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Budget 2024-25 wins IMF praise amid calls for more fiscal tightening
The International Monetary Fund (IMF) has praised the stringent economic measures outlined in the budget, citing them as essential for economic stability, according to sources.

The sources also reveal that there has been progress in the talks between Pakistan and the IMF. The Fund, they said, has welcomed the tough economic decisions in Pakistan's federal budget and praised the positive role of political parties. The IMF has also appreciated the limitation of tax exemptions for economic improvement.

However, the IMF has reiterated its call for fiscal discipline despite the approval of the Federal Budget 2024-25.

Sources also revealed that the IMF has urged Pakistan to raise electricity and gas prices by July 10, preferring implementation by July 1, with immediate action on NEPRA's decisions for electricity price increases.

Gas rates will increase to reduce subsidies in the upcoming fiscal year, aligning with IMF conditions for new loan programs.

An IMF delegation is expected in Pakistan in mid-July.

However, many consider the tax system unjust as the Commonwealth and Development Office (FCDO) of the UK Chief Economist Professor Adnan Khan reiterated that the poorest 10% of citizens were paying a larger share of their income in taxes than the richest 10%.

IMF bailout plan likely in July
Federal Minister for Finance and Revenue Muhammad Aurangzeb expressed optimism on Sunday Pakistan would secure a “larger and longer” bailout agreement in its negotiations with the International Monetary Fund (IMF) in July, following the approval of the $67.76 billion federal budget.

Pakistan began discussions about a new loan with IMF officials soon after completing a $3 billion program that helped the country stave off a sovereign debt default last year.

The international lending agency sent its delegation to Pakistan in May to hold negotiations with the new government.

“I have already said we are moving in a positive way,” the finance minister said while discussing the fresh IMF programme during a media interaction in the federal capital. “During July we should get into a good agreement.”

“I am very optimistic that we will be able to take it through the finish line for an extended fund program, larger and longer in nature,” he added.

The finance minister reiterated that he viewed the programme being funded and supported by the IMF as part of Pakistan’s own endeavour to strengthen itself economically.

“We need the IMF because not only these IFIs [International Financial Institutions] but even our friendly nations want a backstop which is the fund program,” he continued. “What we have to do in the next three years to make sure this is the last program.”

He mentioned he had already been in virtual discussions with the IMF to move toward a staff-level agreement.

Aurangzeb said the basic framework, including the prior actions, had been formulated while the IMF delegation was in Pakistan, saying that the structural benchmarks of the programme had been the same for the last three or four years while Pakistan had not implemented.

“Now we have told them to trust us and we will get this done,” he added.

Federal Finance Minister Muhammad Aurangzeb said the country is witnessing economic stability, with inflation rates dropping significantly from 38 percent to 12 percent.

The finance minister said Rs 750 billing corruption was uncovered in sales tax, urging reforms in the Federal Board of Revenue (FBR).

Aurangzeb revealed that a significant corruption of Rs750 billion rupees has been uncovered in sales tax.

He assured that measures are being taken to address this, with sales tax refunds amounting to over Rs50 billion to be processed within the next 2-3 days. He also mentioned that Rs2700 billion are stuck due to tax cases, and resolving even half of these would be highly beneficial for the economy.

He highlighted key areas of progress and ongoing reforms aimed at bolstering Pakistan’s economy. He emphasized that the government’s efforts have restored the confidence of foreign institutions, as evidenced by the World Bank’s approval of a $1 billion project for Pakistan. Additionally, the nation’s foreign exchange reserves stand at $9 billion.

Aurangzeb urged the need to facilitate foreign investors, revealing ongoing talks about investment opportunities in the country.

He expressed optimism about achieving the Federal Board of Revenue’s (FBR) tax target of 9300 billion rupees and mentioned that taxes are being paid at a rate of 12% of GDP over the past three years.

The minister outlined plans for reforms in the energy and petroleum sectors, highlighting that improvements in these areas would lead to sustainable economic stability and stressed importance of curbing tax evasion and preventing corruption through FBR digitization, which he believes will increase transparency and efficiency in tax collection.

The Finance Minister announced that the construction sector and the supply side are being brought into the tax net. A new pension scheme is set to be implemented from tomorrow, aimed at providing better financial security for retirees.

Aurangzeb confirmed that the government is adhering to the terms of the IMF programme, which includes a tax exemption of 3.9 trillion rupees. He also mentioned that the government is shifting towards Public Private Partnerships (PPP) instead of relying solely on the Public Sector Development Program (PSDP).

Budget approved by NA ahead of fresh IMF loan
Amid strong protests by opposition MPs, the government on Friday passed Federal Budget 2024-25 from National Assembly – ahead of crucial talks with the International Monetary Fund (IMF) – with specific amendments, but further enhancing the taxes and no relief to the taxpayer.

The Finance Bill, 2024 – the total outlay of the federal budget for the fiscal year 2024-25 is Rs18.877 trillion – sailed through the lower house after a clause-by-clause reading, incorporating specific amendments moved by Finance Minister Muhammad Aurangzeb Khan, while all the amendments from opposition members were rejected.

The approved budget includes several amendments from the original proposal presented on June 12, 2024, as the government made the following changes in the Finance Bill 2024.

The reduced tax rates for hybrid vehicles will continue until June 30, 2026. Vehicles with engine capacities up to 1800cc and between 1801-2500cc will be taxed at 8.5 per cent and 12.75 per cent, respectively.

Contrary to expectations of a reversion, the Federal Excise Duty (FED) on cement was increased from Rs3 per kg to Rs4 per kg.

The sales tax benefits for erstwhile Fata/Pata were extended for another year.

The exporters will now be subject to the standard corporate tax rate of 29 percent plus applicable Super Tax, instead of the previous one percent tax on export turnover.

The individuals or the association of persons (AoPs) earning upwards of Rs10 million per year will also have to pay a 10 percent surcharge on their income tax amount.

Despite severe criticism from the opposition, the government increased the levy on petrol and diesel from Rs60 per litre to Rs70 per litre.

However, the finance minister assured the house that it would be increased gradually and would not be imposed at once.

“Rs50 per litre levy would also be imposed on light diesel oil and kerosene oil, while Rs70 per litre levy would be applicable on high-octane,” he added. The house also approved an amendment proposed by the Pakistan People’s Party (PPP), a key ally of the ruling coalition, to increase the salaries and allowances of the legislators.

Abdul Qadir Patel of PPP said that the amendment is aimed at increasing the perks and privileges for members of parliament.

The amendment says that “the unauthorized air tickets and travel vouchers to which a member is entitled shall carry forward to next financial year and not lapse on end of a financial year.”

 “A member [parliament] and ex-member shall be entitled to the same medical facilities as are admissible to a BPS-22 officer of federal government in all government hospitals in federal capital and provinces as well as private hospitals as may be notified by the federal government.”

New taxation steps come into effect today
The government has enforced new taxation measures of Rs1.761 trillion, taken through Finance Act 2024, from July 1, 2024, including increased tax burden on salaried class and heavy indirect taxation on general public including imposition of sales tax on stationery items, dairy products and poultry feed.

The Federal Board of Revenue (FBR) has issued Finance Act 2024 incorporating amendments made in the Finance Bill 2024.

The FBR has also rescinded customs and withholding tax related notifications to abolish exemptions/zero-rating and reduced rates from July 1, 2024.

In this regard, the FBR has issued nine SROs here on Sunday. From July 1, the customs duty related changes at the import stage have also been implemented at ports.

Finance Act 2024 has enforced income tax measures of Rs 443 billion and personal income tax (PIT) increase of Rs 224 billion; sales tax measures of Rs 485 billion; Federal excise duty measures of Rs 289 billion and the Act has implemented customs duty measures of Rs 70 billion.

From July 1, the government has withdrawn various exemptions/zero rating and reduced/fixed rates.

From the start of the new fiscal year (2024-25), the FBR will charge sales tax on items on which exemption or zero-rating has been withdrawn.

Besides, raise in the excise duty on international air travel, the federal excise duty (FED) of Rs15 per kg would be applicable on supply of white crystalline sugar by any person to a manufacturing, processing or packaging entity.

The government has also increased the Federal Excise Duty (FED) on cement from Rs 3 per kg to Rs 4 per kg through an amendment in Finance Bill. In budget (2024-25), the rate of FED on cement was enhanced from Rs. 2 per kg to Rs. 3 per kg.

The government has imposed 10 percent sales tax on poultry feed; 10 percent tractors, 10 percent on oil residue and 10 percent sales tax on edible vegetables from Afghanistan.

The government has raised taxes on salaried, non- salaried class, real estate, retailers, and vehicles, removed GST exemptions, and slapped taxes on milk and milk products, mobile phones, tier-1 retailers of branded stores at 18 percent.

FBR exceeds revenue target by Rs54bnFBR has collected Rs 9,306 billion in Financial Year 2023-24 against the target of Rs 9,252 billion thereby exceeding the yearly target by a significant margin of Rs 54 billion.

The revenue is expected to further increase after reconciliation of figures. The growth in revenue collection is 30% as compared to the last year.

This was possible due to historic collection throughout the current financial year. It is a striking fact that FBR has added Rs. 2,142 billion during the year as compared to the last year collection of Rs. Rs. 7,164 billion and Rs. 1,183 billion in the month of June 2024 alone.

The target was achieved despite the fact that the imports were further compressed from $ 55 billion to $ 53 billion whereby the shortfall was to be recovered from domestic taxes.

In addition to exceeding the annual target, the tax system of Pakistan saw significant structural improvements which were direct result of the interest of the honourable Prime Minister and Finance Minister. This is a direct consequence of policy shift with increased focus on domestic resource mobilization, more direct taxation from the rich and affluent and facilitating businesses and exporters by prompt issuance of refunds:

• Under the Honourable Prime Minister’s directives, the FBR disbursed refunds amounting to Rs 469 billion during the FY 2023-24 as compared to Rs 331 billion during the FY 2022-23 which is 42% more than last year.

• Due to focus on direct taxes of the government, the revenue collection target was achieved mainly due to growth in direct taxes which led the way by contributing 47% to the revenue collection.

• The domestic taxes also improved significantly and overall, FBR collected Rs. 6,128 billion in domestic taxes and Rs. 3,178 billion in import taxes thereby depicting a growth of 37% in domestic taxes and 18% in imports despite import compression from $ 55 billion last year to $ 53 billion during the current year.

• The composition of domestic taxes in total revenue collection is 65% which used to be less than 50% two years ago. For the FY 2023-24, FBR collected income tax amounting to Rs 4,528 billion as compared to Rs. 3,270 billion during the same period last year, depicting an increase of 38.4%. Similarly, under the head sales tax Rs 3,098 billion was collected as compared to Rs 2,593 billion and under the head FED Rs 576 billion was collected as compared to Rs 370 billion. The revenue collection under the head of customs duty was Rs 1,104 billion as compared to Rs 931 billion last year.

In spite of all odds and issues faced by the organization as a whole, the officers and officials of FBR have remained dedicated and committed to their primary role i.e. achievement of the assigned revenue targets under all circumstances.

The economic growth of Pakistan is intrinsically linked with the achievement of revenue collection targets, and the employees of FBR are fully determined and ready to cope with the challenges and depict further wins in the years to come. It is also reiterated that for the assigned revenue collection target for the FY 2024-25 the team FBR is ready to deliver and put in their best efforts to achieve it and serve the nation.

Ministry warns of food-driven spike in inflation
Conceding a higher inflationary trend for the current month and challenges to current seasonal crops ahead, the government on Friday hoped for encouraging and sustainable growth prospects on the basis of budgetary measures for the next fiscal year.

“The inflation outlook for June has slightly increased compared to the previous month but remains well below the levels of the same month last year. This rise is primarily due to higher prices of perishable items driven by Eidul Azha”, the Ministry of Finance said on Friday in its monthly economic update and outlook.

In its ‘Seasonal Agro-Climate Outlook for June-August 2024’, the Pakistan Meteorological Department has advised the farmers to take measures based on recent extreme heatwave events. The amount of soil moisture available is currently under stress in most parts of the country.

“Accordingly, seasonal crops like cotton, peanut, sugarcane, seasonal vegetables and orchards are under water stress and require additional irrigation in most parts of the country”, the MoF said.

The report claimed that FY24 was concluding with “an economic stabilisation path accompanied by improved macroeconomic indicators”. The subsiding inflationary pressures, stability in external accounts and exchange rate, fiscal consolidation and gradual recovery in industrial activities were restoring the confidence of economic agents thus facilitating economic growth, it added.

The MoF said the budget 2024-25 was geared towards a shift to an era of sustainable and inclusive growth, for which the government was focusing on high-potential sectors like IT, SMEs, mines and minerals, tourism, exports and agriculture. These sectors can pay rich dividends and support the country’s balance of payments position.

“Complementing this, fiscal discipline, effective implementation of home-grown growth programme along with bilateral and multilateral cooperation will necessitate the sustainable potential growth path in coming years”, the ministry hoped.

The government claimed credit for recent fuel price reductions, although it simply passed on the impact of international prices. On the other hand, the government never takes blame when these prices go up more frequently than price cuts.

It said it was “implementing various administrative, policy, and relief measures to control inflationary pressures. Notably, the government reduced petrol prices by Rs4.74 per litre and diesel by Rs3.86 per litre on June 1, with further reductions of Rs10.20 per litre for petrol and Rs2.33 per litre for diesel effective from June 15”. These actions, coupled with efforts to boost the availability of food items, reflect the government’s commitment to curbing inflation.

The report did not mention the measures to boost the availability of food items even though it had rather allowed the export of sugar while its prices were rising and lobbying was already in process for allowing wheat exports. “By managing supply and demand, the government aims to stabilise prices and mitigate market volatility, presenting a more optimistic inflation outlook”, it said. Conceding a higher inflationary trend for the current month and challenges to current seasonal crops ahead, the government on Friday hoped for encouraging and sustainable growth prospects on the basis of budgetary measures for the next fiscal year.

ECNEC postpones $6.7b ML-I project
Pakistan, on Saturday, deferred approval for the $6.7 billion Mainline-I (ML-I) project of the China-Pakistan Economic Corridor (CPEC), opting instead to sanction two other Chinese-funded schemes: building a new airport in Gwadar and completing a missing road link with multibillion-dollar investments. The decisions were made during a meeting of the Executive Committee of the National Economic Council (ECNEC), chaired by Deputy Prime Minister and Foreign Minister Ishaq Dar. ECNEC, mandated to approve projects costing over Rs7.5 billion, approved 19 projects, including some brought forward due to cost revisions.

ECNEC did not clear the re-modified PC-I for the ML-I upgrade and advised Pakistan Railways to consider preparing smaller projects and packages for financing and implementation, according to a Foreign Office press statement. The coalition government had previously cleared the “unviable” $6.7 billion ML-I project before Prime Minister Shehbaz Sharif’s visit to China. The initial approval came despite the Ministry of Finance noting that the scheme conflicted with the goals of the next International Monetary Fund (IMF) loan programme.

Sources indicated that during PM Sharif’s visit, Chinese officials advised Pakistan to complete the project in phases due to the significant financing needs and Pakistan’s limited capacity for major foreign loans. The government had pushed the ML-I project despite doubts about allocating Rs250 billion annually to complete the $6.7 billion (Rs1.93 trillion) project over eight years. Beijing had previously asked for the project cost to be reduced by one-third to $6.7 billion, but this reduction made the project unviable, according to Planning Commission officials. The Planning Commission had termed the project unviable due to compromises on speed limits, line capacity, rolling stock, axle load, and the deletion of the fencing plan. The original ML-I track was 1,872 km long, but the Ministry of Railways now proposes rehabilitating a 1,726 km track.

However, ECNEC approved two other CPEC projects. “Among the projects falling under CPEC, the forum cleared the re-alignment of the Karakoram Highway between Thakot and Raikot at a rationalised cost of RMB13.067 billion and the revised PC-I of the New Gwadar International Airport,” according to the Foreign Office. The new Gwadar airport is scheduled to become operational within the calendar year.

In dollar terms, the Karakoram Highway (KKH) project cost is $2 billion. The KKH, originally built with China’s help 50 years ago, saw numerous fatalities during its construction due to the challenging terrain. A fully functional, all-weather KKH is crucial for China-Pakistan economic and commercial relations. This is the third major road infrastructure project under CPEC, following the Multan-Sukkur motorway and the Havelian-Thakot section of the KKH.

The KKH project includes upgrading the highway from Thakot to Dasu with a bypass road, exclusive relocation of the KKH at Dasu Dam by WAPDA, upgrading the road from Sazin to Thor Nullah & R-1, and new construction of the KKH after Basha. The project will be completed in five years, said the planning ministry. ECNEC also approved the construction of the New Gwadar International Airport (NGIA) at over Rs60 billion. The project was initially approved in January 2010 at an estimated cost of Rs7.6 billion, which has since been revised twice: to Rs22.9 billion in January 2015 and to Rs51.3 billion in November 2021.

To expedite the reconstruction and rehabilitation of flood-affected areas in Balochistan, the forum approved sub-components of the $400 million World Bank-funded Integrated Flood Resilience and Adaptation Programme (IFRAP). This includes $155 million for housing reconstruction, $50 million for road infrastructure, $40 million for livelihoods, and $30 million for irrigation infrastructure. An amount of Rs11.2 billion has been allocated in PSDP2024-25 for reconstruction projects in Balochistan.

Several projects in Sindh were also approved, including the revised Flood Response Emergency Housing Project at Rs296 billion, with Rs50 billion committed by the federal government. An amount of Rs30 billion has been allocated in PSDP2024-25 as the federal share for housing reconstruction in Sindh.

Dar informed ECNEC that the federal government remains committed to providing its share in Sindh’s housing reconstruction efforts. Other Sindh projects approved included the Karachi Water and Sewerage Services Improvement Project Phase-II and Competitive and Liveable City of Karachi.

ECNEC also cleared the revised PC-I of the operationalisation of Green Line BRTS in Karachi at a rationalised cost of Rs13.5 billion while suggesting that the Sindh government consider increasing the fare to reduce the subsidy borne by the federal government. Additionally, the forum approved the rehabilitation and reconstruction of an 86-km stretch of the national highway (N-5) between Moro and Ranipur, electrical and mechanical works and allied buildings for Lowari tunnel at Rs33.3 billion, and the 48 MW Jagran hydro power station at Rs14 billion.

ECNEC extended the Sehat Sahulat Programme until the end of December 2024, directing the Ministry of National Health Services to submit recommendations by September 15 for shifting the programme to the current budget, improving fiscal sustainability, and reforming the regulatory and monitoring framework.

Natural gas sale pricing: Proposals presented by Petroleum Div approved by ECC
The Federal Minister for Finance & Revenue Senator Muhammad Aurangzeb presided over a meeting of the Economic Coordination Committee (ECC) at the Finance Division Sunday.

The meeting was attended by the Minister for Petroleum Musadik Masood Malik, Minister for Power Sardar Awais Ahmad Khan Leghari, Minister of State for Finance & Revenue Ali Pervez Malik, representatives from Oil and Gas Regulatory Authority, Federal Secretaries, and other senior officers of the relevant ministries.

SNGPL’s stance on gas price determination

The Cabinet Committee approved the summary proposals presented by the Petroleum Division related to natural gas sale pricing.

Minister orders quality, price control on urea
Minister for Industries, Production, and National Food Security, Rana Tanveer Hussain, on Saturday directed the Pakistan Standards and Quality Control Authority to rigorously check value-added urea products of fertiliser companies to ensure the quality of the commodity across the country. According to a press statement, the minister chaired a review meeting that discussed issues related to the availability and pricing of urea fertiliser in the country.

Hussain also directed the introduction of toll-free numbers to receive complaints against price increases and overcharging by dealers, aiming to facilitate growers across the country by providing them with all agricultural inputs at sustainable rates. The minister further stated that the estimated availability of urea during the Kharif season 2024 was recorded at 3,394 thousand tonnes, while the total consumption of urea during the Kharif season is expected to be around 3,156 thousand tonnes.

He noted that there was a sufficient stock of urea fertiliser available in the country for the Kharif season and stressed the need to ensure an uninterrupted supply of the commodity at affordable prices during the season. The CEOs of the fertiliser companies ensured that all manufacturing units will operate at full capacity to meet local demand, provided that an uninterrupted gas supply is ensured by the government.

The minister warned that dealers who charge higher prices than the retail price will be blacklisted.

Traders urge PM to withdraw SRO 350
Karachi industrialists have appealed to the prime minister, finance minister and commerce minister to take cognizance of the emerging situation and issue immediate orders to abolish the SRO 350 for a smooth working of businesses and industries that are already going through difficult times.

They urged the government to scrap or withdraw the SRO 350 as utilities like Sui Southern Gas Company (SSGC), K-Electric and others were unable to file sales tax returns on time because the Federal Board of Revenue (FBR) had yet to address the issue. Sharing their concerns with The Express Tribune, scores of business leaders belonging to the seven industrial zones of Karachi said the matter had been raised time and again by the business community, even during their meeting with Prime Minister Shehbaz Sharif, when he nipped down to Karachi in April where business leaders collectively requested the PM to issue orders for the withdrawal of SRO 350.

The uncertainty and ambiguity regarding timely filing of sales tax returns along with unreasonable sales tax liabilities is really a big issue being faced by businesses and industries at an already difficult time.

SRO 350 establishes a critical link between the tax return filing by buyers and the compliance by their suppliers. This initiative triggers a concerning chain reaction, wherein non-compliance by the suppliers threatens to disrupt the entire system.

Eminent industrialist Majyd Aziz said, “This is an issue of the FBR. This is not an issue of the utilities. Legally as per SRO 350, all those registered under the sales tax regime have to submit returns or pay the additional sales tax by the end of a month. Today is June 29 and tomorrow is Sunday. Therefore, all submissions must be made by tonight.” Until noon, a major utility had not submitted the tax return. Hence, no customers of that utility could take input and submit their returns, finding themselves between a rock and a hard place.

He urged the Federation of Pakistan Chambers of Commerce and Industry, Karachi Chamber of Commerce and Industry and other associations to take up the issue with the relevant authorities. SITE Association of Industry (SAI) President Muhammad Kamran Arbi once again demanded that the government immediately withdraw the SRO 350 because of it being an ambiguous order.

In a statement, Arbi said that two major public and private utilities, SSGC and K-Electric, had not yet been able to file their sales tax returns for the tax period May 2024 due to the SRO 350. “This has resulted in non-filing of returns by a vast majority of industries, leading to exorbitant sales tax liabilities for them.” The association requested the FBR to extend the date for filing returns for the tax period May 2024 by one week.

Dar becomes alternate chairman of ECNEC
Prime Minister Shehbaz Sharif on Friday made Foreign Minister Ishaq Dar the alternate chairman of the Executive Committee of the National Economic Council (Ecnec), which further strengthened the position of four-time finance minister in economic affairs.

Just two weeks after the constitution of Ecnec, PM Sharif elevated Dar, who is also the Deputy Prime Minister, to the position of alternate chairman. Earlier, Dar was only a member of Ecnec.

The PM has kept the post of Ecnec chairman after some resistance to making Dar the head of the committee two weeks ago.

“In the absence of the prime minister, the deputy prime minister and minister for foreign affairs shall chair the meeting of the Executive Committee of the National Economic Council,” the Cabinet Division notified on Friday.

Dar is scheduled to chair his first Ecnec meeting on Saturday in the absence of the PM, who will not be available for the meeting.

Ecnec is mandated to make decisions on economic and development plans. Finance Minister Muhammad Aurangzeb will sit under the chairmanship of Dar.

Dar’s position as the party’s economic czar strengthened due to the poor handling of the federal budget.

Eyebrows were also raised over an attempt to quietly grant Rs60 billion to Rs90 billion in income tax relief to banks. The issue came to the fore after a story appeared in The Express Tribune and the PM had to intervene to reverse the proposed tax exemption.

Dar played a role and briefed the PM about the move to give the tax favour. As a result, the Federal Board of Revenue (FBR) had to drop the proposal from the final Finance Act 2024, which the National Assembly approved on Friday.

Ecnec has a total of eight members – four from the centre and one each from four provinces. Earlier, the PM made Dar the chairman of the Cabinet Committee on Privatisation.

Ecnec is a crucial body particularly at a time when the coalition government is banking on the support of different political parties. The Pakistan Peoples’ Party (PPP) has secured the allocation of Rs65 billion in the Public Sector Development Programme (PSDP) in return for its vote for the budget. Punjab’s Senior Minister for Planning Marriyum Aurangzeb is a member of Ecnec. From Sindh, Jam Khan Shoro, from Khyber-Pakhtunkhwa, Adviser to Chief Minister Muzammil Aslam and from Balochistan, Finance Minister Shoaib Nosherwani are members of Ecnec.

Ecnec has the mandate to approve mega development projects of Rs7.5 billion and above. In its maiden meeting, Ecnec is expected to take up the $6.7 billion Mainline-I railway project, $2 billion Karakoram Highway project along with other mega schemes approved by the Central Development Working Party (CDWP) but required the final nod of Ecnec.

Although the finance minister is a member of Ecnec, he would not have the final say in matters that will have serious implications for the budget.

There has been a tendency in the Planning Commission to approve mega projects without due diligence. Ecnec is a check on such decisions.

The government has allocated 19% of next fiscal year’s development budget for the new schemes.

Govt increases petrol price by Rs7.45, takes it to Rs265.61 per litre
The federal government on Sunday increased the price of petrol by Rs7.45, taking the rate to Rs265.61 per litre.

The price of high-speed diesel (HSD) has been raised by Rs9.56 per litre to Rs277.45.

The new prices take effect from July 1, 2024.
In the previous review, the government had decreased the petrol price by R10.2 per litre and the diesel price by Rs2.33 per litre.

Earlier, Business Recorder had reported that a rise of Rs 7.54 per litre for petrol and Rs 9.84 per litre for HSD was likely for the next two weeks.

These estimates were based on current government taxes and profit margins for oil marketing companies (OMCs).

Finance Minister says economic stability has revived international institutions’ trust
Finance Minister Muhammad Aurangzeb said Sunday the economic stability in Pakistan has revived the trust of international institutions, Aaj News reported.

Addressing a press conference in Islamabad, he said that the country’s economy has significantly improved with the prudent economic policies of the government.

Budget approved by NA ahead of fresh IMF loan

He said that with prudent economic policies sustainable economic stability will also be achieved.

He reiterated the government’s commitment to digitizing the Federal Board of Revenue (FBR) to ensure transparency and end corruption.

He stressed the need to avoid human interventions to make the system of FBR free from malpractices.

Aurangzeb said that retailers will be brought under tax net and for this purpose forty-two thousand retailers have so far been registered.

He vowed to bring the tax-to-GDP ratio to thirteen percent in the next three years by introducing pragmatic reforms in various sectors of the economy.

 ‘Do more’: IMF says budget approval ‘not enough’

The finance minister’s remarks come days after the government passed Federal Budget 2024-25 from the National Assembly – ahead of crucial talks with the International Monetary Fund (IMF) – with specific amendments, but further enhancing the taxes and no relief to the taxpayer. In a related development, the IMF on Saturday termed budget 2024-25 approval as insufficient and demanded Pakistan to do more.

The National Assembly has approved the Federal Budget for the fiscal year 2024-25 with a total outlay of Rs18,870 billion.

According to sources, the IMF wants Pakistan to hike the electricity and gas rates from July 1 and immediately implement the NEPRA decision regarding the gas and power tariffs increase.

Govt mulls selling LNG in spot market
Pakistan is working on a proposal to seek the consent of Qatar for selling its liquefied natural gas (LNG) cargoes, being imported under a long-term contract, in the international spot market.

Pakistan has signed an LNG supply contract with Qatar in 2016, as part of which a price revision is due in February 2026. Under the deal, Pakistan State Oil (PSO) is bound to accept LNG shipments even if the country does not have demand for the imported gas.

This arrangement sparks trouble for Sui Northern Gas Pipelines Limited (SNGPL) in transmitting LNG through its pipelines in case the company fails to consume gas.

According to officials, Pakistan has approached Qatar through diplomatic channels, asking it to either cancel shipments or allow their sale in the spot market if there is no consumer demand for LNG.

The National Electric Power Regulatory Authority (Nepra), the power-sector regulator, held a public hearing on Friday to consider an increase in electricity tariffs up to Rs3.41 per unit on account of fuel charges adjustment for May 2024.

It was informed during the hearing that the tariff hike would burden consumers with an additional Rs41 billion in electricity bills for the coming month.

It was pointed out that the actual fuel cost came in at Rs9.12 per unit in May against the reference price of Rs5.7 per unit, showing an increase of Rs3.41 per unit.

During the month, the consumption of electricity dropped 5% due to weather conditions. Officials of the Central Power Purchasing Agency-Guarantee (CPPA-G) told the hearing that total demand had been only 17,000 megawatts during May 2024.

They revealed that more electricity was produced by consuming LNG rather than coal. The cost of LNG-based electricity was calculated at Rs24.7 per unit.

They argued that they had to forecast LNG demand months ago but sometimes “its consumption drops in the electricity sector that increases pressure on the line pack for the public gas utilities”. Net metering myth

The public hearing was told that the share of net metering in the total energy mix stood at less than 1%.

However, the interveners contended that the Power Division had made it part of propaganda to discourage net metering in the system by saying that its share was less than 1%.

The hearing was informed that those opting for net metering were consuming more electricity from the national grid in night hours. Therefore, “it was just propaganda against net metering”.

The interveners raised questions about the role of the regulator in providing relief to consumers over the past five years.

Nepra also came in for criticism for depriving electricity consumers of the option of paying bills in installments. Nepra did not respond to the queries of the interveners.

CPPA-G officials were questioned about the alleged scam in relation to the Sahiwal coal-fired power plant. Company officials were asked how many cases they had lost in the international court.

Rupee appreciates 2.75% in FY2023-24
The Pakistani currency appreciated by 2.75% (or Rs7.65) in the outgoing fiscal year 2023-24, closing at Rs278.34 against the US dollar in the inter-bank market on Friday. This marks the first appreciation after a three-year decline, ending the currency’s losing streak. However, the gains may not sustain, as the government has projected the exchange rate at Rs295/$ for the next fiscal year starting July 1, 2024-25, suggesting a potential drop of 5.65% or Rs16.66.
According to State Bank of Pakistan’s (SBP) data, the currency increased by Rs0.03/$ on Friday, the last working day of FY24, maintaining an uptrend for the fourth consecutive working day. To recall, the rupee hit a high of Rs277.03/$ in March 2024 and a low of Rs307.10/$ in September 2023.

In a brief commentary, Tahir Abbas, Head of Research at Arif Habib Limited, attributed the year-on-year appreciation of 2.75% to a decrease in the current account deficit, improved foreign inflows, a reduction in the spread between open and inter-bank rates, and other administrative measures. At the start of the year, the rupee was highly volatile due to extreme political uncertainty and uncontrolled smuggling of foreign currencies to neighbouring countries, including Afghanistan and Iran.

The rupee lost 6.87% or Rs21.10 in the first two months of FY24, hitting a record low of Rs307.10/$ in the first week of September 2023, but closed the FY2023 at Rs286/$. The sinking rupee was pressured by dwindling foreign exchange reserves as black marketers smuggled dollars to Afghanistan, which needed foreign currency after the US blocked its reserves in Western banks following the Taliban’s return to power.

Political stability improved in Pakistan after the completion of the previous government’s term in August 2023 and the establishment of a caretaker government. The caretaker government launched a crackdown on currency smugglers and illegal currency markets, stabilising the rupee-dollar exchange rate. Administrative measures, International Monetary Fund (IMF) loan tranches, funds from friendly countries, and control over imports helped the rupee partially recover, making a historical gain of about 10.50% or Rs29 from September 2023 to March 2024, ending the year at a high of Rs277.03/$.

The successful completion of the first and second reviews of the economy by the IMF under the-then $3 billion loan programme, along with subsequent loan tranches and bilateral inflows, boosted foreign exchange reserves to over $9 billion in the fourth quarter of FY24 from less than $4 billion at the end of FY23. The rise in reserves supported the rupee, which has remained stable for the past couple of months at around the current levels.

969MW Neelum Jhelum Hydropower Project: Some serious design flaws identified
Pakistan is said to have identified serious design flaws in 969MW Neelum Jhelum Hydropower Project in Azad Jammu and Kashmir (AJ&K) with the Chinese company and asked for early rectification of faults, well informed sources told Business Recorder.

The project was built at a cost of over Rs 500 billion with a delay of several years because of faults, leading to its complete or partial shut down periodically and has been unavailable since first week of May this year.

A two member Committee comprising former Federal Secretary, Shahid Khan and Secretary Water Resources, Syed Ali Murtaza is probing the project’s faults on the directions of Prime Minister, Shehbaz Sharif who had also visited the project a couple of weeks ago to get an update on it.

The Committee has also been asked to ascertain the reasons for delay in submission of the findings/ report of the Panel of Experts, hired in 2022 to find out the reasons for the blockage in the tailrace tunnel.

On June 28, 2024, a representative of National Power Control Centre (NPCC), the System Operator (SO) stated during the public hearing on FCA for the month of May 2024 that hydel generation remained below the projections due to close of 969 MW NJHPP. The financial impact of shut down of NJHPP has been calculated at Rs 55 billion per annum.

According to sources, Prime Minister, Shehbaz Sharif who undertook a crucial visit to China during first week of June, raised the issue of NJHPP with the top boss of the Chinese companies China Energy / China Gezhouba Group which built the project.

 “Prime Minister raised the issue of serious design flaws in Neelum Jhelum HPP and asked them to rectify the fault to make the project operational as soon as possible,” the sources said adding that Chairman Gezhouba Group committee to investigate the matter and submit a report.

He further stated that M/s Sinosure had increased deductible insurance because of payment delays to IPPs, which was causing delay in Azad-Pattan HPP.

On June 12, 2024 Chairman, Water and Power Development Authority (WAPDA), Engr Lt Gen Sajjad Ghani (Retd) visited Neelum Jhelum Hydropower Project. He reached Dam (Weir) site of the Project located at Nauseri, Azad Jammu & Kashmir.

The Chairman visited the de-watered head race tunnel to inspect and review damages that may have occurred to the tunnel. He was accompanied by Project Manager, Neelum Jhelum Consultants James Stevenson.

Private sector participation in Discos’ sell-off: Govt approaches World Bank for NLTA
The government has approached the World Bank ((WB) for Non -Lending Technical Assistance (NLTA) to facilitate private sector participation in the privatisation of power Distribution Companies (Discos), well informed sources told Business Recorder.

Economic Affairs Division (EAD), in a letter to World Bank’s Country Director stated that the Ministry of Energy (Power Division) intends to avail WB’s support under Non Lending Technical Assistance for carrying out the following broad activities to facilitate private sector participation in the DISCOs: (i) draft guidelines for private sector participation in DISCOs and the competitive process for inviting the private investors/operators ;(ii) sector financial sustainability and sensitivity analysis including development of sector financial model, framework on uniform tariffs for DISCOs, management of DISCOs liabilities and subsidy management procedure ;(iii) updating licensing eligibility criteria and rules for distribution and for supplier of last resort ;(iv) developing a communication strategy and implementation action plan ; (v) developing/proposing HR strategy and action plan for implementation; and (vi) assessment of impact of market evolution on private sector participation in DISCOs .

Sell-off plan approvals: New independent directors appointed for 9 Discos

EAD has asked World Bank to consider the request of Ministry of Energy (Power Division) and indicate its commitment to support the proposal under NLTA.

Recently, a high level meeting presided over by the Prime Minister, Shehbaz Sharif decided to privatise certain power distribution companies.

In Phase-I, IESCO, Gepco, and FESCO will be fully privatised, followed by LESCO, MEPCO, and HAZECO in Phase-II. SEPCO, HESCO, and PESCO will be offered long-term concession agreements to the private sector, while TESCO and QESCO will remain under government control due to their unique conditions.

The Privatisation Commission has been directed to hire a transaction advisor and complete necessary formalities to finalize Phase-I transactions by January 2026. The Power Division will engage a technical advisor to review the regulatory and policy framework for the privatisation and outsourcing of Discos.

The Government recently obtained approval of a new Board of Directors of Discos from the Cabinet Committee on State Owned Enterprises (CCoSOEs), after issuance of Ordinance to remove existing Boards as the proposal of Power Division to sack Boards of Discos was not in line with the SOE’s law.

There are suspicions that some of the new Board Members have ‘links’ with some potential investors who are keen to buy stakes in Discos. However, official circles are denying such speculations.

Failure to block SIMs of non-filers: Cellular cos face the prospect of heavy penalties
The Federal Board of Revenue (FBR) has been bound to issue a notification for the imposition of heavy penalties on mobile phone companies for not blocking SIMs of non-filers of income tax returns.

According to tax experts, the Finance Bill 2024 had proposed to impose a penalty of Rs100 million on the first default, and a Rs200 million penalty for each subsequent default on the person who fails to comply with an income tax general order issued by the Board within 15 days of issuance of such Order. The amended Bill 2024 has proposed to reduce the said penalties to Rs50 million and Rs100 million, respectively.

Not stopped from blocking SIM cards: FBR only barred from taking coercive steps against telcos: IHC

Further, the amended Bill has also proposed to empower the Board to notify the effective date of such penalty. As such, this proposed penalty shall only be effective once a Notification has been issued by the Board to that effect.

Fata, Pata ghee mills: PVMA threatens to shut units if tax concession not withdrawn
Pakistan Vanaspati Manufacturers Association (PVMA) has announced country wide closure of factories, if the federal government does not withdraw the tax concessions granted to Ghee factories of FATA and PATA.

Addressing a press conference on Friday at Federation House, Sheikh Abdul Razzaq Chairman PVMA along with Sheikh Amjad Rasheed former chairman, Sheikh Umar Rehan former vice chairman PVMA, and other industry representatives said that tax concessions given to the FATA and PATA are affecting the entire Ghee sector.

They informed that the ghee industry of the entire country except FATA and PATA is paying Rs 85 per kg tax to the government while FATA and PATA factories are paying only Rs 15 per kg tax. Due to this disastrous difference of Rs 70 per kg, the government treasury and Ghee industry is facing huge losses.

“If tax concession scheme to FATA and PATA is retained in Budget 2024, all ghee and oil factories will be closed across the country from July 1 to protest against this discrimination,” they said and added that in addition, PVMA has decided to knock on the doors of the court for justice. Abdul Razzaq said that some 26 oil and ghee factories are operating in FATA/ PATA and paying only Rs 15 per kg tax to the government. While, some 156 ghee mills were working across the country with Rs 85 per kg tax; however, due to this discrimination fifty percent of the ghee mills have already been closed as they are unable to compete with FATA and PATA companies that are paying 82 percent less tax compared to Ghee factories operating in the other parts of the country.

He warned that if the government does not address this issue, the price of ghee will be increased by Rs 10 to Rs 12 per kg with the passing of the budget 2025.

He informed that FATA and PATA have a total population of 6.25 million, and an average person in this population does not consume 17 kg of king oil per year. As per these statistics, about 100,000 metric tons of edible oil annually is sufficient, but the FATA and PATA Ghee units have imported about 353,000 metric tons of oil in FY24, which is much higher than the actual requirement.

The government is losing some Rs 43 billion annual tax revenue due to this tax concession as excess oil, ghee and cooking oil are being sold in the other parts of the country. Similarly, tax exemption given for the past six years, then the government has suffered a loss of about Rs 180 billion to Rs 200 billion, Abdul Razzaq mentioned.

 “FATA and PATA edible oil and Ghee industry has already availed tax concessions for the past 6 years and now one more year extension is not accepted. The government must provide a level playing field to all industries”, he said.

Sheikh Umar Rehan said that at present, Pakistan ghee industry is an industry worth about Rs 2400 billion and the third largest revenue generating industry in Pakistan by paying Rs 500 billion taxes to the government.

 “The government should save the government revenue and immediately remove the tax exemption given to FATA and PATA for the survival of the Ghee industry”, he demanded.

Pakistan’s ghee industry has come to the edge of collapse and many mills have closed down, while it has become very difficult for the rest to continue business.

PTCL gets $400m financing for Telenor acquisition
In a major development for Pakistan’s telecom sector, Pakistan Telecommunications Company Limited (PTCL) has secured $400 million in debt financing from an International Finance Corporation (IFC)-led consortium to acquire Telenor Pakistan and Orion Towers (Pvt) Limited. PTCL recently signed formal loan agreements with the consortium, marking a significant milestone in the acquisition process following the IFC Board of Directors’ approval of the financing deal in April 2024.

Last December, PTCL entered into a Share Purchase Agreement with Telenor BV to acquire 100% of the shares of Telenor Pakistan for Rs108 billion on a cash-free, debt-free basis. The IFC-led consortium, which includes the Silk Road Fund and British International Investment plc, has now formally agreed upon a $400 million facility with a seven-year tenor. This facility will be repaid in quarterly instalments with a one-year capital grace period.

The financing of this project aligns with the IFC-led consortium’s commitment to enhancing digital connectivity and narrowing the digital infrastructure gap in Pakistan. Commenting on the development, Hatem Bamatraf, President and Group CEO of PTCL & Ufone 4G, expressed enthusiasm about the deal, stating, “We are thrilled to witness the materialisation of this financing deal, which brings us closer to concluding this transformative milestone in Pakistan’s telecom sector. We are eager to serve a larger customer base with renewed commitment as soon as the acquisition process concludes following the necessary regulatory approvals.”

The disbursement of the financing is expected to take place following the completion of the conditions specified in the financing agreements.