Latest news with #Rs14.3
Express Tribune
11 hours ago
- Business
- Express Tribune
SBP injects Rs14tr to bridge gaps
Listen to article The State Bank of Pakistan (SBP) conducted one of the highest Open Market Operations (OMOs) on June 20, 2025, injecting liquidity worth a substantial Rs14.3 trillion into the banking system to meet temporary and structural liquidity requirements. According to official data, the SBP accepted Rs13.93 trillion through a conventional reverse repo (injection) at a rate of return of 11.03% per annum across 36 quotes. Additionally, a Shariah-compliant Mudarabah-based OMO injection of Rs375 billion was executed at a return of 11.11% per annum with three accepted quotes. Sana Tawfiq, Head of Research at Arif Habib Limited termed this "among the highest single-day OMOs by the central bank," attributing the surge to both temporary and permanent factors. She noted that currency in circulation typically rises ahead of Eid, creating a temporary liquidity gap. On the structural side, debt repayments and a time lag between repayments and fresh inflows are elevating liquidity needs, she explained. She added that the government's fiscal deficit financing — constrained by International Monetary Fund (IMF) conditions that bar direct borrowing from the SBP — has further amplified OMO reliance, with banks channelling funds into government securities instead. Market experts expect the liquidity injections to remain elevated in the near term until inflows match outflows and post-Eid cash demand normalises. Furthermore, the Pakistani rupee extended the declining trend against the US dollar in the interbank market on Friday, slipping by 0.02%. By the close of trading, the local currency settled at 283.70 against the greenback, down by six paisas from the previous day's closing rate of 283.64. Globally, the US dollar was on track for its largest weekly gain in over a month, supported by safe-haven demand as investors remained cautious over escalating tensions in the Middle East and their potential impact on the global economy. Meanwhile, gold prices in Pakistan fell on Friday in line with the international market, which remained steady but on track for a weekly loss as investors awaited clarity on the Israel-Iran conflict after US President Donald Trump delayed a decision on possible involvement. According to data released by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the price of 24-karat gold per tola dropped by Rs1,595 to settle at Rs357,000. Similarly, the rate for 10 grams of gold declined by Rs1,368 to Rs306,069. Internationally, gold prices were steady on Friday and poised for a weekly loss after President Trump delayed a decision on entering the Israel-Iran conflict, according to Reuters. Spot gold was little changed at $3,369.63 an ounce, as of 1557 GMT. Adnan Agar, Director of Interactive Commodities said gold prices remained range-bound on Friday, with the metal trading between $3,340 and $3,375 in the international market, as investors awaited clarity on geopolitical developments in the Middle East. He told The Express Tribune that the market has been on a downward trend for the past five trading sessions, with a key support level identified at $3,320.
Business Recorder
19 hours ago
- Business
- Business Recorder
SBP injects record high Rs14.3trn in banks for seven days
The State Bank of Pakistan (SBP) has injected a record high Rs14.3 trillion in conventional commercial and Shariah-compliant banks for one week to help overcome the shortage of liquidity in the system after people withdrew significant cash during Eid-ul-Adha and external inflows delayed, it was learnt on Friday. The volume of the injection through open market operations (OMO) comes to almost 44% of the total deposits standing at Rs32.7 trillion in May 2025, according to the central bank latest data. SBP injects massive Rs11.85 trillion into banking system for up to 14 days Citing SBP Governor Jameel Ahmad from an analysts briefing held after the issuance of the latest monetary policy at the outset this week, Arif Habib Limited (AHL) and Topline Research said the OMO stock had increased mainly due to two reasons, including higher currency in circulation during Eid (temporary effect) and delays in external inflows. 'However, OMO levels are expected to decline in the coming weeks as (external) inflows materialise,' AHL reported Ahmad saying this. AHL's Sana Tawfiq and AKD Securities' Awais Ashraf said the cumulative supply of over Rs14 trillion to banks through OMO were record high injections. Elaborating SBP Governor Ahmad's reasoning for the elevated OMO stocks, Tawfiq said people withdrew huge cash from banks during Eid that reduced deposits levels and created additional demand for liquidity in the system. Besides, the reliance of the government on domestic debt has spiked after external inflows from multilateral creditors like the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB) got delayed. She added the government reliance on domestic debt, including the one from commercial banks, had been on the rise, as the collection of revenue in taxes had remained low compared to government expenditure. The low tax collection was increasing fiscal deficit, which is being met through piling up debt. Ashraf said the external inflows had remained low for the past two to three years, shifting the government reliance solely on domestic debt to finance budget deficit. Pakistan salaried class rejects govt's claim of giving relief in income tax He said commercial bank financing and national saving schemes had remained two rich avenues available with the government to raise new debt. Out of total Rs31.8 trillion the domestic debt, the share of bank loans had stood at Rs28.1 trillion at present, he added. SBP OMO breakup The breakup of the data suggest the SBP injected Rs13.9 trillion into conventional commercial banks at the rate of return of 11.03% for a period of seven days, as it accepted all the 34 quotes received from banks for the loan. The central bank supplied another Rs375 billion to Shariah compliant banks at the rate of return of 11.11% for seven days, accepting all the three quotes received from Islamic banks.
Express Tribune
14-05-2025
- Business
- Express Tribune
Budget talks with IMF start today
Listen to article The International Monetary Fund (IMF) will begin virtual discussions on Pakistan's upcoming budget on Wednesday (today), as the visit of its mission to Islamabad has been delayed due to security concerns in the region, government sources told The Express Tribune on Tuesday. The virtual talks will take place as the global lender has appointed a new mission chief to Pakistan. According to sources, the IMF mission delayed its scheduled arrival in Islamabad on Tuesday due to uncertainty caused by Indian aggression, which affected air travel across the region. However, the sources added that the mission is now expected to travel to Islamabad over the weekend, subject to the security situation. They emphasized that the adjustment would not adversely affect the work or the original programme schedule. The talks are set to begin on May 14 (today) and continue until May 16. "Virtual discussions are expected to be held. For the second and final leg of the talks, the IMF team is expected to arrive in Islamabad on Saturday and stay until May 23," the source said. The IMF's Resident Representative to Pakistan Mahir Binici did not respond to a request for comment on the change in the travel plan. Finance Ministry Spokesperson Qumar Abbasi also did not respond to questions on the change in the travel plans. Meanwhile, the IMF appointed Iva Petrova, a Bulgarian origin staff member, as new Mission Chief to Pakistan. She would join the discussions along with the outgoing Mission Chief Nathan Porter — who served in the position for an extended term. Porter was known for his firm stance on policy issues, but was averse to public interactions. He also kept a tight control over the Finance Ministry's media policy. Mahir did not comment whether both outgoing and new mission chiefs would join both rounds of talks. Petrova, who holds a PhD degree in economics from the Michigan State University, has been serving as the IMF Mission Chief to Armenia. Previously, she had served with the missions to Israel, Iceland and Latvia. The government of Pakistan is planning to unveil the budget for fiscal 2025-26 on June 2 — before the Eidul Azha holidays. This will be Finance Minister Muhammad Aurangzeb's second budget speech, which has to be in line with the parameters that the IMF will set during these talks. The fiscal policy is expected to remain tight in the next fiscal year too. The IMF has asked Pakistan to make a budget on the assumption of having 1.6% of the GDP primary budget surplus, which will require generating about Rs2 trillion over and above the non-interest expenses. The tax target for the Federal Board of Revenue (FBR) is proposed to be 11% of the GDP or Rs14.3 trillion. The IMF would examine whether the government plans to take credibly realistic measures to back the new tax target, said the sources. The size of the federal budget still remains tentative due to redoing of defence needs and the government plans to announce less than Rs18 trillion budget. The overall budget deficit target after incorporating large provincial cash surpluses is projected at 5.1% of the GDP or Rs6.7 trillion, they said. According to the sources, on the first day of talks the Finance Ministry would apprise the IMF mission of the fiscal developments during July-March period of the current fiscal year. It will also share details of supplementary grants approved during the fiscal year. The IMF has set multiple fiscal conditions, whose successful completion has so far helped smooth continuation of the programme despite initial setbacks. Pakistan has met the IMF targets for a primary budget surplus by the federal government, as well as net revenue collection and cash surplus targets by the four provinces. Against a primary surplus target of Rs2.7 trillion, the federal government reported a surplus of Rs3.5 trillion, or 2.8% of GDP. This higher surplus was primarily due to fully booking the annual central bank profit in the first quarter, with the entire estimated profit of Rs2.5 trillion already accounted for. The four provinces collectively generated a cash surplus of Rs1.028 trillion during the first nine months, exceeding the IMF target by Rs25 billion. The federating units also generated Rs685 billion in tax revenues, surpassing the IMF target by Rs79 billion. But against a nine-month revenue target of over Rs9.2 trillion, the FBR pooled Rs8.5 trillion, falling short of the goal by Rs715 billion. The IMF has also asked the government to give an update on any savings from the planned downsizing of the government. The next fiscal year's non-tax target will also be discussed during the first day of the talks, mainly the prospects of petroleum levy collection and the central bank profits. The FBR will give an update on the tax performance in April and the chances for the remainder of this fiscal year. The tax shortfall has ballooned to a staggering Rs830 billion in the first 10 months of the fiscal year, despite the government imposing record additional taxes and reducing refunds. Only in the month of April, the government added around Rs135 billion in the tax shortfall, breaching commitment to the IMF that the shortfall against the original annual target will not be more than Rs640 billion. The FBR has provisionally collected Rs9.3 trillion in taxes by the end of April. Though, the collection was around 27% or Rs1.95 trillion higher than the previous fiscal year, yet it is not enough to stay on track. The sources said that on the first day, the discussions will also take place on the so-called enforcement measures in the areas of track and trace, retailers scheme and compliance risk management. The FBR has miserably failed in all these areas and its collection is largely driven by the additional tax measures.
Express Tribune
11-05-2025
- Business
- Express Tribune
IMF sets stringent fiscal path for next fiscal year
Listen to article The International Monetary Fund has set a more stringent fiscal path for Pakistan by setting the primary budget surplus target for the next fiscal year at 1.6% of the size of the economy which, this time, is projected to be achieved by largely containing expenditures. Compared to this fiscal year's 1% of the GDP primary budget surplus target, which is calculated after making interest payments, the IMF has set the target at 1.6% for fiscal year 2025-26, according to the details the Fund released on Saturday after the approval of the new loan. Unlike in this fiscal year when the primary surplus target had been designed to achieve by solely depending upon increasing taxes, the next fiscal year's goal largely hinges upon restricting expenditures. The details showed that compared to 0.7% of the GDP increase in total revenues to GDP ratio, the IMF has projected a 1.3% of the GDP reduction in expenditure. The IMF macroeconomic table showed that the total revenues of the federal and provincial governments are estimated at Rs15.2% of the GDP or Rs19.6 trillion at next year's projected size of the economy. Out of this, the Federal Board of Revenue's target will be Rs14.3 trillion and around Rs4 trillion is estimated to be recovered on account of non-tax revenues. Rest will come from the provinces. The total expenditures by all five governments estimated at 21.6% of the GDP for this fiscal year, are projected at 20.3% of the GDP or about Rs26.3 trillion, according to the IMF's projections. These are hardly Rs1 trillion higher than this year's estimated expenses, requiring all the governments to keep their belts tightened. Since the primary surplus target is exclusive of interest payments, the Finance Ministry sources said that the containment in the expenditures would largely be on the development side with no room available on the defense spending side. Pakistan cannot afford to reduce or contain the defense budget in the light of new tensions in the region and around 2% of the GDP will be allocated for defense expenditures, said the Finance Ministry sources. The government has indicated to increase the defense budget by at least 18% compared to the last year, they added. Nigel Clarke, Deputy Managing Director of the IMF and Chairman of the IMF board that approved on Friday two packages worth $2.4 billion, said that risks to Pakistan's outlook remain elevated particularly from global economic policy uncertainty, rising geopolitical tensions, and persistent domestic vulnerabilities. He said that against this backdrop, the Pakistani authorities need to maintain sound macroeconomic policies and accelerate reforms to safeguard the macroeconomic gains and underpin stronger and sustainable, private sector-led medium-term growth. The Finance Ministry is planning to allocate Rs921 billion or 0.7% of the GDP for the development budget for the next fiscal year. An amount of about Rs1.35 trillion or little over 1% of the GDP is being set aside for giving subsidies in the next fiscal year, said the sources. Out of this power sector subsidies are estimated at Rs1.04 trillion or 0.8% of the GDP, said the sources. Some of the cabinet ministers are not in favour of allocating a large pie of the budget for the development when particularly it cannot be spent during the course of the fiscal year. There are huge wastages at the name of the development spending, which was also admitted by the Planning Ministry this week. The IMF has projected the overall budget deficit at 5.1% of the GDP or Rs6.6 trillion for the next fiscal year. In terms of the size of the economy, the deficit is 0.8% of the GDP less than this fiscal year but almost at the same level in absolute terms. The IMF on Friday completed the first review of the programme and allowed an immediate disbursement of around $1 billion by turning down Indian's unwarranted opposition to it. The IMF Executive Board also approved the Resilience and Sustainability Facility (RSF), with access of about $1.4 billion. The IMF said that under the bailout package key priorities include entrenching macroeconomic sustainability through consistent implementation of sound macro policies, including rebuilding international reserve buffers and broadening of the tax base. It also emphasized the need for advancing reforms to strengthen competition and raise productivity and competitiveness; reforming SOEs and improving public service provision and energy sector viability; and building climate resilience. The IMF noted that inflation fell to a historic low of 0.3% in April, and progress on disinflation and steadier domestic and external conditions, have allowed the State Bank of Pakistan to cut the policy rate by a total of 11% since June 2024. The IMF said that Pakistan's gross official foreign exchange reserves are projected to reach $13.9 billion by end-June 2025 and continue to be rebuilt over the medium term. It has projected $17.7 billion reserves in the next fiscal year and a low current account deficit of 0.4% of the GDP. However, it does not see any increase in the foreign direct investment in the next fiscal year, estimated at only 0.6% of the GDP for the next fiscal year too. Nigel Clarke, Deputy Managing Director said that "Pakistan has made important progress in restoring macroeconomic stability despite a challenging environment. Since the approval of the Extended Fund Facility, the economy continues to recover, with inflation sharply lower and external buffers notably stronger, he added. "The steadfast implementation of the FY2025 budget and the passage of key fiscal reforms, notably the Agricultural Income Tax, underpin the process of rebuilding policy making credibility. Continuing to mobilize greater revenue from under taxed sectors and the noncompliant will make the tax system more equitable and efficient, according to the IMF. "The State Bank of Pakistan's (SBP) tight monetary policy stance has been pivotal in reducing inflation to historic lows. Monetary policy should remain appropriately tight and data-dependent to ensure inflation is anchored within the SBP's target range, the fund emphasized. A more flexible exchange rate will facilitate the adjustment to external and domestic shocks, aiding the rebuilding of reserves, according to Nigel.
Express Tribune
06-05-2025
- Business
- Express Tribune
Govt may hike agri input taxes
Listen to article The government may double the excise duty rate on fertiliser to 10% and introduce at least 5% new tax on pesticides in the budget, the two critical inputs for the crops that may get expensive amid heightening challenges for the agriculture sector. Among the other proposals, it is considering starting limiting the tax-free status currently available to the Special Economic Zones from fiscal year 2025-26 and reducing the super income tax rate by 2% to 8%, said the tax officials. However, the reduction in the super tax rate, which could cost Rs28 billion to the government, would depend upon finding other tax avenues, they added. The proposals are part of the government's taxation measures that it wants to introduce in the new budget to achieve the overall Rs14.3 trillion tax target in fiscal year 2025-26, according to the senior tax officials. The government is already charging 5% Federal Excise Duty (FED) on fertiliser, which it wants to double for generating additional around Rs50 billion in the next fiscal year, said the sources. They added that the 5% FED might also be introduced on the pesticides. One of the options was that instead of 5%, the duty on pesticides should also be 10% equal to the fertiliser rate. The government has already committed to the International Monetary Fund (IMF) to increase taxes on agricultural inputs, leaving little room for reversal, even if the Pakistan Peoples Party opposes the move in the budget proposal, said the sources. The farmers have long been complaining to the government about the rising cost of their inputs coupled with their low quality. In its meeting with Prime Minister Shehbaz Sharif, the PPP delegation on Monday had urged the government to prioritise the agriculture sector in the next budget to achieve economic growth. The agriculture sector is already struggling after the government abruptly withdrew the agriculture support price mechanism without timely intimating the farmers. The sector has been grappling with issues of climate change, limited water availability and insufficient reservoirs to store water, which is also now at the centre of India-Pakistan tensions. For the first time, the farmers will also pay income tax at rates ranging as high as 45% from the next fiscal year on the income that they earned from January onwards. At the time of negotiations for the $7 billion bailout package, the federal government had promised the IMF that it would end preferential treatments to reduce distortions. The government had explicitly committed with the IMF that "its large-scale interventions in markets for agricultural commodities, including fertilisers, are no longer fit for purpose" of ensuring food security. The low or no FED rate on the fertiliser and the pesticides are described as "distortions stifling private sector activity and innovation, exacerbated price volatility and hoarding, and placed fiscal sustainability at risk." The IMF and the federal government think that the farmers excessively use fertilisers, which is polluting the environment. The sources said that the government was considering the possibility of reducing the super tax rate by 2% to 8%. The business community has long been demanding to completely abolish the current 10% super tax, which the government charges from high earner individuals and companies. However, due to its major contribution in the tax collection, the government is reluctant to completely abolish it. Some of the companies have also challenged the levy in the courts on the point of collecting it from the past. The government is planning to set the revenue collection target at Rs14.3 trillion or 11% of the GDP for the next fiscal year. The sources said that the IMF has already asked to propose tax measures to achieve this target. The discussions with the IMF will take place from May 14th. There is also a view in the government that the Rs14.3 trillion target can be achieved without taking additional measures, as the new target was 16% higher than this year's revised goals. SEZs The government also promised with the IMF that within 10 years, it will completely abolish the tax-free status of the Special Economic Zones (SEZ). As part of the commitment, the government plans to amend the tax laws in the budget to lower the tax-free status to nine years, starting from July, said the sources. Shehbaz Sharif's government has promised with the IMF that it will refrain from providing companies with fiscal incentives such as tax breaks or other subsidies. In another move, it has engaged the AT Kearney firm for conducting an assessment of the fiscal costs and effectiveness associated with each SEZ. The report will be ready before the end of June, said the sources. According to the plan, the government will not provide new fiscal incentives to any new or existing SEZ, and will not renew existing ones. By end-June 2025, the government will prepare a plan based on the assessment conducted to fully phase out all current SEZs incentives by 2035, subject to pre-existing contractual obligations. During the transition period between 2024 and 2035, the government will replace pre existing profit-based incentives with cost-based incentives, subject to compliance with existing legal commitments. For those cases where contractual provisions allow for early termination or renegotiation of existing SEZ incentives, Pakistan will phase out such incentives insofar as allowed by these legal provisions.
