Tag: Economic crisis

  • Economic situation worse than expected, subsidies not feasible: Finance Minister

    Economic situation worse than expected, subsidies not feasible: Finance Minister

    In the midst of Pakistan’s ongoing battle with rising prices, the country’s interim Finance Minister, Shamshad Akhtar, issued a strong warning on Wednesday. She pointed out that Pakistan’s economic situation is even “worse” than expected, and the government can’t afford to provide subsidies to the public due to financial constraints.

    According to DAWN, Akhtar made these comments during a meeting of the Senate’s Standing Committee on Finance. She explained that the current government had inherited a programme from the International Monetary Fund (IMF) that couldn’t be changed.

    This announcement comes at a time when Pakistan is facing high living costs, especially expensive electricity bills that have led to protests across the country.

    The government has struggled to find ways to help while also maintaining good relations with the IMF. The caretaker government, which is temporarily in charge, hasn’t been able to come up with clear solutions to ease the situation.

    In a recent meeting chaired by Caretaker Prime Minister Anwaar ul Haq Kakar, the government expressed that it’s not sure how to solve the issue. They even discussed the possibility of letting people pay their electricity bills in smaller portions over time, but this would need permission from the IMF.

    Interim Information Minister Murtaza Solangi mentioned that discussions are ongoing with the IMF to find relief measures for people struggling with high electricity bills. An official announcement about this is expected soon.

    However, it’s important to note that even if the option of paying bills in smaller portions is pursued, it still needs approval from the IMF. This underscores the IMF’s influence on Pakistan’s economic decisions.

    Minister Akhtar, while speaking to the Senate’s Standing Committee on Finance, highlighted the substantial losses faced by government institutions. She stressed the need to sell off some government-owned assets to alleviate financial pressure. Currently, a large portion of Pakistan’s tax earnings goes toward repaying debt. Moreover, the Pakistani rupee is facing challenges due to a shortage of dollars coming in and a high amount going out of the country.

    Akhtar also expressed concern that if Pakistan doesn’t follow the IMF’s agreement, the country might stop receiving dollars, leading to an even worse economic situation. She admitted that the government has taken actions that weakened the economy. She mentioned that the Federal Board of Revenue is not collecting as much as it should while expenses remain high.

    The finance minister clarified that the caretaker government doesn’t have unlimited power. They are restricted in their actions and must work within those limits.

    She also pointed out that any changes to the existing IMF agreement, made by the previous government, are not possible for the current administration. She mentioned that the government is considering reducing benefits for the wealthy, and a detailed update on the economy will be provided to the committee within a week.

    Before the finance minister’s comprehensive briefing, several committee members expressed concerns about the rising value of the dollar and the high electricity bills. Senator Kamil Ali Agha insisted that taxes added to electricity bills should be removed immediately, arguing that the entire country shouldn’t suffer due to a few people’s actions.

  • Taxes in your electricity bill: What Pakistanis are paying and what for?

    Taxes in your electricity bill: What Pakistanis are paying and what for?

    Protests against exorbitant electricity prices continued to grip Pakistan as consumers from all corners of the country voiced their frustration by burning electricity bills and chanting slogans denouncing overcharging. With Pakistan facing a severe economic crisis and inflation rates surging to a staggering 29 per cent, citizens are grappling with the overwhelming impact of inflated electricity costs.

    The outcry has intensified as incumbent authorities adhering to an IMF deal have slashed power sector subsidies, resulting in unprecedented price hikes that have burdened already inflation-weary citizens. The new pricing structure has set electricity rates at a record high, significantly affecting the cost of living for the nation’s over 240 million inhabitants.

    Central to the grievances is the manner in which electricity bills are calculated. The basic charge is linked to kilowatt-hours (kWh) or units consumed, a component that carries an array of additional taxes. These taxes, directly borne by the masses, have contributed to the mounting frustration felt by the population.

    An individual from Gujranwala recently shared an eye-opening example of the impact of these charges. Despite consuming around 212 units in the previous month, he received an electricity bill of Rs10,500, while the cost of the electricity consumed was merely around Rs6,400. The disparity between consumption and billing has drawn attention to the various components contributing to the final cost.

    For those consuming slightly over 200 units, the Fuel Price Adjustment (FPA) accounts for approximately Rs250. This adjustment is contingent on the price of the fuel used in electricity generation. If the cost of fuel rises during power generation, WAPDA (Water and Power Development Authority) levies an additional charge in subsequent billing cycles.

    Breaking down the bill further, it reveals a complex web of charges. An electricity duty of around Rs100 is imposed, accompanied by a General Sales Tax (GST) of Rs1,316.

    Additional charges include Income Tax amounting to Rs900 and Extra Taxes totaling Rs366. The bill also features a peculiar charge of Rs227 labeled as ‘Further Taxes,’ which has prompted criticism from citizens questioning its purpose and transparency.

    Additional charges on the bill encompass Rs365 for Sales Tax, Rs680 for Financing Cost Surcharge (FC Surcharge), and Rs115 designated as ‘Taxes on FPA.’ Notably, non-filers of income tax are subjected to supplementary charges on their utility bills.

    As confusion mounts among consumers regarding the breakdown of charges, it is imperative for electricity consumers to comprehend the various taxes levied on their monthly bills. Diverse categories of consumers are subject to a range of taxes, duties, and surcharges, contributing to the complex structure of electricity pricing in Pakistan.

    Below is a list of the taxes and levies imposed on electricity consumers in Pakistan:

    Electricity Duty: Ranging from 1.0 per cent to 1.5 per cent of Variable Charges, this provincial duty is levied on all consumers.

    General Sales Tax (GST): At a rate of 17 per cent of the electricity bill, GST is levied on all consumers under the Sales Tax Act 1990.

    PTV License Fee: Domestic consumers pay Rs35, while commercial consumers pay Rs60 as PTV license fee in their electricity bills.

    Financing Cost Surcharge: This surcharge of Rs0.43 per kWh applies to all consumer categories except lifeline domestic consumers.

    Fuel Price Adjustment (FPA): FPA represents the difference between actual fuel charges and reference fuel charges. Positive variation leads to a charge, while negative variation benefits the consumer.

    Extra Tax: Imposed on industrial and commercial consumers not registered in the active taxpayer list, rates range from 5 per cent to 17 per cent based on different bill amount slabs.

    Further Tax: Levied at a 3 per cent rate on all consumers without a Sales Tax Return Number (STRN), except for domestic, agriculture, bulk consumers, and street light connections.

    Income Tax: Charged at varying rates depending on the applicable tariff and the electricity bill amount.

    Sales Tax: Commercial consumers face a 5 per cent sales tax on bills up to Rs20,000 and a 7.5 per cent tax on bills exceeding Rs20,000.

    With public discontent on the rise, authorities are urged to address the concerns of citizens and seek a balanced approach that mitigates the impact of these charges on the already struggling populace.

    As the nation grapples with economic uncertainties, finding a solution that eases the burden on citizens while ensuring the sustainability of the power sector remains a pressing challenge.

  • Hungry man calls 15 for food; police helps

    Hungry man calls 15 for food; police helps

    Malik Tahseen Raza has reported in Dawn News that police received a call on the 15 emergency number from a man in dire need of help.

    The man told the police that his family had nothing to eat in the past two days, adding that he is at the verge of committing suicide. 

    The caller, Bashir Ahmed from Sargani village in tehsil Karor Lal Esan, is a daily labourer but is currently jobless since quite some time, while inflation has worsened his circumstances. He had a wife and four children who had nothing to eat since the last two days.

    Resultantly, Layyah DPO Asadur Rehman called Bashir back and counselled him. In the morning, the DPO met Bashir at his house in village Sargani along with his team. They brought enough food to feed the family for the coming few weeks. He also gave Bashir cash.

    In a video clip, Bashir told a YouTuber that the items of daily use that the DPO had given him must be worth about Rs60,000 to Rs70,000.

    The DPO was accompanied by Inspector Muhammad Idris Khan, the SHO of Karor Police Station.

    Talking to the media, the DPO said it was the first time a citizen called at 15 to say that his family was dying of hunger.

    “I asked him to be patient, telling him that we (police) would come to his home to help him.”

    The DPO said he requested him to not put the lives of his children and wife in danger. He then urged people to remain conscious of their surroundings and people.

  • Load shedding and unbearable hike in electricity prices hit Pakistani homes and businesses

    Load shedding and unbearable hike in electricity prices hit Pakistani homes and businesses

    Pakistan is facing an ongoing and unbearable increase in electricity tariffs, causing hardships for the majority of the population. The government justifies these price hikes by claiming they are under pressure from the International Monetary Fund (IMF) to generate more revenue. However, the tariff increase is mainly due to fuel price adjustments and high taxes imposed by the government.

    Consumers, especially low- to middle-class households, are struggling to pay their electricity bills, which have more than doubled. The rise in fuel price adjustments and government taxes further exacerbates the burden on consumers. The government’s commitment to the IMF to implement a fifty per cent increase in the base tariff from July to October contributes to the escalating bills.

    Unfortunately, the increase in electricity prices is expected to continue, and there is no progress in essential power sector reforms to reduce system losses, corruption, power theft, and reliance on imported fuels. As a result, the National Electric Power Regulatory Authority (NEPRA) has raised the average tariff to ensure funds for loss-making power distribution companies, putting additional financial strain on consumers.

    The government claims that the tariff increase is necessary to meet the IMF’s requirements and support energy sector viability. However, the business community also suffers, fearing a loss of competitiveness and increased costs. Industries have cut down production due to high energy prices and inflation, affecting economic growth and job creation.

    Many argue that successive governments have failed to implement essential structural reforms, leading to Pakistan’s economic predicament. The solution proposed by economists involves fixing the energy sector’s deep-rooted issues, taxing sectors adequately, and implementing a credible privatization plan to reduce pressure on the budget.

    In conclusion, Pakistan’s never-ending increase in electricity tariffs has become a major burden for the population, and without significant reforms, the situation is unlikely to improve. The government’s need to meet IMF requirements clashes with the urgency of boosting industrial activity and economic growth, leaving the country in a challenging economic predicament.

  • Will Pakistan secure IMF’s bailout? Decision expected within 48 hours

    Will Pakistan secure IMF’s bailout? Decision expected within 48 hours

    Prime Minister Shehbaz Sharif engaged in a telephonic conversation with Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), on Tuesday.

    During the discussion, Prime Minister Shehbaz Sharif expressed his optimistic outlook, anticipating that a decision regarding the bailout programme would be reached within the next day or two.

    In an official statement issued by the Prime Minister’s Office (PMO), it was highlighted that the premier and IMF MD delved into various matters pertaining to the IMF programme. The statement further indicated that the efforts of the finance minister and his team were duly acknowledged by the IMF MD.

    The statement continued to convey the Prime Minister’s expectation that the coordination efforts on finer details would culminate in an IMF decision in the coming days. Additionally, Shehbaz reiterated his commitment to achieving the shared goal of improving the economic situation through collaborative endeavors.

    Last week, Prime Minister Shehbaz Sharif held a meeting with Georgieva during the Summit for a New Global Financial Pact in Paris, wherein he provided a comprehensive briefing on Pakistan’s economic outlook. The Prime Minister expressed hope that the critical funds would be disbursed as a result.

    Pakistan is currently engaged in a race against time to revive its halted bailout programme, which is set to conclude on June 30. Experts emphasise the significance of resuming the IMF bailout, which has been at a standstill since November of the previous year.

    The cash-strapped South Asian economy is grappling with a balance of payment crisis, making the expected funding of $1.1 billion from the international lender crucial. This funding would also pave the way for additional inflows from Pakistan’s multilateral and bilateral partners, effectively reducing the risks associated with a potential default, as per expert opinion.

  • Shell Pakistan’s parent company to exit ownership, announces sale of stake

    Shell Pakistan’s parent company to exit ownership, announces sale of stake

    Shell Pakistan Limited (SPL) announced on Wednesday that its parent company, Shell Petroleum Company Limited (SPCo), has communicated its intention to divest its ownership stake in SPL. The notification was conveyed by SPCo to the Board of Directors of Shell Pakistan Limited during a meeting held on June 14, 2023. The announcement was promptly disseminated to the Pakistan Stock Exchange (PSX) by Shell Pakistan.

    The potential sale of shares is contingent upon a targeted sales process, the completion of binding documentation, and obtaining the requisite regulatory approvals. It should be noted that SPL operates as a subsidiary of Shell Petroleum Company Limited, United Kingdom, which is itself a subsidiary of Royal Dutch Shell Plc—a globally renowned energy and petrochemical conglomerate.

    Shell Pakistan Limited engages in the marketing of petroleum products, compressed natural gas, and a diverse range of lubricating oils. While this development signifies a change in ownership, Shell Pakistan has emphasised that its ongoing business operations will remain unaffected and continue as usual. The company remains fully committed to ensuring the provision of safe and reliable services to its valued customers and partners.

    In the previous month, Shell Pakistan Limited released its financial results for the first quarter of 2023, which were significantly impacted by the prevailing economic crisis in the country. The company reported a substantial loss of Rs4.6 billion, in contrast to a profit after tax of Rs2 billion in the corresponding period last year. This downturn can be attributed to the unprecedented devaluation of the Rupee, escalating inflation, and broader macroeconomic uncertainties.

  • ‘When will Pakistan meltdown?’ Question shocks Pak minister, might approach China for help

    ‘When will Pakistan meltdown?’ Question shocks Pak minister, might approach China for help

    Pakistan is actively exploring alternative measures to prevent a full-fledged eruption of its balance of payment crisis, as the International Monetary Fund (IMF) continues to prolong the revival of the already-delayed $6.5 billion bailout programme.

    According to The News, Pakistan may have no choice but to turn to China to devise a mechanism for rescuing its ailing economy.

    “Amid the deepening political and economic crisis in the country, the IMF has adopted a wait-and-see policy, but this approach cannot be sustained indefinitely,” sources informed the publication. “Either the IMF programme must be revived through the completion of the ninth review, or the programme will be abandoned. We will not share any further data with the IMF until the ninth review is completed,” the sources asserted.

    Multiple reports indicate that Pakistan has already urged the Fund staff to conclude the review, warning that the budgetary framework for 2023-24 will not be shared otherwise.

    Sources recounted an incident where a diplomat from a Western capital questioned a minister about the expected economic meltdown in Pakistan. “This direct question from the dignitary shocked the minister, who assured the visiting diplomat that Pakistan would never default,” the sources narrated.

    It is noteworthy that the diplomatic community has also begun inquiring about “domestic political affairs.”

    Considering these developments, independent economists are now recommending that the government make last-ditch efforts to revive the IMF programme or turn to China for a potential bailout to support the struggling economy.

    Renowned economist Dr Hafiz A Pasha, a former finance minister, expressed that if the IMF fails to make progress, Pakistan would have no alternative but to request China’s assistance in devising a mechanism to avert a full-fledged crisis. He suggested utilizing the Asian Infrastructure Investment Bank (AIIB) as a potential instrument to aid Islamabad in navigating the balance of payment crisis, acknowledging that it falls outside the AIIB’s mandate but emphasizing the need for an institution to assume the role of an Asian IMF.

    When approached, Dr Khaqan Najeeb, a former finance ministry adviser, acknowledged the efforts taken by the country to achieve macro stabilization and pave the way for the completion of the ninth review. However, he pointed out the IMF’s cautious stance due to Pakistan’s weak State Bank reserves, which currently stand at just $4.38 billion, and the precarious balance of payment position. The IMF is taking extra care to ensure that financing needs are more than adequately met, despite efforts by authorities to convince the lender in this regard.

    Dr Najeeb also highlighted the relaxation of imports, with the IMF keen for Pakistan to build reserves and ease administrative restrictions. Notably, Pakistan’s imports in April (year-on-year) have been halved to $2.9 billion, as reported by the Pakistan Bureau of Statistics.

    “The advisable solution is for the IMF to show consideration, as a staff-level agreement can facilitate commercial and multilateral inflows,” Najeeb commented, adding that Pakistani authorities could do more to ensure a robust financing plan.

    He concluded that if an agreement is not reached, the country would have to persist with heightened import restrictions, a constrained economy, and borrowing and rollovers from friendly countries wherever possible. “This is not Pakistan’s preferred option to sustain a thriving economy,” he emphasised.

  • Petrol price expected to decrease by Rs10 per litre for the next fortnight

    Petrol price expected to decrease by Rs10 per litre for the next fortnight

    The prices of petroleum products are expected to decrease starting from May 16, as the coalition government intends to provide some relief to the distressed public amidst the severe economic crisis and record inflation.

    According to reports in local media, petrol price will see a reduction of Rs10 per litre for the rest of May.

    It has been reported that the Oil and Gas Regulatory Authority (OGRA) has recommended a decrease in the prices of petroleum products. Based on these reports, the price of petrol may be reduced by Rs10 per litre, while the price of diesel is anticipated to decrease by Rs8 per litre.

    OGRA has submitted a summary to the government, and Finance Minister Ishaq Dar and other officials will seek the input of Prime Minister Shehbaz Sharif on the recommendations. The final decision will be announced today.

    The revised prices of petroleum products for the upcoming two weeks will be implemented after midnight on May 15.

    Earlier this month, the federal government announced a reduction of Rs5 per litre in the price of diesel, while the price of petrol remained unchanged. Presently, petrol is being sold at Rs282, HSD at Rs288, kerosene oil at Rs176.07, and light diesel oil at Rs164.68 per litre.

  • Pak Suzuki follows Atlas Honda’s lead, raises motorcycle prices amid economic crisis

    Pak Suzuki follows Atlas Honda’s lead, raises motorcycle prices amid economic crisis

    In the midst of Pakistan’s economic crisis, the country’s automobile industry is struggling to stay afloat. One of the major players in the two-wheeler market, Pak Suzuki Motors, has recently increased the prices of its motorcycles due to the continuous devaluation of the rupee.

    This comes as no surprise since Pakistan’s auto industry heavily depends on imports and has been facing obstacles due to restrictions on the opening of letters of credit (LCs) after the rupee’s depreciation.

    According to a notification sent by the company to its dealers, the new rates will apply from May 9 and remain unchanged until further notice. The retail prices include the ex-factory product price and freight charges incurred on motorcycles that are delivered to dealerships.

    The notification mentioned that the rate of GD110s has increased to Rs335,000, GS150 to Rs364,000, GSX125 to Rs488,000, GR150 to Rs521,000, and GW250JP to Rs1.04 million.

    It’s worth noting that this isn’t the first time the automobile industry has seen such a price hike. Atlas Honda, Pakistan’s biggest player in the two-wheeler segment in terms of market share, recently increased its motorcycle prices for the fourth time this year, making them more expensive by Rs5,000-15,000.

    As the industry continues to face hindrances, it remains to be seen how it will adapt to the current economic conditions.

    Here are the new prices for all Suzuki motorcycles:

    Motorcycle Price (in PKR)
    GD110s Rs335,000
    GS150 Rs364,000
    GSX125 Rs488,000
    GR150 Rs521,000
    GW250JP Rs1,040,000
  • Pakistan’s IMF bailout programme revival delayed: blame game between Pakistani authorities and IMF

    Pakistan’s IMF bailout programme revival delayed: blame game between Pakistani authorities and IMF

    Pakistani authorities and the International Monetary Fund (IMF) are blaming each other for the delay in reviving the IMF bailout programme. The IMF approved a $6.5 billion bailout package for Pakistan in 2019, of which $1.1 billion is still outstanding.

    However, issues related to fiscal policy adjustments have delayed the release of the funds since November. The delay has raised concerns as Pakistan has less than a month’s worth of foreign exchange reserves and needs the IMF package to avert defaulting on external payment obligations.

    With the expiry of the existing IMF programme on June 30, 2023, Pakistan’s options for reviving the IMF programme are shrinking with every passing day.

    While Pakistani authorities argue that the IMF is playing politics, IMF sources say they are still waiting for confirmation on the remaining $2 billion from the World Bank and Asian Infrastructure Investment Bank, as well as seeking commercial loans from banks.

    According to Geo, Dr Khaqan Najeeb, former adviser Ministry of Finance, has called for short-term measures, such as funding from friendly countries, the revival of the IMF programme, clarity on programme completion dates, and work on the budget for 2023-24 to be undertaken to avoid Pakistan being near the brink of default.