Prime Minister (PM) Shehbaz Sharif announced that the coalition government plans to impose a 10 per cent super tax on large-scale industries, and that “tough decisions” have been taken to protect the economy in budget 2022-23.
Addressing the nation, PM Shehbaz announced the imposition of a 10 per cent super tax on cement, steel, sugar, oil and gas, fertiliser, banking, textile, chemical, beverage, and automobile industries, adding that it it has been done to save the common man from taxes.
PM said that people whose annual income exceeds Rs150 million will be subject to one per cent tax; for Rs200 million, two per cent; Rs250 million three per cent; and Rs300 million will be taxed four per cent of their income.
PM Shehbaz said the steps taken in the budget were designed to ease the burden on the poor. “And the classes who are blessed, today, this nation is demanding of them to also work hard, to come forward and to make Pakistan prosperous, progressive and with its head held high,” he added.
The premier called on the wealthy to distribute some of their wealth and “relive the memory of Ansar-i-Madina”. “This is your responsibility, and the nation demands it of you,” he said.
Due to a fuel shortage, the Sri Lankan authorities on Friday announced a two-week shutdown of government offices and schools.
“Taking into consideration the severe limits on fuel supply, the weak public transport system, and the difficulty in using private vehicles, this circular allows minimal staff to report to work from Monday,” said Sri Lankan Public Administration Ministry.
However, essential employees will continue working.
Meanwhile, the Sri Lanka Education Ministry said on Thursday that schools will be closed for two weeks due to persistent power outages. However, the ministry said the schools should conduct online classes, if possible.
Sri Lanka has been experiencing roughly 12- to 13-hour-long blackouts for months.
Sri Lanka went into default on its $51 billion foreign debt in April and is currently negotiating a bailout with the International Monetary Fund (IMF).
Federal Minister for Planning and Development Ahsan Iqbal’s recent statement about cutting down on tea has not just taken social media by storm but international media has widely covered his remarks.
“I appeal to the nation to reduce tea intake by one or two cups daily because we borrow money for tea import as well,” said Ahsan Iqbal on Tuesday.
People in Pakistan urged to drink fewer cups of tea was how BBC covered it.
CNN’s headline says: Pakistanis told to drink less tea as nation grapples with the economic crisis
People in Pakistan urged to drink fewer cups of tea, was how Iqbal’s statement was covered by the Saudi Gazette.
AlJazeera also reported Ahsan Iqbal’s statement:Pakistan minister slammed for ‘drink less tea, save money’ appeal
Turkish news media outlet TRT also did a story and a video on the same with the title: Pakistan minister stirs controversy with ‘drink less tea, save money’ plea
Indian media also jumped in and did a news piece with the title: Pak Minister Asks Citizens To Drink Less Tea As Economy Faces Loan Burden: Report
The Print wrote: ‘First roti, now tea? Pakistan’s angry response to the minister who wants them to drink less
Prime Minister (PM) Shehbaz Sharif emphasised the importance of drafting an economic strategy during the day-long Pre-Budget Business Conference on Tuesday, stating that all stakeholders should work together to develop a framework for attaining economic growth.
During his speech, the PM stressed the importance of financial management in order to boost exports and agricultural yields. The meeting was attended by senior economists, industrialists and was organised by the government to explore avenues of consensus-based economic initiatives, according to APP.
“All of us will have to move collectively. The government will need guidance from stakeholders and experts. The government will form a taskforce on agriculture and exports for formulating comprehensive plans,” he said.
PM Shehbaz stated that his government had about 15 months to implement short and medium-term economic initiatives.
He was disappointed that Pakistan was lagging behind other countries, despite the fact that the rest of the world had excelled by following their development plans. He claimed that Pakistan was endowed with talented individuals capable of replicating India’s success in the IT sector.
PM Shehbaz announced that he had assigned Minister of Information Technology Aminul Haque the objective of increasing IT exports to $15 billion in the next two years. “We cannot progress until we set ambitious targets,” he stressed.
Syed Amin Ul Haque pledged on Tuesday to increase information technology exports to $5 billion by the end of 2023.
For the coming fiscal year, several IT and telecommunications programmes have been proposed in this regard.
According to sources, these projects include 31 existing and two new ones, for which the Pakistani government would give Rs4,438.696 million and foreign aid will provide Rs1,042 million.
Budget allocation for IT sector
Reportedly, an amount of Rs100 million is proposed for IT professional certification through the Pakistan Software Export Board, while Rs80 million is planned for Crime Analytics and Smart Policing. In Azad Jammu and Kashmir and Gilgit-Baltistan, Rs50 million has been suggested for demand-driven industry, while Rs179 million has been earmarked for the building of a data centre to provide cloud-based services.
PM Shehbaz warned that development plans could not be implemented unless political stability was achieved. The premier also stressed the importance of concentrating on exports and developing the agricultural sector.
He went on to claim that he was aiming to ‘fix’ friendly country relations that had deteriorated during the previous administration’s tenure. “I have invited China, Japan, Turkey, and other countries to invest in Pakistan,” he said. He invited the corporate community to join him in this endeavour.
Meanwhile, Finance Minister Miftah Ismail stated that the government will require $41 billion in the next 12 months and that he is ‘confident’ that this can be achieved.
The Shehbaz Sharif government, he added, has re-engaged with the International Monetary Fund (IMF). “We spoke with them and are extremely optimistic that we will reach an agreement with the IMF soon. That is something we are extremely certain about”.
Moreover, he explained that the present coalition administration had made difficult measures to help the economy stabilise. “It is difficult for any prime minister to authorise a fuel price hike of twice the amount we have, but we were losing Rs84 per litre on diesel and Rs69 per litre on petrol”.
Prime Minister (PM) Shehbaz Sharif on Tuesday during a pre-budget business conference stressed the need of signing a ‘Charter of Economy’ for economic stability and progress in the country.
“Charter of Economy will remain unchanged. It will become our sacred trust, which will not change,” the prime minister said, adding: “We need this.”
If there will be no political stability, there will be no economic stability
Shehbaz said, “If there will be no political stability, there will be no economic stability.”
“It’s about time the elite class had to make sacrifices and non-productive assets like real estate would have to be taxed. Until now, the hard time has been faced by the poor but today it’s the turn of well-off people to take the burden,” said Shehbaz.
Shehbaz stressed that the enhancement of exports, agricultural yield, and financial management should be the major components of the plan. “The government will form a task force on agriculture and exports for formulating comprehensive plans,” he said.
The premier said that since Pakistan’s inception 75 years back, the economic development in the initial 25 years and the economic development after that have a “stark” difference.
We must go for special export industrial zones
Comparing the country’s Information Technology (IT) industry with that of India’s, the premier said that India generates around $200 billion while Pakistan’s industry is hovering around $2.5 billion. “We must go for special export industrial zones,” he added.
The PM went on to say that the government will make well-structured industrial zones. “To increase the export, the developed zone should be handed over to the investors to work on it. We need to fix ambitious targets.”
Government bans wedding ceremonies after 10pm in Islamabad
The government has banned wedding ceremonies after 10pm in the federal capital.
According to media reports, permission to serve only one dish to wedding guests will be given, and a notification will be issued over this new restriction.
The Islamabad police and administration have been informed to strictly implement the ban. In case of any violation, strict action will be taken.
Finance Minister Miftah Ismail forecasted that Pakistan’s GDP would expand by 5 per cent to 6 per cent, and that the government would keep inflation under control, while speaking at the pre-budget conference on Tuesday, June 7.
The Finance minister expressed his ‘high confidence’ in the agreement with the International Monetary Fund (IMF) and revealed that the government had developed a progressive fiscal budget with a deficit of less than 5 per cent, according to Express News.
“We had to make difficult decisions; it’s difficult for any prime minister to authorise such a hike in petrol costs, but we were losing money.” “Every month, we lost more than 120 billion rupees,” the minister said.
According to him, the PTI administration signed an IMF agreement that mandated the reduction of fuel subsidies.
Miftah claimed the administration has re-engaged with China, Saudi Arabia, and the United Arab Emirates (UAE), among other countries, as part of the present government’s successful negotiations.
“Following a meeting between Foreign Minister Bilawal Bhutto and Chinese Prime Minister [Li Keqiang], China decided to re-roll their $2.4 billion programme. China has lowered its borrowing rate from 2.5 per cent to 1.5 per cent, saving the country money “Miftah said, “Roughly $23 million”.
He went on to say that the Saudis had agreed to increase Pakistan’s “oil line” and offer the country with a $100 million revolving credit.
According to Miftah, the current government inherited a country with the world’s third highest inflation rate, 20 million people living in poverty, and widespread unemployment.
He went on to say that the country’s debt payments had increased tremendously as a result of the amount of loans taken on by the PTI government.
Pakistan’s economic paradigm, according to the minister, is inherently faulty. “We enrich the wealthy,” he remarked.
The finance minister also spoke about one-time Rs2,000 assistance for 14 million families. The amount will be distributed in June at a cost of Rs28 billion to the government.
Aside from the 7.3 million BISP recipients, the package also covers 6.7 million households with poverty levels of less than 37.
According to Miftah, the country’s industry and consumers are heavily reliant on imports, causing the current account to be in deficit. He went on to say that Pakistan’s economy focuses on import substitution rather than export development, a paradigm that has been replicated in a number of developing countries.
Aside from textiles, Pakistan has no big exports because the agriculture sector is failing to remain productive.
Pakistani rupee (PKR) gained 60 paisas after closing in the inter-bank market on May 31, as a return of clarity on the economic front and a reduction in domestic political turmoil boosted it for the third consecutive day.
According to the State Bank of Pakistan (SBP), the local currency closed at Rs198.46 after gaining 60 paisas (0.30 per cent) in the day. The local currency concluded at Rs199.06 on Monday, up 70 paisas, or 0.35 per cent, from its previous closing.
On the other hand, oil prices, a key indicator of currency parity, rose on Tuesday as the EU decided to cut Russian oil imports, fueling fears of a tighter market already stressed for supply ahead of the peak summer driving season in the US and Europe.
The appreciation arrived as European Union leaders decided to slash 90 per cent of Russian oil imports by the end of this year, breaking a deadlock with Hungary over the bloc’s heaviest sanctions against Moscow since the invasion of Ukraine.
The rise in oil prices is another bad news for Pakistan, which has seen its import bill increase, putting strain on external payments while increasing market demand for dollars.
Preliminary EU-harmonised statistics indicated that inflation in France surged more than projected in May to a new high, putting additional pressure on President Emmanuel Macron before upcoming legislative elections.
Consumer prices rose 0.7 per cent in May, for a 12-month inflation rate of 5.8 per cent, up from 5.4 per cent in the last month and the highest rate since France started working on European Union methodology to generate the numbers in the early 1990s, as per the INSEE statistics.
Inflation was predicted to grow to 5.6 per cent on average, considering a poll of eight economists in a report by Reuters.
High inflation is at the top of France’s political agenda, and following the elections, Macron’s government has promised a new wave of measures to protect buying power.
Apart from Malta, France has managed to maintain the inflation lower than the rest of the EU due to a 25 billion euro package of measures that includes, among other things, hefty price limits on gas and electricity.
Annual inflation in France, as measured by the national consumer price index, climbed to 5.2 per cent in May from 4.8 per cent in April, reaching its highest level since September 1985, according to INSEE.
This month, economists surveyed by Reuters projected an average growth rate of 5.0 per cent. In France, the national index is regularly monitored, whilst outside the country, the EU-harmonised index is used to assess inflation rates among euro-area nations.
Airlift Technologies, a national grocery delivery service, has laid off 31 per cent of its workforce.
The company posted a statement on its official LinkedIn account confirming the layoff of its workforce; “In the light of the significant downturn in global capital markets, Airlift is undertaking a strategic realignment to reduce the surface area of operations and to increase focus in key areas that drive sustainability and profitability.”
“The decision to part ways with talented teammates has been incredibly challenging for the company. For impacted teammates, Airlift stands committed to providing financial and placement support to help find new roles,” the statement read.
Quick commerce startup Airlift closes down all cities apart from Karachi, Lahore and Islamabad, lays off 31% staff. pic.twitter.com/hSM8Cz3kYE
Usman Gul, the 33-year-old co-founder, and CEO commented on the company’s decision to permanently shut down, saying, “I think if the lens of change is ‘Did Airlift offer great returns to investors?’ then yes, regrettably, it was unsuccessful. If you’re talking about bringing Pakistan into a new reality or altering the entire ecology, then by that yardstick of success, we’ve come a long way,” Gul told Rest of World.
“In many ways, Airlift raised the bar of ambition for Pakistani startups in a big way. Our teams at Airlift redefined the standard of execution, strategy, building a world-class culture, developing a cutting-edge product, raising sizable fundraising rounds,” Gul continued.
What is the point of raising the greatest series B in the nation if the business fails 11 months later? Gul believed that these were improper inquiries when questioned about the $85 million that Airlift blew through in less than one year. He said that the appropriate questions to ask were: “What enabled Airlift to raise $100 million-plus in three years? That’s never happened in Pakistan before. What did this team do differently?”
Airlift was started in 2019 by Usman Gul, Ahmed Ayub, Awaab Khaakwany, Meher Farrukh, Muhammad Owais, and Zohaib Ali as a mass-transit option that connected consumers with buses at reduced costs. Due to the pandemic, Airlift’s transportation operations were halted in March 2020. During the covid pandemic, the company then pivoted its business plan and launched Airlift Express, a grocery delivery service with $10 million in investment. Airlift, last year in August, secured a mega-round of funding of $85 million dollars.
A former Airlift employee described the layoff as “shocking, unexpected, and heartbreaking.”
WHAT FINANCIAL EXPERTS THINK HAPPENED AT AIRLIFT
Ariba Shahid, Financial Journalist at Profit Magazine and DealStreetAsia, while talking to The Current about the layoffs at Airlift, said, “While downsizing is sad considering people lose their livelihoods, sometimes young startups need to scale back operations, recalibrate and start differently or fresh,” adding “In order to do so, they sometimes downsize. There is nothing wrong in doing so. I don’t think any business downsizes unless it’s absolutely necessary.”
Taking about the reason behind the layoffs Ariba added, “There are a number of ways to look at it. One likelihood is that Airlift’s funding was contingent on it attaining milestones. So maybe, they did not get the entire $85 million.”
“The other scenario is that they burned through approximately $10 million a month in customer acquisition costs and expansion. It is difficult for consumers to change their consumption pattern and move onto quick commerce. It also costs a lot to expand and grow, especially internationally, like Airlift did in South Africa. The macroeconomic environment with rising inflation and diminishing purchasing power makes it even more difficult.”
“Airlift was one of the bigger names in the ecosystem. The same way Airlift was used as an example while raising funds, it may be seen as a warning sign. However, the global liquidity crunch plays a bigger role at this point in time, in addition to Pakistan’s weakening macroeconomic sentiments.”
“There is no right or wrong way to run a startup at this point because the ecosystem is very nascent. There are no examples locally to follow. However in order to succeed startups need to ensure they are clean, transparent, do not fudge numbers, accept realistic valuations, stop obsessing over large rounds, and know when to stop blitz-scaling,” she added, talking about Pakistani startups.
While answering a question about the situation of Pakistan’s job market Ariba said, “Too soon to say that but yes, one can expect more layoffs across industries considering working capital will be more expensive, political instability, low investment inflows.”
Aitlift’s Lahore office
Dr Aqdas Afzal, Program Director and Assistant Professor of Economics, Habib University while talking to The Current about the possible reason behind the layoffs said, “The reason is not related to the Pakistani market, there is an economic downturn in the entire world. The inflation in UK and US is highest in last 40 years.”
He continued by adding that, “the main input of Airlift’s delivery is fuel and as considering the fuel inflation, they have withdrawn their services from those markets and cities from where they don’t get much sales and find it difficult to drive “sustainability and profitability.”
“I don’t think Pakistani startups are doing anything wrong, as we have seen they have been able to get get a lot of seed money.”
He further said, “In the coming days you will see a lot more startups booming in Pakistan.”
“The government needs to provide reliable, fast speed and affordable internet, because it is slowly becoming the weakest link for Pakistani startups.”
“I don’t think that Pakistan’s job market is collapsing,” said Afzal while answering a question about Pakistan’s job market.
He added, “We are in low value-added end of the spectrum in terms of freelancing skills and we should see if our educational institutions are teaching the level of coding that freelancers around the world are doing.”
Aitlift’s Lahore office
WHAT LAID-OFF EMPLOYEES HAVE TO SAY
Airlift released a database of the names of113 staffers who were abruptly terminated from their positions and were then ‘open to work.’ The employees listed in the database served in various departments of the cash-strapped venture, including operations, human resources, customer service, rider support specialists, and several software engineers, that were based in Pakistani cities including Karachi, Lahore, Islamabad, Gujranwala, Faisalabad, Hyderabad, and Peshawar, with the remainder in South Africa.
“The layoff news shocked the entire workforce as we had no idea the company would announce a massive layoff along with closing key warehouses in different cities,” an employee at Airlift Head Office Lahore, told The Current, “I was aware that the stock market was collapsing dramatically, with some well-known corporations laying off a large number of staff, but I had no idea that the capital market’s volatility would have such an immediate impact on Airlift.”
According to another insider, the company was unable to generate sufficient profit to entice international investors, which is why layoffs had to be done.
Khan revealed that he is looking for work and has undergone three job interviews so far. “After the news of the Airlift went viral on social media, I was approached by a couple of companies and individuals, although I have yet to receive job confirmation,” he claimed.
“I have had a wonderful time at the Airlift. The management took good care of the overall staff. The payouts were never delayed,” Husnain Raza, who was employed as a Rider Operations Specialist at Airlift barely a year ago, told The Current. “The company had to take this horrendous step or it could’ve been dissolved.”
Ex-Operations Lead at Airlift Faisalabad, stated that he is not concerned since the company has offered to compensate the employees who were laid off without notice with 1-2 months of salary. “I assume I’ll find another job until then,” he asserted.
The Current has reached out to the founders of Airlift for a comment on why the layoffs took place and about the future of the company. We are still waiting for a comment and until we get one, here is the statement issued by the company on the dismissal of their staff.
GLOBAL IMPACTOF THE ECONOMIC DOWNTURN
The impact of the global economy is not just being seen at Airlift or in Pakistan.
Cutbacks, contract terminations, and layoffs have impacted at least 5,600 startup employees since the beginning of 2022 at a number of unicorns, global tech companies in India, and growth-stage startups.
Startups like Unacademy, Furlenco, and many others have cut back and downsized in order to improve profitability. Better.com, a mortgage technology company based in the United States, has also asked employees to sign voluntary separation agreements. These layoffs occurred at Better.com’s India operations, where another 920 employees were let go earlier this month, following a total of over 3,000 laid off by April.
Unacademy, the edtech unicorn, laid off over 1,000 employees and shut down its online education platform, PrepLadder, in April 2022. More than 800 employees at BYJU’s-owned WhiteHat Jr were told to resign because they refused to work from the office.
Furthermore, Cars24, a marketplace, laid off workers in order to cut costs and move toward automation. In this downsizing, the unicorn may lay off up to 600 employees soon.
Alongside startups, some big names, such as Netflix, have cut staff this year, with some blaming the COVID-19 pandemic and others faulting ‘overhiring’ during periods of speedy growth. In 2022, Robinhood, Glossier, and Better are just a few of the technology firms that have significantly reduced their staff numbers.
The capital markets have taken a beating in 2022, and this has filtered down to the private sector. Fears about inflation, rising interest rates, and geopolitical issues have all contributed to a volatile financial market.
Startups, particularly those that profited from a pandemic growth that is now slowing, are beginning to feel the strain as well. Valuations have begun to fall, especially at the later phase, and entrepreneurs say it is far more challenging to raise new funding in such a situation.
A multitude of companies that experienced pandemic-related surges are experiencing a correction as a result of a variety of factors, including rising inflation, economic distress, war, and shifting consumer taste buds. Companies such as Meta and Twitter have publicly announced hiring freezes, and Snap confirmed this week that it is slowing hiring as revenue targets are missed.
If a company is bleeding money, it will most likely begin to lay off employees, preserving only those who are required to work to retain the business’s level of operations. If the company dissolves, the remaining workers may be laid off as well.
Among the most likely causes for layoffs is that the company is trying to cut costs in some way. This could be because the company needs to pay off debts, fewer sales or the company no longer has the financial backing of investors like Airlift.
As technological advancements and automation grow common in businesses, employers sometimes lay off employees in order to cut costs and reduce position redundancy. Moreover, if the employee satisfies certain requirements and is prepared to make the change, the organisation may commit to finding another role for them and transferring them to the position.
Finance Minister Miftah Ismail along with his team left for Doha on Tuesday to hold talks with the International Monetary Fund (IMF).
The ministry said that talks with the IMF mission started today (May 18).
Talks with the IMF Mission started today. Finance Minister Mr. Miftah Ismail, MoS Dr. Aisha Ghous Pasha, Finance Secretary Hamed Yaqoob Shaikh, Acting Governor SBP Dr. Murtaza Syed, Chairman FBR Mr. Asim Ahmad and senior officers from Finance Div joined vitually.@MiftahIsmail
— Ministry of Finance, Government of Pakistan (@Financegovpk) May 18, 2022
The review talks are expected to continue for a week and will focus on striking a staff-level agreement for the release of a $1 billion tranche under the Extended Fund Facility (EFF).
It has been reported that Pakistan will have to convince the IMF to revive the stalled $6 billion programme at a time when the government had not started eliminating the unfunded fuel subsidy after making a commitment with the forum.
The dollar rate is at its peak in the country. Currently, the rupee touched 200 against the US dollar in the open market. This spell of the dollar’s persistent rise against the rupee began last week.
