of polyester value chain and it is already on the higher side.

Saqib Naseem, Junaid Teli urged Minister for Finance & Revenue, Miftah Ismail to kindly continue with two percent WHT with FTR on commercial imports on items falling under SRO 1125. Furthermore, in view of information from reliable sources, it has been learned that the government may impose ACD & RD on polyester filament yarn (HS Code: 5402.3300, 5402.4600, 5402.4700 & 5402.5200).

Since these are basic raw materials of the textile industry, therefore we are requesting you not to impose any ACD and RD on these HS Codes. We would also request you to rationalize Customs duty tariff of Poy (5402.4600) & Polyester Filament Drawn Yarn (PFDY) at seven percent instead of present 11 percent.

Copyright Business Recorder, 2022


Blame game, once again

Published June 18, 2022
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A successor government blaming its predecessor government for all the ills is nothing new. Therefore, Pakistan Muslim League(N) government blaming Pakistan Tehreek-e-Insaf (PTI) government for causing immense harm to economy is not unusual. Both parties are trying to get the best out of it while the public, with no interest in either of the narratives, is suffering.

The nation is looking for solutions and not excuses or narratives.

To ascertain facts, one tends to read or hear the opinion of independent experts. In this case we have one. Truth can be explored in Pakistan Economic Survey 2021-22 prepared by a team of 20 economists. It was issued on 9 June 2022 under the signature of the Economic Adviser to Government of Pakistan with a foreword by the incumbent Federal Finance Minister, Miftah Ismail.

The salient figures extracted from the survey of FY 2021-22 are:

– Real GDP Growth: 5.97%

– GDP Volume: Rs 66,950 billion (vs Rs 55,796 billion in 2021)

– Gross Fixed Capital Formation: Rs 8,992 billion (vs Rs 7,217 billion in 2021)

– Industrial Growth: 7.19%

– Large-Scale Manufacturing (LSM) and mining growth: 10.4% (vs 4.2% in 2021)

– Services: 6.19%

– Agriculture growth 4.4% (vs 3.48% in 2021)

– Per capita income: $ 1798 (vs $ 1676 in 2021)

– Inflation 11.3% (vs 8.8% in 2021)

– Total revenue increase: 17.7% (vs 6.5% in 2021)

– Exports growth: 27. 6%: ($ 26.8bn)

Most encouraging is the growth in LSM, Services and Agriculture. These sectors are employment providers, revenue generation vehicles and food security guarantors. The reasons cited for a good agricultural year are high yield, attractive output prices, supportive government policies, better availability of seeds and pesticides and accessible agri credits. Whereas, the growth in LSM is attributed to rising global demand, easy access to credit and subsidised energy supplies.

Overall, the key performance indicators point towards a trend of growth and improvement over the past years.

On the other hand, however, the state economy is facing serious challenges of which fiscal deficit and mounting debt are red flags. Despite a significant rise in tax contribution, the higher current and development expenditure widened the fiscal deficit to 3.8 % of GDP in FY 2022 (July to March 2022) as against 3% in 2021. The debt position is equally disturbing with:

Public Debt: Rs 44,366bn

Domestic Debt: Rs 28,076bn

External Debt: US $ 88.8bn.

Energy subsidies provided by the PTI government pose significant risks to fiscal sustainability in an already constrained fiscal environment. The weakness in the economy carried forward from the past government escalated on account of the Russia-Ukraine war.

The shocks of the Russian-Ukraine conflict began to hurt the economies of the world in March 2022. The main shock was on account of oil, gas and commodity availability and price, with Russia being one of the key suppliers of the three. Economies around the globe scrambled to safeguard their supplies from alternate sources at a premium.

The newly installed government in Pakistan was caught in the crossfire and it took them too long to comprehend and react to the situation. The oil prices increased and the LNG deliveries committed to Pakistan were diverted to elite countries who have deep pockets to pay whatever it may cost. An opportunity to procure oil and gas from Russia at a discounted price was not explored by the government for reasons not made public owing to whatever reasons. India, Sri Lanka and many others cashed in on this opportunity.

The entire world is in economic turmoil: it is hit by energy shortage, inflation, disruption in commodities and logistics. After many decades, rising inflation is biting the people of the US as well.

The incumbent government needs to move out of the shadow of what the past government did and start working on solutions which so far are non-existent. The government appears to be expending all of its energies only on efforts aimed at working out a deal with the IMF, which is one of the key issues but there are many more serious issues that need to be equally addressed. The market is depressed and confused, the rupee is losing its value, the transactions and cash flows in the market are minimal and even the remittances from overseas Pakistanis have taken a dip.

The national budget rolled out by the government is more of a political and election-oriented national outlay rather than a solution-oriented document to move the country out of its current economic impasse. The IMF has raised objections and the economic team knew that they would do so. Tax incentives have been provided to retailers and importers alike while a tax has been imposed on IT exports which had just begun to pick up. The government employees have been given a 15% increase in salaries while the salaries of employees in the private sector are being curtailed on account of growing business stagnation.

To move the nation out of the present political and economic crises a more serious and meaningful approach has to be adopted by all stakeholders – that is elusive so far.

(The writer is former President, Overseas Investors Chamber of Commerce and Industry)

Copyright Business Recorder, 2022

Farhat Ali

The writer is a former President, Overseas Investors Chamber of Commerce and Industry

Business & Finance

Punjab debt service estimates stand at Rs82.4bn for FY23

Published June 18, 2022
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LAHORE: With interest payment of Rs 18 billion and principal repayment of Rs 64.4 billion, Punjab debt service estimates for FY 2022-23 was Rs 82.4 billion.

As per budget document made available to the Business Recorder, Punjab’s ratio of debt service to average revenue is 4.6% for FY 2022-23 which is not high and indicates low risk. A number of indicators are used to monitor and control risks associated with the government’s debt risk indicators act as a guideline to devise future borrowing strategies.

Highlighting the risk indicators, financial experts told this scribe that refinancing/rollover risk refers to the risk of being either unable to raise new debt to repay the portion of existing debt that is maturing, or to raise such debt at a much higher cost. Debt maturing in a year and average time to maturity (ATM) are two indicators used to measure this risk. ATM means the average time to retirement of the entire debt stock, they said.

They added that the interest rate risk refers to the exposure of debt portfolio to changes in the interest rate. Proportion of fixed rate debt, ATR and share of debt stock exposed to interest rate re-fixing in one year are the key indicators. Fixed rate debt is considered less risky as it is not exposed to interest rate fluctuations during its life.

On the other hand, external debt outstanding on 30 June, 2022, has an average borrowing cost of 1.57% and average maturity of 8.4 years. External debt of the government is denominated mainly in US dollar (72%), followed by special drawing rights (18%), Japanese Yen (6%) and other currencies (4%).

External debt of the government comprises mainly of concessional, long-term, foreign currency-denominated loans obtained from multilateral creditors such as World Bank and Asian Development Bank. These loans are borrowed by the federal government and on-lent to the Punjab government. These loans can be broadly classified as project loans and programme loans. Project loans are long-term loans meant for public investments in infrastructure whereas programme loans are medium-term loans meant for budgetary support and are typically linked with certain legal or policy reforms.

It may be noted that the redemption profile refers to the projections of annual principal repayments according to the repayment schedules of underlying loans. It helps identify periods in which large principal repayments will be due so that appropriate measures can be taken to address with such challenges. The redemption profile of Punjab’s debt is quite smooth and is spread over a period of 36 years.

Copyright Business Recorder, 2022


Games politicians play

Published June 18, 2022
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EDITORIAL: Minister for Water Resources Syed Khurshid Shah of Pakistan People’s Party (PPP) was spot on when he lamented the absence of ministers as well as the prime minister during the budget session. In a house already without a real opposition because of all the drama about en masse resignations of PTI (Pakistan Tehreek-e-Insaf) members, for ruling coalition legislators to also not show up, including all ministers, during an extraordinarily important budget session is a crying shame.

He also very rightly pointed out that politicians go through all sorts of troubles to get elected to parliament, yet treat it with utter contempt once they make it there; which goes to show where their interests really lie.

PPP has now threatened to boycott the remainder of the session if proper attendance is not assured, and rightly so. These are times when the public is being made to pay for the excesses and failures of the country’s rulers all over again, after all, and everything that concerns the lives of ordinary citizens and businesses is collected in the budget document. Word is that the unusual austerity owes to the compulsion of falling in line with the IMF (International Monetary Fund) $6 billion EFF (Extended Fund Facility). But that ought to require even more detailed debate than usual.

The behaviour of the country’s political elite, pretty much as a whole, has left a lot to be desired lately. If the confusion at the centre is not bad enough, the unprecedented pandemonium in Punjab is set to go down in history as one of the darkest days of the so-called most important province of the federation. It’s been literally paralysed only and only because one alliance of political parties cannot accept that it has lost its grip on power and will go to any extent, no matter how disgraceful or even unconstitutional, to spoil the show for all the others and then also play the victim.

All this is a very far thing from the kind of mature behaviour that is going to be needed to come out of the crises that confront the country at the moment. But what to do, and where to look for it, when it is simply not found in the political lot? This brings us right back to the crisis of democracy that we seem doomed to go through after every few years of representative government. Every time politicians have only themselves to blame for spoiling the whole show, and then they complain to no end if outside forces should intervene. That the so-called establishment is now neutral is well established. Yet the best that politicians can do, even when there is no outside interference, is fall all over themselves.

If political leaders cannot conduct themselves as responsible professionals, can they really be expected to find solutions to problems of monumental complexity? Right now, all of them know very well just how fragile the economic situation is. Yet they don’t agree to work together to mend the economy and latch on to any opportunity to bring harm to the other, even at the cost of harming the country and the people in the process.

No wonder, then, that the whole system seems ready to implode. For the good of everything in the country, including themselves, Pakistan’s leaders must immediately put their differences aside and help each other to bear the burden of structural adjustment that can no longer be delayed. It will be a painful process, but there is light at the end of this tunnel. But first we would have to get going, and take the hit together. Otherwise, there will still be a lot of economic trauma, but there will be nothing to show for it. Politicians need to stop playing their usual games and start working for the country for a change.

Copyright Business Recorder, 2022


NA budget debate: Treasury mum despite opposition MP’s protest over hike in POL prices

Published June 17, 2022
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ISLAMABAD: The MPs belonging to the ruling coalition government – who made it to the power corridors by ousting former prime minister Imran Khan under the pretext of rising prices and skyrocketing inflation – did not say a single word on Thursday in the National Assembly despite, the massive increase in the prices of petroleum products.

However, Mir Khan Muhammad Jamali, a Pakistan Tehreek-e-Insaf (PTI) dissident, lambasted the government for the unprecedented hike in petroleum prices, saying it should focus on reducing the prices of essential items to provide relief to the poor.

In a somewhat emotional speech, he also raised “Imran Khan, Zindabad!” slogans, and questioned: what has the incumbent regime did to control prices and lower the prices of the POL products despite, making tall claims before coming into power.

He rejected media reports of his resignation from his National Assembly seat, saying he would continue as a member of the house.

“I haven’t resigned from my NA seat…I’m still with the PTI and Imran Khan is still my leader,” he declared.

Taking part in the budget debate for 2022-23, the MPs proposed the government to announce more incentives in the budget 23 for the agriculture sector to make the country self-sufficient in agrarian products.

Aslam Bhootani, an independent MNA, was all praise for the budget, saying at a time when the country is going through economic challenges, there could have been no better budget.

He said that the subsidies on electricity should not be withdrawn as it would affect the farmers, adding the farmers should be given more incentives in order to boost the agriculture sector.

Javed Hussain of Pakistan Muslim League-Nawaz (PML-N) said that the coalition government in the proposed fiscal plan preferred to work for the betterment of the state instead of doing politics on national issues.

He asked the government to provide maximum relief to the farmers in order to produce better results. He also proposed the formation of a parliamentary committee on the agriculture sector for devising a more prudent policy to increase agri production.

Jamaluddin of JUI-F said that suggestions by MPs should be incorporated into the budget 2022-23.

He was of the view that sufficient funds had not been allocated for the development of merged districts of erstwhile Federally Administered Tribal Areas (Fata).

He asked the government to release funds for people affected by operations in districts of previous Fata besides providing facilities to local people for developing the mining sector.

He also asked the government for allocating special funds for establishing educational institutes.

Maulana Abdul Akbar Chitrali of Jamaat-e-Islami criticized the recent hike in the prices of petroleum products, saying it would multiply the miseries of the common people.

He was of the view that the government was taking directions from the International Monetary Fund (IMF) for imposing an unnecessary burden on the people.

Afzal Khan Dhandla said that the recent increase in petroleum prices is unbearable for the common people and the government should immediately withdraw it.

He said every ruler makes tall claims and builds castles in the air to befool the people and does nothing to provide respite to the people.

He said a special focus should be given to the agriculture sector and the agro-based industry, adding agri-loans should be waived off to save farmers from selling their lands to pay back their debt.

Regarding the suggestion of waiving off agri-loans, Minister for Economic Affairs Ayaz Sadiq proposed a committee comprising members of the house from both sides of the aisle to look into the matter.

He said the government will arrange a meeting of the committee with the president of the Zarai Taraqiati Bank in this regard.

Nawabzada Iftikhar Ahmed Khan said that more funds should be diverted toward the education, health, power, and agriculture sectors.

Rao Ajmal Khan appreciated the government for withdrawing 17 percent general sales tax on farm machinery and agri-inputs as well as allocating 21 billion rupees for the livestock sector.

He proposed a subsidy of at least, Rs2,500 on DAP fertilizer, enhancing support price for wheat and other crops, shifting of agri-tube wells on solar from expensive electricity to save power, and ban on establishing new housing colonies to conserve agri lands.

Hussain Tariq called for long-term and sustained policies to attract foreign and local investors for a stable economy, adding modern technology should be introduced to the agriculture sector to increase our per acre yield.

Ramesh Kumar, a PTI dissident, lauded the passage of a resolution by the house, recommending constituting a task force for compiling recommendations for the welfare of minorities in the country.

Copyright Business Recorder, 2022


FY23 budget: need for fiscal reforms

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“He who wishes to serve his country must have not only the power to think but the will to act” – Plato

The coalition government of Pakistan Democratic Movement (PDM), led by Prime Minister, Shehbaz Sharif, assumed power in April 2022 after constitutionally removing Imran Khan as premier.

The PDM government in the last 60 days has failed to provide clarity of thoughts and actions to the public and businessmen in dealing with pressing problems of inflation and high interest rates.

They have been transmitting confusing signals about their tenure and their financial plans to address mammoth economic challenges. There is no doubt that when they took charge, the country was facing severe financial, political, and legal challenges like draining of foreign exchange reserves, dishonouring of commitment with the global lenders and straining of relations with friendly countries, especially those offering help to meet the pressing fiscal needs. However, the PDM government cannot use these as an excuse for not performing as per their own promises.

Notwithstanding the economic challenges, the political allies were expected to have some plan for economic revival and provision of relief to the common man. However, the journey so far has been evolving around the appeasement of the International Monetary Fund (IMF). Clarity of purpose and direction is one of the most crucial elements of the governance. However, these are apparently missing and the latest federal budget proves it. It shows the incompetence and lack of planning and direction on the part of the economic team of the PDM government, led by the Finance Minister, Miftah Ismail.

The new government was under the responsibility to introduce its action plan to implement the IMF reforms agenda so that the delay on the part of the securing next tranche should be minimized. However, the economic team of the government appears to be visionless and following in the footsteps of their predecessors. In the last two months, the US dollar has crossed the psychological mark of Rs. 200 twice.

Similarly, the actions of the government so far like import ban, increase in fuel and electricity prices, austerity drive within the government offices are merely cosmetic in nature. The Prime Minister and all the key ministers of the federal and provincial government are still escorted with huge convoys and enjoying their protocols and VIP culture. In these circumstances, the early closing of markets will not achieve much, but may affect GDP growth, employment rate, revenue mobilisation, etc.

The government has been making efforts for the resumption of IMF programme by withdrawing subsidies. However, the Finance Bill 2022 violated the terms agreed with the IMF related to personal income tax to achieve extra 0.25% revenue collection. It extended relief of Rs 47 billion to the privileged classes.

Prime Minister Shehbaz Sharif and his cabinet should keep in their mind the words of Thomas Jefferson: “The purpose of government is to enable the people of a nation to live in safety and happiness. Government exists for the interests of the governed, not for the governors”.

The incumbent government is caught between rock and a hard place for the revival of the IMF’s 39-month Extended Fund Facility (EEF) programme of US$ 6 billion signed by the previous government in July 2019. Till today, the government has failed to set its priority to address the issues that pertain to fiscal challenges. The Finance Minister has no other thing to share except to criticise the previous government for his agreement with the IMF.

He does not have anything in his bucket but to tell the nation about his unpopular decisions like the withdrawal of subsidies for energy and petroleum, which have attracted public criticism and backlash. The public who was already finding it difficult to make their ends meet is now taken aback by this new tsunami of inflation. In the parallel, the foreign reserves are constantly falling, and the Pak rupee is in a constant fall.

In a very short period, the prices of petroleum products have been massively increased. The rates of electricity bills have also been significantly increased and Consumers Price Index (CPI) is touching a new high of 13.8%. Though the stock markets at the global level are witnessing a tough spell, the Pakistan stock exchange is in red primarily due to local political turmoil.

The market session following the budget shed 1,100 points, mainly since the overall budget does not provide for any policy/strategic measures that can pave the way for economic revival. Like previous budgets, this budget is also mismatched in terms of revenue and expenditure and relies on financial lending as a balancing factor.

Further, the estimates of a provincial surplus of Rs 800 billion seem overambitious and most probably this will also be bridged by leveraging costly funds from lenders. With the current levels of fiscal and current account balances, we cannot continue this ad hoc approach of borrowing expensive funds to bridge the gaps.

The debt balloon is getting bigger with every passing day and currently 41% of budgeted expenditures are represented by interest payments. Rather than taking concrete steps to formalise the economy, the government has further widened the gulf between corporate and non-corporate/informal business sectors. The current budget offers simplified and nominal tax for retailers through electricity bills as compared to a 29% tax on profit for corporate retailers. Extending a fixed tax regime rather than profit-based taxation can wrongly promote informal sectors and cash-based dealings which will discourage documentation of the economy.

The power outage is another challenge for the current government. The country is facing power outages and the shortfall is reported to be above 7,000 megawatts. The main reason reported is the closure of several plants on account of a shortage of oil, gas, and coal. This significant shortfall has resulted in severe load-shedding of 8 to 10 hours in several parts of the country. The government is shifting the blame to the incompetence and indecisiveness of the previous government as they did not make any agreement related to liquefied natural gas (LNG) and other supplies. Now, they are forced to buy LNG at expensive rates, making the situation more difficult for the already cash-strapped economy.

On the administrative front, the government needs to get its acts together and must ensure that roles and responsibilities within ministries and divisions are communicated and followed up through a robust accountability system. People in key roles must possess the desired skill set rather than based on political affiliations. This help in introducing progressive policies which help the overall economy and business environment of the country.

Another important factor is stability and continuation of policies, especially those which are already under successful execution. For example, the Auto Industry Development and Export Policy for 2021-26 were designed to boost the development of Pakistan’s automotive industry and provide significant support to the Government of Pakistan to help in addressing economic issues, ensuring import substitution, export enhancement and job creation for the local workforce. These can help make our facilities par for competitive manufacturing of auto parts and vehicles which can fulfill local market and offshore demands.

The governments, irrespective of political connotations and differences, must continue to facilitate investors who are inclined to employ funds in different sectors. The prime focus should be on providing an enabling environment with a stable economic outlook. With a fast-deteriorating economy, we cannot afford ad hocism and short-term approach.

The government in general and finance minister in particular must be cognizant of the fact that the current energy challenges, weak currency, double-digit inflation, high cost of funds, and political turmoil are antidote to growth. There is, therefore, the need for initiating and implementing fiscal reforms without any further loss of time.

(Huzaima Bukhari & Dr. Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’)

Copyright Business Recorder, 2022

Huzaima Bukhari

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS), member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). She can be reached at [email protected]

Dr Ikramul Haq

The writer is a lawyer and author of many books, and Adjunct Faculty at Lahore University of management Sciences (LUMS) as well as member of Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE). He can be reached at [email protected]

Abdul Rauf Shakoori

The writer is a US-based corporate lawyer, and specialises in white collar crimes and sanctions compliance. He has written several books on corporate and taxation laws of Pakistan. He can be reached at [email protected]

Business & Finance

‘Country’s development budget kept on decreasing in 4 years’

Published June 17, 2022
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ISLAMABAD: Minister for Planning and Development Ahsan Iqbal on Thursday said that the government had no option but to increase the oil prices due to the unprecedented increase in international prices of crude oil while adding that the government had also withdrawn all the taxes and levies on the petroleum products.

Addressing a press conference here, he said the country’s current economic situation was due to the mismanagement of the previous government.

The minister explained that the economy of any country grows with the development activities, but unfortunately for the last four years, the country’s development budget kept on decreasing instead of increasing.

“In 2018, when we left the government, Rs1,000 billion was allocated to both the defence and the PSDP.”

“Today when after four years, I take over the charge, the allocation was Rs900 billion, but only Rs550 billion could be spent during the outgoing year due to fiscal constraints,” he added.

He said the Finance Division categorically declined to issue further releases to the PSDP since the end of the third quarter of the outgoing fiscal year.

The minister informed that Imran Khan Government had agreed with the International Monetary Fund (IMF) that all subsidies on the petroleum products would be withdrawn and further taxes would be charged on the products.

He also blamed the previous government for rapidly depleting the country’s foreign exchange reserves.

He said the coalition government was well aware of the worse situation, but “we had no choice but to take the charge of the government only to save the country’s future.”

He said Pakistan needed stability and the coalition government could easily go for the next general election but the country could have collapsed during the interim government.

Therefore, he said the coalition government took the toughest decision to save the country’s future.

He said for the next fiscal year, the Federal Board of Revenue (FBR) revenue target had been set at around Rs7,000 billion and after paying the provinces’ share, only Rs3,000 billion would be left with the federal government.

The federal government had liabilities of over Rs6,000 to 7,000 billion so in order to meet all these expenditures, the federal government would have to take further loans.

In four years, he said the annual debt service was Rs1,500 billion but now it had increased to Rs4,000 billion.

He said as per the vision of Prime Minister Shehbaz Sharif, the country badly needed the charter of economy to put the country on the path of stability and growth.

He said under the charter of economy, all political parties should sit together and agree to continue the policies for at least 10 years irrespective of whichever political party is in the government.

Former Prime Minister Imran Khan was “destabilizing the country by targeting Pakistan’s key institutions”.

He alleged Imran Khan had used social media and indulged his team in campaigns against the state institutions as planned and aimed at destabilizing the country.

He alleged Imran Khan was deliberately spreading anarchy against the country’s key institutions.

The minister said, “We will not let Imran Khan target the nation and the country’s institutions through his negative politics.”

Copyright Business Recorder, 2022

Business & Finance

Govt hasn’t suffered major revenue loss due to tariff rationalisation: NTC

Published June 17, 2022
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ISLAMABAD: Chairperson National Tariff Commission (NTC) Robina Ather on Thursday informed the Senate Standing Committee on Finance that the government has not suffered any major revenue loss on account of tariff rationalisation done in the federal budget (2022-23) to facilitate domestic industries and sectors.

Responding to a question of Chairman of the Committee Senator Saleem Mandviwala, the chairperson NTC informed the committee that the FBR and the NTC have no differences on customs tariff lines of the Pakistan Customs Tariff (PCT) during the budget finalisation exercise.

The FBR has no objections to the NTC’s tariff rationalisation done for the new fiscal year.

Ather further stated that there is no significant revenue impact on the government as a result of tariff rationalisation. In some areas, the government has imposed regulatory duties, but the amount has been compensated through other relief measures. The NTC has followed the policy to reduce the average rate of tariff on raw materials and inputs to facilitate the domestic manufacturers and downstream industries.

She said that the anomalies in the customs tariff have been referred to the FBR’s Anomaly Committee.

The chairperson NTC added that the customs duties have been decreased on the import of packaging materials, dyes and combined harvesters.

Secretary Finance Hamed Yaqoob Sheikh said that there is no change in the rates of customs duty due to the updated Harmonised Commodity Description and Coding System (HS).

The FBR Member Customs (Policy) informed that the World Customs Organisation (WCO) updates its Harmonised Commodity Description and Coding System (HS) after every five years to accommodate modern developments and changing trade patterns. The last HS version was updated in 2017. The current amendments to the HS nomenclature have entered into force since 1st January 2022.

Pakistan being a signatory to the HS Convention has obligation to adopt the HS 2022 version. Since, these amendments are required to be incorporated in the First Schedule to the Customs Act, 1969 (Pakistan Customs Tariff), therefore, Pakistan adopted the same by incorporating all of its latest amendments introduced in earlier nomenclature/HS codes in Pakistan Customs Tariff by the process of addition/ deletion and creation of local PCT codes, accordingly.

It will be effective from 1st of July 2022.

Copyright Business Recorder, 2022


Local, foreign loans critical to meeting financial needs: Ahsan

Published June 17, 2022
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ISLAMABAD: Federal Minister for Planning and Development Ahsan Iqbal Thursday said that to meet national financial requirements, the government has to take additional local and international loans.

He said this while briefing a meeting of the Senate Standing Committee on Planning and Development held under the chairmanship of Senator Ataur Rehman.

The committee members raised the issues related to budgetary recommendations sent by the committee to the ministry of planning and development on February 11, 2022, related to developmental schemes on water, power, health and education projects under the Public Sector Development Program (PSDP) for the financial year 2022-23.

The planning minister and federal secretary Ministry of Planning, while briefing the committee on the agenda item said that the ministry has a certain share in the budget regarding countrywide development projects. They further said that PC-1 of any scheme is not planned by the ministry but is prepared by the concerned departments and agencies which forward the schemes to the planning ministry for funding.

The minister said that the department prepares as many schemes as the budget quota of the Ministry of Planning and gives them to us. We do not have the authority to add or reject recommendations.

Rs800bn PSDP proposed for FY23, says planning minister

The secretary planning said that the ministry after receiving the recommendations of the parliamentarians was thoroughly reviewing them and are sent to the relevant federal department for implementation. The Standing Committee was informed that the recommendations of the members of the Senate were sent on February 11, 2022, after which they were reviewed and handed over to the concerned departments and provinces on March 14.

The committee was informed that the members of the Senate forwarded a total of 216 schemes to the ministry of which 174 were related to provincial governments and 42 were of the federal government. The meeting was further informed that out of 174 recommendations related to provinces 33 were related to Punjab, 50 to Sindh, 73 to Khyber-Pakhtunkhwa (KPK), and 18 to Balochistan.

Of 42 developmental projects recommendations 6 were related to Power Division, 20 to Petroleum Division, 8 to Interior Ministry related and eight were related to other ministries.

The National Economic Council (NEC), headed by the prime minister and comprising 12 members, including the provinces, decided in June 2021 to set March 31 as the date for new schemes. The panel was informed that Rs900 billion had been allocated for PSDP schemes for the financial year 2021-22 which was later reduced to Rs550 billion. For 2022-23 financial year the government has earmarked Rs800 billion for PSDP schemes across the country.

The panel was further informed that the ministry received a total Rs1.3 trillion developmental schemes by the federal and provincial departments but the concerned departments have been directed to send the schemes as per the stipulated budget. No new scheme will be added after 31st March and the existing schemes will be completed by spending resources for the next nine years. Funds for the last quarter of the last financial year were also not released.

Responding to a question raised by Senator Attaur Rehman, the ministry officials said that the Planning Ministry is playing a role of a regulator which receives schemes and sends them to the concerned departments for implementation. The panel was informed that the highest share has been allocated in the budget for the province of Balochistan and the provincial and federal departments have been informed about the ceiling so that PSDP schemes can be formulated accordingly.

Senator Sardar Muhammad Shafiq Tareen said that Pakhtun areas are being ignored once again like the previous government. None of the national food security schemes are in the Pakhtun area, adding that only nine percent of the total water projects related schemes of Balochistan province are for Pakhtun areas and out of 30 special area schemes, only four schemes are for Pakhtun areas. The government should pay more attention to the Pakhtun areas.

The committee was also informed that 80 percent of the budget was allocated for old schemes and 20 percent for new schemes but the ratio of 60 to 40 has been fixed in the NEC with collective consultation.

The panel was informed that the government has allocated Rs30 billion for the uplift of the 20 most backward districts of the country with special focusing on education, health, water supply, and other human development-related projects. The federal government and respective provincial governments will share 50 percent costs. About 250 vocational schools will be opened for vocational education in the country and 250 new stadiums will be constructed for the promotion of sports in the country.

Ahsan Iqbal said that the government was taking tough decisions to put the country’s economy on the right track. He added that owing to lack of funds, Gwadar port is as yet not fully developed with only 11 meters depth which cannot handle large ships. The government has allocated funds for cleaning streets and drainage. The minister further said that the government will provide funding for 5,000 scholarships in various subjects related to higher education. The development projects of Balochistan province are double that of Punjab province.

He said that the government was paying special focus on the completion of China-Pakistan Economic Corridor-related projects and steps are being taken to ensure timely completion of industrial zones which were to be completed in 2020.

While lamenting the reduction of developmental budget, the minister said that it was very unfortunate that in 2018 when Pakistan Muslim League (PML-N) left the government, the total PSDP allocation was Rs1,000 billion which Imran Khan-led government kept on reducing and in 2021-22 the previous government allocated a total Rs900 billion for the developmental schemes which later was reduced to Rs550 billion. He said that the defense and development budget should have been equal for the smooth running of the economy but now the defense budget is Rs1,500 billion while the developmental budget is Rs550 billion. He said that the present government has increased the developmental budget to Rs800 billion for the financial year 2022-23. He further said that for a strong national defense, the development budget should be more than the defense budget.

The committee was also informed that 80 percent of the budget was allocated for old schemes and 20 percent for new schemes but the ratio of 60 to 40 has been fixed in the NEC with collective consultation. There is a plan of Rs30 billion for this. 50 per cent will be provided by the provincial governments. About 250 vocational schools will be opened for vocational education in the country and 250 new stadiums will be constructed for the promotion of sports in the country.

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Govt in talks with IMF on daily basis: Aisha

Published June 17, 2022
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ISLAMABAD: Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha has said that the government would very soon resolve all issues with the International Monetary Fund (IMF) including personal income tax reforms agreed upon by the previous PIT regime.

At the conclusion of the Senate Standing Committee on Finance meeting on Thursday, Dr Pasha informed that the discussions with the IMF will conclude very soon for reaching staff level agreement. The government is negotiating with the IMF on a daily basis. The discussions are daily held on budget numbers and projections. The IMF is analyzing each and every number of budgetary targets. “We are trying to give them clarity on all issues raised by them. We are very confident that all issues will be resolved very early”, she said.

The main concern of the IMF is the non-fulfilment of the condition of the personal income tax reforms. Once the tax-base is broadened and the number of filers increases, the government would be able to effectively deal with the withholding tax regime, she said.

The Minister of State for Finance stated that the real problem is that the previous government did not enforce measures required as per conditions and timelines agreed upon by them with the IMF. Contrary to this, the PTI government went totally 180 degrees against what it actually agreed with the fund.

“Now the government is facing problems of credibility and the IMF is checking each and every number again and again. There are not only the issues of credibility, but the present government is facing the consequences of things done by the PTI government”, she said.

Miftah says IMF lending critical to averting default

The government is patiently responding to every query of the IMF and satisfying them on each question raised by them, she maintained.

Dr Pasha categorically said that the IMF is not demanding any additional taxation measures in 2022-23 except the fulfilment of the conditions and benchmarks agreed with the previous government under the IMF program. “I want to categorically clarify that the changes proposed in the personal income tax rates and raise in the petroleum levy were already agreed by the previous government with the IMF. If we talk about the increase in electricity prices, it was also agreed by the previous government. Thus, the IMF is not seeking new measures but the implementation of the conditions already agreed with the past regime”, she said.

The Minister of State for Finance further stated that the real issue is that the non-fulfilment of conditions and missing the timelines has created a backlog for the present government. We are also convincing the IMF that we are clearing the backlog, but it is difficult for the government to move ahead expeditiously with the implementation of measures in future. But we want to implement measures up to the level of adjustment which the economy can tolerate. When asked about China’s loans to Pakistan, Dr Pasha confirmed that the processing of the agreement is nearly completed.

About the inflationary impact of the increase in the petroleum prices, she said that the inflationary impact is not only faced by Pakistan but it is a global phenomenon. The excessive import of commodities like sugar and wheat by the previous government was also an issue. With the help of provincial governments we are coming towards a better price management of essential food commodities, she added.

She added the government has done very hard work and the conditionalities and requirements of the FATF have been met. We are confident that Pakistan would soon be excluded from the Financial Action Task Force’s (FATF) grey list, she added.

During the meeting of the Senate Standing Committee on Finance, while reviewing the Finance Bill 2022, Dr Pasha stated that we strongly discourage indirect taxes measures that result in inflation. The government is moving towards resource mobilization through direct progressive measures in budget (2022-23).

The change in the holding period and tax rate on capital gains of the immovable properties has been proposed to control speculative buying and selling of open plots. The government is trying to discourage the uneven gains and charging a part of the unearned gains. The purpose is to divert the non-productive investment to productive investment like industry and agriculture, she maintained.

She stated that the government wants to give the message to shift your investment to the productive areas. In this regard, the government has given a number of tax incentives in the budget including admissibility of 100 per cent depreciation. To incentivize agriculture sector and farmers, customs duty exemption is extended further to Farm Mechanization and Logistics including agricultural machinery pertaining to irrigation, drainage, harvesting/ post-harvest handling and processing, plant protection equipment, as well as, machinery, equipment and other capital goods for miscellaneous agro-based setups.

Dr Pasha added that the government had the choice to rely on indirect taxes but it focused on direct taxes on a progressive basis. The government has not imposed any indirect tax in the budget (2022-23), she added.

Copyright Business Recorder, 2022


Punjab budget 2022-23

Published June 17, 2022
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EDITORIAL: The Punjab 2022-23 budget envisages a 125 billion rupee surplus which, if delivered by the end of next fiscal year when elections would be looming large on the horizon subject to parliament being allowed to complete its tenure, would still imply a shortfall of 675 billion rupees in the federal budgeted revenue of 800 billion rupees under the head of provincial surplus.

It is relevant to note that the envisaged contribution of Punjab in the federal provincial surplus would have been considerably higher than the 16 percent that the province’s budget surplus indicates and, disturbingly, further highlights the fact that while setting the federal provincial surplus the finance ministry in general and the Federal Finance Minister Miftah Ismail in particular may not have engaged in meaningful consultative discussions with provincial finance ministers including in Punjab where the Prime Minister’s son and his unconditional supporter is the chief minister.

The total budgeted outlay for next year is 3,226.4 billion rupees and in a marked deviation from earlier PML-N budgets the allocation for infrastructure development takes a distant second place at 216.68 billion rupees (8 percent of total) to social sector development budgeted at 1.083 trillion rupees (34 percent of total outlay), perhaps indicative of the changes wrought in the political narrative by the Khan administration. Production sector is budgeted at 127.32 billion rupees or 4 percent of total outlay.

Punjab has budgeted current expenditure at 1,711.9 billion rupees out of which 190.58 billion rupees has been earmarked for subsidies (11 percent of total current expenditure) with 100 billion rupees alone defined as a flagship initiative for social protection initiative (Utility support programme), followed by free medicines of 39.9 billion rupees, transport 17.89 billion rupees, agriculture 17.32 billion rupees, environment challenges 6 billion rupees and subsidy on ghee 5 billion rupees.

One would not be remiss in assuming that the International Monetary Fund would have serious reservations at the high priority accorded to subsidies, especially as these appear to be largely untargeted. However, true to form the PML(N)-led Punjab government allocated the highest-ever to Annual Development Programme (ADP) — 685 billion rupees — a tradition that is as evident in federal budgets as in provincial budgets though lack of fiscal space due to a reduced divisible pool collection by the Federal Board of Revenue (FBR) that, in turn, is distributed as per each province’s share under the National Finance Commission award leads to slashing the ADP.

Flagship initiatives in the Punjab budget also include: (i) 31.5 billion rupees for sustainable development of southern Punjab, an allocation that reflects the growing political relevance of this largely underdeveloped region, with 58.5 billion rupees earmarked for sustainable development programme for the entire province though it is unclear whether the allocation for southern Punjab is subsumed in this total; (ii) correctional facilities have been budgeted 5 billion rupees, perhaps after the sorry state of our facilities became apparent to PML-N leadership which spent considerable time in jail during the Khan administration; (iii) laptops 1.5 billion rupees (a continuation of Shehbaz Sharif’s initiative as chief minister Punjab); and (iv) 9 billion rupees for road rehabilitation programme with, one hopes, priority given to those roads that urgently require maintenance rather than those that are used by the elite.

In addition, salaries have been raised by 15 percent, above the Consumer Price Index of 13.8 percent year-on-year in May 2022, while pensions have been raised by 5 percent, well below the CPI — a discrepancy that is inexplicable given that utility and food prices, the major budget item of a pensioner, have risen by over 20 percent.

The Punjab government envisages raising tax collections by Punjab Revenue Authority from 155.9 billion rupees in the outgoing year to 190 billion rupees next fiscal year — a 22 percent rise in spite of the continuation of reduced sales tax on services for 30 plus sectors and a 44 percent raise in revenue collected by the Board of Revenue, the controlling authority in all matters pertaining to property, that includes enhancement of rates of luxury houses from 1 July, enhancement of stamp duty from 1 to 2 percent in urban areas, and harmonization of PRA procedures with FBR and other revenue authorities (a long pending demand of domestic business community as well as multilaterals).

Austerity measures include a ban on purchase of new cars, a ban on purchase of air-conditioners exceeding 5 million rupees next year, ban on medical treatment abroad, ban on air travel through government funding, ban on workshops/seminars and ban on upgradation of posts — good optics but one wonders how much of the budgeted current expenditure would be contained by these measures.

It is evident that the Punjab budget, like the Sindh budget, does not support the federal budget’s economic priorities, particularly in terms of creating fiscal space, a factor that would have negative economic implications on the people of the country.

Copyright Business Recorder, 2022

Business & Finance

Budget proposals: FPCCI chief decries absence of ‘industrial package’

Published June 16, 2022
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KARACHI: Shabbir Hassan Mansha, the acting president of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has said that the business community was expecting an industrial package to propel the country into the much-needed industrialisation and import substitution mode.

He said the business community is concerned at the imposition of wealth tax on tax-paid assets as well. Mr Mansha was of the opinion that the federal budget for 2022-23 is devoid of categorical explanations about various budgetary and fiscal initiatives.

He welcomed the emphasis on setting up of special economic zones (SEZs) under the China-Pakistan Economic Corridor (CPEC) and also commended the imposition of fixed tax on small retailers, as this will make it viable for them to register into taxation system.

He expressed dismay that FPCCI, being an apex body, had proposed to the government to announce a comprehensive industrial package, as there is no other way to control the unsustainable trade deficit that contributes to current account deficit, which will be $47-48 billion this year, gradually reduce debt servicing of Rs 3.95 trillion, protect the ever-depreciating rupee that results in massive fuel and power inflation, save dwindling foreign exchange reserves, increase growth rate which is grossly insufficient to match the population explosion, deal with increasing unemployment and curtail the budgetary deficit through generating more taxes through productive activities, and not through squeezing the existing taxpayers even further.

Addressing the other area of concern, he said that remittances recorded a significant decline of 25 percent in May 2022 on a Month-on-Month (MoM) basis, and FPCCI had categorically suggested that incentives be provided to facilitate remittances.

The acting head of the FPCCI said selected commercial bank branches should be open 24/7 in all major cities and towns of Pakistan to facilitate remittances, taking care of time lapse in emergency circumstances and varied time zones.

He noted with a sigh of relief that zero tax has been levied on agricultural machinery and inputs, which was a major demand of the FPCCI given the food security situation in the country. “Exempting tractors and seeds was critically needed and the government listened to us on the issue,” he added.

However, fertilisers should also have been exempted as it is one of the major inputs for higher yields.

Mr Mansha appreciated the relief extended to the middle class by raising taxable salaried income threshold to Rs 100,000 per month from the current Rs 50,000, and also providing relief to micro and small businesses by raising the minimum tax bracket from Rs 0.4 million to Rs 0.6 million.

He maintained that property tax of 1 percent on properties worth over Rs 25 million should be reconsidered, as in times of crises all segments and sectors of the economy should be supported. It is pertinent to note that real estate and construction sectors directly or indirectly accelerate growth in 40 industries, he added.

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Business & Finance

Sixth Schedule: ‘Proposed restoration of exemption may hit medicine makers badly’

Published June 16, 2022
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KARACHI: The proposed exemption restoration in Sixth Schedule may lead to serious financial shock to the pharma manufacturers because input tax on supplies to charitable hospitals would not be refunded.

Ejaz Bhutta executive director, Moore Shekha Mufti contended that Finance Bill 2022 includes a proposal to exempt the supply of goods to charitable hospitals. If the proposal is carried out in the Act, the pharma industry will not be eligible for a refund of input tax on such supplies. Therefore, charitable hospitals may face trouble in securing medicine supplies directly from manufacturers. Ejaz was of the view that effectively, the cost of medicine for charitable hospitals will increase under this amendment.

He pointed out that the export of medicines to Afghanistan is already excluded from the facility of zero-rating. Furthermore, no proper mechanism for smooth issuance of a refund to the pharma sector has been devised yet. Therefore, the pharma industry may face liquidity crises ultimately affecting the supply chain of life-saving drugs in the country.

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Murad pledges record development in Sindh

Published June 16, 2022
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KARACHI: Chief Minister Sindh Syed Murad Ali Shah on Wednesday said that the provincial fiscal budget 2022-23 proposes “no new taxes”, vowing to achieve a record development in the province.

“A budget of Rs1.71 trillion proposed with no new taxes,” he told a post-budget news conference at the Sindh Assembly auditorium, saying that the fiscal plan rather extends a relief in taxes on cotton fee, professional and entertainment duties.

Tax on IT sector was dropped to 3 percent from 13 percent, he said that the move is aimed to encourage the freelancing in the filed. He told reporters that his government is going to announce a five-year IT policy.

About the non-development schemes, he said that they will not exceed 60 percent, though the budget projects their 70 percent share for next fiscal year.

The non-development schemes also include grants, which he said, remain as a development measure. The grants go to the Sindh Local Government Department stand at Rs85 billion, hospitals at Rs75 billion, education at Rs30 billion and social sector at Rs18 billion.

In addition: 14.5 percent or Rs 174.229 billion employees Retirement Benefits, 12.3 percent or Rs147.449 billion operating expenses and 42.5 percent or 509.732 billion employees related expenses.

“The current revenue expenditures of Rs1.199 trillion could not be termed as non-development expenditures but it has 2.9 percent or Rs35.360 billion repair and maintenance budget which itself is part of development budget,” he said.

Thus, he said, the non-development schemes remain for not more than 60 percent in the budget.

The budget proposes Rs15 billion for social relief, which he said, is aimed to make registry database to make it easy for the government to reach out to the most needy during emergencies.

He said that the Sindh government is seeking investments for the city’s development from the gulf nations mainly Kuwait and Saudi Arabia. An investment conference, he said, has been under consideration to hold for Sindh in Kuwait to attract investors for the metropolis uplift.

The Sindh government is not looking for loans for the province from the Kuwait Investment Authority, he said, rather seeking investments. The city’s development requires about Rs600 billion, which the government cannot spare from its uplift budget that meant for the entire province.

The total development outlay for Karachi in 2022-23 was Rs125 billion, Murad said that Rs80.077 billion has been allocated for 750 Karachi specific projects of which Rs60.686 billion for 483 ongoing schemes and Rs19.390 billion for 267 new schemes.

He said that Rs5 billion was earmarked from District ADP and Rs40.715 billion for seven projects through Foreign Project Assistance including Competitive and Livable City of Karachi Project (Click), Karachi Neighbourhood Improvement Project (KNIP), Kara chi Water & Sewerage Services Improvement Project (KWSSIP) Phase-I and Phase-II for Environmental, Social Safeguards and Design Studies, Solid Waste Emergency and Efficiency Program (SWEEP), Construction of BRT Red Line Karachi and Karachi Urban Mobility Project – BRT Yellow Line.

For around 32 mega projects, he said, Rs5 billion reserved for Safe City for [its pilot part will be completed next year], Rs12.19 billion for dual carriageway Manghopir Road to Shahrah-e-Qaddafi, Rs1.6 billion for renovation of Karachi Fish Harbour as Rs309.6 million has already been allocated, Rs1 billion for rehabilitation of storm water drains Phase-II.

Murad acknowledged that the burden of Rs174.229 billion of employees’ retirement benefits is “huge” on the provincial exchequer that should be arrested, saying that the government is evolving a new plan in this regard.

To a question, he replied that his government was preparing a policy to offer registration of electric vehicles free of charges.

He announced that Gambat, a small town of Khairpur District, will be developed as Medical City to begin a medical tourism in the province.

He said that Rs219.787 billion was allocated for the health sector, which includes Rs196.453 billion non-development and Rs23.334 billion development budget.

Nabisar-Vajihar water infrastructure project will be developed for Rs35 billion, he said: “This project has been launched under public private partnership with a Kuwait-state company.”

He said that his government was planning to convene an investment conference in Kuwait to attract more investment.

Earlier, Murad condemned the PTI lawmakers for their noisy protest hampering his budget speech during the Sindh Assembly session. He alleged that the protesting legislators used an unparliamentarily language against the PPP leadership.

Copyright Business Recorder, 2022


Punjab sets aside Rs470bn for health sector

Published June 16, 2022
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LAHORE: The Punjab government has proposed an amount of Rs 470 billion for health sector in its budget 2022-23, which is 27% higher than the current year (2021-22) budgetary allocation of Rs 369.3 billion.

As per budget document made available to Business Recorder, Rs 296 billion has been set aside for non-development expenditures while Rs 174.5 billion has been reserved for development expenditures. An amount of Rs 125.34 billion has been allocated for Universal Health Insurance Program (Health Card) as against Rs 60 billion allocated in the year 2021-22.

In the next financial year, Rs 5 billion have been allocated for PKLI while from July 2022, provision of free medicines in the hospitals is being started. An amount of Rs 5.80 billion has been set aside for provision of missing facilities in public sector hospitals while Rs 3.87 billion has been reserved for National Health Support Programme (NHSP). An amount of Rs 1 billion has been reserved in the budget for CT scan facility at THQs while MRI facility will be provided in DHQs with allocation of Rs 2 billion.

Under the development portfolio for healthcare, Rs 1.8 billion has been allocated for revamping of THQ Hospitals, Rs 1.16 billion for population welfare, Rs 1.6 billion for establishment of nursing and tertiary care hospitals, Rs 1.3 billion for revamping of DHQ Hospitals, Rs 1.6 billion for integrated reproductive, maternal new born & child health.

In the budget 2022-23, Rs 2 billion have been allocated for communicable disease programme and infection control programme. An amount of Rs 4 billion has been set aside in the budget for provision of family planning services.

In the development budget of Primary & Secondary Healthcare Department, Rs 21 billion has been proposed. An amount of Rs 3.10 billion will be spent for ongoing projects of provision of facilities like equipment and missing facilities. An amount of Rs 2.70 billion has been reserved for new projects.

For specialized healthcare & medical education department, Rs 151.50 billion have been proposed which is 93-percent high from current year’s allocation. An amount of Rs 2 billion will be spent on upgradation of medical colleges’ hostels while Rs 900 million will be spent on provision of ventilators in hospitals. A trauma centre comprising 70 beds will be established in Multan with a cost of Rs 500 million.

Moreover, a meeting on ‘Universal Health Insurance’ was held at Punjab Health Initiative Company with provincial minister Khawaja Salman Rafique in the chair, to review steps for health insurance. State Life Insurance Company officials briefed the provincial minister on the details of M-paneling and treatment facilities in more hospitals of the province.

Salman Rafique said, “We are trying to provide maximum free medical treatment to the people of Punjab through Universal Health Insurance. Health insurance is the brain child of Prime Minister Shahbaz Sharif. Both the PM and CM want to provide the best healthcare facilities to the people. We also want to provide bone marrow transplantation facility to the patients through this scheme.”

He said the State Life staff in selected public and private hospitals in Punjab must ensure better treatment of patients. Treatment of patients will be monitored through Universal Health Insurance by visiting selected hospitals of Punjab.

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Business & Finance

Punjab govt imposes no new tax under ST on services

Published June 16, 2022
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LAHORE: No new tax has been imposed by the Punjab government under the sales tax on services for the fiscal year 2022-23. However, the ratio of stamp duty has been increased to two percent from earlier one percent in urban areas in order to increase revenue of the province throughout its resources.

According to the Finance Act 2022 presented at Aiwan-e-Iqbal, where the Punjab government had presented the budget instead of the provincial assembly, tax relief has also been extended to small businesses besides no increase in the existing tax slabs in the province.

Meanwhile, an amendment proposed in the Punjab Motor Vehicles Taxation Act, 1958, includes provisions for imposition of tax in the Schedule to the Act ibid on the electric vehicles proportionate to their power in kilowatts. In this regard, an equation for conversion of kilowatts into engine power in cubic centimeters (cc) has also been devised for determination of power of those electric vehicles that are not specifically included in the said provisions of the Schedule. Despite making proposal for imposition of the said tax, it has been proposed on the analogy of the financial year 2021-22 that 95 percent exemption on such tax shall be given till 30 June 2023. This proposal, among other targets, will facilitate and promote registration of electric vehicles, in turn, leading to a considerable improvement in environment.

The legislative proposal contains provisions for ending the exemption given to student internet package as such exemption has become redundant since no telecommunication service provider is providing student packages anymore while this exemption is no more beneficial for anyone; rather such exemption may help in tax evasion resulting in loss of revenue. Further, it has been clarified that the services of real estate aggregators are included in information technology-based services while the services provided by cab aggregators are included in ride-hailing services.

For ease of doing business, the limit of input tax adjustment is proposed to be increased from 80 percent to 90 of the output tax. A number of provisions regarding limit of input tax adjustment, penalties and time limitation are also part of the legislative proposal seeking amendments in the Act XLII of 2012.

In order to achieve a more progressive taxation, enhanced rates for tax on luxury houses have been introduced for houses above a certain size with the completion of construction date from 01.07.2022.

For purposes of promoting e-payment of urban immovable property tax and motor vehicles tax, a discounted rate of five percent has been proposed as introduced previously. Besides, surcharge and penalty for property tax and motor vehicles tax have also been rationalized by shifting them to the payments made during the last two quarters of the financial year. Provincial Minister Sardar Awais Khan Leghari, who presented the provincial budget, said the government has decided to continue with its policy of reduction in tax burden on poor segments while shifting it to the affluent classes of the society.

He said the fundamental theme behind the tax scheme of the province is to bring rich segment of the society to the tax net while exempting the deserving and low income sections of society. Similarly, a revised e-auction policy has also been introduced in the bill for the auction of attractive numbers of vehicles during the upcoming fiscal year.

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Delay in taking vital decisions fuelling inflation, says PBIF head

Published June 16, 2022
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KARACHI: Delays in important decisions are fuelling inflation which could increase from the current 13 percent to 23 percent, Chairman of the National Business Group Pakistan and President of Pakistan Businessmen and Intellectuals Forum (PBIF) Mian Zahid Hussain has warned.

He further said that Pakistan needs $ 41 billion in the current financial year while presently foreign exchange reserves are barely enough for 45 days of imports. It is impossible to stabilise the situation in the presence of existing policies.

So far the government has failed to convince the International Monetary Fund (IMF) to provide $ 900 million and the friendly countries are in no mood to finance our deficits.

Regarding the conflicting statements, he said that the government claims to keep inflation at 11 percent but at the same time it will be raising the price of oil and gas. It has also hinted at imposing heavy taxes on oil, gas and other commodities which will increase inflation further.

It has been claimed that the growth rate will be kept at 5 percent but at the same time reduction of imports has also been announced. If imports are low, the growth rate will also be affected as most of the revenue comes from imports.

An increase in tax revenue has also been claimed but if imports are less then tax collection will also be reduced. The government has allocated Rs 800 billion for PSDP in which a lot of deductions will have to be made to balance the budget.

Zahid Hussain said it does not benefit a country with a sinking economy to violate the agreement with IMF in the budget. Continued violation of the agreement with the lender is an irresponsible act which should be addressed as soon as possible.

He said that the ambiguities and contradictions in the budget should be removed immediately so that it could become a workable document.

Talking to members of the business community, the veteran business leader said that the country was on the brink of disaster but important economic decisions were still being taken on political grounds, which was astonishing.

Many issues, including those pertaining to revenues and expenditures, remain unclear in the budget, while the IMF has reservations about oil subsidies, current account deficits and direct taxes, he added.

It is impossible to get a loan from the IMF unless the government responds to the reservations of the lender.

Zahid Hussain said that Finance Minister Miftah Ismail has admitted that IMF is not happy with some budget proposals but still no adjustment is being made, which is worrisome as it is affecting the economy and the value of the rupee.

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Education sector projects get Rs52.5bn

Published June 16, 2022
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LAHORE: The Punjab government in its Annual Development Programme (ADP) for 2022-23 has earmarked a total sum of Rs480.13 billion for the education sector out of which only Rs52.5 billion was set aside for developmental projects.

According to the budget document, the provincial government has allocated Rs 421.06 billion for the school education sector out of which Rs 382.06 billion were set aside for current expenditures. Similarly, the government has allocated Rs 59.07 billion for the higher education sector. Of them, only Rs 13.50 billion were proposed for uplift projects.

For the school education sector, the biggest allocation of Rs 21.5 billion was proposed under the head of “imparting education through private participation” (PEF) which aimed at improving enrolment of children in schools amid lack of government infrastructure.

Similarly, the second largest allocation of Rs 4.8 was proposed for imparting education through outsourcing of public schools, followed by allocation of 3.84 billion for afternoon schools programmes.

As per the budget document, the government would spend Rs 500 million on the re-construction/revamping of dilapidated school buildings, Rs 1 billion on the construction of additional classrooms, Rs 500 million on provision of missing facilities, Rs 500 million on construction of shelter-less schools in Punjab and Rs 1.5 billion for Daanish Schools and Centres of Excellence Authority.

On the other hand, the government has allocated a total of Rs 59.07 billion in the ADP for the higher education sector. Of them, only Rs 13.50 billion were earmarked for uplift projects while the remaining Rs 45.57 billion were set aside for current expenditures.

The budget document says that the government will spent Rs2 billion on the establishment of Waris Shah University in Sheikhupura, Rs2bn on the establishment of Chunian University in district Kasur, Rs2bn on provision of classrooms along with furniture to graduate and associate colleges, Rs1.5bn on provision of missing facilities, Rs1.5bn on provision of laptops, Rs1bn on the establishment of Punjab University campus in Daska, Rs800 million on the establishment of Chemical Block at Khawaja Fareed University of Engineering & Information Technology Rahim Yar Khan and Rs700 million for Punjab Education Endowment Fund (PEEF).

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Three major revenue measures may be challenged in court: Shabbar

Published June 16, 2022
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ISLAMABAD: Three major revenue measures (direct taxes) of the Finance Bill, 2022, having accumulated revenue impact of Rs76 billion may be challenged in a court of law.

Former Chairman Federal Board of Revenue (FBR) Shabbar Zaidi told Business Recorder that the proposed tax on deemed income of non-productive immovable property to generate Rs30 billion and two percent Poverty Alleviation Tax on high earnings of all persons to raise revenue of Rs38 billion are expected to be challenged in courts.

Similarly, one percent Capital Value Tax on foreign immovable properties of Pakistani residents having revenue impact of Rs8 billion may also be challenged in courts.

He stated that a special tax for tax year 2022, other than income tax has been levied on all persons including companies and AOP’s where the income exceeds Rs300 million at the rate of two per cent of such income taxable under the Income Tax Ordinance, 2001.

The income for the purposes of this tax will be determined on taxable income other than brought forward depreciation, brought forward amortisation and brought forward losses. This provision will also be applicable for income determined under the Fourth, Fifth and Seventh Schedules for insurance, oil exploration and banking companies.

Tax in the similar nature was levied for the rehabilitation of displaced persons which was challenged before the Sindh and Lahore High Courts. Both the High Courts upheld the validity of this levy, and the matter is pending before the Supreme Court for decision.

According to him, the Capital Value Tax 2022 has been levied on the capital value of domestic and foreign assets under the Finance Bill, 2022. In case any immovable property falls within the purview of this CVT then is clearly invalid as the same has been devolved under the 18th Amendment to the Constitution. The Federal Government is not empowered to levy taxes on capital value of immovable property under Article 50 of the Federal Legislative List of the Fourth Schedule to the Constitution. Therefore, the Capital Value Tax 2022 on domestic and foreign assets can only be levied on moveable properties.

Zaidi raised questions about the right to tax immovable properties outside Pakistan. The question is whether or not the Federal Government has the right to tax capital value of any immovable property if that property does not fall within the areas of any provinces. The citizens of Pakistan cannot be taxed on the capital value of immovable properties outside Pakistan by the Federal Government.

Moreover, Capital Value Tax was levied by the federal government in 1989 on transactions relating to the acquisition of immovable properties. This tax which was effectively a tax on immovable property was devolved by the 18th Amendment and then adopted by the provincial governments.

Talking about the taxation of non-productive immovable property, the former chairman FBR added that for the tax year 2022 wealth tax in an indirect method on immovable property situated in Pakistan has been reintroduced. Under the proposed system all immovable property valuing above Rs25 million (other than a house for own residence) will be subject to a deemed tax. The income for such deemed tax will be five per cent of the fair value of such property. The tax rate will be 20 per cent of such income. This means that under the new section a wealth tax at the rate of one per cent has been levied under this provision. Under Entry 50 of the Federal Legislative List of the Constitution the Federal Government is not entitled to tax capital value of immovable property.

Therefore, this tax is not constitutionally valid and will be struck down in courts keeping in view Entry 50 of the Federal Legislative List, Zaidi added.

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Punjab allocates Rs5.54bn for energy sector

Published June 16, 2022
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LAHORE: The Punjab government has allocated Rs 5.54 billion for energy sector in the annual budget for the fiscal year 2022-23 out of which Rs 0.54 billion is for non-development expenditures while Rs 5 billion for development schemes.

According to details, Rs 2.20 billion has been allocated for design and construction of net zero energy building, followed by Rs 3.43 billion for energy efficiency and conservation programme, Rs 1.53 billion for Punjab Ujala programme, Rs 1.09 billion for solarisation of basic health units, Rs 8.25 billion for Khadim-e-Punjab Ujala programme, Rs 385 million for solarisation of 35 THQs and 100 RHCs, Rs 250 million for solarisation of schools for special children, and Rs 200 million for provision of biogas digesters in villages.

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Punjab govt proposes Rs13.76bn for forestry, wildlife and fisheries

Published June 16, 2022
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LAHORE: The Punjab government has proposed allocation of a total budget of Rs13.76 billion for forestry, wildlife and fisheries collectively for the year 2022-23 out of which Rs7.17 billion are proposed for the non-development and Rs6.59 billion for the development sector.

As per the budget documents, Rs1100 million development budget has been proposed for the fisheries sector to be spent on 14 ongoing and new schemes. Out of this Rs1,006 million has been proposed for 11 ongoing schemes and Rs93.321 million for three new schemes.

Similarly, Rs990 million has been proposed for 14 ongoing and new schemes in the wildlife sector with allocation of Rs740 million for seven ongoing and Rs249 million for seven new schemes.

A sum of Rs4.5 billion have been earmarked for 27 schemes of the forestry sector in the budget 2022-23 out of which 3.787 billion will be spent on ongoing schemes and Rs712 million have been earmarked for 10 new schemes.

Prominent schemes in these sectors are establishment of Dargai Gill forest Park at a proposed cost of Rs459.69 million, establishment of Biodiversity Hotspot for conservation of Rare Cholistan Desert Ecosystem at a cost of Rs370 million and strengthening of Protection Regime in Changa Manga Irrigated Plantation at a cost of Rs396.5 million. Besides, work will be carried on project of livelihood improvement and Green Job creation through ecosystem restoration in Punjab at a cost of Rs2 billion, revival of wildlife resources in Punjab under Green Pakistan Programme at a cost of Rs2.94 billion, cage culture cluster development project at Rs1.47 million, pilot shrimp farming cluster development project at a cost of Rs2.64 billion while the budget document shows that work will also continue on Ten Billion Tree Tsunami Programme during the year 2022-23.

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Democracy didn’t work either

Published June 16, 2022
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So, there’s going to be no snap election. Imran Khan’s call for the second, decisive march on the capital never came, though he’s still threatening it, and soon enough “imported government” and “foreign conspiracy” will also become stale.

But what does that matter?

Look at it, for a moment, from the people’s point of view. Most of the two-hundred-many-million strong that give the Islamic Republic one of the highest population growth rates in the world and who couldn’t take their minds off of the price list if they wanted to.

This, then, just means that the PML-N (Pakistan Muslim League-Nawaz) government will now take the country closer to bankruptcy, default, ruin, and all that, instead of the PTI (Pakistan Tehreek-e-Insaf) administration over the next year or so. For them (people), nothing changes at all because literally every administration opts for an IMF (International Monetary Fund) bailout programme, implements its excruciating structural adjustment for a while, and then abandons it just before the next election.

Now, though, the situation has reached a breaking point. If you kick the can any further down the road and try to delay implementation of the Fund’s harsh conditions, there’s going to be certain default – something Finance Minister Miftah Ismail finally coughed up at a press conference the other day. But things have come to such a pass only and only because no government ever took the trouble of devising policies to expand and add value to the export basket and give the trade balance a shot in the arm in all these years.

The fact that it is budget time ought to make this thing easier to understand.

Nobody did that, just like the previous government did not do it, because such things require a lot of short-term pain for lasting, long-term benefits. And the problem is that the next election arrives a lot sooner than there’s even a hint of good times down the road.

Plus, in a parliamentary democracy like the one we’re so proud to have at last, there’s always the opposition breathing down your neck. Give the people any pain at all, even if it’s for their own benefit eventually, and you’d have the other lot that’s dying to come to power nailing you on crosses all over the campaign trail next time.

That explains why Imran Khan took Nawaz Sharif to the cleaners for his high-visibility, high-cost projects that allegedly looked good on the resume but wasted more money than they earned and then did pretty much the same things when he came to power. It also explains why, if you observe enough surveys, you come to understand that just about the only difference that different governments or leaders make for most people is that they give them a different name to assign blame for all the problems of the time to; which are also more or less the same even at different times.

That’s why the governments the people vote in cannot take the difficult decisions that are needed to give the economy enough strength to turn around in a few years. That’s not all. The institution of democracy has not just not done us much good, despite all the sacrifices all the politicians claim to have made for it all the time, it has also done us much harm; especially lately.

The no-confidence motion against Imran Khan was, after all, perfectly constitutional and, technically at least, in keeping with the finest democratic traditions of the advanced world. Who’s to blame, then, if the former prime minister very cunningly laid what former interior minister Sheikh Rashid recently referred to as “economic landmines” by suddenly reducing and then freezing petrol and electricity prices?

In an instant, it derailed the IMF programme. And the press didn’t talk about it much at the time, but it also put the Saudi loan and oil facility in very serious danger; since it was contingent upon the bailout programme. And the former PM and his associates were the only people laughing when the new PM initially resisted raising prices, out of fear of severe public backlash which PTI was itching to exploit, even as it did very serious harm to the economy.

Long years of military rule might not have done the country much good. But equally long years of representative democracy haven’t done the people much good either. And since a nation is its people, these people ought to figure out newer, better systems for themselves because soon enough this debt and the interest on it will become unpayable and the country will have to default.

And since government of the people, for the people, etc., didn’t quite work out either, whatever could be next?

Copyright Business Recorder, 2022


Punjab budget presented in parallel session

  • Provincial minister Sardar Awais Leghari while presenting Rs 3.226 trillion provincial budget for the fiscal year 2022-23 termed it a 'pro-poor and pro-development
Published June 16, 2022
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