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SUPREME COURT DECLINES TO EXPAND BENCH IN ARMY TRIALS CASE
Profit
Wednesday, 19 July, 2023 I 30 Zil Hajj, 1444
Rs 15.00 | Vol XIV No 19 I 8 Pages I Islamabad Edition
102 CIVILIANS HANDED OVER TO ARMY FOR TRIALS IN AFTERMATH OF PROTESTS FOLLOWING UNLAWFUL ARREST OF FORMER PRIME MINISTER IMRAN KHAN ON MAY 9
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ISLAMABAD
STAFF REPORT
HE chief justice of Pakistan turned down the government’s request to form a full court to hear the multiple petitions challenging the trial of civilians in custody over a series of nationwide protests against the unlawful arrest of former prime minister Imran Khan in military courts. Umar Ata Bandial deemed the demand “impossible” during a hearing of the petitions in the Supreme Court. The six-judge bench, consisting of Justice Ijaz ul-Ahsan, Justice Yahya Afridi, Justice Munib Akhtar, Justice Mazahir Ali Akbar Naqvi, Justice Ayesha A. Malik, and the chief justice, presided over the case. In response to the government’s request conveyed through Attorney General for Pakistan (AGP) Mansoor Usman Awan, the chief justice clarified the bench was initially formed after consultation with all available judges. Establishing a full court at the present moment was deemed technically unfeasible. The judge explained that three judges had recused themselves from hearing the case, while some judges were currently out of the country.
Additionally, two judges, Qazi Faez Isa and Sardar Tariq Masood, had excused themselves from the case on the first day of the hearing. The chief justice expressed surprise when the government objected to a judge during the second hearing. He noted that Justice Mansoor had also excused himself from hearing the case, resulting in the reduction of the bench from nine to six judges. He emphasized that no judge had any personal interest in the case, as it pertained to a matter of public interest.
FBR adds another category for vehicles imported by diplomats g
VEHICLES SOLD WITHIN TWO YEARS OF IMPORT WILL BE LEVIED 100% OF PREVAILING DUTIES, AND TAXES PROFIT
DANIYAL AHMAD
MILITARY TRIALS: The development comes a day after the outgoing government of Prime Minister Shehbaz Sharif justified trials by the military in cases related to protests, as per the media. Calling the military trial an “apt and proportionate response,” the government told the top court that the Army Act and the Official Secrets Act “not only predate the Constitution, but were never, till date, challenged”. Pakistan’s current constitution was imposed in 1973. The government said this in a written
response after petitions against military trials of accused civilians were filed by former chief justice Jawwad S. Khawaja, Aitzaz Ahsan, Karamat Ali, and Khan, the chairman of Pakistan Tehreek-i-Insaf (PTI). Sharif announced last week that he will hand over reigns to a caretaker setup next month as general elections in Pakistan are due in October. Military trials are being held after an inquiry into the May 9 protests. The government told the court: “The events of May 9 were neither localised nor isolated and indicated a premeditated and intentional attempt to undermine the country’s armed forces and inhibit the country’s internal security.” The director general of Inter-Services Public Relations (ISPR), Maj. Gen. Ahmad Sharif, revealed last month that 102 protesters allegedly involved in the attacks were being tried in military courts, already established under the Army Act. Besides the sackings, Sharif added that “strict disciplinary” action was taken against another 15 officers, including three major generals and seven brigadier-rank officers. At least eight people were killed and over 300 others, including policemen, wounded in the protests, and thousands of activists and supporters of Khan were detained over their alleged involvement.
NAB closes inquiry into Port Qasim, Sahiwal coal power projects g
DECISION TO DISAPPOINT MANY EXPECTING THOROUGH PROBE INTO ALLEGED FINANCIAL IRREGULARITIES PROFIT
AHMAD AHMADANI
The Federal Board of Revenue (FBR) has instituted a modification to the regulations governing the sale of automobiles imported by diplomats into Pakistan on July 17. A new classification of vehicle imports, designated as the ‘special category,’ has been introduced, and automobiles within this classification will be liable for 100% of the prevailing duties and taxes if sold within a two-year period following importation. However, if sold subsequent to this two-year period, no duties or taxes will be levied. This alteration has been enacted through Statutory Regulatory Orders (SRO) 923(I)/2023 and will coexist alongside the previous three classifications. Categories of vehicular imports by diplomats The original three categories of vehicular imports by diplomats are delineated in SRO 577(I)/2006. The appraised value of the automobiles imported under these classifications is ascertained utilising the prevailing exchange rate.
The decision as to which classification a diplomat falls under is made by the Ministry of Foreign Affairs, based on arrangements made for Pakistan’s diplomats in other nations, any reciprocity agreements that may be extant, and conventional diplomatic relations between Pakistan and the respective country. Profit was unable to obtain a list of which nation’s diplomats fall under which classification. However, we were informed by the Ministry that the requisite embassies are cognisant of which classification their diplomats fall under, and that this information is deemed satisfactory.
The National Accountability Bureau (NAB) has officially closed its inquiry into the Port Qasim Coal Power Project and Sahiwal Coal Power Project, bringing an end to the probe surrounding these projects. The decision to drop the inquiry against these coal power projects, which allegedly caused an annual loss of approximately Rs. 175 billion to the national exchequer, has raised eyebrows among citizens and experts alike. According to sources, the closure of the inquiry, which was approved by NAB Chairman, has left many questioning the accountability process. These power plants were alleged to be causing an annual loss of approximately Rs. 175 billion to the national exchequer. Both projects were accused of over-invoicing and receiving additional tariffs from the National Electric Power Regulatory Authority (NEPRA). The inquiry revealed that NEPRA had granted additional tariff rates to these projects, resulting in significant financial losses for the national exchequer. Despite allegations of causing a loss of Rs. 60 billion and Rs. 150 billion annually for the Port Qasim and Sahiwal projects, respectively, NAB has chosen to close the inquiry. As per sources, NAB, in a letter dated 14th July 2023, communicated to the Secretary Power Division that it (NAB) has closed the inquiry against officers/officials of NEPRA, M/O W&P, PPIB and sponsors of Port Qasim Coal Power and Sahiwal Coal Power Projects and others. NAB, in its letter, said it had conducted an inquiry against officers/officials of NEPRA, M/S W&P, PPIB and sponsors of Port Qasim Coal Power and Sahiwal Coal Power Projects and others under provisions of National Accountability Ordinance (NAO), 1999 on allegations of misuse of authority, illegal gratification, and failure to prevent undue favor and dishonestly causing loss to the government exchequer. However, based on the finding of Final Inquiry Report, the recommendations of Regional NAB and Executive Board, the worthy Chairman NAB has approved the closure/referral of the inquiry. The closure of the inquiry has disappointed many who expected a thorough investigation into the alleged financial irregularities sur-
rounding these coal power projects. The move has further eroded public trust in the accountability process and heightened calls for greater transparency and oversight. It is worth noting that neighboring countries like India and Bangladesh have managed to secure more cost-effective tariffs for their coalfired power projects, highlighting the need for a critical examination of the tariff structure in Pakistan. The high upfront tariffs and associated costs have not only burdened consumers but have also hindered the competitiveness of Pakistani industries, posing challenges to economic growth and export performance. The dropped inquiry highlights the urgency to address the transparency and accountability issues prevalent in the power sector. Without effective checks and balances, the financial burden on the national exchequer may persist, impeding the country’s progress towards a more sustainable and affordable energy landscape. As the closure of the inquiry continues to spark controversy and raise concerns, it is essential for relevant authorities to address public sentiment, provide clear explanations for the decision, and take steps to restore trust in the accountability process. Furthermore, efforts should be made to ensure transparency and fairness in future power projects to safeguard the interests of the Pakistani public and promote a more robust and accountable power sector.
Govt agrees to IMF proposal to raise revenue from agriculture, construction sectors ISLAMABAD
SHAHZAD PARACHA
The Federal government has agreed with the International Monetary Fund (IMF) that it will raise additional revenue by targeting undertaxed sectors such as agriculture and construction. According to Memorandum of Economic and Financial Policies (MEFP) issued by IMF, Parliamentary approval of a FY24 budget in line with IMF staff agreement to meet program targets (Prior Action (PA) for program approval) advances fiscal consolidation through a primary surplus of Rs 401 billion (0.4 percent of GDP) built on a set of credible measures that help sustainably raise additional revenue by targeting undertaxed sectors (such as agriculture and construction), broaden the tax base, and improve progressivity; and (ii) restrain nonpriority spending (including through energy sector measures aimed at credibly containing energy sector subsidies, the public wage bill, and pensions) while making fiscal room to protect the generosity level of the Benazir Income Support Programme (BISP) Kafalat program. In addition, the Pakistani side has also agreed to expand the Personal Income Tax base by another 300,000 persons through the use of data on the withholding tax of businesses, third-party data, and physical surveys to book new individuals. They will also seek to bring the service sector, notably retailers, into the tax net by making better use of data (e.g., from tax collected through electricity bills on commercial connections). Continued progress on the roll-out of track-and-trace will be essential to secure the full benefit of recent taxation changes, notably FED on cigarettes. The report also disclosed that the circular debt stock to a new historical high of PRs 2.5 trillion (3 percent of GDP), mainly on account of CD flow overruns of Rs 387 billion (0.5 percent of GDP) relative to the Circular Debt Management Plan (CDMP) from early-FY23. Key drivers were policy slippages (mostly from new unbudgeted, untargeted energy subsidies for exporters and agriculture, and some deferred tariff adjustments for certain residential consumers) and slow progress with structural cost-side reforms. Amid mounting liquidity pressures for fuel inputs, debt payments, and capacity charges to independent power producers (IPPs), Pakistan took a set of corrective socially-balanced measures from March 2023 to contain both the FY23 budget subsidy (to 1.1 percent of GDP) and CD flow (to 0.4 percent of GDP). Also enshrined in their cabinet-adopted FY23 CDMP update in February 2023, these measures (worth 0.2 percent of GDP in FY23 alone) not only helped catch up with the deferred tariff adjustments, but also permanently (i) expand the base and level of the debt service surcharge; and (ii) remove all new unbudgetted subsidies. It also revealed that the CD stock in the gas sector (also including petroleum and late payment fees) has also grown rapidly and is now almost on par with that in the power sector. The main drivers remain below costrecovery prices from delays in regular biannual tariff adjustments (since September 2020), high operational losses (especially from unaccounted for gas losses (UFG) and collection shortfalls), and uncovered subsidies (especially for export and zero-rated industries). To avoid burdening the budget with additional subsidies, the authorities implemented a gas price hike in mid-February 2023 (i) of, on average, 75 percent as determined by the Oil and Gas Regulatory Authority (OGRA) in January 2023; and (ii) along an updated tariff slab system, which, developed with the support of the World Bank, ensures full cost recovery, affordability, and efficiency. The MEFP states that there are 10 (fiscal, social, Monetary and Financial, Energy Sector and StateOwned Enterprises, Climate, Economic Statistics) structural benchmarks including not to grant further tax amnesties, avoid the practice of issuing new preferential tax treatments or exemptions and Issuance by the Central Monitoring Unit (CMU) of its first periodic report on the performance of SOEs, using latest available data, to the Federal Government. In addition, the government has promised the lender that it will notify the annual rebasing (AR) for FY24 to take effect on July 1, 2023 by the end of July 2023. Moreover, Improve state-owned enterprise (SOE) governance by operationalizing the recently approved SOE law into a policy that clarifies ownership arrangements and the division of roles within the federal governments; and (ii) amending the Acts of four selected SOEs to make the new SOE law fully applicable to those SOEs by end November 2023. Pakistani authorities have committed that it will not allow supplementary grants for any additional unbudgetted spending over the parliamentary approved level in FY24 at least until the formation of a new government after the elections (except if needed to respond to a severe natural disaster).
What does IMF country report say, and what does it mean? PROFIT REPORT
After the board approval for the $3 billion Standby Arrangement between Pakistan and the International Monetary Fund (IMF), the fund has published its country report for Pakistan detailing the program’s woes, expectations and projections for the SBA. According to the statement by the IMF executive board, “The program will focus on (1) implementation of the FY24 budget to facilitate Pakistan’s needed fiscal adjustment and ensure debt sustainability, while protecting critical social spending; (2) a return to a market-determined exchange rate and proper FX market functioning to absorb external shocks and eliminate FX shortages;
(3) an appropriately tight monetary policy aimed at disinflation; and (4) further progress on structural reforms, particularly with regard to energy sector viability, SOE governance, and climate resilience. “ To look deeper into what the next year is going to be like for an average Pakistani, under the IMFprogram, we delve into the details of the report itself. Program Objectives and Policy: The new program’s policies are designed to assist the authorities in their immediate endeavors to stabilize the economy and strengthen reserves. This is what the discussions with the fund were focused on. According to the report the IMF’s talks centered around 4 main policy pillars.
(i) Developing a suitable FY24 budget to facilitate necessary fiscal adjustments; (ii) Reestablishing a market-driven exchange rate and ensuring the smooth functioning of the foreign exchange market to address balance of payments issues and eliminate foreign exchange shortages; (iii) Implementing appropriately stringent monetary policies to aid disinflation and maintain stable expectations; (iv) Continuing structural initiatives to enhance the energy sector’s sustainability, improve governance in state-owned enterprises, and strengthen the banking sector, while also supporting climate resilience efforts in Pakistan. Looking at the Macroeconomic Out-
look and Risks, the report assumes that strong policy implementation and timely external financing would reduce near-term uncertainty and help the real economy to gradually stabilize and recover. The report predicts that the GDP growth will remain around 2.5% and inflation close to 20%, by the end of FY24. The fund is also cognizant of Pakistan specific risks in this regard. The report reads: “Amplified by the tense political environment, policy slippages could undermine program implementation, in turn jeopardizing macro-financial and external stability and already stretched debt sustainability”. Another key objective of the IMF program is renewed Fiscal Policies. The fund
believes that The FY24 budget aims to set in a gradual fiscal improvement. It strengthens the tax revenue by rationalizing new taxation and containing the expenditures. The program’s broad based reforms include strengthening revenue administration and enhancing public finance management. It also includes amplifying Pakistan’s spending transparency with the help of the world bank and improving debt management in the longer run. The fund is however, still adamant on Poverty Reduction and Social Protection for which it plans to “persevere with administrative efforts” and “boast structural reforms” because of the tight fiscal space.
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