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IMF demands tax on NEC grEEN-lIghTs rs3.5Tr dEvElopMENT agriculture sector budgET ahEad oF budgET 2024-25 Tuesday, 11 June, 2024 I |4 Zil-Hajj, 1445
Rs 20.00 | Vol XIV No 342 I 8 Pages I Islamabad Edition
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ENDORSES NEXT FISCAL YEAR’S ECONOMIC GROWTH RATE TARGET OF 3.6%, INFLATION TARGET AT 12%
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APPROVES FIVE-YEAR MACROECONOMIC PLAN INCLUDING TO INCREASE EXPORTS OF GOODS, SERVICES TO $63B BY 2029
RS932B OR 27% OF TOTAL DEVELOPMENT OUTLAY WILL BE FUNDED THROUGH FOREIGN LOANS ISLAMABAD
NEWS DESK
HE National Economic Council (NEC) on Monday approved a whopping development budget outlay amounting to Rs3.5 trillion amid support by the four provinces, including the PTI-led KhyberPakhtunkhwa, for the International Monetary Fund (IMF) programme. The NEC greenlit a Rs3.5 trillion budget for the federal and four provincial governments – Rs663 billion or 24% higher than the original allocations for the outgoing fiscal year. Out of the total development budget, an amount of Rs932 billion or 27% of the outlay will be funded through foreign loans. However, the NEC revived the budget for the parliamentarians’ schemes and allocated Rs75 billion for the next fiscal year in addition to setting aside more financial resources for provincial nature projects in the federal budget 2024-25. Headed by Prime Minister Shehbaz Sharif, the NEC – the constitutional body mandated to approve the nation's financial policies, also endorsed next fiscal year’s economic growth rate target of 3.6% and the inflation target at 12%. The NEC approved a five-year macroeconomic plan including a target to increase the country’s exports of goods and services to $63 billion by 2029. The Premier also set up a committee under Economic Affairs Minister Ahad
Cheema to prepare a mechanism under the NEC to involve provinces in major decisions, a step towards the federal fiscalism and consensus decision-making on major national economic matters. Some members objected to projecting negative growth in the important crops in next year including in wheat and rice. But subsequently the NEC approved the annual plan after Deputy Prime Minister Ishaq Dar urged the forum to approve these numbers subject to the condition that these would be again reviewed by the NEC. The NEC approved Rs1.4 trillion worth federal PSDP, which is higher by Rs450 billion or 47% over this fiscal year’s budget. The federal government has estimated receiving Rs316 billion
uNsC set to decide on us-backed Israel-hamas ceasefire proposal NEW YORK
AGENCIES
The United Nations Security Council will vote later on Monday on a United States (US)-drafted resolution backing a proposal outlined by US President Joe Biden for a ceasefire between Israel and Hamas in Gaza. The US finalised its text on Sunday after six days of negotiations among the 15-member council. It was not immediately clear whether veto powers Russia and China would allow the adoption of the draft. A resolution needs at least nine votes in favour and no vetoes by the US, France, Britain, China, or Russia to pass. Biden laid out a three-phase ceasefire plan on May 31 that he described as an Israeli initiative. Some Security Council members questioned whether Israel had accepted the plan to end the fighting in Gaza. The draft resolution welcomes the new ceasefire proposal, “which Israel accepted, calls upon Hamas to also accept it, and urges both parties to fully implement its terms without delay and without condition.” It also goes into detail about the proposal, and spells out that “if the negotiations take longer than six weeks for phase one, the ceasefire will still continue as long as negotiations continue.” The council in March had demanded an immediate ceasefire and unconditional release of all hostages held by Hamas. For months, negotiators from the US, Egypt, and Qatar have been trying to mediate a ceasefire. Hamas says it wants a permanent end to the war in Gaza and Israeli withdrawal from the enclave of 2.3 million people.
worth project loans in the next fiscal year to finance its bloated development programme. Earlier, the Finance Ministry had indicated Rs1.5 trillion PSDP, which it cut by Rs100 billion. Four provincial chief ministers attended the NEC meeting and assured Prime Minister Shehbaz Sharif of their support for the IMF bailout package, including providing the cash surpluses equal to 1% of the GDP, a federal minister told The Express Tribune. The provincial governments also assured their support for the National Fiscal Pact, which the IMF is asking Pakistan to implement as part of the conditions for the next programme. As per the IMF condition, the National Fiscal Pact has to be concluded by end September and the deadline can only
be achieved if the Finance Ministry sits with the provinces, said Muzammil Aslam, the Advisor to CM KP on Finance. Under the National Finance Pact, the province will share spending on the Benazir Income Support Programme, Higher Education Commission and provincial infrastructure projects. The provincial governments would also have to throw a Rs1.219 trillion cash surplus for the next budget under the IMF condition. Punjab’s share is Rs630 billion, Sindh Rs300 billion, KhyberPakhtunkhwa Rs178 billion and Balochistan’s share is Rs111 billion. Finance Minister Muhammad Aurangzeb will formally announce the budget on Wednesday. The NEC approved Rs2.1 trillion provincial annual development plans – higher by Rs216 billion or 12% over this year’s original budgetary allocations. The four provincial governments would take Rs616 billion worth foreign loans to finance their schemes. The government of Punjab’s next year’s development budget is indicated at Rs700 billion compared to original Rs655 billion for this year. Chief Minister Maryam Nawaz Sharif told the forum that her province’s budget may increase to Rs825 billion once the internal exercise is finished. Sindh will spend Rs764 billion on development compared to Rs652 billion this year. K-P would spend Rs351 billion compared to Rs290 billion this year.
Enemies perturbed over rapid progress under Shehbaz: Tarar ISLAMABAD
STAFF REPORT
Federal Minister for Information and Broadcasting and National Heritage and Culture Attaullah Tarar on Monday said Pakistan’s fast-track progress under the leadership of Prime Minister Shehbaz Sharif had stunned its enemies who were dreaming its economic downfall. “The disappointed elements are fully perturbed as the prime minister has charted the country on path of progress and development,” Attaullah Tarar said while addressing a press conference. The minister said a so-called leader while being at the helm of affairs in 2018 had adversely affected Pakistan’s relations with the brotherly countries, causing serious problems on the diplomatic front. On the other hand, the government led by PM Shehbaz Sharif had not only mended relations with the brotherly states, besides restoring the country’s prestige in the global community, he added. Tarar said the prime minister’s historic visit to China was “highly successful”, which had been marked by an unprecedented level of enthusiasm and mutual cooperation. A multitude of issues, he said, were addressed during the visit, fostering the dawn of a new era in the bilateral relations of two countries which had been enjoying exemplary bonds for decades. Their unparalleled friendship stood steadfast against all odds over the years, he added.
The minister said the Chinese leadership congratulated Pakistan on securing a seat in the United Nations Security Council and achieving 182 votes in the 193member General Assembly. China had played a significant role in helping Pakistan achieve the feat. Chinese President Xi Jinping during the meeting that lasted for over three hours, personally felicitated Prime Minister Shehbaz on the achievement, he added. The prime minister, he said, had discussed the revival of Karachi Circular Railway (KCR) and the Mainline 1 (ML-1) projects during the meeting. A committee was formed to extend the ML-1 from Karachi to Multan and potentially beyond, he added. The minister said a total of 32 B2B agreements were inked among various business enterprises of the two countries. Moreover, he said, some 500 entrepreneurs attended a business conference where many agreements and memorandum of under-
DECISION FOLLOWS REDUCTION IN INFLATION TO 30-MONTH LOW PROFIT
NEWS DESK
The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) announced on Monday a reduction in the key policy rate by 150 basis points (bps) to 20.5%. According to a statement issued by the SBP after the MPC meeting, this decision precedes the annual budget and follows data showing inflation slowed to a 30-month low of 11.8% in May. However, the MPC forecasted a risk of inflation to rise significantly in July 2024 from current levels, before trending down gradually during FY25. The MPC noted that while the significant decline in inflation since February was broadly in line with expectations, the May outturn was better than anticipated earlier.
The Committee assessed that underlying inflationary pressures are also subsiding amidst a tight monetary policy stance, supported by fiscal consolidation. This is reflected by continued moderation in core inflation and ease in inflation expectations of both consumers and businesses in the latest surveys. At the same time, the MPC viewed some upside risks to the near-term inflation outlook associated with the upcoming budgetary measures and uncertainty regarding future energy price adjustments. Notwithstanding these risks and today’s decision, the Committee noted that the cumulative impact of the earlier monetary tightening is expected to keep inflationary pressures in check. The MPC noted the following key developments since its last meeting. First, real GDP growth remained moderate at 2.4% in
PROFIT
AGENCIES
The International Monetary Fund (IMF) has demanded more tax collection from provinces and imposition of the agriculture tax, official sources said on Sunday. The IMF has urged to tax the agricultural income, adding that the farm sector is paying the lowest taxes in Pakistan over its share of income. The monetary fund has also advised the government to use the national tax council to enhance provincial taxation. “The province’s tax share in national revenues has been at the minimal level of one per cent,” IMF has pointed out. The IMF has also demanded full tax collection on properties as well as sales tax on services in provinces. The International Monetary Fund earlier demanded Pakistan to public assets of office holders, government officials, ministers, and parliamentarians. According to sources, the IMF has suggested strict anti-corruption measures in the upcoming budget 2024-25. The monetary fund directed the government to establish a portal to declare the assets of public officials, but the government has failed to do so, sources said. Pakistan’s authorities are bound to create a portal and disclose asset details under the agreement with the IMF, sources added. The government had prepared a Performa for officials to disclose their assets, but it was not made public, sources revealed. Furthermore, banks will now be required to obtain asset information from government officials when opening new accounts, sources said.
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standings (MoUs) were also signed to enhance business cooperation between the two countries. IT (information technology) exports would be enhanced with the visit of the prime minister to China, he said, adding that China had agreed to train 200,000 IT students. Establishing smart cities were also discussed during the meetings, the minister noted. Tarar said that training of the youth would further increase IT exports by encouraging the tech startups to contribute to the national economy, positively. He said Pakistan’s tech companies were competing with its foreign counterparts and it was the responsibility of the government to create a conducive environment for them. “Pakistan-China friendship is in our blood,” he said, lauding China for persistently supporting Pakistan which was being reciprocated in the same manner. He said that the benefits of the upgradation of CPEC (China Pakistan Economic Corridor) would reach the people of both countries. He said Pakistan had already achieved economic stability, witnessed a reduction in price hikes with inflation declined from 18 to 11 percent, and experienced overall economic improvement. The foreign exchange reserves had increased to $14 billion, he added. Terming the CPEC a lifeline of Pakistan, he said the Chinese leadership had vowed to upgrade the flagship project and now its process was moving forward at fast pace.
SBP cuts policy rate by 150bps to 20.5% g
FUND DIRECTS GOVT TO ESTABLISH PORTAL TO DECLARE ASSETS OF PUBLIC OFFICIALS
FY24 as per provisional data, with subdued recovery in industry and services partially offsetting the strong growth in agriculture. Second, a reduction in the current account deficit has helped improve the forex reserves to around $9 billion despite large debt repayments and weak official inflows. The government has also approached the IMF for an Extended Fund Facility program, which is likely to unlock financial inflows that will help in further build-up of FX buffers. Lastly, international oil prices have declined, whereas non-oil commodity prices have continued to inch up. Based on these developments, the Committee, on balance, viewed that it is now an appropriate time to reduce the policy rate. The Committee noted that the real interest rate still remains significantly positive,
pM shehbaz vows to rid pakistan of enemies LAHORE
STAFF REPORT
Prime Minister Shehbaz Sharif and Lieutenant General Syed Aamer Raza, Commander IV Corps Lahore, on Monsday offered funeral prayers of Capt Muhammad Faraz Ilyas Shaheed who embraced martyrdom in a terrorist attack in Lakki Marwat district of Khyber Pakhtunkhwa (KP) province the previous day. On the occasion, Prime Minister Shehbaz Sharif vowed to rid Pakistan of all sorts of enemies. Capt Muhammad Faraz Ilyas along with six brave soldiers were martyred during an IED blast at Lakki Marwat. After the funeral prayers, the Prime Minister and Corps Commander participated in the burial of Shaheed Captain and offered Fatiha at the grave. Later, the Prime Minister offered condolences to the family of Capt. Muhammad Faraz Ilyas Shaheed. A large number of serving and retired officers of Pakistan Armed Forces, relatives of the martyr and locals from the area participated in the funeral prayers The PM also met with the parents of Shaheed captain and expressed condolences. He announced the transformation of the native village of the martyred officer into a model village and renamed it “Faraz Ilyas Shaheed”. The prime minister also met with the parents of shaheed captain and expressed condolences. He announced to transform the native village of martyred officer as model village and renamed it as “Faraz Ilyas Shaheed”. He told the parents that the sacrifice of their son would not go in vain and prayed for the bereaved family to bear the loss with fortitude. Under the Quranic teachings, a shaheed had an elevated place in Jannah, he said, adding that a large number of Jawans of armed forces had laid down their lives for the motherland. The prime minister said that the nation was proud of its brave sons and the coward terrorists could not succeed in shaking their strong resolve.
which is important to continue guiding inflation to the medium-term target of 5 – 7%. The Committee also emphasised that future monetary policy decisions will remain data-driven and responsive to evolving developments related to the inflation outlook. Real Sector Latest estimates indicate real GDP growth at 2.1% in Q3-FY24 against a contraction of 1.1% in the same quarter last year. While agriculture was already showing strong growth, the industry also witnessed positive growth in Q3. Also, initial growth estimates for both Q1 and Q2 for FY24 were revised upward. Taking into account the developments in the first nine months, FY24 growth is provisionally estimated by PBS at 2.4% against a contraction of 0.2% in FY23. Almost twothirds of this recovery was explained by improvement in the agriculture sector. “These developments are in line with
the MPC’s earlier expectations. For FY25, the MPC expects economic growth to remain moderate. This assessment takes into account the impact of expected moderation in agriculture output and ongoing stabilization policies,” the SBP’s statement added. External Sector The current account posted a surplus for the third consecutive month in April on the back of robust growth in remittances and exports, which more than offset the uptick in imports. During July-April FY24, the current account deficit narrowed significantly to $202 million. In the same period, exports grew by 10.6%, mainly driven by an increased quantum of rice and HVA textile exports. Conversely, imports decreased by 5.3% during the same period due to lower international commodity prices, better domestic agriculture output and moderate economic activity.
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