Month: April 2024

The Tariq Bajwa-led inquiry Committee has proposed the Federal Board of Revenue (FBR) to establish a dedicated enforcement force for the Track and Trace project whose sole task should be to carry out effective enforcement which is critically needed for the success of the system.

According to a report available with ProPakistani, the inquiry Committee, in its recommendations, proposed that the government should notify the supervisory committee at the level of PM or the Finance Ministry that should be mandated to look after the entire project implementation and should be empowered to take action against stakeholders for delays.

In addition, it also proposed that FBR may be asked to strengthen its data analytics capability to match production data with sales tax returns of the companies or notified units.

The system was originally envisaged only for the tobacco sector but also extended to other three sectors in haste without due diligence and understanding of local conditions leading to design flaws in the s
cheme.

This resulted in a poor agreement lacking key requirements such as technology requirements, arbitration mechanisms, performance audits, penalty provisions, and a clear definition of terms.

Although FBR followed the PPRA guidelines for the selection of process, the lack of clear understanding between the licensee and FBR regarding the requisites expertise. The contract lapses on the FBR side weakened the project governance, and oversight resulted inordinate delay in the resolution of outstanding issues between the Licensee and FBR.

Also, this resulted in a flawed implementation of the scheme.

The committee believes that despite the fact that current technology solutions are neither the most efficient nor the most effective, termination of the contract at this stage will trigger litigation and lead to prolong delay in the implementation of their TTS. Thereby resulting in revenue slippage and evasion.

The committee did not find any evidence of malafide in the award of the contract.

Source: Pro Paki
stani

The Executive Board of the International Monetary Fund (IMF) Monday completed the second review of Pakistan’s economic reform program supported by the IMF’s $3 billion Stand-By Arrangement (SBA).

The Board’s decision allows for an immediate disbursement of around US$1.1 billion, according to sources in the Ministry of Finance. The IMF is expected to issue a detailed statement in this regard soon.

It is pertinent to mention here that an IMF team, led by Nathan Porter, visited Islamabad from March 14-19, 2024, to hold discussions on the second review.

The inflow of funds will push the reserves held by the State Bank of Pakistan (SBP) close to the $9 billion mark. As of April 19, the foreign currency reserves held by the SBP were recorded at $7.981 billion.

Source: Pro Pakistani

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has decided to keep the policy rate unchanged at 22 percent.

The announcement came after a meeting of the bank’s Monetary Policy Committee (MPC) today.

At its meeting today, the Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 22 percent. The Committee noted that the macroeconomic stabilization measures are contributing to considerable improvement in both inflation and external position, amidst moderate economic recovery. However, the MPC viewed that the level of inflation is still high. At the same time, global commodity prices appear to have bottomed out with resilient global growth.

The recent geopolitical events have also added uncertainty about their outlook. Moreover, the upcoming budgetary measures may have implications for the near-term inflation outlook. On balance, the Committee stressed on continuation of the current monetary policy stance to bring inflation down to the target range of 5 – 7 perc
ent by September 2025.

Since its last meeting, the MPC noted the following key developments.

First, data for the first half of FY24 suggests that economic activity is recovering at a moderate pace, led by a strong rebound in the agriculture sector. Second, the current account recorded a sizable surplus in March 2024, which helped to stabilize the SBP’s FX reserves despite substantial debt repayments and weak financial inflows.

Third, inflation expectations of consumers inched up in April 2024, whereas those for businesses declined. And lastly, leading central banks particularly in advanced economies have adopted a cautious policy stance after noticing some slowdown in the pace of disinflation in recent months.

Real Sector

Incoming data continues to support the MPC’s earlier expectation of a moderate recovery in this fiscal year with real GDP growth projected to remain in the range of 2 to 3 percent. The agriculture sector remains the key driver with robust 6.8 percent growth in H1-FY24. This outcome was
supported by a significant increase in rice, cotton, maize, and wheat harvests, according to the latest official estimates.

In the industrial sector, large-scale manufacturing reported a 0.5 percent decline in July-February FY24 compared to 4.0 percent contraction recorded in the same period last year. In the services sector, the Committee noted that the growth in H1 was slightly lower than expected, reflecting the impact of subdued demand. Based on relatively improved capacity utilization and business sentiments, as well as low base effect from last year, the MPC expects value-addition from the manufacturing and services sectors to recover in the coming months.

External Sector

The current account has turned out better than expected, recording a sizable surplus of $619 million in March 2024, mainly owing to the Eid-related surge in workers’ remittances. Cumulatively, the current account deficit narrowed by 87.5 percent to $0.5 billion during July-March FY24 as compared to the same period last year.

Export
s continue to exhibit steady growth – led by rice – while imports have decreased in the wake of better domestic agriculture output and moderate economic activity. This reduction in the current account deficit – amidst weak financial inflows – allowed SBP to make sizable debt repayments, including that of a $1 billion Eurobond while sustaining the SBP’s FX reserves of around $8.0 billion. The MPC emphasized that a further build-up in FX buffers is essential to enhance the country’s ability to effectively respond to external shocks and support sustainable economic growth.

Fiscal Sector

In line with fiscal consolidation efforts, the primary surplus increased to 1.8 percent of GDP during July-January FY24 from 1.1 percent in the same period last year. This improvement is mainly led by the continuous increase in revenue collection and some restraints on non-interest expenditures. The sizeable increase in both tax and non-tax revenues largely reflects the impact of taxation measures and ongoing economic recovery.

The interest payments, however, have increased due to high debt levels and the government’s reliance on expensive domestic borrowing. As a result, the overall deficit increased to 2.6 percent of GDP during July-January FY24 from 2.3 percent in the same period last year. The MPC reiterated that continuation of fiscal consolidation, particularly through broadening the tax base and reducing losses of public sector enterprises, is essential for price stability and durable economic growth.

Money and Credit

The broad money (M2) growth increased to 17.1 percent y/y in March 2024 from 16.1 percent in February 2024. In the same period, reserve money growth increased to 10 percent from 8.2 percent. The increase in M2 was primarily attributed to expansion in net foreign assets on the back of improved FX reserves and increased net budgetary borrowing from commercial banks.

On the other hand, private sector credit continues to show a broad-based deceleration. The MPC viewed that the recent growth in monetary aggregates
is expected to decelerate in the coming months, and this has already started to reflect in the latest data. Moreover, the MPC viewed that the underlying compositional changes in M2 will have positive impact on the inflation outlook.

Inflation Outlook

In line with the MPC’s expectations, inflation has continued to moderate noticeably in H2-FY24. Headline inflation in March declined to 20.7 percent y/y from 23.1 percent in February. In the same period, core inflation fell significantly to 15.7 percent from 18.1 percent in February.

Besides the coordinated tight monetary and fiscal policy response, other factors that have led to this favorable outcome include lower global commodity prices, improved food supplies and high base effect.

The Committee views inflation to continue to remain on downward trajectory. However, the Committee also noted that this inflation outlook is susceptible to risks emanating from the recent global oil price volatility along with bottoming out of other commodity prices; potential i
nflationary impact of resolution of circular debt in the energy sector; and tax rate-driven fiscal consolidation going forward. Cognizant of these risks, the Committee assessed that it is prudent to continue with the current monetary policy stance at this stage, with significant positive real interest rates.

Source: Pro Pakistani

The National Assembly passed the Tax Laws (Amendment) Bill, 2024 on Monday which would give the legislative effect to the taxation proposals of the federal government.

The bill was taken by the House as the supplementary agenda and Federal Minister for Law and Justice Azam Nazeer Tarar moved the bill.

The House passed the amended bill which aims to give legislative effect to the taxation proposals of the federal government to liquidate a significant number of appeals pending before Commissioner IR (Appeals) and Appellate Tribunals as ATIR is the last fact-finding authority in the appellate hierarchy provided in fiscal statutes.

Over the years, and for various reasons, including arbitrary constitution of benches, inadequate number of benches, delay in fixation of cases and disposal of appeals, a substantial amount of revenue, to the tune of Rs. 2 trillion, is held up in litigation before the ATIR.

Earlier, a meeting of Senate Special Committee to consider and make recommendations on the Money Bill, the Ta
x Laws (Amendment) Bill, 2024 was held at Parliament House.

Attorney General of Pakistan, Mansoor Awan, briefed the committee that the primary objective of the Money Bill is to create a dedicated ‘Director General Law’ position within the FBR for the timely disposal of tax litigation pending before Commissioner Inland Revenue and Appellate Tribunals.

The Attorney General added that Money Bill will serve as a safeguard against tax evasion, as the government is determined to broaden the tax base to combat the current financial crunch.

Moreover, the Money Bill curtails the period of appeals before the High Court from ninety days to thirty days and restricts the jurisdiction of Commissioner Appeal to cases where the value of tax does not exceed Rs. 10 million, with the right of appeal in cases where the value assessment exceeds Rs. 10 million before Appellate Tribunals. After detailed deliberation, the Special Committee passed the Money Bill with amendments.

Source: Pro Pakistani

Oil and Gas Development Company Limited (PSX: OGDC) announced its financial result today, posting profit after tax of Rs. 171.1 billion (EPS: RS. 39.78) during 9MFY24, an increase of 7 percent over profit after tax of Rs. 159,64 billion reported in the same period of FY23.

The growth in net profit is attributable to the reversal of tax provisions worth Rs. 28.2 billion in 2QFY24 (which is due to a favorable judgment from the court, related to depletion allowance), Arif Habib Limited said in its result review.

On a quarterly basis, the company’s profitability stood at Rs. 47.8 billion (EPS: RS. 11.12), down by 26 percent over the previous year. Alongside the result, the company announced a cash dividend of Rs. 2.00 per share (Rs. 6.10 per share in 9MFY24).

Topline in 9MFY24 rose by 13 percent YoY to Rs. 348.16 billion compared to Rs. 309,15 billion in same period of FY23 owing to i) A 2 percent YoY increase in oil production, and ii) Depreciation of the Pakistani rupee against the US dollar by 17 percent Y
oY.

During 3QFY24, the net sales increase by 6 percent YoY, settling at Rs. 112.8 billion, amid i) A 5percent YoY jump in oil production, and ii) A 1 percent YoY uptick in oil prices.

The exploration costs declined by 22 percent YoY to Rs. 8.5 billion in 9MFY24. Whereas, the exploration costs during 3QFY24 fell by 18 percent YoY, on account of the absence of a dry well during the quarter compared to one dry well (Bhamabra-2) reported in SPLY.

Other income clocked in at Rs. 44.54 billion in 9MFY24, down by 32 percent YoY. Whereas, other income during 3QFY24 arrived at Rs. 17.3 billion, down 54 percent YoY due to the absence of exchange gains during the quarter (-Rs. 27.7 billion worth of exchange gains recorded in 3QFY23).

The company booked effective taxation at 41 percent in 3QFY24 compared to 35 percent in 3QFY23.

Source: Pro Pakistani