Category: Business

The most important business news, explained in a young, easy to understand way. News that affects young career professionals.

  • Govt expected to present Rs13-15 trillion budget for FY23-24 amidst economic uncertainties

    Govt expected to present Rs13-15 trillion budget for FY23-24 amidst economic uncertainties

    The government is anticipated to present a budget ranging from Rs13-15 trillion for the fiscal year 2023-24, according to a budget preview report by Topline Securities. This substantial increase is attributed to the record-high markup cost caused by the soaring interest rates. The proposed budget target of Rs9-9.2 trillion marks a 21 per cent surge compared to the current fiscal year’s target of Rs7.5 trillion.

    Notably, if implemented, the tax target for the upcoming financial year would be 29 per cent higher than the projected tax collection for the outgoing FY23. However, the brokerage house highlights the challenging nature of formulating a budget amidst stagflation and uncertainties surrounding the upcoming elections and Pakistan’s ability to bridge its external account funding gap.

    The report emphasises the prevailing nervousness in currency, bond, and stock markets due to the uncertainty surrounding the financing of the US dollar funding gap. Furthermore, it states that revenue targets have historically deviated by an average of 8 per cent from the actual targets in the past five years, and a similar trend is expected in FY24 due to the economic slowdown.

    The non-tax revenue target for FY24 is estimated at Rs2.5 trillion (2.4 per cent of GDP), compared to Rs1.6 trillion (2 per cent of GDP) for FY23. The report predicts several taxation measures, including tax on undistributed reserves, continuation of the super tax, a shift from the final tax regime to the minimum tax regime, asset/wealth tax, higher tax on non-filers, tax on rental income, and taxes on banks, tobacco, and beverages.

    Regarding development spending, the Federal Public Sector Development Programme (PSDP) is projected to amount to Rs0.9 trillion for FY24. However, due to fiscal constraints, significant cuts are expected in this area. The consolidated PSDP (federal and provincial) is anticipated to reach Rs2.6 trillion (2.5 per cent of GDP) in FY24.

    With the Pakistan Tehreek-e-Insaf (PTI) party being sidelined, there is a possibility of a weak coalition government coming to power in the upcoming elections. The report highlights the importance of an aggressive and competent new setup to tackle the ongoing economic crisis.

    To create a favorable perception, the government may set unrealistic revenue targets in order to allocate more spending in the budget. The report suggests that it is unlikely for the government to complete the current International Monetary Fund (IMF) program on time and urges Pakistan to enter another, potentially larger, IMF program.

    In light of the economic slowdown and high inflation, the government may introduce expansionary policies in the budget to appease the public, such as direct cash subsidies for the underprivileged and an increase in minimum wages. However, the brokerage firm warns against excessive spending without substantial tax collection measures.

    In terms of its impact on the stock market, the upcoming budget is expected to be neutral to positive. Sectors such as oil and gas exploration, chemicals, pharmaceuticals, consumers, tobacco, technology and communication, textile, cement, fertilizers, and oil marketing companies may experience a neutral effect. Conversely, the budget might have a neutral to negative impact on banks and autos, while steel and independent power producers could experience a neutral to positive effect, according to the research.

    As the budget is unveiled, stakeholders and citizens alike will closely monitor the government’s strategies to address the economic challenges and promote stability and growth in Pakistan.

  • PM Shehbaz urges Turkish business community to boost investments in Pakistan

    PM Shehbaz urges Turkish business community to boost investments in Pakistan

    Prime Minister (PM) Shehbaz Sharif, amid increasing debt burden and declining foreign exchange reserves, has invited Turkish investors and businessmen to expand their investments in different sectors of Pakistan. The premier is currently in Ankara on a two-day official visit to attend the inauguration ceremony of President Recep Tayyip Erdogan.

    During a meeting with a delegation from the Anadolu Group, which included Coca Cola CCI CEO Karim Yahi, Chief Strategy Officer Atilla Yerlikaya, and Head of Public Policy Taylan Coban, the PM expressed his encouragement for the Anadolu Group to invest in Pakistan and provide job opportunities to the people.

    Minister for Information and Broadcasting Marriyum Aurangzeb, Special Assistant to the Prime Minister Tariq Fatimi, and Pakistan’s Ambassador in Turkey Dr Yousuf Junaid were also present at the meeting.

    Prime Minister Shehbaz Sharif’s visit to Turkey is a result of an invitation from Turkish President Erdogan, who emerged victorious in the second round of elections held on 28 May. Upon his arrival at Ankara airport last night, the Prime Minister was received by senior officers of the Turkish Foreign Ministry and Pakistan’s ambassador in Turkey, emphasising the significance of the visit.

    Pakistan, facing economic challenges, is actively seeking foreign investments to alleviate its debt burden and stabilize its foreign exchange reserves. The Prime Minister’s appeal to Turkish investors and businessmen reflects the government’s commitment to attracting international investment and fostering economic partnerships.

    By engaging with the Anadolu Group and inviting increased investment, Prime Minister Shehbaz Sharif aims to leverage Turkish expertise and capital to drive economic growth and create employment opportunities in Pakistan.

    During the ongoing visit, it is anticipated that discussions between Pakistani and Turkish officials will focus on exploring potential areas of collaboration, identifying investment opportunities, and strengthening bilateral ties. The outcome of these engagements may play a pivotal role in shaping Pakistan’s economic trajectory, leading to increased foreign investment and a revitalized economy.

    In a time of economic challenges, Prime Minister Shehbaz Sharif’s proactive approach and diplomatic outreach to Turkish investors send a clear message of Pakistan’s commitment to enhancing economic cooperation and attracting much-needed investment.

  • Pakistan’s merchandise exports dive for ninth consecutive month, drop by 16.69% in May

    Pakistan’s merchandise exports continue to decline for the ninth consecutive month, plunging by 16.69 per cent year-on-year to $2.18 billion in May, according to data released by the Pakistan Bureau of Statistics.

    The downward trend has persisted throughout the first 11 months (July to May) of the 2022-23 fiscal year, with exports experiencing a dip of 12.14 per cent to $25.36 billion compared to $28.87 billion during the same period the previous year.

    The decline in export proceeds can be attributed to a combination of internal and external factors, raising concerns about the potential closure of industrial units, particularly within the textile and clothing sector.

    In line with this, imports also experienced a significant decrease of 36.76 per cent to $4.27 billion in May compared to $6.76 billion in the corresponding month last year. From July to May, imports fell by 29.22 per cent to $51.15 billion, down from $72.28 billion during the same period last year.

    The government has implemented restrictions on luxury and non-essential goods while promoting imports of raw materials, semi-finished products, pharmaceuticals, food, and energy products. This policy shift has resulted in a substantial decline in the import bill over the past 11 months.

    As a result of these developments, the trade deficit has narrowed by over 40 per cent, reaching $25.79 billion between July and May of the fiscal year 2022-23, compared to $43.40 billion during the corresponding months of the previous year. In May, the trade deficit saw a year-on-year decline of 49.49 per cent to $2.08 billion.

    According to Dawn, the textile and clothing sector, which constitutes over 60 per cent of total exports, has been severely affected, making it challenging for the government to achieve its export target for the current fiscal year. Exporters have pointed out that the federal government lacks a clear strategy and effective prioritization, leading to a decline in textile exports.

    Exporters have also highlighted several root causes contributing to the export decline. These include shortages in working capital and liquidity, delayed refunds of taxes and levies, technology upgradation fund, and duty drawbacks.

    The promised faster refund system has not functioned as intended, resulting in refund processing times of 3-5 months instead of the expected 72 hours. The sector is also grappling with increased financial and energy costs.

    In addition, exporters are facing challenges in procuring raw materials and other inputs, both domestically and through imports. The State Bank of Pakistan’s hurdles in opening letters of credit have further contributed to the decline in exports.

    The negative growth in exports, except for a slight increase in August due to backlog clearance, poses a significant concern as it threatens the balance of the country’s external account.

    The government needs to address these issues promptly and formulate effective policies to revive the export sector and stimulate economic growth.

  • Pakistan will not default, reforms underway for economic recovery: Finance Minister

    Pakistan will not default, reforms underway for economic recovery: Finance Minister

    Pakistan’s Finance Minister Ishaq Dar has assured the nation that the government is committed to implementing long-term reforms aimed at improving the country’s economic situation.

    Speaking to the Karachi Chamber of Commerce and Industry, Dar emphasised the need for collective efforts to overcome the current economic challenges. He outlined key areas of focus, including the agricultural sector, the establishment of a sovereign wealth fund, and the development of the IT industry.

    Additionally, he addressed concerns about the delay in the International Monetary Fund (IMF) program, expressing confidence in Pakistan’s assets and downplaying the possibility of default.

    Reforms for Long-Term Improvement: In his address to the Karachi Chamber of Commerce and Industry, Finance Minister Ishaq Dar reiterated the government’s commitment to implementing reforms that would pave the way for long-term improvement.

    He acknowledged the importance of the agricultural sector, emphasising the need for an agricultural revolution to enhance productivity and ensure food security.

    The establishment of a sovereign wealth fund was also highlighted as a means to generate additional revenue and support sustainable economic growth. Furthermore, Dar expressed determination to prioritise the neglected IT sector and capitalise on its potential for job creation and technological advancements.

    No technical reason behind delayed IMF program

     Addressing concerns regarding the delay in the IMF program, Dar reassured the delegation that there was no technical reason behind it. He emphasised that Pakistan, as a sovereign country, possesses valuable assets worth trillions of dollars, thereby implying that default is not a plausible scenario. While external liabilities stand at approximately $100 billion, the finance minister pointed out that Pakistan’s gas infrastructure alone is valued at around 40 to 45 billion dollars, underscoring the country’s significant assets.

    Recognising the vital role of the business community in Pakistan’s economic development, Finance Minister Ishaq Dar called upon them to present reasonable demands for the upcoming budget. He assured the delegation that the government would cooperate with the business community to address their concerns and promote a conducive environment for trade and investment. By fostering a constructive partnership, the government aims to create a business-friendly climate that supports entrepreneurship and economic growth.

    IMF loan requirement and government’s approach

    Amidst recent developments, it was revealed that the IMF rejected Pakistan’s request to lower the requirement of arranging $6 billion in new loans. Minister of State for Finance Dr Aisha Pasha highlighted that returning to the IMF was Pakistan’s only option, stressing the urgency of fulfilling the financing requirement. Pakistan had sought a reduction in the external financing requirement based on new current account deficit data. However, the IMF insisted on the full $6 billion to demonstrate Pakistan’s commitment to implementing necessary economic reforms.

    Finance Minister Ishaq Dar’s reassurances regarding the government’s commitment to long-term reforms and the denial of Pakistan’s possibility of default provide a glimmer of hope amid economic challenges.

    The focus on sectors such as agriculture and IT, the establishment of a sovereign wealth fund, and the emphasis on cooperation with the business community signal the government’s determination to foster economic growth and stability.

    While the IMF’s rejection of Pakistan’s request poses a hurdle, the government remains steadfast in its efforts to revive the deal and secure the necessary financing to support the country’s economic recovery.

  • Consumer suffering intensifies: Pakistan’s weekly inflation skyrockets to 42.67%

    Consumer suffering intensifies: Pakistan’s weekly inflation skyrockets to 42.67%

    Inflation in Pakistan continues to surge as the Sensitive Price Indicator (SPI) recorded a significant increase, jumping to 42.67 per cent on a year-on-year basis for the week ending on June 1, according to official data released by the Pakistan Bureau of Statistics (PBS). The weekly inflation showed a marginal increase of 0.03 per cent compared to the previous week.

    The short-term inflation, measured by the SPI, reached an all-time high of 48.35 per cent for the period ending on May 4, highlighting the ongoing challenges faced by the economy. The Combined Index, a comprehensive measure of inflation, stood at 254.13 compared to 254.05 on May 25, 2023, and marked a significant increase from 178.12 recorded on June 2, 2022.

    The PBS report revealed that out of the 51 monitored items, the average prices of 19 items increased, 14 items witnessed a decrease, while 18 items remained unchanged during the week under review. This data indicates the volatile nature of prices in the current market.

    Analyzing the SPI change across different income groups, the weekly percentage change showed a mixed trend, ranging between -0.1 per cent and 0.12 per cent. However, on a yearly basis, the SPI increased across all quantiles, ranging between 40.2 per cent and 43.49 per cent, suggesting the broad impact of inflation across various income segments.

    Additionally, the statistics bureau reported that Pakistan’s annual inflation rose to 37.97 per cent year-on-year in May, further confirming the country’s highest-ever inflationary period. The Consumer Price Index (CPI) recorded 36.4 per cent in April, which at the time was already the highest level according to the bureau’s historical records.

    Furthermore, the month-on-month rise in May was reported to be 1.58 per cent, with the bureau highlighting significant increases in the prices of vegetables, pulses, and chicken. These factors contribute to the overall rise in the cost of living and put additional strain on households and businesses alike.

    The continuous surge in inflation poses significant challenges to the economy, affecting consumers’ purchasing power and increasing the cost of doing business. The government and relevant authorities are urged to take immediate measures to stabilize prices, address supply chain issues, and implement effective policies to alleviate the impact of rising inflation on the population.

    As the situation unfolds, policymakers and economists will closely monitor the inflationary trends, devising strategies to bring stability and mitigate the adverse effects on the economy and the welfare of the people.

  • APCC likely to propose Rs900-1,000 billion macroeconomic framework for budget 2023-24

    APCC likely to propose Rs900-1,000 billion macroeconomic framework for budget 2023-24

    The Annual Plan Coordination Committee (APCC) is poised to recommend a substantial macroeconomic framework and the size of the federal development outlay amounting to approximately Rs900-1,000 billion for the fiscal year 2023-24. This recommendation comes ahead of the upcoming budget and is expected to shape the economic policies and priorities of the country for the next fiscal year.

    In an effort to address the Sustainable Development Goals (SDGs), the government plans to allocate Rs90 billion for the controversial Sustainable Development Goals Achievement Programme (SAP) specifically designed for parliamentarians. This proposed allocation is a significant increase from the revised estimates of Rs111 billion allocated in the outgoing financial year.

    Moreover, the government is currently working towards raising the allocation of the SDG Achievement Programme even further, aiming to reach Rs116 billion for the ongoing fiscal year. Notably, parliamentarians from Balochistan and Sindh provinces have primarily presented flood-related schemes under this program during the current fiscal year. The World Bank and Asian Development Bank (ADB) are also contributing $3 billion in loans for flood-related initiatives, highlighting the need to establish mechanisms that prevent overlap and ensure optimal utilization of funds.

    A substantial portion of the development schemes in Sindh and Balochistan, ranging from 50 to 60 per cent, focused on flood-related projects during the outgoing financial year. However, concerns have been raised about one political party, a significant ally of the ruling coalition, demanding that funds on behalf of their parliamentarians be channeled through the party’s political leader for distribution among its members.

    According to The News, the APCC, scheduled to meet today in the Ministry of Planning, will consider approving the macroeconomic framework, which includes a targeted real GDP growth rate of 3.5 per cent and a Consumer Price Index (CPI)-based inflation rate of 21 per cent for the budget of 2023-24. These figures are based on a working paper prepared by the Ministry of Planning and reflect the government’s economic outlook and goals for the upcoming fiscal year.

    The Ministry of Finance has provided an indicative budget ceiling of Rs700 billion for the Public Sector Development Programme (PSDP) in the next budget. However, the Minister for Planning, under the guidance of Prime Minister Shehbaz Sharif, aspires to increase this amount to Rs800 billion. Additionally, a proposed allocation of Rs200 billion for the Viability Gap Fund (VGF) through public-private partnerships (PPP) would bring the total PSDP size to a proposed Rs1,000 billion at the federal level for the upcoming financial year.

    In an effort to address infrastructure needs, the share of the National Highway Authority (NHA) in the proposed PSDP is expected to decrease, ranging from Rs90 billion to Rs100 billion, due to the NHA’s inability to fully utilise the allocated funds in the ongoing financial year. The government is also considering allocations for flood mitigation and reconstruction efforts, as well as the inclusion of the Diamer Basha Dam project in the upcoming budget for 2023-24.

    As the APCC finalises its recommendations and the budgetary process unfolds, the government aims to strike a balance between addressing developmental needs, achieving SDGs, and ensuring efficient utilization of funds for the benefit of the nation.

  • Pakistani rupee gains ground as State Bank eases cross-border transaction rules

    Pakistani rupee gains ground as State Bank eases cross-border transaction rules

    In a significant turn of events, the Pakistani rupee experienced a notable appreciation against the US dollar in the open-market on Thursday.

    The value of the US dollar dropped to the range of Rs295-300, compared to the previous day’s rate of Rs314. This shift can be attributed to recent changes implemented by the State Bank of Pakistan (SBP) to facilitate cross-border transactions.

    Currency dealers consulted by Business Recorder acknowledged that the supply of US dollars remains limited in the market, as customers are not actively selling their currency. This scarcity could be a contributing factor to the rupee’s recent surge in value.

    According to experts, the recent development is a direct result of the SBP’s decision to allow credit card payments through banks. The SBP, on Wednesday, permitted banks to purchase US dollars from the interbank market for settling card-based cross-border transactions with International Payment Schemes (IPSs).

    Previously, the SBP guidelines only permitted authorized dealers to purchase US dollars from exchange companies for settling card-based cross-border transactions with IPSs such as Visa and MasterCard.

    However, in response to stakeholder feedback, the SBP opted to extend this privilege to banks, allowing them to source dollars from the interbank market for such transactions.

  • China lifts ban on seafood product imports from Pakistan

    China lifts ban on seafood product imports from Pakistan

    China’s General Administration of Customs (GAC) has confirmed the resumption of aquatic product imports from Pakistan and several other countries, aiming to enrich the supply of domestic aquatic products and boost the stability of the seafood industry and supply chains. In a statement released on May 26, the GAC announced that imports from 20 overseas companies would be allowed.

    The GAC statement revealed that the 20 companies resuming exports to China are based in various countries, including Pakistan, Brazil, Malaysia, Spain, New Zealand, and Indonesia.

    This move comes after China suspended imports from eight overseas suppliers last year due to non-compliance with safety and hygiene controls, as well as inadequate adherence to COVID-19 control measures set by the United Nations Food and Agriculture Organization.

    Although industry experts told the Global Times that this recent change would not have a significant impact on overall supply in China, they acknowledged that the rise in seafood imports reflected a growing demand among Chinese consumers.

    Cui He, Director of the China Aquatic Products Processing and Marketing Alliance, stated that the increase in imports was driven by China’s expanding consumption patterns and its customers’ preference for quality aquatic products offered by some overseas companies.

    According to Geo, China’s seafood imports have been on the rise, primarily sourced from countries such as Russia, Australia, and Argentina, according to Cui. Last year, China experienced a 35 per cent surge in seafood imports, reaching a value of $19.13 billion, as reported by data from the International Trade Centre.

    The GAC emphasised its commitment to strengthening the management of imported food safety. While the resumption of imports from Pakistan and other countries is expected to contribute to the diversification of China’s aquatic product supply, the focus on ensuring the safety and quality of imported food remains a priority for Chinese authorities.

  • PIA’s Boeing 777 aircraft freed by Malaysian authorities, returns to Islamabad

    PIA’s Boeing 777 aircraft freed by Malaysian authorities, returns to Islamabad

    Pakistan International Airlines (PIA) successfully resolved the issue with its Boeing 777 aircraft, which was held by Malaysian authorities in Kuala Lumpur. According to a spokesperson for PIA, the aircraft was released a few hours later and arrived in Islamabad late Monday night. The spokesperson stated that the matter was resolved through diplomatic channels.

    The incident occurred a day earlier when PIA flight PK-894 was halted upon reaching Kuala Lumpur, following court orders that issued a stay on the aircraft. The stay was related to issues concerning a lease requested by a foreign company. The PIA spokesperson clarified that the Boeing 777 aircraft is owned by PIA, and the engine leasing company had obtained the stay by submitting incorrect data to a Malaysian court.

    According to The News, the leasing company had falsely claimed $4.5 billion, whereas the actual amount owed by PIA to the leasing company was $1.8 billion, which had already been paid. The spokesperson emphasised that such cases of halting an aircraft and extorting money are unprecedented, particularly considering that both the leasing company and PIA are not local entities in Malaysia.

    Following the incident, PIA took legal action by approaching the court in Malaysia through its lawyers. The spokesperson confirmed that the matter is currently under consideration by the court.

    It is important to note that PIA had already arranged for the repatriation of the passengers from the affected flight through an alternative aircraft. The airline had previously announced that the aircraft would soon return home to resume its commercial flights.

    PIA’s prompt response and successful resolution of the issue reflect its commitment to ensuring the safety and smooth operations of its flights. The airline continues to prioritise the well-being of its passengers while upholding its professional reputation in the international aviation industry.

  • Minister of State for Finance and Revenue criticises IMF for interfering in Pakistan’s internal affairs

    Minister of State for Finance and Revenue criticises IMF for interfering in Pakistan’s internal affairs

    In a strong rebuke to the International Monetary Fund (IMF), State Minister for Finance and Revenue Aisha Ghaus Pasha criticised the international lender for what she called “intervening” in Pakistan’s internal affairs.

    Speaking on Wednesday, the state minister asserted that Pakistan’s actions were within the boundaries of the law, dismissing the statement made by IMF Mission Chief for Pakistan, Nathan Porter, as “extraordinary.”

    While the IMF typically refrains from commenting on domestic politics, Porter had expressed the hope that Pakistan would find a peaceful way forward in line with the Constitution and the rule of law. The state minister expressed her dissatisfaction with the IMF’s involvement in Pakistan’s political situation, emphasising that the delay in reaching a staff-level agreement was detrimental to both Pakistan and the Fund.

    Dr Pasha confirmed reports that Prime Minister Shehbaz Sharif had reached out to IMF Managing Director Kristalina Georgieva. In their conversation, the prime minister assured the IMF chief that Pakistan would fulfill all its obligations.

    On May 27, Prime Minister Shehbaz had contacted Georgieva, requesting her assistance in revitalising the stalled $6.5 billion facility. It is believed that the prime minister urged her intervention to facilitate the completion of the pending ninth review, which would unlock $1.1 billion in financing for the cash-strapped nation.

    Negotiations between the coalition government and the IMF have been ongoing since November to revive Pakistan’s bailout program, with the financing gap being a major hurdle. Approximately $2.7 billion remains to be disbursed from the $6.5 billion program, which is set to expire next month.

    Responding to a question regarding Pakistan’s contingency plan if it fails to convince the IMF before the program’s expiry on June 30, the state minister stated that while there is always a “Plan B,” the Ministry of Finance’s priority is to revive the IMF program.

    With the federal budget announcement scheduled for June 9, both sides are hopeful of reaching a staff-level agreement before then. The successful conclusion of the agreement would provide a much-needed boost to Pakistan’s economy and help address its financial challenges.

    As the negotiations continue, the Pakistani government remains committed to meeting its obligations and finding a way forward to revive the IMF program, while asserting its sovereignty and independence in internal affairs.