Economics URC
NEWSCLIPPINGS
JULY TO DECEMBER 2019
ECONOMICS
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Budget madness
IT might be one of the most consequential budgets passed by any government in recent times, yet it is surprising to see how little of its most important aspects have been discussed. The budget is built around a massive hike in revenues and an accompanying need to keep current expenditures in check, with the express purpose of bringing down the primary deficit as per the preconditions set by the International Monetary Fund. Many of the projections in the budget are surprising, such as the overall fiscal deficit remaining elevated at 7.1pc of GDP, only slightly below the level in fiscal year 2019, while inflation is projected to rise to almost 13pc and GDP growth to slow to 2.4pc by the end of this fiscal year. Those who understand would know that something stunning is being described in these numbers. The numbers talk of rising inflation and unemployment and a government struggling hard to do everything in its power to meet its obligations to its creditors. Yet very little of this emerging situation was discussed during the budget debate, where the most highlighted portion of the exchange centred on the speaker‘s ruling disallowing the use of the words ―selected prime minister‖ in the course of the proceedings.
The tax plan also deserved in-depth discussion. A closer look shows that the burden of the incremental revenues for the year disproportionately falls on salaried people, and is followed by a vigorous attempt to net undisclosed incomes of industrialists and small and medium enterprises, and to document trader incomes. All this is fine and necessary. Tax evasion and undocumented businesses have become a way of life in this country, and the FBR chairman‘s repeated insistence that somewhere around 30pc of all bank accounts are, in fact, benami accounts may well be true. But the wisdom of doing all this in one go, on the back of a vigorous and muscular implementation strategy that seeks to intimidate people into compliance more than anything else, deserved a thorough debate in parliament. Traders and business people understandably felt that parliament and the opposition parties were too busy with their own issues to be responsive to the genuine concerns of their constituents.
Those concerns revolve around jobs, cost of living, ease of doing business and harassment by government officers, to name a few. This budget and its accompanying finance bill are about to aggravate all these issues simultaneously. The wheels that are ready to be set into motion are larger and more menacing than anything we have seen in well over a decade. That is what makes the budget so significant, yet it sailed through parliament with hardly any imprint being left by the opposition. Let‘s hope politics is not becoming irrelevant to the real-life concerns of the very people it is supposed to serve. (By Editorial Dawn, 06, 01/07/2019)
Worried about your job prospects? This man can help
Starting your career can be quite a daunting process. Most corporate entities require candidates to have prior experience, even if they are hiring for starting roles. Then there is the cumbersome application process, interviews and probationary period.
At each step of this selection process, the candidate is judged for various qualities – many of which they haven‘t been prepared for in their academic careers.
Muhammad Jaffar Khan, a resident of Karachi, realised these pressures as soon as he graduated from college. For the last 14 years, he has been striving to make the transition from student life to a professional career a little easier for fresh graduates.
Around 14 years ago, Khan founded the Karsaz Education and Welfare Organisation, which provides trainings and certification to aspiring professionals or those who want to advance in their career. Essentially, the courses aim to bridge the gap betwee n theoretical knowledge and its practical application – something that most varsities in the country barely think about.
The idea When Khan completed his MBA from Hamdard University in 2004, one of his teachers advised him to ensure he ‗closed‘ all the courses required for the degree. What the teacher basically meant was that he should get professional certification for the courses he had undertaken during his MBA.
Khan got certifications for almost 30 out of his 34 courses. The certifications were provided by professional institutes and they cost him hundreds of thousands of rupees. ―I was able to afford it because I came from a business-oriented family,‖ he told The Express Tribune. ―But then I thought of my fellow students who were unable to pay the fees for these kinds of courses.‖ The idea had struck a chord and Khan decided to do something about it.
At first, he started providing guidance and consultation for students of various colleges and universities on a voluntary basis. Soon, he enlisted some friends and they started providing the training courses on a much larger scale.
―The most common complaint among youngsters is that they don‘t receive calls after submitting their CVs and giving interviews,‖ said Khan. ―The main reason for this is that the youngsters are not making any value additions to their skillset.‖ For exampl es, most candidates who apply for a particular job don‘t even bother to read the company‘s mission statement or its vision. ―Many aspiring candidates fail to stand out in terms of their presentation skills, body language, dress code and physical appearanc e,‖ said Khan. Moreover, they are unaware of the responsibilities of the role they are applying for. They have little knowledge of current affairs, the market and the country‘s economy. ―These are all valuable additions to your profile when you walk into t hat interview room,‖ he said.
KEWO This is where Khan‘s organisation – the Karsaz Education and Welfare Organisation – steps in. ―The idea behind this organisation was to aid students develop soft skills as well as provide them professional trainings,‖ Khan told The Express
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Tribune. Over the years, he has enlisted the help of top professionals from renowned multinational companies who voluntarily teach professional courses at the organisation.
According to Khan, most centres charge anywhere north of Rs100,000 for these courses and certifications. KEWO charges no fee for any of the 87 courses it offers in 20 different categories.
Over the years, over 30,000 students have benefitted from the guidance of the 140 professionals associated with Khan‘s organisation. In response to a question, Khan says that the male-to-female ratio of these students is almost half.
Besides, Khan has also signed memorandum of understandings (MoUs) with over 30 companies to provide assistance to the students in getting job placements. The students are sent for internships to these companies and many of them have ended up with job letters based on their performance.
Need of the hour Khan believes that the demand for skilled manpower is rapidly increasing in Pakistan. Export-oriented firms need employees to meet the requirements of human resource management in order to meet the international standards of certification (ISO).
Similarly, larger conglomerates need their staff to be trained in basic life support and rescue efforts – something that is quite unheard of among fresh graduates. Today, the largest demand for manpower arises from the IT, engineering and textile sectors, says Khan.
Besides, there are ample opportunities for quality control experts in the food sector but there is a dearth of trained profes sionals in the field. KEWO is currently offering special courses to bridge this gap.
Building on what it has accomplished thus far, KEWO is now looking to expand and Khan wants to work with the provincial and federal government to make the courses available to more students. It also enjoys the support of the Employers Federation of Pakistan.
Besides, KEWO has recently entered into a contract with the government of Sindh under which a call centre facility will be established for training and consultation of youngsters in the province.
For Khan, the centre may have achieved more than he set out for, but there is still a long way to go. ―The idea is to improve the standard of available manpower in the power, and at the same time, eliminate poverty through the provision of employment opportunities.‖ (By Kashif Hussain The Express Tribune, 04, 01/07/2019)
Reading the IMF programme
THE executive board of the IMF has approved Pakistan‘s request for accession to a three-year, $6 billion programme. The programme now begins and the first tranche of the money will be transferred into State Bank accounts within days.
Equally important, the programme document that details all the commitments agreed to between the Fund and the government of Pakistan will be uploaded onto the Fund website, also within days. This is a crucial document and all those with a keen eye on Pakistan‘s economy, and with an interest in knowing where things are expected to go in the future, will give it a careful read. So I thought I‘d share some tips on what sort of things to look for in the document that a layperson could understand, and that will reveal important details about what to expect for the next three years. This is not some sort of a definitive list, and others may well point out other areas that will also be of critical interest.
First thing I would look for are the projections contained in the document for the external financing requirements of the country over the next three to five years. Since debt and its management have become such a critical agenda item in this government‘s economic self-awareness, this figure will tell us what sort of dollar inflows will be required all this year and the next two years to manage financing requirements. These include debt-service obligations, repayment of principal amounts as well as private-sector liabilities that will need to be met from the country‘s foreign exchange reserves.
The fact that this programme has been drawn up after an in-depth examination of CPEC financing requirements means that in this programme document we will get a first, authoritative look at what sort of financing commitments Pakistan has to meet to pay for CPEC investments under the early harvest programme that have been by now largely completed.
To understand the figures and projections given in the programme it would be helpful to see how this figure has been reported in previous IMF documents.
To understand the figures and projections given in the programme document it would be helpful to see how this figure has been reported in previous IMF documents. I have written about this in the past but it is important and bears repeating.
There are three Fund documents prior to the one that is about to be released where the projections for external financing requirements are given, and these vary sharply in each. One is the post-programme monitoring report issued in March 2018, after
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Pakistan had completed a three-year programme that began in 2013. The other was an Article IV report released in July 2017. And the third is the last review of the previous IMF programme that was issued in October 2016. Between them, these three documents provide three separate snapshots of what the projections were saying for Pakistan‘s gross external financing requirements, and something interesting happened when you looked at all three one after another.
In October 2016, the projections showed that Pakistan‘s external financing requirements will rise from $15.8 billion in FY2019 to $17.5bn in FY2020. For perspective, we have just completed FY2019 and have just begun FY2020.
By July 2017, the projections in the Article IV report showed that the same requirement will rise from $16.9bn in FY2019 to $20.5bn by FY2020. And then, less than a year later, when the post-programme monitoring report was released in March of 2018, external financing requirement for FY2019 was projected at $27bn, rising to $33.8bn by FY2020.
What this means is that projections on external financing requirements, which includes financing the current account deficit, debt amortisation and payments of short-term debt from the previous period, nearly doubled between October 2016 and March 2018 (less than two years). What exactly drove this increase was never explained, nor do I know of anyone who went digging into these numbers.
Suffice it to say that in the latest of these reports, the current account deficit was projected to come in at $15.7bn in FY2018 whereas in reality it came in closer to $19.9bn, so the real figures given in the report to be released in the next few days will be higher still.
The latest projections from the monitoring report of March 2018 projected these requirements rising sharply in the years to come. In FY2023 (three years forward) the projected external financing requirement was shown as $45bn in the March 2018 report. The report to be released in the next few days will be the next snapshot we have on this figure, and if it is considerably higher, we will know that questions need to be asked about the drivers of this increase.
Of course, economic numbers don‘t make sense on their own. They either make sense when shown in a series or as a proportion.
So the next thing to look at will be what the projections are showing about exports (not that those often pan out), and foreign exchange reserves over the programme period. If that gets too technical for lay readers, it is enough to leave it at this: keep an eye out for this figure (gross external financing needs). If it has risen significantly beyond what the last projections were showing, we‘ll know something is up.
Beyond this, the fiscal deficit figures will be important. The government has launched a ferocious budget that seeks a historic increase in revenue collection. If the fiscal deficit targets for the subsequent two years of the programme are similarly fierce, we‘ll know the ferocious hunger for revenues is here to stay for a while longer.
Of course, the key in all these programmes is the structural reforms that the government commits to. Those are also the ones they never deliver. So if you‘re feeling enthusiastic and earnest, go ahead and peruse what the commitments are regarding the state- owned enterprises, especially in the power sector. (By Khurram Husain Dawn, 06, 04/07/2019)
Back to the IMF
WITH only the faintest hint of ceremony, this week Pakistan entered its 13th IMF programme since 1988.
That date is significant because that is when the first of the programmes was signed that contained the conditionality for structural reforms. It sought deep reform in the tax system as well as privatisation-related conditions, liberalisation of the foreign currency transactions and the mechanisms for raising government debt, in addition to reforms in gas and power pricing and a move away from a pegged towards a more market-determined exchange rate.
Each programme since then has carried these two dimensions: macroeconomic adjustment meaning more taxes, exchange rate depreciation and interest rates hike followed by structural reform. And in each case the story has played out in the same way: the government takes the money, imposes massive hardships on the population through austerity and ‗demand compression‘, then reneges on its commitments for structural reform through a patchy implementation, at best.
This cycle has repeated itself so often now that if we were to add up all the years since 1988 that Pakistan has spent inside an IMF programme, we would find that the country has spent more time inside than outside Fund programmes. And now we are gearing up for one more round.
The new Pakistan that the ruling PTI promised has kicked off with the oldest of stories — an IMF programme and solemn invocations of a familiar mantra ie ‗we inherited a broken economy‘. At least the former finance minister — Asad Umar — had the courage to acknowledge this and promised that this would be Pakistan‘s last IMF programme, meaning he intended to ensure that this cycle of eternal return to the Fund would be broken.
His replacement — Adviser to the Prime Minister on Finance Hafeez Shaikh — who is an insider in the world of whispers that is the IFIs of Washington D.C., has made no such commitment.
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It appears his brief is limited to ensuring that the adjustment dictated by the Fund is implemented regardless of the cries of pain from the factories, markets and streets of Pakistan. The only structural reforms that he is talking about at the moment is to ensure further revenue mobilisation, and perhaps a plan later this year to figure out what to do with the state-owned enterprises. So much for the Sarmaya Company that was such an integral part of the PTI‘s election promises.
The finance adviser is preparing us all for what he says are ‗difficult decisions‘ ahead, decisions that are his to make and, sadly, ours to suffer. In fact, there is a difficult question that he himself must answer: is he willing to commit on record that after this, Pakistan will never need another IMF programme again? Unless he answers that question, all the talk about ‗difficult decisions‘ will ring hollow. (By Editorial Dawn, 06, 05/07/2019)
Rising fuel prices
The current trend of price rise seems to be interminable. On June 1, the prices of petrol and HSD were increased. On July 2, the price of CNG was increased by Rs20 a kg in Sindh, pushing up the price of the fuel to Rs123 a kg. CNG is now widely used in buses, freight trucks and cars. So the hike in CNG price will result in an increase in public transport fares, but this will be only a minor part of the overall impact of the fuel price rise on the economy. It will most significantly impact transportation of goods, thereby increasing the prices of all commodities, especially those of basic food items like wheat flour, rice, edible oils, lentils, sugar, etc. An increase in fuel rates pushes prices of all commodities, fuelling further inflation which is already high in Pakistan. This won‘t be a demand-pull inflation but a cost-push one.
The Karachi Transport Ittehad, a transporters‘ association, has announced that they will observe strike on July 10 to protest against the CNG price hike and to press the government for a proportionate increase in bus fares. Transporters want an increase of at least Rs10, because besides the increase in CNG price, the provincial government has increased the charges for route permits and vehicle tax. Further, now imported spare parts cost more due to the rising rupee-dollar parity. The ride-hailing services have already announced a five per cent increase in fares.
Now people in Pakistan are being crushed by the twin menace of ever-increasing taxes and inflation. The rising inflation would result in declining demand for goods and services. This will increase unemployment. Inflation has a negative multiplier effect. This is a depressing scenario. It is time for the government to tame inflation and keep its taxation policy in line with the taxable capacity of the people. Inflation does not benefit anyone. No government can defend it. (By Editorial The Express Tribune, 16, 05/07/2019)
Tax amnesty scheme
The Federal Board of Revenue (FBR) has started cracking down on benami property holders and attached billions of rupees in assets as the PTI government‘s tax amnesty scheme approached its deadline. The move came after Prime Minister Imran Khan issued directions to FBR Chairman Shabbar Zaidi to begin pursuing the holders of benami assets. Oddly enough, reports also suggest that the prime minister asked the FBR not to harass the business community or industrialists.
That begs the question: how many billionaire school teachers and milkmen are there in the country? Because one thing remains abundantly clear — planners in Naya Pakistan, like Purana Pakistan, will not tax the hands that fund them. Much of the agriculture sector remains heavily subsidised and untaxed, despite most of the richest Pakistanis — both declared and undeclared — having minted their millions and billions in agriculture. This should not be a huge surprise, considering that every major party is financed by agriculturists, and many of the most powerful ‗farmers‘ have seats, spouses, or frontmen in Parliament.
Interestingly, with the amnesty period expiring, it has now been revealed that the PTI government has stopped chasing people who have stashed around $7.5 billion in 152,000 offshore bank accounts and whose names have been shared with Pakistan by the Organisation for Economic Cooperation and Development (OECD). The reason claimed was to give them a chance to avail the amnesty scheme before the government went on the offensive. But if this was the case, the amnesty cannot be considered a success.
Only 130,000 or so people availed the scheme and paid just Rs60 billion in taxes. Of the total declarations filed, nearly 80% were related to domestic assets. For comparison, the last tax amnesty scheme, offered by the PML-N government, had been availed by 83,000 people who paid Rs124 billion in taxes. Couple this with the fact that the initial raids on benami assets — which were ostensibly tied to the end of the amnesty scheme — almost universally seem to be directed at politicians, so doubts are again raised over the point of the scheme. (By Editorial The Express Tribune, 16, 06/07/2019)
Workers, activists denounce federal budget, demand better wages, pensions
People from all walks of life, including labourers, home-based workers and rights activists, observed a ‗black day‘ by holding a rally from Regal Chowk to the Karachi Press Club on Saturday against the terrible price hike. Chanting slogans, they also voiced their agony about not getting water, electricity and gas despite paying the bills through their noses.
The rally, organised by the Home-Based Women Workers Federation and the National Trade Union Federation, criticised the recent federal budget, which they said was made in collaboration with the International Monetary Fund and that it was going to break the
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There were demands for the minimum wage of workers to be set at Rs30,000 at least. ―Otherwise we are going to starve!‖ screamed one protester. ―We don‘t even have money to feed our children. How are we to send them to school?‖ she said.
Call for minimum wage to be set at Rs30,000
Further demands by the protesters included a 30 per cent increase in the salaries and pensions of government employees, making pensions equal to minimum wages, more hospitals and schools to be set up with a reasonable public transport system.
―The country is suffering because of the bad choices and poor policies of the government. Why should the common people have to bear the brunt of that?‖ said another protester.
―According to this new budget, there will be up to a 200 per cent increase in our utility bills. Now we have to make a choice between eating food to stay alive or paying utility bills,‖ said a woman who had copies of her electric bills with her. ―We only have two fans and three or four lights in our small home with a small fridge, but look at the astronomical bills we receive,‖ she said showing the bills which were all more than Rs10,000.
Others there wanted to know: ―Where are the people displaced due to the Karachi Circular Railway scheme to go?‖ ―What are the poor shopkeepers displaced in the name of removing illegal encroachments to do?‖ And ―Who is going to pay for the devaluation of the rupee?‖ (By The Newspaper's Staff Reporter Dawn, 07/07/2019)
Pakistan to get $1.65bn net receipts out of $6bn IMF package
Pakistan will get net receipts of about $1.65 billion in four years from the International Monetary Fund (IMF) under the just concluded $6bn bailout as it delivers on a steep macroeconomic adjustment plan.
A senior government official told Dawn that beginning this year Pakistan will receive a total of $6bn in about three years ending 2021-22 from the IMF, while it has to repay about $4.355bn in four years ending 2022-23, showing net receipts of $1.65bn.
He said the government is expected to receive first disbursement of about $1bn this week under the $6bn Extended Fund Facility (EFF) that would boost the foreign exchange reserves in the short term, but its repayment obligations under the previous $6.4bn EFF have already begun.
Islamabad has to repay about $4.35bn in four years
The Fund‘s previous EFF had envisaged a repayment period ranging between four-and-a-half years and 10 years, with repayments in 12 equal semi-annual installments. The 12 disbursements by the IMF had started during the fiscal year 2013-14 and completed in September 2016. The repayments under that programme started in March 2019 with $532 million, including $70m interest charges, and will continue until June 2026.
Therefore, in the near term net inflows during the 39-month period of the programme from the IMF are estimated at $2.72bn. Pakistan will receive $2.3bn during the current fiscal year, followed by $1.847bn next year (2020-21) and $1.847bn in 2021-22. During the current fiscal year, Pakistan has to make repayments of $1.045bn, followed by $1.167bn in 2020-21 and $1.06bn in 2021-22. This means the net inflows will amount to $1.26bn during the current fiscal year, followed by $680m next year and $786m in 2021-22.
In contrast, there will be no inflows from the IMF during the fiscal year 2022-23, but $1.08bn repayments to the Fund will be due that year. After accounting for $532m repayments last fiscal year and due until 2022-23, Pakistan‘s inflows from the Fund will be $6bn against the outflows of $4.9bn, meaning net inflows of just $1.1bn over the five-year period.
However, the programme is expected, in the words of the IMF, ―to coalesce broader support from multilateral and bilateral creditors in excess of $38 billion, which is crucial for Pakistan to meet its large financing needs in the coming years‖.
This will include about $8.7bn project loans, $4.2bn programme loans (mostly from the World Bank and the Asian Development Bank), about $14bn of rollover loans (from Saudi Arabia, the UAE, China, Qatar and Islamic Development Bank) and up to $8bn in commercial loans. This will also include borrowing from the international capital market at least $1bn per annum.
As part of the IMF package, Pakistan has committed a comprehensive reform programme to stabilise the economy and lay the foundation for a robust and balanced growth. That would mean the economic growth rate going down to 2.4 per cent during the current fiscal year, compared to 3.3pc of GDP last year ending June 30, 2019.
Likewise, the rate of inflation has been projected at 13pc under the IMF programme. The authorities have promised the keep the State Bank of Pakistan‘s policy rate at least 1.5pc higher than the projected inflation. This means the policy rate will further go up to 14.5pc from 12.25pc at present.
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Also, the fiscal deficit will stay stagnant at about 7.1-7.3pc, while general government debt will further go up to almost 77pc of GDP during the current year, up from about 75pc of GDP last year. The current account deficit is estimated to reduce from 4.6pc of GDP to 2.6pc during the current year.
The government has promised in writing a decisive fiscal consolidation to reduce public debt and build resilience, starting with the adoption of an ambitious FY2020 budget. The adjustment will be supported by comprehensive efforts to drastically increase revenue mobilisation by 4-5pc of GDP at the federal and provincial levels during the 39-month period.
The government has also agreed to ensure a flexible, market-determined exchange rate to restore competitiveness, rebuild official reserves and provide a buffer against external shocks. This will be supported by an appropriate monetary policy to shore up confidence and contain inflation, conducted by an independent central bank.
The authorities will also ensure energy sector reforms to eliminate quasi-fiscal losses and encourage investment, including by depoliticising gas and power tariff setting and within three years gradually bringing the sector to full cost recovery.
The structural reforms will be ensured through strengthening institutions, increasing governance and transparency and promoting an investment-friendly environment to improve productivity, entrench lasting reforms and ensure sustainable growth. (By Khaleeq Kiani Dawn, 01, 08/07/2019)
Will CPEC survive the IMF bailout?
The staff report released by the International Monetary Fund (IMF) last week must have provided some measure of comfort to the champions of the China-Pakistan Economic Corridor (CPEC) as well as China that chose Pakistan to be the first key destination for the Belt and Road Initiative (BRI), which aims to sustain its economic triumph and realise future ambitions.
If this is just a coincidence, it is intriguing. After a long lull, there is light blipping again on the CPEC drawing board. Last Friday, a 55-member Chinese delegation of business executives met Prime Minister Imran Khan and reportedly committed to ploughing $5 billion investment over the next five years. ―Probably the interaction with the Chinese delegations was already planned, but the fact that it did materialise as soon as details of the IMF deal were made public kindled new hope for the future,‖ commented a top leader of the government‘s economic team.
In its staff report following the approval of a three-year $6bn bailout programme, the IMF mentions the repayment of $14.68bn due for $21.8bn bilateral and commercial loans that Pakistan owes to China. This is almost 24pc of the country‘s total $85.8bn external debt and liabilities. The document states that the Chinese commercial debt will be fully retired by the end of the programme in 2022 while the bilateral debt ($15.5bn) will be almost half of what the country owes at this point to $7.9bn.
There is no official word from China on the apparent slow pace of CPEC projects. Its enthusiasm somewhat waned for want of clarity on the post-election economic direction
Sometime back, the United States explicitly expressed its dismay over the possibility that Pakistan could use the Fund‘s money to pay back Chinese loans. The US stance exasperated the anxieties surrounding the multibillion-dollar China‘s investment plan. The CPEC did stimulate growth and motivated economic drivers by removing infrastructure bottlenecks before the start of the current tumultuous phase in May last year.
There is no formal word on the issue from China. The enthusiasm of the dependable friendly nation did somewhat wane for want of clarity on the post-election economic direction. There were concerns about the intent of the new set of rulers on the pledges by the PML-N government regarding CPEC-related projects. The initial statements by members of Prime Minister Khan‘s economic dream team where they questioned the sealed deals must have added to the confusion. How far the visit helped to allay China‘s reservations is anyone‘s guess. But the optics are lacking if China is still as upbeat on the CPEC as before.
China prefers to speak with its silence most of the times. However, people in the know of things in Islamabad said that China did remind the current government, at some point, of the grave consequences of reneging on the earlier signed contractual obligations.
Approaching the relevant Chinese officers supervising the CPEC was a vain exercise as earlier efforts proved useless. It became apparent quickly that China feels neither keen nor obligated to share the details of its multiple deals. It sees no value in entertaining the prying journalists. Sometime back, a senior Chinese diplomat told this writer that whatever they wish to be known is put up on the CPEC website. He said their system does not allow free flow of information. ―We need clearance from Beijing before sharing our opinion. It takes time and does not serve the calls of fast-paced media based in democratic traditions.‖
The relevant people in the federal government dismissed the perception that the ruling party knocks the wind out of the CPEC sail as being a figment of someone‘s imagination. All provinces, except Khyber Pakhtunkhwa, endorsed the counter-narrative — the movement on the CPEC agenda has indeed slowed down under the watch of the current government.
The focal person on the CPEC, Hasan Dawood Butt, sees the project progressing at the expected pace. He termed Pakistan ―the buckle of the Chinese belt initiative‖. ―Prime Minister Khan is as much devoted and committed to the CPEC as anyone else. His successful meetings with the leadership in China hold testimony to his recognition of the project‘s value to the country and its people. We are moving ahead in the next phase of economic cooperation that focuses on development of the social sector and economic cooperation,‖ he said over the phone from Islamabad.
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―We host Chinese experts and business delegations every other day. Recently, a delegation of the petroleum sector was in Islamabad to explore the avenues of joint ventures in special industrial zones,‖ he said. There are nine sites identified across Pakistan for special zones.
Mr Butt attributed the relative lack of visibility of the Chinese in Pakistan to the completion of several early-harvest programmes in the first phase. ―We are commencing the second phase of the CPEC where there are no big-ticket infrastructure projects that require Chinese technicians in big numbers. Instead, the focus now is on improving health, education and agriculture. There is discussion over agriculture co-branding etc. Once special zones become operational, perhaps the optics will improve,‖ he told Dawn.
The sense in the provincial capitals was different. Generally, officers were reluctant to come on record, but said that if the progress on the CPEC is not halted altogether, it is too slow to be seen as moving at all.
―Be it transport or industrial zones, I do not remember when it was last even mentioned in a high-level meeting. I don‘t have a shred of doubt in my mind that the lack of interest right now is mutually shared between both partners. It could be the preoccupation of China with sour trade relations with the United States or the obsession of Prime Minister Khan‘s team with the demands of the IMF.
Whatever it is, it has pushed the CPEC down on the priority list on both sides,‖ a senior member of the hierarchy in Sindh said. ―At long last, the Punjab government has identified and started the process of acquiring land for the planned industrial zones. If all goes as planned, it will take another two years to fix the infrastructure and arrange for basic utilities before gates are opened to investors,‖ a senior officer from Punjab told Dawn.
Not everyone agrees. Dr Muhammad Amanullah, a senior officer from Punjab, defended the government. ―In the second phase under the new government, the focus of the CPEC has moved towards industrial development, agriculture and socio-economic development. The perception of a slowdown, therefore, is wrong as currently provincial governments are working towards identifying and proposing projects for special economic zones. The exercise needs research and spadework with eyes on realising the full potential of this opportunity,‖ he said.
KP Planning and Development Secretary Atif Rehman sounded optimistic. He said the work is in progress on the Rashakai Economic Zone. He was happy with the pace of progress.
According to insiders, not all of the 22 projects in the first phase of the CPEC worth about $29bn have been completed yet. Some eight projects in the power sector that are completed are said to be in financial troubles for the non-payment of dues. (By Afshan Subohi Business & Finance Dawn, 01, 15/07/2019)
The rise in ‘roti’ price
As if the issue of food inflation weren‘t serious enough, bread makers have announced steep rises in the prices of chapati, from Rs7 to Rs15, and naan, from Rs12 to Rs20. Understandably, the announcement has been met with public rage. Contrary to the popular belief, however, the rupee‘s fall against the dollar and the hike in petrol prices do not fully explain these price increases. Pakistan this year possesses a wheat stock of 27.9 million tonnes which is more than enough to meet the national requirement of 25.8 million tonnes. The roti price hikes are being caused largely by unscrupulous middlemen who, in a largely undocumented economy, purchase wheat from farmers at extremely low prices and sell it at the market at exorbitant rates. The FBR chairman, therefore, must be lauded for his efforts towards a documented economy which would ensure both fair competition and proper taxation. Secondly, it is important to note that the country had a shortfall in wheat production this year and could only att ain self- sufficiency due to the carry-over stock from last year. There is, therefore, a dire need to improve the country‘s per hectare wheat yield which currently lags behind both global and regional competitors. This is due to water shortage, the absence of high -yield seed varieties, and lack of research and development — all of which must be addressed to increase wheat production and bring down the roti prices.
Additionally, the government must facilitate farmers in the use of modern technology for wheat production, provide them easy access to loans, improve agricultural infrastructure, maintain buffer stocks of wheat to ensure price stability, and enforce maximum control on the smuggling of wheat to neighbouring countries. Furthermore, the provinces should adjust the wheat quotas for their flour mills in order to keep wheat prices stable. Enforcement of these measures should certainly be able to control roti prices in a country like ours which is completely self-sufficient in all of life‘s essential foodstuffs. (By Editorial The Express Tribune, 16, 16/07/2019)
Sindh govt, WB launch Rs33.6b liveable city project
The Sindh government, with the assistance of World Bank (WB), is going to start a Rs33.6 billion project, Competitive and Liveable City of Karachi (CLICK), next year. It is set to be completed within a period of five years.
The announcement came during the meeting of Sindh Chief Minister Syed Murad Ali Shah and a two-member delegation of World Bank, led by Acting Country Director Melinda Goods and Senior Operation Officer Amina Raja, at the CM House.
The meeting was attended by Local Government Minister Saeed Ghani, Chief Secretary Mumtaz Shah, Planning and Development Department Chairperson Naheed Shah, Principal Secretary to CM Sajid Jamal Abro, Local Government Secretary Khalid Hyder Shah and others.
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The project is aimed at supporting Karachi Metropolitan Corporation (KMC), all six district municipal corporations (DMC), K arachi district council and excise and taxation department in carrying out a detailed property survey of the city.
The CM directed the chief secretary to hold a joint meeting of KMC, DMCs, district council and excise and taxation department to prepare a plan to formally devolve the collection of property tax. ―I am keen to financially strengthen the local bodies in the city so that they emerge as self-sufficient organisations,‖ he said, adding that under the project, capacity building of the related local bodies would also be ensured to facilitate them for the task of collecting property tax.
The CM said that the Karachi Water and Sewerage System Improvement Project (KWSSIP) would also be launched with the financial assistance of $1.6 billion from the World Bank. The payment will be made over the course of 12 years. Under the project, the Karachi Water and Sewerage Board (KWSB) would be overhauled. ―I am committed to making KWSB a self - sustainable and efficient service providing organisation,‖ said Murad.
The World Bank delegation and the chief minister also discussed the modalities and implementation methodology in their meeting.
Planning and development department chairperson informed the meeting that the first phase of the scheme of overhauling KWSB has been approved for Rs14.7 billion, over a period of five years.
The KWSSIP is divided into three phases. The first phase, estimated to cost $400 million, focuses on improving water and wastewater services and a defined set of institutional reforms to transform KWSB into a financially viable utility.
Under the project, the World Bank would finance $400 million three investment plans of KWSSIP that include reform in KWSB of $30 million, securing sustainable water supply and sewerage of $350 million and project management and studies of $20.00 Million.
Breakup of CLICK Karachi Urban Management Project (KUMP) has been renamed the Competitive and Liveable City of Karachi (CLICK). It is a $250 million project which will be completed within five years. The project has three components such as performance-based block grants to Karachi urban local councils of $120 million, strategic infrastructure investment and capacity building in integrated stormwater drainage and solid waste management of $50 million and support for urban immovable property tax reform and institutional capacity building of $30 million. The tax reform component includes support for improvement and devolution of Urban Immovable Property Tax (UIPT).
The performance-based block grants to Karachi urban local will finance formula-based block grant to KMC and the six DMCs upon achievement of results. It will provide an incentive to urban local councils to improve their institutional performance and capacity in areas of investment planning and execution, financial management, procurement, business environment, and citizen engagement.
The grants would be used to fund local level infrastructure and municipal services within respective mandates of KMC and the DMCs for the improvement of Karachi‘s liveability and competitiveness. Indicative eligible investments may include small secondary or tertiary drainage works, municipal roads, street lighting, parks and other public spaces, public buildings and markets.
Strategic infrastructure investment and capacity building in integrated stormwater drainage and solid waste management will finance the strategic city-wide, inter-jurisdictional infrastructure needed to enhance Karachi‘s liveability and competitiveness. The component will focus on two interlinked sectoral interventions of integrated stormwater drainage and solid waste management (SWM) and include the development of drainage and SWM master plans, financing models, public awareness campaigns, feasibility studies for private financing models, etc.
Support for urban immovable property tax reform and institutional capacity building will be a support for improvement and devolution of UIPT. This sub-component will support the devolution of administrative functions of the UIPT to local bodies of Karachi. A phased roadmap to implement the administrative improvements and devolution of urban property tax and its respective institutional model has been developed, to substantially increase public revenues, through UIPT reform.
Reform activities to be supported during Phase-I include comprehensive all-Karachi property survey to update property tax database and fiscal cadaster and digitisation of the property tax base for all six districts in Karachi.
Phase-II may focus on deeper reforms of the property tax system. The collection function may be devolved to DMCs in a phased and gradual manner, whereas several options are being considered for provincial-level management of an ICT platform that manages the property register.
The sub-component, institutional capacity building and implementation support, will finance supply-side capacity building interventions for Karachi local governments in areas of financial management, project implementation, social and environmental management and technical assistance to enhance metropolitan coordination between the local bodies.
Support for enhanced regulatory environment and infrastructure financing for competitive Karachi will support developing a strategy, roadmap and institutional architecture for infrastructure financing model and enhancing the regulatory environment for improved competitiveness in Karachi. The main activities to be financed include technical assistance and feasibility studies for
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Economics URC developing and setting up a proposed Karachi Infrastructure Fund (KIF) and a technical assistance programme targeted at KMC and DMCs for piloting public-private partnerships for service and infrastructure provision. This component will finance improving regulatory and doing business environment, by simplifying, streamlining, modernising and automating regulatory governance, and improving commercial dispute resolutions, particularly related to property rights.
The project‘s main coordinating agency would be the local government department. A Project Management Unit (PMU) would be established to provide overall coordinating and necessary technical assistance to Karachi‘s local councils. The project‘s executing agencies for specific interventions under this arrangement will be KMC, DMCs, KWSB and excise and taxation department. (By Our Correspondent The Express Tribune, 05, 18/07/2019)
Property valuation rates for taxation raised in 20 cities
The Federal Board of Revenue (FBR) has revised the valuation tables for taxation of property in 20 cities including the federal and provincial capitals and Gwadar.
For each city, the FBR issued a separate notification on Tuesday that said that the value of immoveable properties on the basis of different categories has been revised with effect from July 24.
This is for a second time in five months that the tax authorities have revised the valuation rates to bring them on a par with the market rates.
Revised property value in some Karachi areas surpasses market rates, says chairman of Association of Builders and Developers
In February, the FBR had revised upward the property valuation table for 21 cities, including Karachi, to do away with sale and purchase of residential/commercial/industrial properties on the deputy commissioner‘s (DC) rate.
With the recent increase, the FBR rates reached around 80 per cent of market value. Only a few years ago the official DC rate was around 10pc of the market value.
In addition to Karachi, Lahore, Islamabad and Gwadar, the new rates for commercial and residential properties in Abbottabad, Bahawalpur, Faisalabad, Gujrat, Hyderabad, Jhang, Jhelum, Mardan, Multan, Peshawar, Quetta, Rawalpindi, Sahiwal, Sargodha, Gujranwala and Sukkur had been revised.
According to the new rates for Karachi, the value of residential plots (open and built up) has been increased up to 44 per cent, with minimum increase of 8pc.
Mohammad Hassan Bakshi, the chairman of Association of Builders and Developers (Abad), told Dawn that the new valuation table for Karachi was somehow ‗encouraging‘, but there was need for improvement.
He said in some areas of Karachi the FBR value of property had surpassed the market value. He said that some areas were wrongly categorised like the commercial area of Bath Island that fell in Category 1. ―We believe it should fall in Category A-1,‖ he added.
Mr Bakshi said that the valuation rates for Hyderabad were unjust and the FBR needed to revisit them. ―They [FBR] did not take [us] into confidence [before notifying the new rates]. We hope that Shabbar Zaidi will give us time to rectify our complaints.‖
Real estate agents said there was still more work to be done to build confidence of the market. ―The new rates will be applicable from Wednesday (today) but the market will take at least one or two months to understand its impact,‖ said property dealer Maaz Liaquat.
He said that the market value of plots in some parts of DHA City along the Superhighway was far below compared to the new FBR rate. ―After the asset declaration scheme, people have money and there is no issue of liquidity but such things need to be addressed first,‖ he added. (By Azfar-ul-Ashfaque Dawn, 01, 24/07/2019)
Inflation hits double digits after nearly six years
Inflation has entered double digits in the first month of the new fiscal year, the biggest increase in five years and nine months.
Inflation, measured by the Consumer Price Index (CPI), rose to 10.34 per cent in July this year from 8.9pc the preceding month, the Pakistan Bureau of Statistics said on Thursday. During the same month last year, inflation stood at 5.84pc.
The last time inflation entered the double digits was in November 2013 and recorded at 10.9pc.
The upward adjustments in prices of petroleum products over the past few months, followed by an increase in electricity and gas tariffs fuelled the total inflation. The government also introduced certain tax measures, the cumulative impact of which dragged the overall inflation to double digits. The rupee depreciation also led to an increase in prices of imported consumer and non-consumer items, especially raw material used in manufacturing of industrial products, over the past few months.
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The government has projected an inflation target of 11pc to 13pc for the fiscal year 2019-20, compared to 7.3pc recorded in 2018- 19. Price levels, perked up in the first month of the current fiscal year, appear to have been driven by a spike in non-food inflation in July.
Upward adjustments in prices of petroleum products, electricity and gas fuel total inflation
The CPI tracks the prices of around 480 commodities every month in urban centres across the country.
Food inflation was up 9.2pc on an annual basis, but surged 1.5pc on a monthly basis. Prices of non-perishable food items rose by 7.85pc and those of perishable products by 8.06pc in July.
Food items whose prices increased the most in July were: potatoes 16.84pc, pulse moong 5.41pc, eggs 5.06pc, gur 4.80pc, pulse mash 4.50pc, wheat flour 3.58pc, fresh vegetables 3.56pc, pulse masoor 2.83pc, vegetable ghee 2.49pc, bakery and confectionary 2.45pc, rice 1.77pc, milk fresh 1.41pc, pulse gram 1.31pc, tomatoes 1.17pc, sugar 1.09pc and meat 0.93pc. In the same category, however, prices of chicken declined by 8.26pc, fresh fruit 7.95pc, onions 1.73pc and betel leaves & nuts 0.65pc.
On the other hand, non-food inflation increased 11.1pc on a yearly basis and 2.8pc on a monthly basis. The increase is mainly driven by higher oil prices over the past few months and the combined impact of the depreciation of the exchange rate. The government passed on this increase to domestic consumers.
Non-food prices also remained under pressure on account of education index, which increased to 6.9pc. Clothing and footwear went up by 7.4pc, housing, water, electricity, gas and other fuels by 12.74pc, furnishing and household equipment by 10.17pc, health by 8.97pc, transport by 14.67 pc and recreation and culture by 7.67pc.
Core inflation, measured by excluding volatile food and energy prices, was recorded at 7.8pc on a yearly basis and 1.7pc on a monthly basis.
On July 16, the State Bank of Pakistan has raised its main policy rate by 100 basis points to 13.25 per cent, citing increased inflationary pressures and a likely near-term rise in prices from higher utility costs.
The gradual build-up of domestic demand is evident in the rising core inflation. Of the 89 commodity groups of CPI, it covers the price movement of 43 items. Due to a continuous increase in education and healthcare costs, core inflation remained higher on average, compared to the same period last year.
Average inflation measured by the Sensitive Price Index crawled up 12.16pc in July as against 3.58pc the previous year, while the Wholesale Price Index was up 13.46pc, compared to 10.50pc in 2018-19. (By Mubarak Zeb Khan Dawn, 01, 02/08/2019)
Taxing doctors
THE latest move by the Federal Board of Revenue to demand more information from hospitals about the private practice of doctors and surgeons to cross-check against their returns is a welcome development. The action should be broadened to include other professions as well, such as law, consultancy and accountancy. Doubtless many of those who are impacted by this move will express puzzlement since they are long accustomed to taking their tax obligations for granted. But most doctors and other medical practitioners maintain a private practice in addition to their formal assignment at the institution where they work. It is common practice to pay the doctor‘s bills in cash after each consultation, and these incomes are underreported to the tax authorities on a large scale. Tax evasion and underreporting are rampant in most professions where the self-assessment regime has been abused to the hilt. The comfort level that all practitioners in these fields have developed with tax evasion must end, and a culture of declaring one‘s income truthfully must be ushered in.
There are good reasons to believe that the FBR can succeed in this effort today whereas it would have looked like a long shot even a decade ago. The amount of information that is available to the authorities about the spending habits of individuals provides the clearest signal of whether or not they are declaring their incomes honestly. This is what the FBR is using to its advantage in the current drive, asking 30 hospitals in Karachi to provide details about the doctors who work there, with the intention to expand the effort to other hospitals and other cities too. Professional service providers are important because they may be liable to pay tax on two counts, first on their incomes and second on the sale of a private service. The first has to be paid to the federal government and the second to the provincial authorities. It is true that many such professionals will protest this double imposition, but there should be little doubt that compliance is necessary. In time, this drive needs to be broadened, not only for revenue purposes, but also to create a culture of compliance among citizens, especially those who habitually evade taxes or mis-declare their incomes. For his part, the FBR chairman should fast-track credible reforms in the tax machinery to restore trust in the system and simplify the rules of compliance. (By Editorial Dawn, 08, 02/08/2019)
The IMF decision
AS the PTI government took the reins of administration in August last year, the most pressing and immediate concern was how to address the severe economic crisis at hand. The country‘s ability to meet its external payment obligations was melting down by the day, while the fiscal imbalance was out of control.
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Examining the numbers will help illustrate the dire situation inherited by the government. The gap between exports and imports in 2017-18 stood at $37.6 billion, the largest in the country‘s history. The external current account deficit (arrived at by adding other inflows and outflows to the merchandise trade flows) had crossed $19bn — once again, the largest in absolute terms Pakistan had ever experienced. The gross external financing requirement — adding external debt repayments, foreign investment outflows etc. to the current account deficit — was an unprecedented $27bn. With debt repayments expected to rise sharply from 2018-19 onwards, Pakistan‘s foreign exchange requirement was projected to remain elevated for the next few years, despite import compression.
On the fiscal side, the budget deficit had breached 6.6 per cent of GDP, or Rs2.3 trillion. Naturally, the magnitude of the unfolding economic crisis took a toll on confidence and the markets, with the rupee experiencing sharp declines. The currency slide added to the sense of urgency for the government since it was feeding into both inflation as well as panic in the markets. With official foreign exchange reserves under pressure, and no confirmed new commitments in sight, the State Bank decided to conserve its forex to honour sovereign payment obligations in a timely manner.
In these circumstances, what was concentrating minds the most was the IMF question. While ordinarily, approaching the IMF for an emergency assistance programme in such a situation would be taken by policymakers without too much hesitation, in this case the context was all-important. Firstly, the prime minister had ruled out going to the IMF in election rallies. He believed the Fund imposed unnecessary and avoidable hardship on a receiving country‘s population. His nominated finance minister fully agreed, while also possibly harbouring the suspicion of many in Pakistan that the Fund is more a weaponised institution of influence and control under US stewardship than an ‗ordinary‘ international lender of last resort.
The prime minister took arguably the most difficult decision of his career.
This suspicion was not without basis. The IMF‘s own Independent Evaluation Office had judged in its inaugural report in 2002 that Pakistan, together with the Philippines, were two cases where geopolitics played an important role in Fund programme decisions. In addition, repeated statements by senior US officials had also signalled their intention to lean on Pakistan via the IMF. The FATF story was also playing out in the background. The fact that FATF benchmarks have been intertwined with IMF programme conditionality in a most unprecedented manner has validated all the concerns.
Two other considerations were on the table. The IMF programme would have stringent ‗front-loaded‘ conditionality that would unleash inflation, unemployment and impoverish parts of the middle class. This would in turn rapidly erode the political capital of the new government. A sharp fall in political capital would not allow the government the space and latitude to pursue its agenda of providing low-cost housing etc. while also potentially seriously impairing its ability to pursue its own wider reform programme.
Finally, a genuine reservation regarding IMF programme design was whether it was aligned with the requirements of structural reform the country so badly needed to undertake. After all, Pakistan was heading back into a second consecutive IMF programme barely two years after ‗successfully‘ completing one. Ultimately, the questions boiled down to: was an IMF programme loaded with stringent conditionality the only option? How viable were the non-IMF options, if any, on the table? And were the consequences of Plan B any different materially from those under the current IMF programme?
While the government grappled with the complex issue of approaching the IMF, and reached out to friendly countries for assistance, the resultant delay was increasing the uncertainty and adding to a sense of panic. However, it would be wrong to lay the blame on the delay alone. It was clear from early on unfortunately that the PTI government had not done its homework before taking over the reins of power and was woefully ill-prepared. Prior spadework had not been done, the severity of the crisis appeared to have been completely misread and underestimated, and there was no stabilisation plan to put into effect from day one. In addition, a most critical element in providing confidence to markets, strategic communication, was completely absent.
In this backdrop of rising confusion and near panic, the prime minister took arguably what is likely to be the most difficult decision of his tenure. He overruled his finance minister and decided to reach out to the IMF. A couple of months later when the IMF leadership (and apparently the US administration) complained about the approach of the then-finance minister, who was stonewalling the Fund on some of the most stringent conditionality, the prime minister decided to replace him to fast-track the process and reach quick closure with the IMF. In hindsight, approaching the Fund appears to be the correct decision. Plan B was not funded and would have created more disruption while prolonging the uncertainty.
Now that the IMF deal is done, and Pakistan has embarked on a robust stabilisation programme, what more can be done to ensure a quick transition to jobs-creating growth? Work on SEZs under CPEC is stalled, and giving it attention and a vigorous push can kick-start an important growth driver. In addition, the government should ensure pending tax refunds are expedited and FBR does not harass businesses in its hunt for taxes. The ridiculous and disruptive anti-encroachment drive should be halted. Thousands of small businesses have been needlessly demolished in a harsh economic environment. The government should seek to lessen the costs of disruption under stabilisation, not amplify them. Finally, improving strategic communication with markets and investors regarding its forward-looking plans still remains a to-do item. (By Sakib Sherani Dawn, 08, 02/08/2019)
An economic plan?
THE State Bank governor, Reza Baqir, used the occasion of a flag-hoisting ceremony on Aug 14 to try and breathe a little life into the economy by assuring the country that the direction in which things were moving was the correct one. He acknowledged the difficulties faced by firms and people in the form of rising inflation and unemployment amid a slowing economy, but sought to reassure his audience that the government was working on a ‗plan‘ to help the economy turn the corner and return to the path of growth. No indication was given of the time that was required for this, nor was there any hint of what the plan looked like. For the
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Missing through all this has been the voice of the adviser to the prime minister on finance. Hafeez Shaikh has now retreated into the background from where he silently calls the shots. As layoffs sweep the country, companies teeter on the edge of bankruptcy and people find their livelihoods squeezed almost to breaking point, the doctor supposedly administering the medicine is barely seen or heard from. There is little doubt that difficult decisions have to be made, and that the pain will continue for a while longer. But Mr Shaikh‘s job is also to breathe confidence into the economy during this period of painful adjustment. To not be visible, then, surely amounts to a dereliction of duty.
If what Mr Baqir said about the economic team‘s working on a plan to help revive the economy is correct, we should also hear this directly from the finance adviser. Important questions must be answered. Who is putting together this plan? Is it being developed by a small group of people in a closed room somewhere? Is there any stakeholder consultation involved in drawing it up? And more importantly, what will be the pace and direction of economic growth once the time comes to implement this plan? Pakistan‘s economy has been through far too many short-lived spurts of growth, followed by catastrophic busts that land the country at the doorstep of the IMF. The government has promised on numerous occasions that the current IMF programme would be Pakistan‘s last, so perhaps it would be helpful to know whether the so-called plan that is in the works is part of delivering on this promise. It is important to share the details with the public, and to know from those in charge of the economy where they stand on the promises made by the last finance minister. Adjustment is not the only thing the economy needs. It also needs transparency and visible leadership — both of which are missing at the moment. (By Editorial Dawn, 06, 16/08/2019)
‘Karachi faces institutional breakdown and corruption’
Participants in a consultative workshop held on Wednesday at a local hotel shared concerns over shrinking public spaces and growing mobility challenges being faced by pedestrians, especially people with special needs, and urged the government to implement the laws that would ensure inclusivity in all aspects of civic matters and development.
They also regretted the recent removal of hundreds and thousands of vendors, many of them operating their businesses with government permission, from the Empress Market, and said that depriving the poor of employment opportunities was a short- sighted approach and negated the principle of justice.
Titled ‗Consultation on accessible and safe street resolution with elected representatives (revitalising the old city)‘, the event was organised by Shehri-Citizens for a Better Environment in collaboration with Friedrich Naumann Foundation for Freedom (FNFF).
It was part of the NGO‘s recently launched campaign aimed at devising a comprehensive strategic roadmap towards having accessible streets and public spaces.
Speaking about the need of the campaign, Amber Alibhai representing Shehri regretted that the city‘s built environment both old and new lacked consideration for people with special needs and the elderly and that the NGO had raised the issue multiple times and even designed a whole map on required infrastructural changes. But, it couldn‘t attract government attention.
Giving a presentation titled ‗Integrating urban policy, planning and design for public spaces renewal‘, project manager of Shehri Farhan Anwar spoke about the progress made so far on the project.
The three-year project was aimed at understanding Karachi‘s challenges through a holistic lens and initiating a narrative and action plan on sustainable urban mobility by involving all stakeholders, he added.
―Unfortunately, Karachi faces institutional breakdown and corruption. There is no ownership. But, we have to work within limited institutional framework available to us,‖ he said.
The world was moving towards ‗smart city growth‘ which meant efficient and sustainable urban mobility and we need to integrate this concept in all spheres of development, he said.
He also referred to examples in regional countries, sharing how they had transformed their public spaces, which not only provided healthy places to communities to relax and socialise but also boosted businesses.
During the discussion, councillors in attendance highlighted their problems hampering their work and said that thought streets came under the jurisdiction of Karachi Metropolitan Corporation and various district municipal corporations, they had no powers and no funds to carry out any development and repairs.
Part of the programme was three presentations by young architects showing how neglected public spaces/pockets could be transformed into meaningful community spaces.
Senior architect Danish Azar Zuby and Aamir Amjad representing FNFF also spoke. (By Faiza Ilyas Dawn, 16, 23/08/2019)
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Population problem
ONE of the persistent yet lesser talked about challenges facing Pakistan is its growing population. From the distribution of essential healthcare and education services, to tackling unemployment and raising the general standards of living, the failure to control population rates has had far-reaching implications. Some have also put forth the argument that rising populations not only place a burden on a country‘s limited resources, but they also contribute to the climate change crisis (of course, though, it is still largely the wealthiest countries that contribute the highest global greenhouse emissions). At 2.4pc, Pakistan‘s population growth rate is much higher than in many parts of the world. Worryingly, the vast majority is under the age of 30. But when the long-awaited 2017 census results were announced, the realisation that we had now surpassed Brazil as the fifth most populous country in the world seemed to create no urgency amongst lawmakers. Currently, Indonesia, the US, India and China have higher populations than Pakistan. Unless concrete steps are taken to halt this trend, the country‘s population could exceed 300m by 2050, warned a UN report this year. Past attempts to introduce family planning schemes and greater access to contraceptives have met with little success. Due to a lack of foresight and long-term implementation of population control policies by successive governments, along with societal stigma and resistance from right-wing quarters each time the topic of birth control is brought up, the problem has been allowed to fester.
At a recent event in the capital city, the Special Assistant to Prime Minister for National Health Services Dr Zafar Mirza highlighted the shocking fact that approximately half of all married women in the country do not use modern contraceptive methods, resulting in 3.8m unintended pregnancies each year. Early marriages, and the lack of knowledge about contraception and birth spacing, have all contributed to the position we are in today. Until these underlying causes are addressed, any and all other progress made will amount to zero. (By Editorial Dawn, 08, 07/09/2019)
Women workers
WOMEN labourers who pick cotton from the fields of Sindh highlighted their grievances at a recent press conference in Karachi, flanked by members of human rights organisations. Other than long hours and tough working conditions that expose them to a host of health complications — the lack of safety measures provided by employers making them especially vulnerable to disease and injury on the job — they are paid very low wages and are offered virtually no social protection. The women present at the event requested the Sindh government to give them the same status and rights that industrial workers are entitled to. Workers employed in the agriculture economy are some of the most exploited and ill-treated. Since there is no data and agriculture is considered part of the ‗informal‘ economy, it is uncertain what percentage of women are employed, but labour organisers estimate that nearly half of the total agricultural workforce of Sindh consists of women. Due to their perceived lower social status, they are left all the more defenceless.
Out of all the labour laws passed over the years, not a single one has extended to agriculture workers, with the exception of the right to form unions under the Sindh Industrial Relations Act 2013. This might be because many of Pakistan‘s parliamentarians are landowners themselves, and the emancipation of their workers would not be beneficial to their own interests. Last year, women legislators vowed to work for the rights of rural women, particularly those employed in agriculture, those who MNA Nafisa Shah referred to as the ―slaves of the slaves‖. Perhaps as a result of their efforts, the Sindh cabinet approved the Sindh Women Agriculture Act this year, but it is yet to be passed by the Sindh Assembly. It may be a rarely acknowledged truth, but much of this country‘s economy runs on the backs of women. It is time their voices are heard. (By Editorial Dawn, 08, 08/09/2019)
Inflated milk price
For governments in Pakistan, things doable have become undoable. During Muharram this year, milk became dearer than petrol and diesel. In Karachi and other places of Sindh, the price of milk had gone up as high as Rs140 a litre. At the same time, petrol was selling at Rs113 a litre and diesel at Rs91 a litre. On the occasion of Muharram, the demand for milk increases. Taking advantage of this, unscrupulous milk sellers increase the price of milk. It becomes a case of strike the iron before it is cold. Whether it is Muharram or Ramazan traders have no qualms about increasing prices. Usually, the authorities turn a blind eye to profiteering. We do not know whether politicians protect the interests of milk sellers in the legislatures.
At present in Karachi, the official price of milk has been fixed at Rs94 a litre but shopkeepers are selling it at Rs110. Retailers say since they purchase milk at a high price from wholesalers and dairy farmers, they sell it at a high price. Dairy farmers and wholesalers maintain that prices of their inputs have increased, so they sell milk at a high price. They say the government has not allowed them any increase in milk price since long. Dr Khatu Mal Jeevan, a Special Assistant to the Sindh CM, has called a meeting on Sept 13 at the Karachi commissioner‘s office to review the matter. Along with the commissioner, all deputy commissioners, additional inspectors general of police, DIGs, SSPs, representatives of dairy farmers and other stakeholders would be present at the meeting
We hope the meeting will arrive at a decision that will make milk available to the common people at an affordable price. Recent experience, however, shows that meetings are indispensable when you do not want to do anything. Pakistan is the sixth-largest producer of milk in the world, so there is no reason why milk and its products should not be available at affordable prices to all strata of society. (By Editorial The Express Tribune, 16, 12/09/2019)
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Many industrial units not paying minimum wages set by Sindh govt, PA told
The Sindh Assembly was told on Monday that the provincial government had set the minimum wages for an unskilled worker at Rs17,500 per month, but the decision was not being implemented by many industrial and commercial units.
Furnishing a statement and replies to lawmakers‘ queries during the Question Hour in the house, Labour Minister Saeed Ghani said the rate of wage for an unskilled worker during 2018-19 was Rs16,200 which was enhanced in the current financial year on recommendation of the Sindh Minimum Wages Board.
He said the government decision was being implemented through labour inspectors of the directorate of labour, Sindh, conceding that a large number of unskilled workers were underpaid as the provincial labour department did not have resources to keep a check on every industrial and commercial unit due to meagre resources and manpower.
In reply to a written question by Pakistan Peoples Party member Ghazala Siyal, the minister said the labour and human resource department had constituted a ‗Minister‘s Task Force‘, headed by the labour director and comprising all joint directors and labour leaders, to ensure implementation of the minimum wages required for workers to meet their family expenditure and preserve their health.
Minister says labour department unable to keep a check on every unit for implementation of law
Besides, he said, all the presidents of industrial zones had been advised to implement the minimum wages in all industrial zones. ―Also in order to resolve the issues and grievances of employers and employees, tripartite committees in all industrial zones have been constituted and notified,‖ the minister added.
Answering a verbal question, he said an underpaid unskilled worker could lodge his or her complaint against the employer with the labour department which would pursue the case and get the matter settled between the employee and the employer.
Mr Ghani said the labour department would file a complaint in the labour court if the employer did not settle the matter with the employee.
He said the complainant worker could also move the labour court against the employer for not paying him the notified minimum wages on their own.
Replying to a supplementary question asked by Muttahida Qaumi Movement‘s Mohammad Hussain, he conceded that the provincial government‘s decision of minimum wages was surely not being implemented in several factories.
The minister said that it was not practically possible for the labour department to check the implementation of the minimum wage law in every industrial unit as there were over 10,000 industrial and thousands of other commercial units.
He said that there was no provision of contractual employees in the provincial laws, while the practice was rampant in the industries and other commercial units. ―We are trying to end this contract system in employment, but we cannot take harsh steps against this as it would render people jobless,‖ the minister added.
He also conceded that several unskilled workers of certain provincial departments were also not being paid the notified minimum wages. ―The chief minister has asked the ministries concerned to ensure that the minimum wage decision is implemented in letter and spirit in the government departments.‖
In reply to a written question, he said that the new building of Madina Dispensary at SITE Circle, Karachi, was established and upgraded at a cost of Rs8.7m by the labour department. (By Tahir Siddiqui Dawn, 16, 17/09/2019)
Top auditor finds over Rs15tr irregularities by ministries
The Auditor General of Pakistan (AGP) has pointed out irregularities of more than Rs15.67 trillion worth of public money by the federal ministries and divisions during the audit year 2018-19.
In its report laid before parliament as required under Article 171 of the Constitution, the AGP highlighted a series of violation of rules and regulations, weaknesses of internal control, misappropriation or overpayment of public funds and negligence. The funds audited were of the fiscal year 2017-18 which is described as audit year 2018-19.
The audit objections regarding the accounts of the federal government for the audit year 2018 are far greater (87 per cent) than the Rs5.8tr a year before, showing that financial control over public money has deteriorated instead of having been improved or the AGP office was too consumed in procedural niceties under the decade-old rules and regulations.
This is evident from the fact, for example, that the government raised $2 billion (Rs280bn) international bonds at 8.25pc and 7.25pc interest with the approval of the prime minister instead of the federal cabinet as required under the rules. While the audit objected to the higher interest rate, the entire amount of Rs280bn was described as irregular and unauthorised without raising questions if the funds were actually justified.
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Highlights a series of violation of rules and regulations, weaknesses of internal control, misappropriation of public funds
As a consequence, majority of such big ticket items are ultimately regularised by the Public Accounts Committee because these seldom involve corruption or embezzlement. This is also evident from the fact that in the huge sum of Rs15.67tr that attracted audit objections, the actual reported cases of fraud, embezzlement, theft and misuse of public resources involved a paltry amount of Rs862 million. But then there were also serious cases of bad fiscal management highlighted by the AGP.
The AGP in its report, also submitted to the president of Pakistan, put on record that its findings were based on scrutiny of public funds of 40 out of 50 federal entities and did not cover amounts below Rs1m spent or received by these entities. It said that an amount of Rs4.9bn was recovered during the year under review at the instance of the auditor and deposited in the federal consolidated fund.
The AGP highlighted a total of 39 cases of weak internal control amounting to Rs14.56tr involving several ministries and divisions and related entities abroad. Again, some of them were also included in 51 cases pertaining to weak financial management involving a total amount of Rs14.735tr. Also, 237 cases of Rs293bn were pointed out involving irregular expenditures or payments in violation of rules.
There were 56 cases of recovery amounting to Rs186bn, while in four cases record relating to Rs1.06bn was not produced on the auditor‘s demand.
Interestingly, the AGP also questioned misrepresentation of more than Rs9.96tr worth of supplementary grants by the Ministry of Finance and the Accountant General of Pakistan Revenue (AGPR) which are required to ensure sound financial management of the federal government. The audit described it as a ―high risk‖ area because it violated Articles 80-84 of the constitution because the finance ministry did not print these supplementary grants in budget accounts which accounted for 94.32pc of the total supplementary grants.
It said the total supplementary grants as per manuscript of appropriation accounts for the fiscal year 2017-18 stood at Rs10.561tr, but only Rs599bn of these grants had been printed in schedule of authorised expenditure, leaving an unauthorised expenditure of Rs9.962tr.
The AGP said the finance ministry was required to place all supplementary grants before the National Assembly for approval, but it was not done and such large amounts remained unreported. The finance ministry‘s response that supplementary grants received from various ministries and divisions beyond a cut-off date could not be made part of the book presented to parliament was found untenable.
Moreover, the AGP noted that the ministries and divisions had incurred an expenditure of Rs3.643tr in excess of final grants available to them and in fact heads and principal accounting officers of the ministries were not authorised to incur excess expenditure without any supplementary grants or within original budget allocation. This also included about Rs3.48tr of excess payment of domestic debt.
The AGP also expressed concern over non-surrendering of savings worth Rs411bn by various ministries and divisions, resulting in lapse of funds. This was violation of financial rules that require that all anticipated savings should be surrendered to the kitty immediately they are foreseen but not later than May 15 each year. This could have pre-empted utilisation of funds by some other deserving areas.
The AGP also highlighted about Rs55bn less payment to the provinces under their National Finance Commission shares through over-deduction of collection charges and unauthorised overpayment of Rs35bn to Balochistan. (By Khaleeq Kiani Dawn, 01, 20/09/2019)
ADB’s assessment
Pakistan‘s economy is having a hard time is no revelation. While the incumbent government, led by Prime Minister Imran Khan, is doing all it can to treat the ills, many an economic expert believe it is the remedy that has worsened the malady. The pol icies adopted by current economic managers, meant to achieve economic stability in a country with negligible FDI and exports totalling half as much as imports, have literally squeezed the common man dry. Fiscal tightening measures, coupled with currency depreciation, have turned inflation into a double-digit demon and led to a notable fall in the economic growth rate. While the government claims that it has achieved the economic stability and is now all set to hit the road to growth and then move on to attain prosperity, there are apprehensions that the economy will be able to turn the tight corner.
A recent report by the Asian Development Bank (ADB) has affirmed all apprehensions about the flagging economy during the ongoing fiscal year i.e. FY2019-20. The Asian Development Outlook Update 2019 released by the bank yesterday has projected that Pakistan‘s economic growth rate will be 2.8% — the lowest in South Asia — and its inflation rate will be 12% — the highest in the bloc of eight nations — during the current fiscal year. In its previous outlook released six months back, the bank had forecast 3.6% growth rate and 7% inflation for the current fiscal year. With a 2.8% growth rate, Pakistan‘s economy will be the slowest growing economy in South Asia. Like the last fiscal year, Bangladesh‘s economy will be fastest-growing at a rate of 8%, followed by India at 7.2%, and the Maldives and Nepal at 6.3%. Even war-torn Afghanistan‘s economy is projected to grow at a higher rate — 3.5% — than Pakistan‘s.
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What‘s even more troubling is the ADB predicting yet another round of hikes in electricity and gas tariffs. The warning for the common man is thus pretty clear: hard days are hard to go. (By Editorial The Express Tribune, 16, 27/09/2019)
Pakistan’s population predicament
At 5:24 pm on September 30, 2019, Pakistan‘s population was 217,641,492. It would be a few hundred thousand more by the time this article appears in print. Most countries have used population control as leverage to make economic gains. Bangladesh stands out for its stunningly successful birth control policies. Only if Pakistan had adopted similar pragmatic policies it could have 54 million fewer people today. Missed completely, here was a perfect opportunity for Pakistan to make the much-needed economic ―great escape‖.
All countries that made dramatic economic breakthroughs in the last 30 years managed to drastically reduce the average fertility rate — the number of children born to a woman over her lifetime. Iran drastically reduced its fertility rate from 6.53 to 1.96 in a span of 30 years. Bangladesh brought its fertility rate down from 6.92 to 2.1 since its independence, while Korea (1.21), China (1.65), Hong Kong (1.23) and Taiwan (1.1) made similar impressive reductions. Sadly, Pakistan has been firmly saddled with a very high fertility rate of 3.73 for the past four years. If not immediately addressed, this single factor could negate every effort Pakistan may make to break away from poverty, hunger, disease and illiteracy.
Bangladesh adopted a community-based approach to population planning. It was based on recruiting married, literate village women trained in basic community health and family planning going door-to-door dispensing contraceptive pills and condoms.
Belonging to the local village, they had credibility among a suspicious and very religious population. Equally important was the decision to give high priority to girls‘ education, which delayed marriages and gave women greater control over their lives.
In the late 1980s, Iran‘s supreme leader issued fatwas (religious edicts) making birth control widely available and acceptable to conservative Muslims. He argued that the economy could no longer support a rapidly-growing population. Under the new decrees, contraceptives could be obtained for free at government clinics, including thousands of new rural health centres. Health workers promoted contraception to increase the gap between births and to reduce maternal and child mortality. Family planning counselling was made mandatory for couples intending to get married. Between 1996 and 2016, the average age of marriage for Iranian females increased from 19.8 to 23 and from 23.6 to 27.4 years for males.
Pakistan, on the other hand, could not benefit from religion as an instrument for change and action. It failed to create and implement population control policies that could integrate communities — lady health visitors, religious leaders and BHUs. There was neither easy free access to contraceptives, nor was the media utilised for mass awareness and guidance. There were no innovative incentives created for those who adhered to a two-child policy. Most importantly, it took no steps to raise the marriage age for girls to ensure 16 years of education as per the Constitution.
Every citizen needs food, water, health, education, protection, employment, housing, electricity and a clean environment to live a healthy and productive life. Pakistan‘s economic and managerial resources are already bursting at the seams. We squarely failed to meet every Millennium Development Goal. Having 25 million out-of-school children, the most polio cases in the world, highest infant mortality rates, and an inability to provide clean drinking water and treating outgoing raw sewage are just a few of our many predicaments. With this alarming growth in population, it may be impossible to maintain sanity, leave aside progress.
Pakistan‘s much-needed break from poverty and disease is critically dependent on its ability to bring down its fertility rate to 2.0 and educating its girls. Let there be an exclusive ministry for population control headed by the most competent ministers in the federal and provincial cabinets. Failure to implement these measures would be a sure recipe for a continued addiction to the IMF besides keeping our children vulnerable to stunted growth, crippling impacts of polio, acquiring HIV by reused syringes and remaining illiterate for never attending school. (By Naeem Sadiq The Express Tribune, 16, 03/10/2019)
Tax shortfall
Under Shabbar Zaidi, the FBR is doing a good job, but not good enough to satisfy the IMF. Tax collection in the first quarter of the ongoing fiscal year is 13.5% higher on a year-on-year basis. The figure, however, has fallen short of the IMF expectations.
As agreed with the global lender for the sake of securing the $6 billion loan facility, the PTI government was to collect Rs1,071 billion in the first three months of FY2019-20, with the target for the full year being Rs5,550 billion. But as per the provisional estimates, the government could only manage Rs955 billion tax revenue in the July-September quarter which means a shortfall of Rs116 billion or nearly 10 per cent of the target. The tax collection would have dipped to Rs910 billion — i.e. a shortfall higher by Rs45 billion — had the FBR not held back on the tax refunds and cleared the whole of Rs75 billion as committed.
The Rs116 billion shortfall is a cause for concern for the common man on how the government is going to bridge up the gap.
There are apprehensions of a minibudget or a cut in development spending. However, neither option is digestible for a people already heavily taxed — both directly and indirectly — and bearing with a growth rate has fallen below 3 per cent, translating
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Going by this rate — Rs116 billion for a quarter — the shortfall for the full fiscal comes to something around Rs450 billion. Instead of squeezing the common man further, the government must look for avenues for raising non-tax revenues. Privatisation of sick industrial units is not a bad option. (By Editorial The Express Tribune, 16, 03/10/2019)
Tomato, onion prices go beyond common man’s reach
As people are already paying very high prices for Afghan and Iranian onions, they are now compelled to face another price hike as prices of tomato have been raised to Rs140-160 per kg while capsicum (Shimla mirch) and green chilli are now selling at Rs280-320 per kg.
Last week, tomato was selling at Rs80-120 per kg while capsicum and green chilli were available at Rs160 per kg.
Traders said capsicum and green chilli were in short supply in the Superhighway vegetable market and expressed their annoyance when consumers demanded some green chilli for Rs10 or Rs20.
―A handful of green chilli comes at Rs20 while previously traders used to give handful of chillies for free with purchase of different vegetables,‖ a vegetable buyer said adding that ―the government does not look serious in controlling food inflation‖.
However, confusion has gripped the market as to whether Indian tomato is arriving via Afghanistan or the red fruit is finding its way from Swat or Iran.
Push-cart vegetable sellers said that they had purchased Indian-origin tomatoes loaded in plastic crates at Rs2,400-2,500 for 20-22 kg weight which were coming from Afghanistan.
They said locally produced tomatoes usually arrived in wooden boxes of 12-15 kg but this imported tomato was arriving in plastic crates.
Being in this business for over 20 years, ―I know that it is Indian tomato which tastes different from Pakistani tomato,‖ a push-cart seller said adding that trucks carrying imported tomatoes were coming in Sabzi Mandi on the Superhighway.
Disagreeing with market traders, president of Falahi Anjuman Wholesale Vegetable Market New Sabzi Mandi Superhighway Haji Shahjehan said that some tomato quantity was actually finding its way into the market from Swat while some vehicles carrying Iranian tomato had also started to arrive.
The wholesale price of tomato has shot up to Rs100 per kg from Rs50-60 per kg last week. Before selling it at Rs140-160 per kg, many traders were demanding Rs80-120 per kg depending on the areas.
He attributed tomato crisis to end of Balochistan crop while the Sindh crop would arrive by next month. Imports are being made to overcome market demand.
People are already consuming substandard quality of Iranian and Afghan onion at costlier rates as soaring imports have failed to provide any relief to consumers. Many feel that these imported onions are not fully ripe and lack taste.
Some onion variety of Sindh crop has also started to arrive in lower volumes. The price of both imported and local onions hovers between Rs80-100 per kg.
Traders had jacked up the onion price ahead of Ashura (Sept 10) to Rs80 from Rs60 per kg.
Consumers‘ problems have further aggravated as prices of various biscuits produced by leading companies have gone up followed by tetra fruit juices. (By Aamir Shafaat Khan Dawn, 16, 16/10/2019)
Govt to ask IMF about fixed tax regime for traders
Pakistan‘s top tax machinery has linked approval of a fixed tax regime for small to medium traders with prior approval of the International Monetary Fund‘s review mission, which is scheduled to arrive here on Sunday.
On Oct 28, the IMF mission — headed by Ernesto Ramirez Rigo — will start review of Pakistan‘s first quarter (July-September) performance as part of the $6 billion Extended Fund Facility (EFF).
It will complete the exercise in two weeks.
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An official source in the finance division told Dawn that during the review, the Fund officials would hold meetings with all stakeholders, including the Federal Board of Revenue, State Bank of Pakistan, those in the power sector, to assess the country‘s performance against the benchmark set for the first quarter.
According to the source, Adviser to Prime Minister on Finance Dr Hafeez Shaikh and FBR Chairman Shabbar Zaidi will hold meetings on the sideline with the IMF officials to convince them that a scheme for traders was needed. ―We will try to convince them to get some favourable scheme for traders,‖ the official said.
The traders have demanded a fixed tax regime, carrying an exemption from sales tax and withholding tax, with a threshold of Rs150 million sales per annum. They have also demanded a minimum tax rate as fixed tax rate.
According to the official, these are the demands of traders. ―We can‘t commit on these demands,‖ he said, adding the demands would be taken up with the Fund officials. ―We will do advocacy for it as being under the Fund‘s programme,‖ he said, adding some close- level understanding might be achieved.
Fund’s mission due in Islamabad tomorrow for two weeks to assess performance
FBR Chairman Shabbar Zaidi told Dawn that his team was in talks with traders. ―We have already reached an understanding with traders on the fixed tax rates,‖ he said. However, he added, the FBR wanted fixed tax regime on an area basis, while traders demanded it on the basis of turnover.
The chairman said the FBR had no issue even on a turnover basis that could be introduced for small to medium traders only, but ―we have to take up this issue with donor agencies‖.
Mr Zaidi said traders in the tier-1 would remain on the point of sales position. ―We have not finalised anything so far,‖ he said, adding that an attempt would be made to finalise the deal before the countrywide traders‘ protest scheduled for Oct 29 and 30.
Broadening of Tax Base The FBR chairman also gave briefing to Prime Minister Khan on Friday on broadening of tax base while using National Database and Registration Authority (Nadra) data.
According to an official statement issued after the meeting, the premier said broadening of tax net is very important for enhancing the government‘s capacity to provide better facilities to the masses. Nadra chairman Usman Yousaf Mobin also attended the meeting.
He said broadening of tax net would not only lessen the burden on existing taxpayers, but would also enable the government to ensure provision of education, health and other facilities in remote areas, too.
He said the government was striving to bring in transparency in tax system so that every citizen could play their role in country‘s progress and development. ―The payment of tax is a national obligation, yet the restoration of taxpayers‘ confidence in this respect is very important,‖ the premier said.
Growth in tax returns FBR Chairman Shabbar Zaidi said that FBR received income tax return of 918,027 from taxpayers up to October 25 as against 585,209 returns received over the corresponding period of last year, showing an increase of 332,818 returns or 56.87pc.
On average, more than 20,000 returns were filed on a daily basis, he said.
Taking to Twitter, the FBR chairman said that from Nov 1, 2019 strict action would be taken against unauthorised interaction between FBR staff and business community. ―Business community is suggested to report to FBR if any person contact through any manner without proper authorisation,‖ he said. ―No harassment,‖ he added.
According to him, the FBR will soon issue very strict instructions to all officers, employees and staff of all formations of the FBR not to interact with businessmen through personal visits, telephone calls, cell phone messages or emails. Automated / authorised system would be only manner to interact, he said.
On the sideline of the press conference on ease-of-doing business, Special Assistant to Prime Minister on Information Dr Firdous Ashiq said Mr Khan held meeting with the relevant stakeholders on anti-smuggling to assess revenue gains and losses.
She elaborated that a comprehensive strategy would soon be finalised in this regard. One of the major components of the policy would be sharing of online information, she said. Besides, she said, the premier would hold a monthly meeting to evaluate anti- smuggling strategy.
FATF grey list On the issue of Financial Action Task Force (FATF), Federal Minister for Aviation Ghulam Sarwar Khan said the government would check Jamiat Ulema-i-Islam-Fazl‘s (JUI-F) baton-wielding force at the district level. ―We will not allow them to reach the federal capital,‖ the minister warned.
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He said JUI-F chief Fazlur Rehman gave a wrong message to the Paris-based FATF meeting as his baton-wielding force was projected on social media. By doing so, he projected a very negative image of Pakistan abroad, the minister said.
Only last week FATF decided that Pakistan would remain on grey list until February 2020 with a warning to further improve implementation of the 27 actions of the International Cooperation Review Group. (By Mubarak Zeb Khan Dawn, 01, 26/10/2019)
Development ethics
AKHTAR Hameed Khan, the celebrated South Asian social scientist, died 20 years ago in October 1999 in America. He was buried in the compound of Karachi‘s Orangi Pilot Project Research and Training Institute — in the shadow of the Orangi hills — where he had worked for over 19 years in developing community- financed and managed models of sanitation, housing, health, and education.
Akhtar Hameed Khan‘s development-related thinking has not only shaped the projects he developed and those that sought his advice but also those whose initiators have never met him. His thinking has been transferred to the new generation by the students of his students and it is necessary to remind the new generation of his thinking regarding development work.
Akhtar Hameed Khan‘s development- and sociology-related wisdom is for all times and situations because of its ethical foundations and the dialectic structure of thinking. Its application can yield different results in different situations but the ethical values and the emphasis on community empowerment that underscores it remain constant.
It is important to mention here that his illustrious colleague and first student, Shoaib Sultan Khan, has helped immortalise his work by setting up the Akhtar Hameed Khan Resource Centre in Islamabad. The centre contains all of Akhtar Hameed Khan‘s written work, documentation of the projects and programmes he initiated and worked on, videos of his talks to programme workers, community gatherings and workshops and to academia the world over.
Akhtar Hameed Khan’s wisdom is for all times.
This collection of his work is a source of immense knowledge that has the potential to teach students and their teachers a whole range of subjects such as development, economics, history, and sociology. This volume of work should be compulsory reading for students and teachers, and government officials, especially for those who are immersed in Western-produced theoretical discourse which is far removed from the realities of the developing world.
The Orangi Pilot Project (OPP) was not only Akhtar Hameed Khan‘s last work but also his only urban project. In Orangi, he developed different programmes that overcame the social, financial, and technical constraints governments face in the development and the upgrading of informal settlements. He set up the research and training institute with the hope that government officials would come here, acquire knowledge and implement these models throughout Pakistan, and on the basis of this, policies incorporating these models would be developed and implemented.
The models, especially of sanitation and microfinance have expanded all over Pakistan and a sanitation policy based on the Orangi model also became federal law in 2006. This policy has not been implemented by state organisations and remains a piece of paper. However, well before the policy was initiated formally, Tasneem Siddiqui implemented the principles of this policy when he was director general of the Sindh Katchi Abadi Authority. As a result, the authority became solvent for the first time and carried out major upgrading schemes. In this process, he was supported by Perween Rehman who was then director of the Research and Training Institute.
While working with him, I was able to discern a number of principles that he applied to the functioning of the OPP. He believed that projects should have a strong populist bias which meant that their priority should be the problems and potential of low-income communities. He believed the project should be supported by an informed public. So when the OPP was young, we went out of our way to create linkages with academic and media institutions. Over time, they became an integral part of our project and participated in all our activities.
For communities to develop their own infrastructure and housing, it was necessary to develop affordable models and their delivery systems. This was left to me. He also believed there should be strong links between the project and government institutions, especially those that formulated policy. So these links were created and promoted through lectures and workshops at institutions such as NIPA, Staff College, and presentations at the Planning Commission.
Being a part of an international debate on development was important to him. In the absence of such participation, he felt the OPP would die of narcissism. So there was continuous coming and going of academics and development experts from all over the world and the publication of books and working papers for important international journals on the Orangi experience.
Along with these principles, Akhtar Hameed Khan firmly believed in the transparency of accounts. He always said that the accounts explained the project better than any other evaluation. He was a great believer in the sanctity of minutes and of regular board meetings. It is these principles that have made the OPP whatever it is today. (By Arif Hassan Dawn, 09, 27/10/2019)
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Prepared by IMF, current budget designed to increase loans, says Bengali
―The 2019-20 budget has deficit increases for the first time. There are small growth targets in there but bigger tax targets pointing to so many missing links. It looks like the budget, prepared by the International Monetary Fund [IMF], has been designed to increase loans,‖ said noted economist Dr Kaiser Bengali.
He was speaking during the launch of a report, prepared by him in collaboration with economist Iffat Ara for the Pakistan Institute of Labour Education and Research (Piler), titled Analysis of Budget 2019-20: Recipe for External Debt Trap? at the Karachi Press Club on Monday.
Dr Bengali feared an increase in the inflation rate during the current fiscal year because according to him industrial growth has decreased and imports have increased. He said most of the time the government figures were incorrect. ―The figures, the statistics point towards negatives but we are being told that the economy will improve. Perhaps they mean it will improve through inflation. Because when inflation increases, the taxes will also shoot up. Otherwise, I see no measures in this budget to improve the economy. In fact, it will push us into greater debts,‖ he added.
Calls for a ban on imports to help local industry create jobs
He said that unemployment rate would further increase because of a slowdown in industrial production as most of the industries have cut their production, and thus laid off employees with the decrease in working hours. This has adversely affected the income of the employees. ―And not just in the manufacturing sector, the number of employees in the services sector such as restaurants has also declined,‖ he said while also pointing out that the service standards of many restaurants had declined due to reduction in their employees.
―Over 95 per cent of the budget is allocated for meeting government expenses, debt service, defence and maintenance of law and order. This year there was only two per cent increase in the social protection budget,‖ he added.
‘Gambling economy’ ―Our economy is import-based as most of our raw material is imported. These days I cannot find local items in supermarkets and big departmental stores in our urban areas. We have converted our economy into gambling economy,‖ he said.
―Budget deficit is a big problem and last year the federal government reduced 28pc budget of the development schemes. This year further reduction is proposed in the budget. The government plans to privatise more state units, which may further increase unemployment. The government has already privatised over 100 industries, but unfortunately most of the privatised industries have been closed down,‖ he added.
―It also looks like the government has relinquished its actual responsibility of providing basic facilities such as education, health, housing, environment, etc, to the public. Launching programmes is not enough. How are they going to run these programmes?‖ he questioned, while pointing out some of the things which the government can do in order to actually improve the economy.
―Ban foreign imports. That will help your own industry with the employment rate coming up again. The 17pc tax on the local industry is too much and should be brought down to five per cent. Another thing to do is decrease non-development expenditures at home. The military expenditures, especially the military‘s non-combat expenditures, should be reduced by 20pc,‖ he said. ―Actually, if the government reduced only two per cent in the defence budget, it can save Rs200 billion from that one head.‖
During her presentation, the analysis report‘s co-author economist Iffat Ara said that the external financing growth nearly doubled from 20pc over 2016-18 to 36pc in 2018-19 and was 26pc above the budget in 2018-19. ―The budget 2019-20 projects external revenue growth at 116pc,‖ she said.
‘Chase IMF people away’ Earlier, Karamat Ali of Piler, while recalling his childhood in Multan, said that during those days the simple folk there used to borrow money from moneylenders who would loan them money for collateral of their choice. ―My friends and I were 12 to 14 years old when we saw one such moneylender banging the door of someone who had borrowed money from him and harassing him on his apologetically telling him that he was unable to pay up that month‘s instalment and interest. That‘s when we children picked up stones and started stoning the moneylender to leave alone the poor man he was harassing. We kept stoning him till he ran away and we chased him out of town. I wish someone could stone the IMF people now and chase them out of the country so that they never bother us again,‖ he said. (By Shazia Hassan Dawn, 15, 29/10/2019)
After talks failure, traders down shutters across country
The trader community observed a shutterdown strike throughout the country on Tuesday to protest measures in the budget designed to document their transactions, with wide swathes of urban markets heeding the strike call.
During the day talks between the government and the trader community broke down, ending hopes of an early end to the strike.
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The markets are expected to largely remain closed on Wednesday (today) too, as a cluster of five traders‘ associations has called for a two-day protest against the recently introduced measures aimed at widening the tax net and ensuring that retailers pay their taxes.
The strike coincided with the launch of the anti-government ‗Azadi march‘ by the Jamiat Ulema-i-Islam-Fazl.
The strike call was given after the failure of a round of negotiations between the traders‘ leaders and the authorities, led by the Prime Minister‘s Adviser on Finance Dr Abdul Hafeez Shaikh and Federal Board of Revenue chairman Shabbar Zaidi.
PM’s financial adviser asks businessmen to stop avoiding paying taxes as latter warn of more strikes
After the inconclusive talks, Dr Shaikh criticised traders for not paying their taxes, pointing out that out of 3.5 million traders, only 392,000 were in the tax net.
Islamabad saw patchy observance of the strike, but traders in Rawalpindi were able to give a powerful message of unity as all main commercial hubs there kept their shutters down throughout the day.
By and large Punjab responded well to the strike call as traders kept their businesses closed in most of the markets and shopping centres on the call of All Pakistan Anjuman-i-Tajiran (APAT).
―We straightaway reject the ‗IMF‘s agenda in the country‘. Since the government is playing ‗meeting-meeting‘ with us, we warn it to either accept our demands or face more shutterdown strikes in the near future,‖ said Ashraf Bhatti, APAT‘s president, at a protest camp in Lahore. Businessmen kept their shops closed in a majority of the markets.
In Multan, most of the markets remained closed and in Faisalabad traders observed strike in the cloth, jewellery, hosiery and yarn markets. However, there was a partial strike in all eight bazaars of Clock Tower.
Traders‘ representatives reported that the strike was observed in most markets in Vehari, Dera Ghazi Khan, Sargodha, Muzaffargarh, Okara, Sialkot, Toba Tek Singh and Gujranwala.
In Sindh, trade centres, main markets and bazaars, shopping malls and business establishments remained closed in all big and small cities, except Karachi where various trade associations‘ representatives, who on Monday had claimed to have come on the same page over closure of the markets, suffered a setback as some major markets remained open throughout the day.
In Karachi, the majority of markets observed the strike as the hub of wholesale and retail trade all along M.A. Jinnah road remained shut.
But markets in Korangi, Landhi and Malir only partially answered the strike call.
Anis Majeed, patron-in-chief of the Karachi Wholesale Grocers Association, said traders had never wanted to close their businesses, but were now forced to shut them down due to the cumbersome method of tax collection through a documentation process which cannot be done overnight.
Neighborhood markets, such as the Hyderi Market in North Nazimabad, and two main markets of F.B. Area, (Water Pump and Karimabad), and most of Liaquatabad markets were doing normal business.
A large portion of Saddar around Empress Market as well as Clifton and Defence areas were also open.
In Khyber Pakhtunkhwa, businessmen observed the strike in the provincial capital Peshawar and other districts of the province. All shopping centres in Peshawar remained closed as the traders‘ leaders frequently visited different areas to ensure success of the protest.
A partial strike was observed in other cities of the province where some shops and markets were closed while others remained open.
Meanwhile, a complete shutterdown strike was observed across Balochistan, including Quetta, where all bazaars, shops, business centres, plazas, markets and business establishments remained closed throughout the day.
The shopping areas of the provincial capital presented a deserted look as most vehicles remained off the roads.
The strike was also observed in Dera Murad Jamali, Sibi, Hub, Dera Allahyar, Khuzdar, Kalat, Zhob, Loralai, Chaman, Pishin, Turbat, Gwadar, Panjgur, Dalbandin, Noshki and other cities of the province. However, on the outskirts of Quetta city some shops opened in the afternoon. (By Kalbe Ali And Aamir Yasin Dawn, 01, 30/10/2019)
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IMF talks and strike
THE first review of the ongoing IMF programme has kicked off in Islamabad at precisely the same time as the traders‘ strike, which by all indications has been widely observed around the country. The timing is very significant, since the government has promised to forward the traders‘ demand for the withdrawal of some key documentation measures to the IMF. The fact that the Fund will be asked to consider this request in the midst of an ongoing countrywide strike will perhaps add some urgency to the discussions. What is important, however, is that in the middle of this urgency, the costs and consequences of a retreat from the documentation goals of the government, announced in its last budget as well as clearly laid out in the Fund programme, will be very large. The traders are adamant that who they buy from and sell to is none of the government‘s concern, only the quantum of revenue that is recovered from them is its business. But in the last budget speech, it was clearly said that the ―primary theme of this budget is to improve documentation of economy‖, and conceding to the traders‘ demand to consider one tax on turnover as a full and final settlement of their tax obligations would be nothing short of a retreat from this position.
The IMF must impress upon the government the cost of retreating from its goal of documentation of the economy. It is fair for the government to search for ways to break the impasse created by the imposition of a CNIC condition upon all transactions of traders since this condition has nearly jammed the wheels of the economy. The supply chain of vendors, suppliers, distributors, retailers and wholesalers that keeps the manufacturing industry in motion and supplied with raw materials, and access to markets where they can disgorge their output, is currently halted mainly due to the imposition of this condition. It was easy enough to see the impasse coming in July when the documentation efforts were launched, but at the time the government repeatedly struck a strong and unequivocal note, signalling its determination to not back down. Having come this far, if it should now bow before the traders‘ demands, the ‗primary theme‘ of the budget and the government‘s economic programme would stand defeated, barely one quarter into the new fiscal year. (By Editorial Dawn, 08, 30/10/2019)
Good news for economy?
With the economy in a shambles and the Maulana Fazlur Rahman-led caravan comprising thousands of protesters closing in on the federal capital, there could have been no worse time for the government to enter into negotiations with the striking trad ers who had locked down their shops to press for their demands concerning taxes. The negotiations thus ended in major takeaways for the traders after two days of lockdown. Except for the deferral of the CNIC condition till January 31, 2020 on purchases worth Rs50,000 — which turned out to be a bit of face-saving for the government — it was all a win-win for the retailers class.
Let‘s look at some of the sweeping concessions granted to traders by the government under the 11-point agreement reached between them on October 30. Traders with annual turnover of Rs100 million will now pay 0.5% income tax instead of the earlier 1.5% — something that would translate into a 66% fall in income tax revenue. Then, the traders consuming up to Rs1.2 million worth of electricity annually (as against Rs0.6 million previously) as well as those having shops spread over 1,000 square feet or less will be exempt from sales tax registration, and thus the CNIC condition. How many of the total four million traders will be excluded from the sales tax net due to these concessions is not known for sure at the moment, but according to the FBR chief, it is likely to cut the sales tax collection by some 10%. The government has also agreed to review the rate of turnover tax for sectors with low profit ratio.
While the October 31 agreement is going to result in a fall in income tax revenue and shrinking sales tax net, the government claims it to be ―good news for the economy‖ that will increase tax revenues by generating economic activity. Isn‘t it time to remind the government if its claims to never ever compromise on steps to document the economy and broaden the tax net? (By Editorial The Express Tribune, 16, 01/11/2019)
Sindh govt, WB approve new development projects worth $1.93b
Sindh Chief Minister Syed Murad Ali Shah met the World Bank President David Malpass, where they discussed $2.77billion ongoing projects and also approved $1.93 billion worth of new projects in the province. The new projects include the rehabilitation of Guddu and Sukkur Barrages as well as the overhaul of the Karachi Water and Sewerage Board.
The meeting, held at the CM House on Friday, was attended by WB South Asia Vice-President Hartwig Schafer, International Finance Corporation Regional Vice-President Nena Stoiljkovic, Equitable Growth, Finance and Institutions Vice President Ceyla Pazarbasioglu, WB Country Director for Pakistan Illango Patchamuthu and others. Meanwhile, the chief minister was assisted by Chief Secretary Mumtaz Shah, provincial cabinet members Nisar Khuhro, Ismail Rahu, Saeed Ghani, Imtiaz Shaikh, Azra Pechuho, Shehla Raza, Nasir Shah, Murtaza Wahab, Planning and Development chairperson Naheed Shah, Principal Secretary to CM Sajid Jamal Abro, finance, education and home secretaries, Sindh Revenue Board Chairman Khalid Mahmood and others.
In his presentation to the WB delegation, the chief minister said that the Sukkur Barrage was one of the most important barrages of the country and it was considered to be a lifeline for the rural economy. Similarly, Guddu Barrage is also important for the agro-economy of the province, he explained.
According to Shah, there was a proposal to construct a new barrage at Sukkur, but it would be a huge project in terms of financial implications. Therefore, the provincial government has decided to rehabilitate the Sukkur and Guddu barrages. The World Bank agreed to finance $328 million for the rehabilitation of both barrages.
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Karachi reforms and investments The chief minister said that the Sindh government had requested the World Bank to conduct the Karachi Diagnostic Study in 2016, leading to the Karachi Transformation Strategy which developed a holistic plan to revitalise the city.
This plan has helped roll out reforms and investments in various sectors including water and sanitation, urban transport systems, and the local government system. These investments, coupled with attention to indicators having a bearing on the business environment, are expected to impact the ease of doing business which is bound to make Karachi the preferred choice of businesses, said the CM.
CLICK The chief minister said that the newly-signed ‗Competitive and Livable City of Karachi‘ (CLICK) is a $ 230 million project, through which the provincial government plans to initiate local government institutional reforms in all six District Municipal Corporations and the Karachi Metropolitan Corporation. ―It includes a component for conditional performance grants to local agencies for investing in infrastructure,‖ he said, adding that ―this funding for improving the urban and municipal infrastructure at the DMC level is expected to upgrade the livability and simultaneously improve the governance of local government institutions‖.
‗Click‘ also includes property tax reforms and enhancing ―doing business‖ reforms.
KWSSIP CM Shah said that the Karachi Water Services Improvement Project (KWSSIP) is a $1.6 billion program to be rolled out in three phases. Its first phase worth $100 million has been approved.
This envisages institutional reforms of the KWSB, strengthening its HR, technical capacity and improving its planning. It als o includes some priority works. He urged the WB team to approve the launch of all the phases one after another so th at it could make a clear impact. The visiting team approved the provincial government‘s proposal.
KNIP The Karachi Neighborhood Improvement Project (KNIP) is a $98 million project, focused on improving urban infrastructure and creating better public spaces. It also involves a reform component for doing business, under which the Sindh government was able to set up a digital platform for the Sindh Building Control Authority. KNIP is also a type of pilot project that will gu ide the Sindh government in rolling out reforms and investments for the local government set up in the province.
KUMP The $381 million Karachi Urban Mobility Project (KUMP) was approved by the WB team, with the Sindh government now ready to start its implementation. The chief minister said that combined with the Bus Rapid Transit System and the Karachi Circular Railway, the mass transit system would provide Karachi seamless connectivity between residential districts, business district s, industrial estates and the ports.
Strengthening the rural economy The chief minister said that a large percentage of the province‘s population depends on agriculture for sustenance and there was a continuous need to invest in agriculture productivity. ―This requires investment in irrigation infrastructure, improved access to better inputs and mechanised farming and improvement in agriculture value chains. However, the most significant aspect that we wish to highlight is the increase in agriculture yields,‖ he said.
The $187 million Sindh Irrigated Agriculture Productivity Enhancement Project (SIAPEP) provides the required investment for on-farm water management. Meanwhile, the Sindh Agriculture Growth Project (SAGP) worth $76 million, is focused on improving various agriculture value chains and livestock in the province.
Reducing stunting The chief minister said that the $61.6 million Response to Reduce Stunting Programme (SERRSP) and the $36.24 million Nutrition Support Programme were both very important projects. He said that the Sindh government was implementing the six- year (2016-2021) multi-sectoral ‗Sindh Accelerated Action Plan for Reduction of Stunting and Malnutrition‘, aimed at reducing the stunting rate from the existing 45% to 30% by 2021.
He added that the WB-supported Nutrition Support Programme was initiated in 2014 and the SERRSP was funded by the Sindh government. ―The 2018 National Nutrition Survey shows that the overall rate of stunting in Sindh has reduced from 48 to 45.5 percent, however it is higher than the national figure of 40%,‖ he said.
The chief minister said that his government would need to make more efforts to attain the overall targets under the multi - dimensional poverty alleviation programmes. ―The support on nutrition programme may need to be extended for another period of four years or so,‖ he said, on which the World Bank asked the provincial government to formally submit the request.
Sindh Chief Minister Syed Murad Ali Shah discussing way forward under Phase 2 of
Intermediary cities’ uplift The CM said that the provincial government was planning to undertake a more planned investment in the intermediary cities for balanced growth across the province. ―This includes investment in urban infrastructure, urban facilities and spaces, market infrastructure for improving livability, economic growth and job opportunities,‖ the CM explained. ―Without investing in intermediary cities, endeavours to create economic surplus won‘t be able to keep the demographic pressure to intermediary
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Sindh government to bring ride-hailing services into tax net
The provincial transport department has proposed a law to bring online ride-hailing services within the tax ambit. However, said Sindh Transport Minister Awais Qadir Shah on Monday, the taxes imposed on the online transport service providers in Sindh wil l be less than the taxes imposed on such services in other provinces. With this statement, Shah put to rest rumours of the provincial government enforcing a ban on online ride-hailing and Hiace van service providers, Airlift and Swvl. The statement was issued after a meeting between the transport minister and a delegation of Swvl.
The Dubai-based private van service providing company maintained that it would invest $25 million in Pakistan as well as provide employment opportunities. Shah confirmed that the transport department would officially issue route permits to the recently introduced Hiace van services. The proposed bill [for imposing taxes] will be discussed at the next meeting of the Sindh cabinet, he added.
―We want to provide quality transport services to citizens. The government will not be an obstacle in this regard and route permits will be issued to all private online bus services,‖ said Shah.
Speaking to The Express Tribune, Sindh government spokesperson and the Adviser to Sindh Chief Minister on Law, Environment and Coastal Development Barrister Murtaza Wahab said that the provincial government had no intention of closing the online bus service. Instead, he added, the Sindh government was making laws to regulate such services and all stakeholders would be consulted before any step is taken.
―The Sindh government welcomes any such private transport company but lawmaking is necessary for this purpose,‖ he added while pointing out that Sindh was the first province to not just regulate online transport companies but to recognise them as well.
In collaboration Meanwhile, in a statement issued on Monday after the meeting with the transport minister, Swvl reiterated its resolve to prov ide a mass transit solution for the people of Sindh in collaboration with the provincial government. According to the statement, the Sindh government has agreed to support Swvl in setting up the public transport infrastructure of Karachi.
―Swvl and the Sindh government have explored multiple avenues to improve the transportation landscape of Sindh and will entering into a public-private partnership to provide quality mass transit solutions,‖ read the statement. (By Vakeel Rao The Express Tribune, 04, 12/11/2019)
Tomato price hits record high at Rs400 a kilo in Karachi
The price of tomato hit a record high in Karachi on Tuesday and reached Rs400 per kilogram from Rs300-320 per kg on Monday. In the absence of any landed price of the Iranian tomato, greedy traders also brought the price of Swat and Sindh crop at par with the Iranian tomato rate to make huge profits.
But the local administration, like its past practice, quoted an unrealistic retail rate of Rs253 per kg compared to Rs193 per kg on Monday.
In the first week of November, the official retail rate of tomato was Rs117 per kg and Tuesday‘s official price clearly indicated that the government itself was revising the price upward.
There are hardly any traders selling tomato at the control rate.
A representative of wholesalers asks citizens not to buy tomato to break monopoly of a few traders
Traders said a box containing 13-14 kg of tomato was available at Rs4,200-4,500 depending on the quality, thus forcing many traders to suspend purchasing.
The government had last week issued a permit for importing 4,500 tonnes of tomato from Iran, but the arrival of the red fruit had yet to pick up pace in the market, resulting in a persistent hike in the rates in view of rising demand.
Of the 4,500 tonnes, only 989 tonnes had arrived in the country so far, a trader said, adding that he could not confirm whether more quantities arrived at the Taftan border on Tuesday.
People urged to not buy tomato for ‘two-three days’ Falahi Anjuman Wholesale Vegetable Market president Haji Shahjehan said two containers carrying 44 tonnes of tomato had arrived on Sunday while on Tuesday only one container reached the market. This failed to bring any relief for consumers. The wholesale price had crossed over Rs300 from Rs180-220 per kg on Monday, he added.
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He blamed the federal government for restricting import to a few people instead of allowing a free import by any trader. As a result, the limited quantities were already booked and sold at the Taftan border. Previously open imports had somewhat kept the tomato prices stable, he said.
―Being president of the wholesale market, I can only urge the customers to restrict their purchases for two to three days as it may break the monopoly of a few traders as well as bring down the tomato prices,‖ he said.
He claimed that the Sindh crop had started in limited quantities and the price of a 10-kg wooden box of tomato in Mirpurkhas was Rs2,300.
Consumers are paying Rs100 for a mere 250 grams or just four tomatoes. They said the government had yet to take serious notice in checking the landed and selling price of the Iranian tomato to curb profiteering by traders. (By Aamir Shafaat Khan Dawn, 15, 20/11/2019)
World Bank restores Pakistan’s budgetary support
After a gap of almost four years, the World Bank has decided to restore Pakistan‘s budgetary support and may approve a $500 million loan to bring improvement in fiscal management and harmonise sales tax across the country.
The bank‘s board of directors may approve a development policy credit — the Resilient Institutions for Sustainable Economy (RISE) programme — by March next year, according to the Ministry of Finance and the World Bank documents.
It will be the first budgetary support loan that the Washington-based lender will approve in four years. Last time it had approved a loan in February 2016.
The Asian Development Bank and the World Bank had suspended Pakistan‘s budgetary support in 2017 after its macroeconomic conditions started to deteriorate.
The ADB has already restored Pakistan‘s budgetary support over two months ago.
The bank had differences on the exchange rate regime and then linked the budgetary support with the devaluation of the currency.
Another requirement for qualifying the World Bank budgetary support loan is that the country must have foreign exchange reserves to cover at least two-and-a-half months of import bill.
Pakistan still does not meet the criterion but since it has already signed the IMF programme, the World Bank is likely to relax this condition.
During the week ending November 15, 2019, the SBP‘s reserves increased by $45 million to $8.44 billion, according to the central bank.
The $8.44 billion reserves are inclusive of foreign investors‘ investments of nearly $450 million in the government‘s debt securities, which is a highly risky venture for Pakistan.
The Ministry of Finance took significant time in finalising the policy matrix of the RISE loan package, which has pushed its approval to the third quarter of this fiscal year.
The World Bank stated that the $500 million upcoming loan will be aimed at enhancing the policy and institutional framework t o improve fiscal management and improving the regulatory framework to foster growth and competitiveness.
Historically, the projects‘ loans remained more effective than the policy loans, as successive governments have failed to ful ly implement the reforms after the disbursements of policy loans.
Pakistan also plans to launch sovereign bonds but the process may take more than the desired time, according to the sources in the Ministry of Finance.
Earlier, the finance ministry had a plan to launch the bonds either by end of October or mid of November.
The IMF executive board is also expected to take up Pakistan‘s request for approval of the second loan tranche of $450 millio n next month under the $6 billion loan package.
Pakistan is once again in a macroeconomic crisis that repeats every four to five years, according to the World Bank.
It said that short periods of relatively fast growth are followed by severe deceleration. The main factors that cause the cri ses are the incomplete implementation of structural reforms, inappropriate policy responses to macroeconomic imbalances, and a federal structure that exacerbates challenges of coordination of institutions and harmonisation of policies nationwide.
After an overall low economic growth period during 2008-13, Pakistan witnessed decent growth rate during past five years.
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However, the country is again passing through a low economic growth phase due to structural weaknesses that remained unaddressed during past five years.
The World Bank said the proposed $500 million was the first in a programmatic series of three operations focused on enhancing the policy and institutional framework to improve fiscal management, and regulatory framework to foster growth and competitiveness.
The proposed series will be complementary to the two-year development policy series Securing Human Investments to Foster Transformation (SHIFT).
The World Bank said that the new budgetary support will help the government‘s efforts maintain macroeconomic stability while putting in place the foundations for sustainable growth.
The reforms in the first pillar will support fiscal management by establishing effective institutions and coordination mechanisms between federating units for a consolidated fiscal framework and improve debt transparency and management.
The programme loan also targets broadening the tax base by resolving inconsistencies in tax policy, dealing with contingent liabilities from state owned enterprises (SOEs), and lowering electricity generation costs and eliminating arrears in the ene rgy sector.
The World Bank also plans to give policy loan for supporting competitiveness and growth by improving the business environment and simplifying business regulations, harmonizing the sales tax across the country, enhancing the transparency and depth of t he financial sector and supporting the digital economy.
The World Bank stated that private investment was severely constrained due to the way the general sales tax was administered across the country, an opaque and overregulated business environment, a shallow financial sector, and significant anti-export bias of the national tariff policy.
In order to fulfil the World Bank condition, the federal government has already approved the national tariff policy. (By Shahbaz Rana The Express Tribune, 01, 22/11/2019)
Informal economy to be regulated for meeting FATF concern
The government has decided to bring all unregulated sectors of the national economy under an interim regulatory framework to address at the earliest outstanding reservations on money laundering and terror financing (ML and TF) of the international financial watchdog — Financial Action Task Force (FATF).
The decision was taken by the National FATF Coordination Committee (NFCC) at its recent meeting. Prime Minister Imran Khan had set up the high-powered 12-member NFCC in the first week of October to ensure execution of all FATF-related tasks till Dec 1.
A senior government official told Dawn that the NFCC has decided to appoint the Federal Board of Revenue (FBR) as an interim regulator for the real estate sector in view of disagreement among key stakeholders over creation of proposed Real Estate Regulatory Authority. The FBR will also act as a regulator for jewellers, jewels, diamonds and precious stones because there was no regulator at present for the sector.
Likewise, the NFCC has recommended the role of regulator for lawyers, legal advisers and law firms to the Ministry of Law and Justice. It authorised the Audit Oversight Board to act as a regulator for chartered accountants, accountants, financial consultants and all those relating to accounts groups.
Financial Action Task Force’s reservations on money laundering and terror financing discussed
The Financial Monitoring Unit (FMU) has been assigned the job of regulating financial transactions through Pakistan Post and National Savings for the time being.
Officials said that the decision to have above interim regulatory arrangements had been taken on the basis of feedback and advice received from a recent plenary of the FATF in Paris that decided to keep Pakistan in the grey list until February next year. The participants of the Paris Plenary had expressed concerns that the above-mentioned unregulated sectors involved great risk potential to be used as sources of ML and TF.
FATF members are reported to have expressed displeasure that so critical areas in Pakistan were operating without regulators and demanded to have proper regulatory framework for these sectors for national risk mitigation.
Led by Minister for Economic Affairs Division Hammad Azhar, the NFCC comprises federal secretaries of finance, foreign affairs and interior besides heads of all the institutions and regulators concerned with money laundering and terror financing.
They include the State Bank of Pakistan‘s (SBP) governor, Securities and Exchange Commission of Pakistan‘s (SECP) chairman, FIA‘s director general, member (Customs) of the FBR and the FMU‘s director general. The committee also has three senior officials from the military‘s General Headquarters.
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The NFCC meeting held about a week ago noted that the country‘s real estate sector had seen concentration of undocumented flow of money. There had been a lot of discussions among the federal and provincial authorities over creation and coordination of real estate regulators but the process was found time consuming given overlapping and yet independent powers of various stakeholders in the constitution and relevant laws.
It was, therefore, found feasible until the resolution of legal challenges to empower the FBR to act as a regulator for the real estate sector. The FBR was considered well placed to act as a regulator given its engagements with key real estate players in the past as part of documentation and taxation purposes in the first phase. Documented and undocumented annual business in the real estate sector is estimated to be around Rs500 billion. The decision would also help the FBR to better achieve its tax related objectives, sources said.
They said senior officials of Pakistan Post, courier companies and national saving schemes would coordinate with the FMU during the interim period to address emergent FATF targets. The work has also been started to put in place proper regulatory framework under the Ministry of Postal Services, finance ministry, the SBP and SECP for which Dec 31, 2019 has been set as deadline.
This framework after completion would be shared with the International Country Risk Guide for review in January 2020.
The official said Pakistan would also submit an updated progress report along with its strategy and measures against anti-money laundering and counter financing terror (AML/CFT) to the FATF and Asia Pacific Joint Working Group by Dec 7. By Dec 17, the joint working group would seek further clarifications (if any) and Pakistan would be required to file a conclusive report, based on joint working group questions, by Jan 7.
Pakistani authorities expect the 39-member joint working group to review the country‘s case by the third week of January. They hope to be able to remove reservations of 8-9 key countries and report significant progress on its target action plans to the FATF that would finally decide in its next plenary due in second half of February about the future course of action — removal, extension or graduation from the grey list.
The Officials believe that Pakistan had completed action plan on about 22 items to a large extent and lagged behind on 4-5 targets.
They advocate that if reviewed under normal circumstances, Pakistan could be given some more time to overcome remaining shortcomings. Some quarters in Islamabad suggest that Pakistan was unfortunately also being viewed from a political angle, otherwise, even Afghanistan was not in the FATF‘s grey or blacklist.
―Pakistan faces greater challenges than many other countries because of its risk profile,‖ Mr Azhar had recently told a parliamentary panel. Some countries had been removed from the grey list after just 80 per cent compliance while Pakistan may be required to do more, he had said. (By Khaleeq Kiani Dawn, 01, 25/11/2019)
CPEC and the US-China tug of war
Last week, two important developments kept the spotlight focused on CPEC. The first was Alice Wells‘ adverse remarks about CPEC and the second was the appointment of Lt Gen (retd) Asim Bajwa as chairman of the newly-created CPEC Authority.
Alice Wells, the lead US diplomat for South Asia, criticised CPEC for what she called creating a debt burden for Pakistan, disproportionately benefitting Chinese state-owned enterprises. She specifically mentioned the ‗expensive‘ price tag of the planned ML-1 upgradation and lashed out at the lack of transparency in the project. She also claimed that the US approach of promoting FDI and trade offered a ‗better‘ alternative to the Chinese model of investment through state-run companies.
Ms Wells‘ statement is a part of Washington‘s recently evolving aggressive stance towards the Belt and Road Initiative (BRI) as it intensifies its efforts to shoo away the world from easier capital flows from China. Last month, US Commerce Secretary Wilbur Ross mentioned exorbitant profits made by Chinese SOEs, leading to foreclosures, while US Vice President Mike Pence aired his concerns about the ―flag of Chinese ownership flying in ports from Sri Lanka to Pakistan to Greece‖. Pence also openly expressed his gratitude towards Iceland, while visiting the country in September, for ‗rejecting‘ China‘s BRI investment.
This hardline US stance has come in the wake of the US-China trade war and stifling relations between the two superpowers. While the jury is out on the future of Sino-US relations, some claim that this polarisation is in fact helping BRI‘s cause. In a blog post, Benn Steil and Benjamin Della Rocca highlighted that Trump‘s tariffs have resulted in a surplus trade balance with China for many countries, with African and Latin American BRI partners being the biggest winners.
But the US-China decoupling has hardly benefitted Pakistan, which has been battling with its own challenges. Since Imran Khan came to power, CPEC has hit a snag owing to a balance of payment crisis, fiscal crunch and prevalent bureaucratic indecision. Resultantly the new CPEC investments dried up while the old ones suffered from slow progress.
However, the establishment of the CPEC Authority and renewed conversations in the 9 th JCC meeting rekindled the prospects for CPEC‘s revival. Many also believe that with a former general in charge of the autonomous CPEC Authority, the government may be able to overcome bureaucratic inaction widely attributed to the NAB‘s accountability drive.
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During the JCC meeting, the two sides agreed to speed up the preliminary design work on ML-1, approve the project and finalise the bidding documents. And while the question of its financing remains in limbo, given the IMF‘s embargo on government guarantees, China agreed to establish a high-level financing committee which would consider RMB financing besides other options. But notwithstanding Pakistan‘s shifting-gear approach towards CPEC, the increasing polarisation between Washington and Beijing is going to pose difficulties for Islamabad which is already struggling to fulfil IMF‘s conditions and making its cas e to get out of the FATF grey list. For Pakistan, on the one hand is the country‘s largest trading partner which also holds significant influence with global lenders and the FATF; and on the other is its time-tested ally which has pumped in billions of dollars to help the country overcome its energy crisis and improve connectivity.
For Pakistan it‘s not an either-or situation. The promised FDI and trade prospects from the US are no substitute for readily available infrastructure financing from China or vice versa. This means that Pakistan will have to draw a balancing act. But more importantly, it will also need to negotiate better terms for future CPEC projects, ideally circumventing the need for soverei gn government guarantees and ensuring manageable repayment options. Or else the government will soon find itself in a very tight spot. (By Hasaan Khawar The Express Tribune, 16, 26/11/2019)
DFID agrees to help Sindh govt in health, education sectors
The Sindh government and the Department for International Development (DFID) of the United Kingdom have agreed to develop partnership in education, health, particularly in mother-child health, water and sanitation and renewable energy sectors.
This decision was taken in a meeting held between Chief Minister Syed Murad Ali Shah and DFID chief Annabel Gerry who was accompanied by British Deputy High Commissioner Mike Nithavrianakis.
DFID is a United Kingdom government department responsible for administering overseas aid.
The chief minister said ―We are working hard to bring out-of-school children back to school,‖ adding that there were 2.2 million children out of school.
He said that DFID help was needed in bringing the out-of-school children back to school. ―You have to help us in developing strategy to bring out-of-school children back to school,‖ he said and added that he had evolved a plan to involve the community to increase school enrolment.
The chief minister and the DFID chief also discussed repairing of old school buildings and improvement of one-room schools by giving them additional classrooms and washroom facilities. They agreed to formalise the proposal for improvement in the education sector. The secretary of education would prepare working papers and the requirement for further approval.
The meeting participants also discussed investment in mother-child health (MCH) by launching a nutrition programme aimed at fortification of food and supplements. The chief minister said that the provincial government had launched MCH programmes in different districts, but food supplement and food fortification plan was needed for rural areas of the province, particularly for Thar, Kohistan and Kachho areas.
The British deputy high commissioner told the chief minister that a UK company was interested in investing in water and sanitation projects in the city.
Mr Shah directed the investment secretary to invite the company and facilitate them to identify the scope of the work, particularly in water treatment, sanitation and desalination projects.
During the meeting renewable energy projects, wind and solar, were also discussed. The British envoy said that their firms were interested in installing wind energy projects, if they were supported.
The chief minister directed secretary of investment to coordinate with the British company and work out a plan for investment in the energy sector. (By Newspaper‘s Staff Reporter Dawn, 16, 05/12/2019)
ADB okays $1.3bn loans for Pakistan
The Asian Development Bank (ADB) on Friday approved $1.3 billion in loans for Pakistan for emergency budgetary support, chiefly through a relatively expensive crisis response facility.
The Manila-based lending agency announced that its board of directors had approved two loan programmes to help Pakistan build foreign exchange reserves viewed as critically low at present. The quick-disbursing loans would be available to Pakistan next week.
The loans include a $1bn Special Policy-Based Loan (SPBL) typically meant for emergency situations and involves about 4 per cent interest rate as it is a relatively short-term loan for seven years and charged at London-InterBank Offered Rate (Libor) plus 2pc. This is the first time Pakistan is availing ADB‘s emergency loan for budget support.
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Another $300 million loan for energy sector reforms for 20 years and five years grace period will be available to Islamabad at 2pc interest.
The two loans are in addition to $10.368bn obtained by the current government during the period between Aug 18, 2018 and Sept 30, 2019 from various institutions and governments, according to a written statement by Minister for Economic Affairs Hammad Azhar to National Assembly on Wednesday.
The two loans approved by the ADB would ―meet the government‘s emergency financing needs to prevent significant adverse social and economic impacts and lay the foundations for a return to balanced growth,‖ said ADB‘s Director General for Central and West Asia Werner Liepach.
The SPBL is used to address external and internal payments crisis by providing large-scale support as part of an international rescue effort, including the International Monetary Fund (IMF) and the World Bank. ―The special characteristics of crisis-related lending, particularly its unanticipated character and exceptional scale, and the associated credit risk require adequate risk-bearing capacity at the side of ADB to back up such lending,‖ according to ADB‘s website.
Another dimension that would justify ADB intervention is when the crisis has significant structural dimensions and is likely to have significant negative social impact. To avail itself of assistance under an SPBL, a developing member country must be regular ordinary capital resources.
The lending agency said ―quick dispersing SPBL was part of a comprehensive multi-donor economic reform programme led by the IMF to stabilise Pakistan‘s economy after a major deterioration in its fiscal and financial position in mid-2018 caused growth to slump and threatened progress in alleviating poverty.
The ADB‘s financing was approved after the government implemented a series of IMF-supported reforms and actions to improve its current account deficit, strengthen its revenue base and protect the poor against the social impact of the economic crisis.
Economic challenges The ADB said Pakistan was facing significant economic challenges on the back of a large balance of payments gap and critically low foreign exchange reserves together with weak and unbalanced growth. While the country‘s economy has a history of boom and bust economic cycles, it reached a tipping point in 2018 after foreign investment shrank sharply in an uncertain political and global economic environment and the ongoing poor performance of state-owned enterprises caused public debt to reach unsustainable levels.
In July, the IMF approved a three-year $6bn Extended Fund Facility (EFF) to finance the government‘s economic reform programme that aims to put Pakistan‘s economy on the path of sustainable and inclusive growth. The EFF is expected to catalyse at least $38bn in financing from Pakistan‘s development partners. ADB has committed to provide a total of $2.1bn in policy-based lending during fiscal year 2019–2020 to support the reform programme.
The ADB explained that it also approved another $300m policy-based loan that will help the government address financial sustainability, governance, and energy infrastructure policy constraints in the Pakistan‘s energy sector.
This will support the first of three sub-programmes totalling $1bn under the Energy Sector Reforms and Financial Sustainability Programme, a key component of a comprehensive IMF-led multi-donor economic reform programme.
―The cash shortfall across the power supply chain in Pakistan, also known as circular debt, has shot up to more than $10bn and is a longstanding chronic issue ailing the country‘s power sector,‖ said Mr Werner Liepach. A comprehensive and realistic Circular Debt Reduction Plan assisted by the ADB in close coordination with other lenders aims to drastically cut the new flows of circular debt and provide policy directions on addressing accumulated circular debt.
The ADB said Pakistan had made significant efforts in recent years to expand its electricity generation capacity and stabilise supply but was yet to overcome the challenge of inefficiencies, distortions, and uneven reform progress in the sector. These inefficiencies were estimated to have cost the country‘s economy up to $18bn, or 6.5pc of gross domestic product, in 2015. (By Khaleeq Kiani Dawn, 01, 07/12/2019)
The $5bn question
IT was common knowledge at the time when Pakistan began receiving billions of dollars in ‗deposits‘ from Saudi Arabia and the United Arab Emirates that this money was little more than short-term relief.
In those days, Pakistan was running a current account deficit of almost $1bn per month, so every billion borrowed was barely enough to get it through the month.
Then came the oil facility, the detailed workings of which are a bit unclear since it is not known how the oil imports coming under it are booked, and how the payables accumulating on the other hand are being recorded in the country‘s accounts. Certainly, the country‘s debt figures do not seem to include purchases made under this facility. But by now the amount that has been borrowed, and digested in the bowels of the economy‘s dysfunctions, has crossed $5bn, and word is circulating that the government is interested in converting this outstanding amount into a loan.
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This is where things stand at the moment. The funds originally arrived as a one-year deposit, the first of which has already matured and been rolled over.
The IMF demanded that the government get guarantees from all those who extended these reserve extension facilities, as they are referred to, so that they would agree to a rollover upon maturity.
That included the Chinese who had similarly been approached for such support. Now that the time has come to start those rollovers, and for the new government to undertake its diplomatic outreach efforts, we learn that important linkages might exist between the loans and the diplomacy.
There could scarcely be a better illustration of how the economy‘s inability to pay its bills — whether on the external or fiscal side — ends up entangling the country in the geopolitical priorities of its lenders.
This has been Pakistan‘s story for decades. It is one of the biggest reasons why we found ourselves on the front lines of a superpower‘s war, not once but twice. It is the reason why we keep returning to the IMF for a bailout every four of five years.
And it is the reason why our country has never really had an independent foreign policy, because those who stand on crutches cannot walk their own path; they must be led by others. The real cost of that borrowing binge from last year is now coming into sharper relief. (By Editorial Dawn, 08, 17/12/2019)
Gas price bomb
THE news that the regulator has asked for another massive increase in the price of gas, which might be as high as 221pc for some categories of consumers, has sent a shockwave through the business community. Those who rely on gas as a primary fuel, whether for boilers or captive power plants, could see their energy cost rise at a time when they are already struggling to keep their business running.
And perhaps more importantly, the price of gas could send yet another inflationary pulse through the economy, forcing the central bank to keep interest rates high at a time when the market is increasingly anticipating a cut in rates from around March onwards. Between high interest rates and high energy prices, the pace of economic activity and any sense of a return to economic growth could potentially be at stake, precisely at a time when the government has begun to talk about moving from stabilisation to growth.
A couple of things are important to point out though. First, the rise in inflation this year has been driven only partially from a rise in utility prices. In significant measure, it is also driven by devaluation of the currency, volatile oil prices at least in the first half of the year, and at least in part by higher taxes. At least that was the assessment of the State Bank back in July when it said that it expects inflation to average 11-12pc in FY20 from 7.3pc in FY19.
But that assessment was based, in part, on two hikes in utility prices, especially gas, one in July and the second in September. In the middle of September, in response to fiscal pressures, the government sought to raise an additional Rs94 billion from gas consumers through a raft of tariff hikes that were as large as 143pc for high-end consumers and as low as 10pc for those in the bottom slab. Additionally, industry was slapped with around 50pc increases in its gas tariffs. The new tariffs took effect at the start of October.
This time utility prices are responding to variables that the inflation forecast has most likely not included.
In the November monetary policy statement, the State Bank noted that inflation in October was ―somewhat higher than expectations but largely reflected upward adjustments in administered prices and rise in prices of food items primarily due to temporary supply disruptions‖. That month the Consumer Price Index rose by 1.8pc from the previous month, at a time when the expectation was that it would either be flat or perhaps start easing.
Each percentage point matters in inflation, because interest rates are pegged to it. The next month, in November, it climbed again by another 1.34pc, inching closer to the discount rate. The discount rate at present is 13.25pc, whereas the average inflation rate for the July to November period has risen to 10.8pc. Any further acceleration in the rate of increase could upset market expectations of an approaching rate cut.
Last year, inflation surged in part due to the price adjustments under way in the economy due to depreciation, but in large measure also due to large-scale government borrowing from the State Bank, a process akin to creating money which fuels inflation by degrading its value. This year, the government has kept money creation under check.
It got some help in this from the massive interest rate hikes that began in January 2018 when the discount rate was 5.75pc and continued unabated till July of this year by when it had gone to 13.25pc. This is quite possibly the single-most ferocious cycle of monetary tightening that our economy has ever had to absorb, in which interest rates have more than doubled in a year and half. But these hikes were required to reactivate the interest of banks in government debt, so direct borrowing from the State Bank could cease.
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That is why by July there was a sigh of relief when the State Bank hinted that the cycle has now ended. ―The [Monetary Policy Committee] is of the view that real interest rates implied by these inflation projections and today‘s policy rate decision are at appropriate levels considering the cyclical weakening of aggregate demand.‖ Translation: that‘s it for now folks!
Inflation has edged up since then but the band established by the central bank has not yet been entered into, let alone breached. The main drivers of the inflationary spiral — monetisation of the deficit, upward revisions in utility prices, rising oil prices, currency depreciation — are largely under control. The upward gas price revisions of July and September were factored into the forecast of annual inflation between 11-12pc. Aside from some disturbances in food prices, that have sent outsized impacts through the price level because of their high weightage, there has so far been no cause for alarm.
But now, the wild card of utility prices is threatening to make a comeback. Power tariffs may require an increase to help bring down the circular debt accumulation while gas tariffs may need to be increased to raise an additional Rs40bn for the two gas utilities (on top of the Rs94bn that the September hike sought to raise).
This time, utility prices are responding to variables that the inflation forecast has most likely not included. In the case of power tariff, for example, the government has made commitments under a $300 million loan from the Asian Development Bank to raise up to Rs469bn through quarterly adjustments in the power tariff in this fiscal year. They have also committed to announcing the next fiscal year power tariff by June 2020. Parking power-sector losses into the tariff is part of an ongoing ‗full cost recovery‘ effort in the power sector, creating a source of uncertainty for the inflation outlook.
Unforeseen events in the price of power and gas could send a new inflationary pulse through the price level, potentially impacting interest rates and upsetting a lot of calculations in the private sector as well as debt-service schedules of the government. The time of uncertainty is not over yet. (By Khurram Husain Dawn, 08, 19/12/2019)
Home-based workers
AT a recent discussion held at the Karachi Press Club, speakers representing the Home-based Women Workers Federation complained about the blatant exploitation faced by those in this informal sector. They noted that the sector is growing each year as factory work is increasingly outsourced to home-based workers, often on a piece-rate system, and yet there has been no change in their lives or the nature of their work. Despite being one of the largest workforces that contributes immensely to Pakistan‘s economy, they continue to suffer poor wages and mistreatment at the hands of middlemen and contractors. For years, they had little negotiating power and virtually no social safety net. Many reported developing physical impairments and health complications from the painstakingly detailed work they engage in, which consumed many hours of their day, in addition to their daily household chores. Additionally, the perceived lower status of women also means they get paid less than their male counterparts for the same amount of work. Unfortunately, women‘s labour continues to be overlooked, especially when it is restricted to the home. And yet, many have no choice but to be confined within the four walls of their homes as their mobility is often limited in patriarchal cultures. The informal nature of the work also results in home-based workers receiving help from other members of the family living in the house. This can include their children, who should be in school, pursuing their right to an education.
Thanks to the decade-long tireless efforts of the workers, the Sindh Home-based Workers Act was passed in 2018 — but its rules of business are yet to be finalised. As articulated by the speakers at the conference, this needs to be done on an urgent basis to ensure the workers receive their due rights. And while legislation is a necessary first step in ensuring rights, the government must see to it that it is implemented on ground. There can be no progress until half the population is counted as an equal stakeholder in every aspect of life. (By Editorial Dawn, 08, 29/12/2019)
For Sindh, a decade stuck in development hell
The 2010s have been a mixed bag for Sindh when it comes to infrastructure expansion and improvement. Although a number of development schemes were announced, not all of them have seen fruition so far. The overall pace of progress on many initiatives remained slow throughout the decade for many different reasons and the average resident has been unable to avail benefits from several others due to administrative snags.
Among the significant development schemes launched in the outgoing decade are the establishment of a coal-based power plant and expansion of coal-mining operations in Thar. Similarly, the province‘s road network has undergone considerable transformation, easing travel and trade operations.
On the other hand, although the provincial government spent billions of rupees on sectors like health, education and irrigation, the common person has so far been unable to draw much benefit from many of them.
From 2014-15 to 2018-19, the government allocated more than Rs952 billion to its Annual Development Programme (ADP). However, it only got around to releasing around Rs683 billion in that five-year span, according to official figures. And although the province‘s budgetary allocation for development initially continued to increase in size every fiscal year, that trend stopped in 2018-19, when Sindh authorities began slashing that head on the pretext of not receiving enough funds from the centre. From a Rs143 billion allocation in 2014-15, the ADP share peaked with Rs244 billion in 2017-18, but shrank to Rs223 billion the following year and only went up slightly to Rs228 billion in the current fiscal.
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During the first six months of the current fiscal, the government has released almost Rs79 billion, about 51 per cent of whic h have been utilised, official data showed. As the Sindh government holds fast to complaints that the federal government is not giving it enough money, several provincial departments, like energy, environment, human rights and the Board of Revenue, has not spent a single penny on development schemes in this period.
Speaking to The Express Tribune, Sindh Information Minister Saeed Ghani placed the blame for lack of development on the federal government‘s shoulders. ―Not enough funds and delayed disbursement from the centre has been a major problem for us,‖ he claimed. Recently, Sindh Chief Minister Murad Ali Shah told the media that the centre owes Sindh around Rs116 billion of its share under the National Finance Commission award.
―That, and the National Accountability Bureau‘s actions against the bureaucracy has slowed progress on development schemes,‖ said Ghani, who until a few months ago, served as Sindh‘s local governments minister. He insisted that ―overall, development in the province has moved ahead on a fast-track basis.‖
―The Pakistan Peoples Party government carried out record-breaking development in Thar during this outgoing decade and we also improved the inter-district road network during this period,‖ he said. ―We also increased the number of hospitals in the province and expanded the network of the National Institute for Cardiovascular Diseases.‖
Opposition parties, however, reject the PPP government‘s ‗excuse‘ for reducing the allocation for development. ―Funding deficits have affected all provinces equally as NFC disbursements are worked out on a percentage basis,‖ said opposition MPA Arif Mustafa Jatoi. ―Only the Sindh government is using it as an excuse to defer development.‖
He pointed that out that much of the province‘s infrastructure continues to be in very poor condition due to lack of bureaucratic and parliamentary oversight. Students in other provinces have been provided laptops and internet facilities while in Sindh, m any schools still suffer from a lack of basic facilities such as boundary walls or toilets.
―The provincial government has been unable to provide basic public transportation network in even the country‘s largest city, Karachi. The main focus of PPP government in Sindh is providing government jobs which only add to the non-development budget,‖ he said, adding that it will be a severe budgetary burden in future as these employees will claim gratuity and pensions on their retirement.
Many development schemes have strayed far from their original timetable due to administrative and financial issues. For instance, both the Green Line and Orange Line Bus Rapid Transit projects are around three years behind schedule. The former, worth about Rs24 billion, is being funded by the federal government, while the latter, costing around Rs1.19 billion, is being undertaken by the Sindh government.
Both governments are also responsible for reviving the long-delayed Karachi Circular Railway (KCR) project, which was expected to cost around Rs276 billion before the rupee‘s value against the dollar plunged drastically. Commissioned in 1967, KCR remained effective till 1984. Recently, the project has been included in the China-Pakistan Economic Corridor.
The energy front, however, has seen some development, most notably the 600MW Thar Coal Power Project completed under a public-private partnership. The provincial government is also working on developing alternative energy sources through projects like the Gharo-Keti Bandar Wind Corridor in Thatta.
Roads too have undergone significant change, with the completion of the Karachi-Hyderabad Motorway (M-9) being a centerpiece scheme. Other projects, such as the Hyderabad-Mirpurkhas and Karachi-Keti Bandar roads, have not enjoyed the same rapid progress.
Despite the billions of rupees spent on health and education, both sectors are still in a sorry state. Hundreds of schools continue to run without basic facilities while several health emergencies, the HIV outbreak in the PPP stronghold of Larkana being the most recent one, have exposed the provincial government‘s inadequacies. (By Razzak Abro The Express Tribune, 05, 30/12/2019)
Economy in 2020
THE incoming year will be a decisive one for the economy. The stabilisation that saw a tortured start in 2019 is set to continue, but optimists in the market are anticipating an end to the chokehold of high interest rates and the aggressive taxation drive sometime in the early months of 2020. The growth rate has plummeted while forecasts say the economy should register a growth rate of between 2.5pc to 3.5pc by the end of the fiscal year. Manufacturing has hit one of its lowest ebbs ever, except perhaps for the years immediately following the great crash of 2008, while private investment and business confidence have also been lacklustre. Even as the economy chokes under the stabilisation measures adopted out of necessity by the government in 2019, the incoming year presents some promise of change.
The prime minister has already begun promising a shift in the focus of economic management away from stabilisation towards growth. In multiple forums over the past few weeks, he has declared the economy stable and the time to move towards growth to now be imminent. These words are partially responsible for fuelling a sense of optimism among certain sections of the business community about the new year. If interest rates are to be reduced and the level of government spending, especially on development projects with strong linkages across various sectors of the economy, picks up, a return to growth and reinflation of aggregate demand can spur economic activities quickly. Interestingly however, the prime minister‘s finance adviser is a little more circumspect
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Still, a lot depends on how the fiscal numbers turn out and how stable the reserve accumulation that has taken place thus far remains. Business groups are asking when growth will return, whereas the government must ask itself whether we are in a position to afford growth at the moment. The fiscal numbers seem to be improving, even if largely on the back of excruciating expenditure cuts, and reserves had only in recent months reversed a long trend of continuous declines. But if there‘s a sudden move to apply the accelerator at this point and reignite domestic demand, the deflation of which is the core aspect of the ongoing stabilisation programme, the same deficits could reappear again. Instead of keeping the focus on growth, the government should present 2020 as the year of reform and outline in detail its plans for the state-owned enterprises, the power sector and the future of administered pricing regimes as well as the overhaul of the regulators to ensure a competitive playing field going forward. More than raw growth, let 2020 be the year the country arrests and reverses the steady erosion of its productivity. That would make for a very happy new year indeed. (By Editorial Dawn, 08, 31/12/2019)
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