Tag: grants

  • Pakistan secures over $228 million in loans from multiple foreign sources

    Pakistan secures over $228 million in loans from multiple foreign sources

    In April 2024, Pakistan secured $237.24 million in external financing from various sources, according to the Economic Affairs Division (EAD). This sum included $228.64 million in loans and $8.60 million in grants.

    Throughout the first ten months of the fiscal year 2024 (10MFY24), the country managed to obtain a total of $7.14 billion in external financing, significantly less than the annual budget estimate of $17.62 billion.

    In April, the government received a substantial loan of $117.39 million for non-project aid, aimed at providing program and budgetary support to help restructure the economy. Over 10MFY24, loans for non-project aid amounted to $4.84 billion.

    The Ministry of Economic Affairs noted Pakistan’s continued reliance on foreign commercial borrowing, which amounted to $107.95 million in April and $889.43 million in 10MFY24. This was primarily facilitated through the Naya Pakistan Certificate.

    Notably, no funds were secured from foreign commercial banks in 10MFY24, despite a budget estimate of $4.5 billion for the fiscal year.

    Disbursements from bilateral and multilateral development partners remained strong, totaling $129.29 million in April and $3.74 billion in 10MFY24. Although these inflows helped bolster foreign exchange reserves, they fell short of the government’s budget estimates.

    Multilateral sources provided nearly $121.61 million in April and $2.87 billion in 10MFY24. Among these, the International Development Association-World Bank (IDA) led with $61.73 million in April, followed by the Asian Development Bank (ADB) with $42.78 million.

    The International Bank for Reconstruction and Development (IBRD) contributed $8.52 million, and the Asian Infrastructure Investment Bank (AIIB) provided $6.33 million. Cumulatively, IDA’s disbursements totaled $1.35 billion, ADB’s $708.30 million, and AIIB’s $309.95 million.

    Bilateral development partners contributed $7.68 million in April and $877.76 million in 10MFY24. In April, Germany provided $3.10 million, Korea $1.80 million, France $1.77 million, and the USA $1.01 million. Over 10MFY24, Saudi Arabia’s Oil Facility dominated bilateral disbursements with $595.18 million.

    While foreign assistance has been crucial in maintaining financial stability, the shortfall compared to budget estimates highlights the need for improved fiscal strategies and diversified financing avenues to achieve Pakistan’s economic goals.

  • Govt hints at major taxation system overhaul in economic revival drive

    Govt hints at major taxation system overhaul in economic revival drive

    The federal government is contemplating significant changes to the tax structure in its economic revitalisation plan, with a particular focus on sectors like retail, agriculture, and real estate. Additionally, the plan includes the introduction of a wealth tax on movable assets. These proposed revisions were outlined in the Ministry of Finance’s September 2023 Economic Update and Outlook report. 

    Underpinning the economic recovery efforts are strategies aimed at enhancing revenue, which include not only tax adjustments but also the restriction of tax exemptions to essential sectors such as food and medicine. To streamline government expenses, the plan also incorporates austerity measures and a review of subsidies and grants. 

    Furthermore, the government is set to scrutinise the development plan and promote public-private partnership (PPP) initiatives. Compliance with quarterly budget targets and agreements with the International Monetary Fund (IMF), encompassing aspects like tax collection and debt management, will be a priority. 

    The plan adopts a 5Es framework—exports, equity, empowerment, environment, and energy—to address socio-economic challenges and stimulate export growth and business facilitation. The digitization of the economy and an expanded tax base through information technology are also on the agenda. 

    According to Business Recorder, state-owned enterprise (SOE) reforms, including the enactment of an SOE policy, are part of the plan. It involves the establishment of a Central Monitoring Unit (CMU) and the preparation of SOE performance reports. The implementation of a Treasury single account (TSA), remittance incentives, energy conservation, and price controls are among the planned actions. 

    Additionally, the Privatisation Commission aims to privatise select public sector enterprises through various methods, including assessing privatisation options for distribution companies (DISCOs) and restructuring options for PIA-CL while conducting unbundling studies for SNGPL and SNGPL. 

    To bolster non-bank finance and promote the capital market, corporate taxes will be reduced. Short-term measures for export enhancement include the implementation of the Weighted Average Cost of Gas (WACOG), the operationalization of the EXIM bank, and expedited sales tax refund processes. 

    Business facilitation and investment promotion will be addressed by the Board of Investment, with initiatives like the Asaan Karobar plan, which involves the establishment of a central e-registry and the development of the Pakistan Business Portal. 

    The plan also outlines measures to boost IT exports, stimulate telecommunications growth with a focus on 5G technology, and revitalise the maritime, railway, and highway sectors. Price reforms, attracting foreign investment, and combating theft are key objectives in the energy sector. 

    Recent administrative actions have already begun to yield positive results in curbing illegal activities in the foreign exchange market and improving the availability of essential food items. The outlook for inflation has improved, albeit with ongoing concerns related to international oil prices and energy costs. 

    On the fiscal front, the fiscal deficit has remained stable, while the primary balance surplus has improved. Notably, federal revenues have seen significant growth, driven by higher non-tax collections and import-related taxes. Reductions in non-markup spending have contributed to this positive fiscal development. 

    The current account deficit has narrowed, primarily due to improvements in the trade balance. Overall, the government’s strategic measures, coupled with prudent economic policies, are expected to attract new investments and stimulate economic growth for fiscal year 2024 and beyond, following the initial steps towards recovery at the beginning of FY2024.