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Express Tribune
07-06-2025
- Business
- Express Tribune
Govt walks a tight rope
FDI in various sectors, including power, oil and gas exploration, financial, and petroleum refinery sectors, witnessed a 6.4-fold increase, reaching $211 million in December 2023 compared to $33 million last year. photo: afp Listen to article The government will walk a tight fiscal rope in the next fiscal year, too, as it plans to unveil the second budget on Tuesday envisaging a federal budget deficit of Rs6.2 trillion or 4.8% of size of the economy. The total size of the budget is expected to be around Rs17.6 trillion, which is 7.3% less than this year's original budget due to relatively lower allocations for the interest payments in fiscal year 2025-26, according to the Finance Ministry's budget estimates. The government sources said that the proposed budget deficit is 2% of the GDP or Rs2.3 trillion less than the original estimates of this fiscal year. The deficit may still be appearing large in absolute terms. But it is, for the first time, lower than this year's gap, both in terms of size of the economy and in absolute numbers. The tight budget envisages fiscal consolidation of 2% of GDP, as the government is planning to set the budget deficit target at 4.8% of GDP, the sources said. This will be 2% of GDP or Rs2.6 trillion lower than this fiscal year's target. Finance Minister Muhammad Aurangzeb will deliver his second budget speech on June 10. The expenditure path is known to be narrower and predicted. However, it seems that the government may again adopt the business as usual approach on the revenue front, which is unsustainable and puts the country's marginalized salaried class and corporate sector at risk of being insolvent. The fiscal consolidation is the need of the hour but it will drastically reduce the government's ability to spend due to no space left for any productive spending after making payments for the interest servicing and defense. However, whatever space is left is not prudently used and the sources said that the quality of spending becomes poorer with large allocations for provincial projects, discretionary spending on the schemes recommended by the Parliamentarians at the expense of space technology and atomic energy programmes. The sources said that the fiscal consolidation is again planned to be achieved by putting more burden on the people, directly as well as indirectly. The government is projecting gross federal revenues at record Rs19.4 trillion for next fiscal year, higher by Rs1.6 trillion. The gross revenues are based on the Federal Board of Revenue's tax target of Rs14.13 trillion and Rs5.2 trillion non-tax revenues. The non-tax income will mainly come from the Petroleum Levy, which the government wants to increases to nearly Rs100 per liter, and the profit by the State Bank of Pakistan. The sources said that like this fiscal year, the FBR may remain the weak area in the next fiscal year, too, despite the required growth to achieve the goal will be far lower than this year. The new tax collection target will become challenging from first day of next fiscal year because the FBR will not be able to achieve even the downward revised target of Rs12.3 trillion, said the sources. This will erode the base of new tax target. Prime Minister Shehbaz Sharif tried everything to put the FBR house in order but all those measures backfired. The FBR's ability to predict revenue estimates is also not up to the mark and this year the World Bank experts helped in projecting numbers, said the sources. Out of the Rs14.1 trillion FBR tax collection, the provinces will get Rs8 trillion as their shares in the federal taxes under the National Finance Commission award, the sources added. This leaves the federal government with Rs11.4 trillion net revenues for next fiscal year, which will not be sufficient to meet the interest payments and inclusive all defense spending, according to the government sources. The government will borrow Rs6.2 trillion in the next fiscal year to finance the Rs17.6 trillion total federal budget. Under the IMF programme, the four provinces are also required to save Rs1.33 trillion from their revenues as cash surplus to bring down the national budget deficit to Rs4.8 trillion or 3.7% of GDP, the sources said. This is steeper fiscal consolidation and would require all the five governments to meet all their revenue and expenditures related targets. The four provinces have indicated nearly Rs2.9 trillion for their development spending in the next fiscal year. This is Rs850 billion more than what the IMF has allowed to spend to the four provinces under the national fiscal framework. Punjab has indicated Rs1.2 trillion record spending on development, followed by Rs995 billion by Sindh.
India Gazette
22-05-2025
- Politics
- India Gazette
TN: Sri Lankan Navy allegedly harasses Nagapattinam fishermen in mid-sea
Nagapattinam (Tamil Nadu) [India], May 22 (ANI): Fishermen from Seruthur village in Nagapattinam district of Tamil Nadu have alleged that they have been harassed by the Sri Lankan Navy personnel when they were fishing southeast of Kodiakkarai in a fibre boat. During the incident, Sri Lankan Navy personnel reportedly rammed their vessel into the Indian fishing boat and seized fishing nets worth Rs2.6 lakh, a GPS device, a walkie-talkie, and other equipment. The fishermen alleged that the Sri Lankan naval patrol ship also cut their fishing nets, seized the fuel from their boat, and engaged in a clear act of harassment. Fishermen Shanmugam, Jayaraman, Sakthimayil, and Manimar, who lost their fishing gear and equipment, have since returned to the shore in fear. Tamil Nadu fishermen getting arrested by the Sri Lankan Navy is a recurring instance, for which the State leadership has sought a permanent solution from the Centre, even by retrieving Katchatheevu island, located in Palk Bay, from Sri Lanka. In April this year, the Tamil Nadu Legislative Assembly unanimously adopted a resolution, urging the Union government to take steps to retrieve the Katchatheevu island. The resolution moved by Chief Minister MK Stalin said, 'Retrieval of Katchatheevu island is the only permanent solution to protect the traditional fishing rights of Tamil Nadu fishermen and to mitigate the sufferings faced by them due to the Sri Lankan Navy.' On March 27 this year, the Sri Lankan Navy apprehended 11 Tamil Nadu fishermen and took them to Kangesanthurai Naval camp for investigation, officials said. Earlier on March 20, 13 Tamil Nadu fishermen who were arrested by the Sri Lankan Navy for allegedly fishing outside the approved boundaries returned home to India after being handed over by the Indian Embassy in Colombo. The group of fishermen were arrested on February 26 and was produced in Mallakam court in Sri Lanka, kept imprisoned for nearly a month. Additionally, three fishermen were also admitted to a government hospital in Sri Lanka due to sustaining injuries. The Sri Lankan court reportedly released 13 fishermen on March 12 after talks between the two sides. On February 23, Tamil Nadu Chief Minister MK Stalin expressed concern over the increase in the capture of Indian fishermen by the Sri Lankan Navy, urging the Centre to convene a Joint Working Group (JWG) to find a permanent solution to the issue. (ANI)
Express Tribune
18-05-2025
- Business
- Express Tribune
A crucial milestone in economic stabilisation
Listen to article Pakistan's economy has once again come under the international spotlight following the disbursement of a $1.023 billion tranche by the International Monetary Fund (IMF), part of a larger $7 billion Extended Fund Facility (EFF) aimed at stabilising the country's ailing macroeconomic landscape. With foreign exchange reserves under pressure and fiscal reforms lagging, the IMF programme is both a relief and a significant challenge for Pakistan's policymakers. The $1 billion disbursement, announced by the State Bank of Pakistan (SBP), is expected to bolster the country's foreign currency reserves in the short term. The reserves, which had dipped below $8 billion earlier this year, are vital for ensuring import cover, maintaining currency stability and fostering investor confidence in the economy. With looming external debt repayments and a trade imbalance, the inflow has offered a temporary breathing room. However, it is the IMF's conditionalities that will ultimately determine the long-term trajectory of Pakistan's economy. Among the most significant conditions tied to the EFF are fiscal reforms focused on enhancing domestic revenue mobilisation. Pakistan's tax-to-GDP ratio continues to hover around 9.5%, far below the regional average and insufficient to meet the country's growing public expenditure needs. In comparison, India and Bangladesh maintain tax-to-GDP ratios of approximately 16% and 12%, respectively. The IMF has emphasised the urgent need for Pakistan to broaden its tax base by including previously untaxed or under-taxed sectors such as agriculture, retail and real estate. As part of the new commitments, the government has pledged to increase the tax-to-GDP ratio by at least 1.5% in the current fiscal year and by 3% over the life of the IMF programme. Agricultural income tax reform has been a particular focus as agriculture accounts for nearly 20% of Pakistan's GDP but contributes minimally to tax revenues. The government has agreed to implement progressive tax rates on agricultural income, with rates reaching up to 45% by January 2025. This move has been controversial, particularly among powerful landlords, who have traditionally resisted attempts to formalise and tax the sector. Nevertheless, experts argue that equitable taxation is essential for ensuring both revenue growth and social justice. The energy sector, long a drain on public finances, has also come under IMF scrutiny. Chronic losses in state-owned power distribution companies (DISCOs) due to theft, line losses and inefficiencies have contributed to the ballooning circular debt, which now stands above Rs2.6 trillion. To address this, the government has committed to privatising two DISCOs by early 2025 and phasing out power and gas subsidies, particularly those granted to influential industrial and agricultural groups. Furthermore, provincial governments have pledged not to offer new subsidies and to halt the establishment of additional Special Economic Zones (SEZs) and Export Processing Zones (EPZs), which have historically enjoyed tax exemptions and utility benefits. Removing subsidies and increasing utility tariffs have sparked political backlash, especially among the middle and lower-income segments of society. Electricity prices have already been adjusted upwards multiple times over the past year, with further hikes likely in the near future. Inflation has eroded the purchasing power and led to widespread public discontent. The government faces a delicate balancing act – meeting IMF conditions without triggering a social and political crisis. The IMF programme has also stirred geopolitical tensions. Following the recent loan disbursement, India raised objections, alleging that Pakistan might misuse the funds to support cross-border terrorism, especially in light of a recent militant attack in Kashmir. In response, Prime Minister Shehbaz Sharif rebuffed the allegations, calling them baseless and politically motivated. He emphasised that the IMF's approval was based on Pakistan's fulfillment of stringent economic criteria and that any attempts to derail the programme had failed. These tensions underscore broader regional complexities in which Pakistan's economic recovery is embedded. Despite the challenges, some positive developments have emerged from the IMF agreement. Improved transparency, better fiscal monitoring and the revival of stalled structural reforms are seen as signs of growing policy maturity. The government has also committed to enhancing the autonomy of the State Bank of Pakistan, strengthening anti-corruption institutions and improving the accuracy of budget forecasting and reporting. These measures are critical for restoring the confidence of both domestic and foreign investors, many of whom have remained on the sidelines due to persistent economic uncertainty. The IMF's involvement is likely to unlock additional financing from multilateral lenders such as the World Bank, Asian Development Bank (ADB) and Islamic Development Bank (IsDB). These institutions typically view the IMF approval as a signal of macroeconomic discipline and policy coherence. Already, discussions are underway for the release of additional project-based funding contingent upon Pakistan's progress in meeting IMF benchmarks. This supplementary support will be crucial for financing infrastructure, health care and education projects that might otherwise be sidelined due to fiscal constraints. The path to sustained recovery will depend on the government's ability to implement reforms consistently and inclusively. The private sector, civil society and provincial administrations all have critical roles to play in this process. Without broad-based political consensus and institutional support, even the most well-intentioned reform packages risk faltering. Economic transformation cannot be achieved through donor-driven policies alone; it must be rooted in local ownership and guided by long-term strategic planning. The government must prioritise social protection and inclusive growth to mitigate the impact of austerity measures on vulnerable groups. Expanding the targeted cash transfer programmes like the Benazir Income Support Programme (BISP), investing in education and skills development and supporting small and medium enterprises (SMEs) can help lay a more resilient economic foundation. Only through such comprehensive efforts can Pakistan ensure that stabilisation leads to sustainable prosperity, not just temporary relief. The recent $1 billion IMF disbursement is a welcome development for Pakistan's strained economy, offering both immediate fiscal relief and a framework for structural reform. However, the true test lies in execution. Meeting IMF conditions such as increasing tax revenues, eliminating subsidies and reforming state-owned enterprises will require political will, administrative capacity and public support. With economic resilience hanging in the balance, the stakes have never been higher. The choices made in the coming months will shape not only Pakistan's financial stability but also its social and political trajectory for the years to come. The writer is a member of PEC and has a Master's in Engineering.
Hans India
17-05-2025
- Business
- Hans India
Another RBI dividend booster in sight
Mumbai: Economists expect the Reserve Bank of India's (RBI) dividend to the government to surpass a record over Rs2.5 lakh crore this year as the central bank earnings, through the sale of dollars to prop up the rupee as it sharply depreciated during 2024-25, are reported to have shot up. This higher profit will be transferred to the government as a dividend in 2025-26. The previous record dividend transferred to the government stands at Rs2.1 lakh crore during 2024-25, which helped to keep the fiscal deficit in check, while enabling the Finance Ministry to continue with its expenditure on big ticket infrastructure projects to spur growth and social welfare schemes to uplift the poor. This was a record jump from the Rs87,416 crore transferred to the government in 2023-24 for the profit made in 2022-23. Similarly, the government is expected to get another booster shot through the RBI dividend in the current financial year as well. 'Among the RBI's earnings, forex transactions are expected to be most significant in light of the in light of the central bank's measures to lower rupee volatility by strong dollar purchases earlier in fiscal 2025 and difference in the current versus historical exchange rate. Add to this the interest income on government securities and earnings from funds extended to banks in midst of previous tight liquidity. 'This transfer could amount to a record high at around Rs2.5-2.7 lakh crore this year,' said Radhika Rao, senior economist at DBS Bank. Earnings on forex transactions are expected to be substantial with gross dollar sales tracking at $371.6 billion in fiscal 2025 till February compared to $153 billion in fiscal 2024, according to Gaura Sengupta, chief economist at IDFC First bank. She estimates the RBI dividend to be between Rs2.6 lakh crore to Rs3 lakh crore, according to an NDTV Profit report. The higher dividend creates fiscal space of 0.1 per cent to 0.2 per cent of GDP, estimates Sengupta. With support from the higher-than-budgeted RBI surplus and savings on a few expenditure heads, the central government is in a fairly strong position to counter the growth slowdown risks and any potential emergency spending requirements.
