Pakistan gets Saudis’ ‘Green Signal’ for dollar 2 bn funding
Pakistan has received the nod for funding to the tune of $2 billion from Saudi Arabia, finance ministry sources on Wednesday said.
The development is a significant step towards reaching a staff-level agreement with the International Monetary Fund (IMF), which has imposed the condition of Pakistan securing $3 billion from other countries for the revival of its $6.5 billion bailout package.
Apart from Saudi Arabia giving the green signal for the provision of $2 billion to Pakistan, the sources said Finance Minister Ishaq Dar would meet the leadership of the UAE before leaving for the US on April 10.
The sources further said the IMF was still insisting on its demand for a further increase in the interest rate according to inflation and opposing the annual subsidy of Rs900 billion.
They added that the global lender was unwilling to budge from its demand for Pakistan to collect Rs850 billion in terms of the petroleum development levy (PDL).
The finance ministry sources said the IMF was demanding from Pakistan to reduce its import of petrol and diesel.
Centre spends Pkr 710bn on devolved ministries
Amid severe fiscal constraints, the federal government is still spending over Rs710 billion every year by retaining 17 devolved ministries and financing development projects in areas that under the Constitution fall in the provincial domain, said the World Bank.
The huge spending is contributing to higher public debt besides keeping many initiatives of the Centre under-funded.
Before the devolution, the federal government was spending 0.39 percent of the GDP on the 17 ministries that were subsequently devolved to the provinces under the 18th Amendment in the Constitution.
However, after some time, the PPP government and its successive ones, revived all those ministries – a move that is now resulting in a duplication of the expenditures.
The spending on these 17 ministries has increased to 0.59 percent of the GDP or Rs328 billion per annum as of last fiscal year, said Derek Chen, a senior economist working with the World Bank.
In its recent publications, the World Bank has advised the federal government to realign its expenses only to those subjects, which under the Constitution were its responsibility.
Investors withdraw $190mn in February
Investors in Pakistan have been aggressively withdrawing investments from various national saving schemes due to significantly low rates-of-return (RoR) compared to the ones offered by banks on fixed investments. The State Bank of Pakistan (SBP) reported on Wednesday that investors withdrew Rs32.38 billion ($190 million) from saving schemes alone in February 2023, with a total disinvestment of Rs285.73 billion ($1.7 billion) in the first eight months (Jul-Feb) of the current fiscal year 2023.
Speaking to the source on the condition of anonymity, a Central Directorate of National Savings (CDNS) official said, “Who will invest in national saving schemes at the prevailing RoR at around 12 percent compared to 22 percent on three-month T-bills (the government debt instrument)? The rate of return has become uncompetitive… it has gone dead.”
ECC approves pkr 300mn for repair of public buildings
The government on Wednesday sanctioned a budget of Rs300 million for the renovation of its buildings and adopted new guidelines of an international organisation for the import of live animals and their products.
The Economic Coordination Committee (ECC) approved a supplementary grant of Rs300 million in favour of the Ministry of Housing and Works for the repair and maintenance of public buildings, according to the finance ministry.
The government decided to renovate the public buildings in the middle of implementation of an austerity policy. The ECC also approved a supplementary grant of Rs87.2 million in favour of the Intelligence Bureau for the payment of taxes and duties.
It approved a summary of the commerce ministry to bring amendments to the Import Policy Order 2022 for the import of live animals and their products.
Government meets another WB loan condition
Pakistan on Wednesday met another World Bank (WB) condition in order to qualify for a $450 million loan to bridge a $6 billion financing gap, as so far only one country has verbally communicated its decision to the International Monetary Fund (IMF) to give additional loans.
The condition was met days before Finance Minister Ishaq Dar’s meeting with the outgoing World Bank president in Washington in which he is expected to request the lender to set a board meeting date for the approval of the loan.
Despite making a request, however, until Wednesday Pakistan was unable to secure a meeting between Dar and the IMF Managing Director, Kristalina Georgieva.
The National Tax Council (NTC), on Wednesday, approved rules to determine the place where a service will be deemed to be provided by a province for the purpose of collecting sales tax. The World Bank has asked for the harmonisation of sales tax on goods and services as a condition to the loan.
The NTC approved the draft Place of Provision of Service Rules, a major milestone towards General Sales Tax (GST) harmonisation across the country, according to the finance ministry. The approval will help achieve the prior actions for the World Bank funded RISE programme, it added.
After approval from their respective cabinets, the provinces will notify the Place of Provision of Services Rules by May 1, according to the decision. The NTC is the administrative coordination body on taxation matters between the centre and the four federating units.
Sindh was of the opinion that the rules be applied from the next fiscal year but the centre requested implementation from April to qualify for the WB loan.