Government will issue ‘debt instrument’ for Pakistani expats to finance dams

Asad Umar, Finance Minister of Pakistan addresses members of the FPCCI. (AN photo)
Updated 21 October 2018

Government will issue ‘debt instrument’ for Pakistani expats to finance dams

  • ‘This will be the last IMF bailout package the country is seeking,’ claims Asad Umar
  • Pakistan’s current account deficit will likely remain around $1 billion

KARACHI: Pakistani Finance Minister Asad Umar said on Saturday that the government will introduce a “debt instrument” for Pakistanis living overseas in order to secure financing for the construction of a number of dams. 
“We are planning to issue a debt instrument for overseas Pakistanis, on which we will offer them good returns,” he said during a speech to the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). He did not elaborate.
Facing a water and power shortage, Pakistan is currently seeking donations to build dams in Diamer-Basha and Mohmand and has set up a fund for that purpose. Prime Minister Imran Khan has already asked expat Pakistanis to donate $1000 each to the Dam Fund established by the chief justice of Pakistan.
Umar also explained that the government was taking steps to increase the investment opportunities for small and medium enterprises (SMEs), which currently contribute 30 percent of the country’s GDP. 
“We are asking banks to increase SME financing by reducing their cash-to-deposit ratio from the existing 37 percent to 25 percent,” he said. “By doing this, two trillion rupees of credit will be available for financing purposes. People keep asking how we will finance our housing project. This is how.”
Pakistan is currently facing serious economic challenges. According to the central bank, Pakistan’s foreign exchange reserves stand at $8.08 billion and its current-account deficit for July-August was $2.7 billion.
However, the minister told the business community that the government was reshaping the country’s foreign policy by focusing more on its economy. “The ministries of finance, commerce and foreign affairs are working closely to make Pakistan self-reliant and economically secure,” Umar said.
He noted that oil products make up around 30 percent of the country’s $60 billion imports, so the government is currently encouraging domestic oil exploration.
Earlier, speaking about the International Monetary Fund bailout program at an event organized by the Pakistan Stock Exchange, the finance minister said that the government had approached the IMF for the last time. 
“This will be the last IMF program Pakistan is seeking,” he claimed.
Pakistan approached the IMF last week for a bailout program to stabilize the country’s external balance-of-payments crisis. Last year, the country faced a current-account deficit of $18 billion and is currently struggling with depleted foreign-exchange reserves.
Pakistan needs $12 billion to plug the financing gap for the current year and, Umar said that gap would be reduced by “adding one time.”
He stressed that Pakistan’s current-account deficit was easing, saying it had “almost halved” in the August-September period to around $1 billion, as imports had gone down and exports had surged.
The finance minister assured his audience that the country’s “painful economic days” would end “in three years,” claiming that “the third year will be the break-even time since all the indicators are moving in the right direction.”
Umar reiterated that the country was not in emergency mode, contrary to what was being said in the media.
He assured his audience that the government would find solutions for the real price valuation of properties in the country for greater transparency and stressed that the government was working to make it easier to do business in Pakistan. 
“The council of business leaders is tasked to come up with suggestions to improve the country’s ranking from 147 to under 100 (in the World Bank’s ‘Doing Business’ report),” he added.

Government presents mini-budget to boost exports, facilitate agricultural financing

Updated 23 January 2019

Government presents mini-budget to boost exports, facilitate agricultural financing

  • Tax on loans for agriculture, SMEs reduced from 39 percent to 20 percent
  • Economists urge the government to ensure strict implementation of all measures

ISLAMABAD: Finance Minister Asad Umar on Wednesday presented the third finance bill for the current fiscal year in the National Assembly of Pakistan, claiming it would boost investment, manufacturing and exports, and facilitate agricultural financing to promote economic activities in the country.

As opposition lawmakers chanted slogans against the government, the minister said he was presenting an “economic reforms package” to address the needs of the people.

“We are committed to helping deprived segment of the society and it is our constitutional responsibility to bridge the gap between the rich and the poor,” he said.

The minister also announced that he would present the “Medium Term Economic Framework” in Parliament next week to boost investment, manufacturing and agricultural produce in the country.

Umar said his government had identified four variables to fix Pakistan’s ailing economy. These included: balancing government’s revenues and expenses; increasing exports that recently plummeted from 14 percent of the GDP to 7 percent; encouraging foreign direct investment; and boosting national savings from 10.4 percent which, he added, were the lowest in the world.

To achieve all these targets, he announced to slash tax on small and medium enterprises and agricultural loans from 39 percent to 20 percent, abolish withholding tax on banking transactions for tax filers, and remove import duty on newsprint.

He said that duty on diesel engines for agricultural purposes was also decreased to five percent. Other than that, abolition of Gas Infrastructure Development Cess on fertilizers would help reduce prices of urea for 200 rupees per bag.

After approval of the Finance Supplementary (second amendment) Bill 2019, non-tax filers will be able to purchase cars up to 1300cc, though the tax will be increased for them.

Tax would also be increased on imported vehicles above 1800cc, he said, adding that tax for low priced imported mobile phones would be decreased but remain the same for expensive imported phones.

To promote low-income housing, the minister announced a revolving fund of five billion rupees for interest free loans, while tax on wedding halls up to 500 square feet would be decreased from 20,000 rupees to 5,000 rupees.

The government has also announced a five-year tax exemption on manufacturing of all products related to renewable energy, including solar panels and wind turbines.

The finance minister announced to abolish super tax for non-banking companies and on bids for sports franchises until profitability, while withholding tax on trading in the stock exchange, he said, had also been abolished.

To encourage exports, the minister said that a scheme of promissory notes was being introduced for businessmen and exporters that would help them get concessionary loans from commercial banks.

Criticizing the opposition earlier, the minister accused them of leaving the country indebted with 2,500 billion rupees to 3,000 billion rupees in loans that were not shown in the books.

However, members of the opposition parties were not impressed by the new finance bill.

“There is nothing in this budget that will generate economic activity in the country,” Pakistan Muslim League-Nawaz leader, Mohammad Zubair, told Arab News. “The government has announced tax reductions in different fields, but it is yet to be seen how this will affect revenue collection.”

Pakistan Peoples Party’s former finance minister, Saleem Mandviwala, said the budget was just a “plethora of numbers” and there was nothing in it for the common man.

“The government just wanted to show its performance by bringing the mini-budget. But it has badly failed to address the genuine issues of people,” he said while talking to Arab News.

Senior economist, Dr. Athar Ahmad, termed the budget “a step in the right direction,” saying that all these measures were needed to fix the economy.

However, he pointed out that the finance minister had failed to introduce any incentives for booming IT industry and measures to increase tax revenue. “The actual test of the government now is to ensure strict implementation of all the announced measures to achieve the targets,” said Dr. Ahmad.