Day: December 3, 2021

Advisor to the Prime Minister on Finance & Revenue Shaukat Tarin has stated that the country’s economy is on the right track and the good days are coming.

Addressing a press conference on Friday, he said, “we have always been telling the public to not worry.” He added that Pakistanis had to be a little more patient as the good days were coming.

It is to note that Pakistan saw a drastic increase in trade deficit in November as the gap rose to 162.4 percent. The huge deficit was caused by the growth in imports tripling that of exports.

Furthermore, the KSE-100 index also dropped by 4.71% in a single day, the highest since March 2020.

As a result of the widening gap, the dollar reached its all-time high and stood at Rs176.42 after gaining 94 paisas on 2 December.

The import bills have gone up to $7.5 billion during November from $6.3 billion in the previous month.

Tarin said the increase in the import bill was caused by imports of four different commodities. He credited the rise in imports owing to a great import of petroleum goods. He revealed that there was a 72% increase in imports of petrol in terms of value whereas 11% in terms of volume. Similarly, the imports of crude oil also increased by 86%.

Moreover, the Finance Advisor added that Rs. 200 billion is proposed to be expunged from the development budget. The government’s Public Sector Development Program (PSDP) for the current fiscal year is at 700 billion, if it is cut by 200 billion it would be called at 500 billion. The figure after the reductions in the budget would be much lower than what was allocated and spent in 2013-14, he stated.

The Advisor pointed out that the problem was being faced all around the world. He cited India where the trade deficit had doubled. He affirmed that the price hike would decline as soon as the international prices come down. He was confident that as soon as the prices would decrease, the exports and the remittances of Pakistan would put the economy back on track.

He admitted that the poor segment of the country was suffering. Yet, he said, the government was helping the poor through the Ehsaas Program.

Due to the prevailing economic situation, he noted, the middle class was suffering. He underlined that the middle class would have to be supported to improve the economy.

In light of the prevailing situation, Tarin stated that tax measures amounting to Rs. 300 billion, increased duties, and removal of tax exemptions will be implemented to spearhead fiscal progression in the right direction.

Source: Pro Pakistani

The Federal Board of Revenue (FBR) has directed 482 big (Tier-1) retailers to immediately integrate with FBR’s point of sale (POS) system by 10 December 2021 to avoid disallowance of input tax claims and creation of tax demands.

In this regard, FBR issued Sales Tax General Order No.6 of 2021 here on Friday.

According to the FBR’s circular, the Finance Act, 2019 added sub-section (6) to section 811 of the Sales Tax Act, 1990 (“the STA, 1990”) whereby a Tier-1 Retailer “(T-1 IR)” who did not integrate its retail outlet in the manner prescribed under sub-section (9A) of section 3 of the STA, 1990 during a tax period, its adjustable tax for that period would be reduced by 15%. The figure of 15% has been raised to 60% vide Finance Act, 2021.

In order to operationalize this provision of law, a system-based approach has been adopted whereby all T-1 retailers who are liable to integrate but have not yet integrated, with effect from July 2021 (Sales Tax Returns filed in August 2021) are to be dealt with as per the procedure laid down in STGO No. 1 of 2022 issued on 3″d August 2021.

FBR has placed a list of 482 identified T-1 retailers on its web portal: www.fbr.gov.pk allowing the retailers to integrate with FBR’s system by 10 December 2021. FBR says that the procedure of exclusion from this list will apply as laid down in Para 2 of STGO 1 of 2022 dated 3 August 2021. And, upon the filing of Sales Tax Return for November 2021 for all notified T-1 retailers, their input tax claim would be disallowed without any further notice or proceedings, creating tax demand by the same amount.

Source: Pro Pakistani

The seemingly unending upward swing in Pakistan’s consumer prices has become an uphill task to deal with — with particular reference to the rise in recent months — for the government and the public. A global analysis by ProPakistani reveals that Pakistan is not the only country facing surging prices at a time when the world is grappling with a supply crunch in the face of high demand.

An in-depth review unearthed what could be driving the rising inflation in the country and where it could head for.

Pakistan’s Consumer Price Index (CPI)-based inflation remained 11.5 percent in November, the highest rise in the past 21 months. The 27 percent year-on-year increase in the Wholesale Price Index (WPI) in November indicates that prices are likely to remain high during the coming months.

The November CPI data came merely days after the Finance Division claimed that despite new impulses in the month, inflation would remain between 8.5 and 9.5 percent. Similarly, the State Bank of Pakistan (SBP) said in November that global commodity prices and further upward adjustments in administered prices of energy pose upside risks to the average inflation forecast of 7-9 percent in the fiscal year 2022. The International Monetary Fund (IMF) in its World Economic Outlook (WEO) released in October projected the average rate of inflation in Pakistan at 8.5 percent during the current fiscal year. Whereas, Pakistan Institute of Development Economics (PIDE)’s inflation forecasting models predict it to remain between 10.0 to 10.5 percent for the financial year 2022 and 11.0 to 11.5 percent for the first half of the financial year 2023.

What Is Driving Inflation?

The Finance Ministry has linked the rising inflation to monetary and supply-side factors, including domestic and international commodity prices, exchange rate, seasonal factors, and economic agents’ expectations concerning the future developments of these indicators.

The central bank last month raised its benchmark rate by 150 basis points to 8.75 percent, saying price pressures from COVID-induced disruptions to supply chains and higher energy prices are proving to be larger and longer-lasting than previously anticipated across the world. It added that heightened risks related to inflation and balance of payments stem from both global and domestic factors. Furthermore, it said that elevated import prices in Pakistan have contributed to higher-than-expected CPI, Sensitive Price Index (SPI), and core inflation outturns. The central bank also noted emerging signs of demand-side pressures on inflation while saying price growth expectations of businesses have risen.

Governor SBP Reza Baqir in a recent interview with a weekly magazine highlighted international commodity prices, domestic demand growth, and the exchange rate as three drivers of inflation in the country. The rupee has lost about 14.6 percent of its value against the US dollar since April 1. (It sank to 175.72 a dollar on November 30 from 153.30 on April 01).

Global Inflationary Pressures

The annual rate of inflation in the United States in October 2021 was the highest in more than three decades. Similarly, inflation in France hit its highest level in 13 years in November 2021. Canada’s annual inflation rate in October also matched an 18-year high. The trend is even more widespread, according to an analysis by Pew Research Center. Data from 46 nations (that covers the 38 Organization for Economic Cooperation and Development (OECD) member nations and eight other economically significant countries) found that the third-quarter 2021 inflation rate in 39 of them was higher than the third quarter of 2019.

In the 12 months till November 2021, the Bloomberg Commodity index, Brent and West Texas Intermediate (WTI) crude oil futures have logged gains in all months, except three.

The OECD Economic Outlook report for December 2021 said that the surge in demand for goods since economies reopened and the failure of supply to keep pace have generated bottlenecks in production chains. It added, “labor shortages, pandemic-related closures, rising energy and commodity prices, and a scarcity of some key materials are all holding back growth and adding to cost pressures.” The report also noted that imbalances in the energy market are a key factor driving up inflation in all economies.

How Pakistan Fares in the Region?

But there’s a flip side, and a rather damning one. According to data by Bloomberg, Pakistan is home to the fastest inflation pace among 12 Asian countries. China, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam and even India all have lower inflation than Pakistan.

Future Course, With Omicron in Focus

Right now, there is a great deal of uncertainty, primarily due to the emergence of the Omicron variant. The OECD has warned that the new strain can intensify imbalances that are slowing growth and pushing costs higher.

On the other hand, oil prices saw their biggest one-day fall since the start of the pandemic last week due to fears surrounding the impact of Omicron variant of COVID-19 on energy demand as the new variant’s international spread continued. On December 2, OPEC and its allies agreed to stick to their existing policy of monthly oil output increases in a much-awaited decision. In a statement, the group said, “Today’s meeting will remain in session pending further developments of the pandemic.”

Lower oil prices are likely to offer Pakistan much-needed breathing space. The slump in oil prices has allowed the government to increase the rates of petroleum levy and general sales tax (GST), in line with commitments made with the IMF despite keeping prices unchanged. But with multiple factors at play, the inflation outlook remains elusive.

Source: Pro Pakistani

Under the regulatory impetus of the Securities & Exchange Commission of Pakistan (SECP), the Insurance Association of Pakistan (IAP) and the Central Depository Company (CDC) have signed a Memorandum of Understanding (MoU) for the digital aggregation of insurance products through CDC’s Emalaak Financials platform.

The distribution of insurance products through the digital portal EMLAAK is expected to provide a low-cost and centralized solution to policyholders by providing a comparative cost-benefit analysis of different products on a centralized platform.

Commissioner SECP Sadia Khan presided at the MoU signing ceremony at the CDC House, Karachi.

On the occasion, describing the features of the platform, CEO CDC Badiuddin Akber said,

This Fintech solution of “Emlaak Financials” is indeed a landmark initiative of national significance, as it aims to become [a] “Digital Financial Super Market” in Pakistan by leveraging the potential of technology to increase outreach for various financial products.

Chairman IAP Azfar Arshad applauded the efforts of CDC and SECP, asserting that the initiative would pave the way for the growth of the insurance industry.

Speaking on the occasion, Sadia Khan said the digital transformation was expected to cast an impact throughout the insurance value chain, from underwriting and pricing of products, their marketing, and distribution, to the claims processing and the ongoing customer servicing.

This will lead to a reduction in the protection gap as new market segments are accessed as well as an increase in the insurance penetration, she affirmed. She added that the goal of the regulator was to enable the insurance industry to play its rightful role both in terms of providing the social safety net as well as the development of the capital market.

The Commissioner SECP commended the role of CDC in bringing the new initiative to life by capitalizing on its technological capability.

The event was attended by senior members of IAP’s Executive Committee and other top officials from the insurance industry.

Source: Pro Pakistani