Pakistan to implement new set of IMF conditions under $6 billion loan program

The International Monetary Fund (IMF) headquarters building is seen in Washington, DC on May 15, 2011. (AFP/FILE)
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Updated 06 February 2022

Pakistan to implement new set of IMF conditions under $6 billion loan program

  • Country expects 0.3 percent of GDP in revenue gains in FY 2024 through personal income tax reforms that reduce the tax slabs 
  • Under energy subsidy reforms, government will lower threshold for protected consumer slab to 200 units from 300 units 

KARACHI: The Pakistani government will be implementing another set of International Monetary Fund (IMF) conditions as part of the $6 billion loan program, an IMF report has suggested, with financial experts doubting the country’s ability to achieve the growth rate target.
The IMF has asked Pakistan to implement seven conditions, including personal income tax (PIT) reforms, electricity rate hike, cut in the slab for lifeline consumers, phasing out of refinance schemes, and recapitalization of two private banks, before the next performance review that is expected in April this year, according to a report released by the IMF this week along with $1 billion tranche of the revived $6 billion program.
People familiar with the development say the conditions already existed, but the government might have preferred to implement them in a “phased manner” instead of instant enforcement.
“There was no surprise on the conditions among the government quarters in Islamabad. It means these conditions were initially existing and government had requested to implement them in later stages,” Dr. Vaqar Ahmed, joint executive director at the Islamabad-based Sustainable Development Policy Institute (SDPI), told Arab News.
“It was not possible for the government to enforce all the conditions at once, so they have sought time to implement in a phased manner.”
As per the new conditions, the government has agreed to reform personal income tax “to change the existing tax rate structure by reducing the number of rates and income tax brackets (slabs) to simplify the system and increase progressivity,” the IMF report says.
“The authorities are in the process of drafting PIT legislation by end February 2022 to ensure it will be ready to come into effect on July 1, 2022 with the FY2023 budget,” it says, adding it will reduce both the number of rates and income tax brackets, and bring additional taxpayers into the tax net.
The income tax reforms, said to be protecting the low-income households, are estimated to yield 0.3 percent of the gross domestic product (GDP) in revenue gains in Fiscal Year 2024.
Economists say the new measures are likely to burden those who are already paying taxes, but government officials maintain they would target the ones out of the tax net.
“The measures will be burdenizing the existing segment of tax payers, because a majority of those who have filed new tax returns have filed zero income,” Dr. Ahmed said.
Muzzamil Aslam, a spokesman for the Pakistani finance ministry, said the draft for the reforms had yet to be made, however, those out of the tax net would be tapped.
“We have to increase the income tax and those who are out of tax net will be targeted, and for that a formula will be developed, the work on it has not begun yet,” Aslam told Arab News.
Under the energy subsidy reform for residential consumers, the government is planning to lower the threshold for protected consumer slab to 200 units from 300 units per month, and the breakdown of unprotected 301-700 unit slabs into smaller slabs of 100 each as well as an expansion of the definition of lifeline consumers (to include residential consumers with a consumption of 50-100 units per month) by the end of February.
“The problem is that in our country around 70 percent of the connections fall into the lifeline category. Due to this, our recovery ratio declines,” said Aslam, who also speaks for the energy ministry.
“People have more than one connections and that way they remain below the 300-unit threshold, so we have to see the circular debt and recoveries.”
The IMF has also asked the authorities to “unwind” lending to the housing and construction sector, saying: “Banks’ housing lending targets could present risks to financial stability and entail a misallocation of credit.”
Ahmed said rolling back these measures would be a blow to the prime minister’s Naya Pakistan Housing project.
He feared the implementation of the new IMF conditions, including increasing the power tariff, would impact the purchasing power and make it difficult to achieve the growth rate of 4.5 percent set by the central bank.
“I don’t think that the projected growth rate will be achieved with the implementation of these conditions by April, when the next review is due,” the expert said.
But the finance ministry spokesperson insisted the government would achieve 4.8 percent growth rate against the IMF’s projection of 4 percent. 
The IMF report also points to a change of the Pakistani finance minister and presentation of the budget for the current fiscal year by the new finance chief, Shaukat Tarin. 
It “marked a departure from EFF (Extended Fund Facility) objectives and contributed to rapidly increasing macroeconomic vulnerabilities,” it reads.
“The budget delayed key reforms and reversed some key policies, damaging revenue prospects.”


Pakistan’s national currency continues to gain against greenback

Updated 7 sec ago

Pakistan’s national currency continues to gain against greenback

  • Pakistani rupee gained Rs3.03 to close at Rs218.88 against the greenback in the interbank market
  • Rupee in the open market also appreciated from Rs218 to Rs216 for selling during trading on Thursday

 

KARACHI

Pakistan’s national currency on Thursday continued its bullish trend and appreciated 1.38 percent against the United States dollar amid easing balance of payment pressure and expected inflows from the International Monetary Fund, traders and analysts said.

The Pakistani rupee gained Rs3.03 to close at Rs218.88 against the greenback in the interbank market following eight consecutive appreciation trading sessions. The rupee has recouped its value by 9.3% or Rs21 against the greenback in the continued uptrend, according to State Bank of Pakistan data.

“There are couple of reasons for the current appreciation of the Pak rupee against dollar including easing off balance of payment pressure and declining demand at home after government’s administrative measures to curtail imports,” Tahir Abbas, Director Research at Arif Habib Limited, told Arab News.  

“Declining current account deficit and price cut of oil and other commodities also eased off pressure on the rupee. The expected inflows from the IMF by the end of this month and undervalued currency are also the key reasons of rupee appreciation.”  

Following austerity measures by the government and a restriction on imports, the import bill has declined from $7.8 billion in June 2022 to $4.8 billion in July 2022, which has not only reduced the trade deficit but also eased pressure on the national currency.  

The rupee in the open market also appreciated from Rs218 to Rs216 for selling during trading on Thursday. The currency in the open market has appreciated by over 11% or Rs28 since July 29, 2022, according to the Exchange Companies Association of Pakistan (ECAP).

“There are only sellers in the market after the sentiments have changed following the measures taken by government and the central bank,” Zafar Paracha, General Secretary of ECAP told Arab News.
 
“The central bank has taken action against the banks’ treasuries departments which were involved in maneuvering of dollar in interbank market. In addition, the expected reduction in the import bill of August has also played appreciation role.”    

The pressure on the Pakistani rupee eased off after the government took steps to curtail imports and meet preconditions of the IMF for the revival of a $6 billion program signed in 2019 to stave off a balance of payment crisis.  

The IMF said last month it had reached a staff level agreement with Pakistan that would pave the way for the disbursement of $1.17 billion after its board approval later this month. Islamabad also has to convince the fund about the availability of funds for a $4 billion financing gap.

Last week, the UAE’s state news agency had reported that the country intended to invest $1 billion in Pakistani companies across various sectors, which include gas, energy infrastructure, renewable energy and healthcare.

Following the current bullish trend in the currency market, Pakistani analysts said the currency was likely to appreciate further to around Rs200 against the greenback in the near future.  

Stocks, however, on Thursday, remained bearish mainly due to profit taking that kicked off during the midsession. The benchmark KSE-100 index closed at 42,243 points, down by 251 points.

“Stocks fell sharply lower on political noise and hike in power tariff. Mid session support remained on strong rupee and falling Pakistan dollar bond yields,” Ahsan Mehanti, CEO of Arif Habib Corporation, told Arab News. “Investor concerns for weak earnings outlook played a catalyst role in bearish close.”


Pakistani journalists, lawyers call for review of British-era sedition laws seen as detrimental to free speech

Updated 22 min 18 sec ago

Pakistani journalists, lawyers call for review of British-era sedition laws seen as detrimental to free speech

  • The sedition law carries life imprisonment which legal experts say is against the fundamental rights of citizens
  • Journalist association urges the government to regulate implementation of the law to avoid vengeance and discrimination

ISLAMABAD: Pakistani journalists and lawyers on Thursday urged the government to formulate a mechanism to follow before registering cases under laws related to sedition, saying this was a pre-requisture to avoiding discrimination, vengeance and suppression of freedom of expression.

Pakistani governments and even private individuals have filed cases against journalists and activists in recent years under colonial-era sedition and incitement laws. A majority of these cases are registered under section 124-A of the Pakistan Penal Code, commonly known as the sedition law, and its sections 505 and 506, for incitement and promoting hatred between different religious, racial, or regional groups.

Pakistan’s sedition law carries sentences of life imprisonment which lawyers and journalists say was a “harsh punishment” used by  governments to silence critics and suppress freedom of expression.

“Whoever by words, either spoken or written, or by signs, or by visible representation, or otherwise, brings or attempts to bring into hatred or contempt, or excites or attempts to excite disaffection towards, the federal or provincial government established by law shall be punished with imprisonment for life to which fine may be added, or with imprisonment which may extend to three years, to which fine may be added, or with fine,” Pakistan’s law of sedition says.

“This section of the law is of sensitive nature and its implementation needs to be regulated,” Afzal Butt, president of the Pakistan Federal Union of Journalists (PFUJ), told Arab News. “There must be a mechanism that needs to be followed before registration of a criminal case under the sedition law … The due process must be followed to avoid discrimination and vengeance.”

Butt said a majority of the cases registered under sedition and incitement laws were later quashed by the courts for being “frivolous in nature and lodged in violation of the merit.”

“Criminal cases are not registered against journalists anywhere in the world on the basis of their news and analysis,” he said, adding that Pakistani governments had been using these laws to gag journalists and media houses for decades.

“These laws should either be abolished completely, or reformed at least to ensure their just application,” Butt said.

The Pakistan government says it does not suppress the press.

Legal experts have also raised questions over the sedition law, calling for its repeal to ensure the freedom of expression.

“There is need to at least revisit this British-era law’s characteristics and features to avoid its misuse by the authorities,” Advocate Mian Ali Ashfaq, who recently represented journalist Imran Riaz Khan in sedition cases, told Arab News.

He said the charge of sedition against anybody was of a “heinous nature” that would quickly invite public reaction, therefore a vetting process before registration of the case should be made mandatory.

“Proper protocols should be set up to see if the sedition charges against a journalist or activist were substantiated and tangible,” he said. “There must be no blanket application of the law.”

Advocate Abid Saqi, who challenged the application of sedition laws in a case in the Lahore High Court in October 2020, said the law was made when there was no concept of the constitution and the freedom of expression.

“This law must be abolished,” he told Arab News, “as this is against the fundamental rights of the citizens including the freedom of expression.”


In Karachi, 104-year-old migrant from India recalls potent memories of a violent partition

Updated 11 August 2022

In Karachi, 104-year-old migrant from India recalls potent memories of a violent partition

  • Muhammad Akram Khan’s family swapped an affluent life for an uncertain future in Pakistan in 1947
  • Khan got his passport made a few years ago but the dream to travel back to India could not come true

KARACHI: With six metal suitcases, three filled with gold and three with clothes, the family of Muhammad Akram Khan fled Jabalpur in the central Indian state of Madhya Pradesh for newly created Pakistan in 1947, leaving without saying goodbye even to best friends and forsaking a sprawling home and a vast business for an uncertain future in Karachi.

In this undated photo, Muhammad Akram Khan, 104-year-old migrant, photographed with the children in his family in his hometown, Jabalpur in India. (AN photo)

Khan’s family was among the millions whose lives were thrown into turmoil by the partition of colonial India into two states, mainly Hindu India and mostly Muslim Pakistan, when British rule ended in 1947.

One of the biggest mass migrations in history was marred by violence and bloodshed as about 15 million Muslims, Hindus and Sikhs swapped countries in a political upheaval that cost more than a million lives.

Muhammad Akram Khan, a 104-year-old transporter who migrated from Jabalpur in India after the independence of Pakistan 75 years ago, shares with Arab News his story of partition at Frere Hall, Karachi on August 2, 2022. (AN photo)

Before partition, Khan, now 104 years old, recalled that his family lived in harmony with Hindu neighbours and the young man’s best friend was a neighbour called Shankar Lal. But in the months running up to the partition of India on August 14, Khan said he began to feel unsafe and started convincing his reluctant father to leave for Pakistan.

“I’m alive today but tomorrow they’ll kill me,” he said, quoting his words to his father. “All young men will be killed if we don’t leave.”

When the family eventually left, they took the route of Khokhrapar, a border town situated in Tharparkar District in Sindh, considering it safer compared to Punjab province where much of the violence was taking place. With death looming over him, Khan walked for miles and miles with his family, often carrying his disabled mother on his shoulders, until they made it safely to the other side. 

The Sikh personnel who checked the family’s luggage at the border were kind, he said, and the Sikh and Hindus they met along the way, who were en route India, also didn’t show hate.

But the ordeal didn’t end there.

Muhammad Akram Khan, a 104-year-old migrant, chats with his sons and grandchildren in Karachi, Pakistan, on August 2, 2022. (AN photo)

In Pakistan “there was no shade,” Khan said, and his family had to wait a whole day to catch a train to Karachi. At first, the family lived in a small house owned by a relative, before moving to a shanty for several years. Finally, at a cost of Rs2,400, the government allotted them two small quarters in Karachi's Korangi area.

Muhammad Akram Khan, a 104-year-old transporter who migrated from Jabalpur in India after the independence of Pakistan 75 years ago, shares with Arab News his story of partition at Frere Hall, Karachi on August 2, 2022. (AN photo)

It took Khan a few months to grasp the new reality of his life, but he ultimately resumed the scrap business after selling the 12 kilograms of gold the family had brought with them from Madhya Pradesh and eventually bought cycle-rickshaws to launch a transportation business.

“I earned and built bungalows,” Khan said, smiling. “I have constructed 25 to 30 houses, all through my hard work.”

The centenarian said he had lived a full life, tying the knot four times.

“Now at my home there are 200 people,” he said smiling. His eldest daughter is in her 90s and youngest is 14 years old.  

Though he does not regret his decision to migrate to Pakistan, Khan said he was distressed by the country’s ever worsening economic situation.

“We dreamt of a great Pakistan,” he said. “We wanted young people to be honest, hardworking and respectful toward their parents and country.”

Khan got his passport a few decades ago and had a strong urge to return to Jabalpur to meet old friends. The dream of traveling back to India, however, has not come true.

“I don’t think I will be able to go now since my eyes don’t open,” he said, wistfully. “In any case, who am I going to meet there after so much time has passed?”


Norwegian woman climber on track to break 'super peaks' record

Updated 11 August 2022

Norwegian woman climber on track to break 'super peaks' record

  • Kristin Harila successfully summit Pakistan's Gasherbrum I on Thursday  
  • Pakistan has enjoyed a record-breaking climbing season this year

ISLAMABAD: Norwegian climber Kristin Harila has just three mountains left in her bid to climb the world's 14 "super peaks" in record time after successfully summiting Pakistan's Gasherbrum I, officials said Thursday.
Nepali Nirmal Purja holds the record for climbing the world's 8,000 meter-plus (26,000 feet) mountains -- six months and six days -- but Harila now has until early November to complete her quest and beat his time.
Harila's latest successful summit was reported on her official social media pages and confirmed by Karrar Hadri, secretary of Pakistan's Alpine Club.
"The second phase in Pakistan was very challenging and dangerous: ever-changing weather conditions, being hit by a rock, illness and a very tight schedule," read a message on Harila's Instagram page.
"But here we are with only three peaks left."
Five of the 14 super peaks are in Pakistan -- including K2, the world's second highest mountain -- and the country has enjoyed a record-breaking climbing season this year.
Sajid Hussain, head of the tourism department in Gilgit Baltistan, told AFP they had issued about 1,780 permits for the top peaks.
"It has boosted our tourism and has increased our foreign exchange," he said.
Only around 40 people in history have summited all 14 of the super peaks, but none have come close to Purja's 2019 expedition.
He demolished the previous record for accomplishing the feat with supplemental oxygen, set by Poland's Jerzy Kukuczka in the 1980s at seven years, 11 months and 14 days.
In an interview with AFP earlier this year, 36-year-old Harila said she was inspired to show women were as capable as men of achieving great mountaineering feats.
"In history and until now, it has been the strong macho men going out climbing mountains," she said.
"When I talk to people that are not in this sport, they believe that men are more capable than women... If we are going to change, we need to get attention and show that women are just as capable."
The three remaining mountains for Harila are Cho Oyu (sixth highest, in Nepal/China), Manaslu (eighth, Nepal) and Shishapangma (14th, China). 


Government in Pakistan’s northwest takes note of Taliban resurgence, pledges to ensure writ of state

Updated 11 August 2022

Government in Pakistan’s northwest takes note of Taliban resurgence, pledges to ensure writ of state

  • Swat Valley was a former Pakistan Taliban bastion seized by Pakistan’s army in a major offensive in 2009
  • This week saw widespread reports of the return of the Pakistani Taliban to Swat and parts of Waziristan

PESHAWAR: A spokesperson for the government of Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province said on Thursday the local administration had taken notice of a protest against reports of the return of a banned militant outfit to the area, ensuring the public that the government would ensure it write.

Swat Valley was a former Pakistan Taliban bastion seized by Pakistan’s army in a major offensive in 2009. During a reign of terror under the Taliban before the military operation, militants decapitated people and tied the heads to the victim’s feet. Bodies were left hanging by telephone poles and for days no one was allowed to take them down for burial.

This week, there have been widespread reports of the return of the Pakistani Taliban, also known as the Tehreek-e-Taliban Pakistan, or TTP, to Swat and parts of Waziristan.

“The provincial government has already taken notice following a security incident in Swat and a sit-in by tribesmen in the country’s restive North Waziristan tribal district,” KP government spokesman Barrister Muhammad Ali Saif told Arab News on Thursday.

“The province’s top police officer, district administration and security officials are in Swat to address reservations of people regarding the presence of some armed men in remote mountains. We’ll ensure writ of the government at every cost because our security officials have already rendered matchless sacrifices for peace there.”

The reports of the resurgence of the Taliban come as the government of Pakistan and the TTP are holding peace talks to end violence in the country, with the latest round of negotiations held last month in Kabul and mediated by the Afghan Taliban who rule Afghanistan.

The TTP, which has carried out some of the bloodiest attacks in Pakistan since 2007, is not directly affiliated with the Afghan Taliban.

Swat police spokesperson Moin Fayyaz said a search operation by Swat police was being conducted in remote areas, including Kabal and Khwazkhela, to purge the region of” miscreants” who two days ago opened fire at a police party, leaving a senior police officer wounded.

For the past several days, an unverified video has been making the rounds on social media, showing security officials, including a senior police officer, in the captivity of militants. The hostages were later released on the mediation of tribal elders in the area, according to media reports.

Zahid Khan, an elder and social worker from Swat, told Arab News the presence of militants had been observed in the Kanala and Balasoor mountainous regions of Swat, who were threatening well-off people, traders and contractors to pay extortion money.

“We’ve summoned a grand jirga on August 17 of all tribes in Mingora, the main town in Swat, in which we will develop consensus on how to deal with emerging threats posed by militancy,” Khan added.

In 2009, thousands of families in Swat were forced to flee to safer areas after authorities asked people to leave their homes following a military operation against militants there.

“We can’t afford to leave our homes again and live a refugee life in other districts. We’ll offer stout resistance against any eventuality,” Khan added.

Jamal Dawar, a tribal elder from the North Waziristan tribal district, said that a sit-in staged by thousands of tribesmen has entered its 26th day, closing all main arteries of the district including a route leading to the Pak-Afghan Ghulam Khan border.

He said the protesters were demanding security following a sharp rise in targeted killings in the restive district.

“We’re just told that a high level delegation of all political parties including government and security officials will meet the protesters in Edak, a village where the sit-in is underway, to address our prime demand of security and getting rid of targeted killings,” Dawar added.

According to a notification, a copy of which was seen by Arab News, the federal government has constituted a committee comprising senior political leaders to meet tribesmen in North Waziristan district and address their concerns.

“The formation of a committee by the federal government to meet protesters in North Waziristan is nothing but a political gimmick and political point-scoring,” the KP spokesperson said. “The provincial government is already in contact with the elders of the district to address their legitimate issues.”