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All eyes on budget 2022-23 as Pakistan struggles to revive economy



  • Pakistan braces itself for budget 2022-23 to be presented before National Assembly at 4pm.
  • It will be presented by Finance Minister Miftah Ismail.
  • This is being dubbed by economists as “one of the toughest budgets in Pakistan’s history”.

ISLAMABAD: All eyes are on the Prime Minister Shehbaz Sharif-led government as it sets out to present its first budget while the country races against the clock to resume disbursements under a $6 billion International Monetary Fund (IMF) loan programme.

The government will present the budget for next fiscal year 2022-23 in Parliament today, with special focus on fiscal consolidation to contain a budget deficit.

Minister for Finance Miftah Ismail will present it before the National Assembly at 4pm. It is being dubbed by economists as “one of the toughest budgets in Pakistan’s history”.

Despite official claims that the budget will restore stability to Pakistan’s economic outlook, the downside risk is difficult to ignore.

In the run-up to Pakistan’s new fiscal year beginning next month (July), independent economists have begun to forecast inflation of up to 20% over the next 12 months, at least in many key areas. This is clearly a staggering increase from the expected inflation of more than 13% in the fiscal year ending this month.

The upcoming increase will be primarily driven by a recent price increase of about one-third in domestic fuel prices, a 45% increase in gas tariffs, and a 40% to 50% increase in the cost of electricity.

Together, Pakistan’s increasingly expensive energy mix will inevitably force middle and low-income households to tighten their belts as never before. The spillover is set to be felt in increasingly expensive essential services such as healthcare and education — just two key ingredients in the life of any mainstream family. Pakistanis are about to face one of the hardest times in recent history, and no amount of sugarcoating will help.

The heavy cost of a return to normalised relations with the IMF following such unpalatable measures may appear to some as a bitter pill not worth swallowing. However, it is the inevitable bitter pill that Pakistan must swallow to save it from short-term economic ruin. The next IMF disbursement of US $1 billion on its own seems far too modest by comparison to the painful measures about to be inflicted on millions of households. But the value of a restored relationship with the Washington-based lender will come through Islamabad’s heading successfully towards accessing other sources of loans. On Thursday, finance minister Miftah Ismail used his pre-budget news conference to announce an imminent increase likely in Pakistan’s existing foreign currency reserves by about 25 per cent to US$12 billion in the next few days, on the back of a Chinese loan of US$2.4 billion.

Yet, the budget will present Pakistan with two recurring challenges—the matter of meeting tax collection targets and narrowing the divide between exports and imports, to protect the country against another balance of payments crisis. On both of these counts, a restored relationship with the IMF provides a few assurances that Pakistan will successfully oversee sweeping reforms to make a difference. For prime minister Shehbaz Sharif, leading a government that is not too far from the next elections, hardly helps.

Already, the twin combinations of sharply rising inflation and energy shortages displayed in daily lives through the dreadful reality of frequent loadshedding have hardly helped to block official credentials from heading southwards.

In the coming months, Pakistan’s continuing economic challenges will likely deepen the pressure on the Sharif government to maintain recent curbs on imports, to narrow the international trade gap. This will inevitably become the outcome of a situation where Pakistan’s space to pump up its exports will remain limited. As long as oil prices stay high and there is no sign of them going down to more affordable levels, import limits will also be a hard problem to solve.

Pakistan’s economic pain will likely remain in place, and possibly even get aggravated, in the presence of high interest rates. Many independent economists say that if inflation keeps going up, the State Bank of Pakistan will be forced to raise its interest rates even more.

Meanwhile, Pakistan’s continuously rising political pressure for the foreseeable future is set to undermine the country’s economic journey. Former prime minister Imran Khan’s continuing clamour for parliamentary elections ahead of summer 2023, will likely keep the country’s overall atmosphere on the boil. Even if the Sharif government stays in place until next year, Khan’s actions will make it less likely that it will be stable, which will hurt the economy.

When finance minister Miftah Ismail rises in parliament on Friday to present the budget, he may well find comfort in delivering his speech uninterrupted in the absence of opposition members. Yet, beyond a relatively smooth delivery of the budget speech, the road ahead is set to be tougher than any seen ever before in recent times.


Pak Suzuki plans to export cars




  • Company working on hybrid variants, says CEO. 
  • Hiroshi Kawamura calls local participants for joint efforts.
  • Notable part manufacturers attend meeting. 

LAHORE: Pak Suzuki Motor Company Ltd (PSMCL) chief executive Hiroshi Kawamura has said that the company has been working on exports of cars which have been upgraded to many WP-29 standards, The News reported Friday. 

Addressing the second round of interactive meetings with the part-makers — held under the banner of Suzuki Motors — Kawamura said that the economic issues were transitory and the automobile company was committed to providing affordable vehicles to common Pakistanis.

The CEO also revealed that the company was working on hybrid variants.

Participants of the meeting, which was attended by notable part manufacturers, unanimously agreed that the automakers should promote localisation, while also reaching out to global markets.

Calling the local participants for joint efforts, Kawamura said: “It is imperative to take stock of the escalating crisis collectively for the automotive industry.” 

“Nothing can be achieved without local partners.”

Addressing the meeting, Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Senior Vice Chairman Usman Aslam Malik assured of complete support to original equipment manufacturers (OEMs) for the export of auto components.

It should be noted that WP-29 standards are a unique worldwide regulatory forum within the institutional framework of the UNECE Inland Transport Committee.

Three UN Agreements, adopted in 1958, 1997 and 1998, provide the legal framework allowing contracting parties (member countries) attending the WP.29 sessions to establish regulatory instruments concerning motor vehicles and motor vehicle equipment.

Those are UN Regulations, annexed to the 1958 Agreement; United Nations Global Technical Regulations (UN GTRs), associated with the 1998 Agreement; and UN Rules, annexed to the 1997 Agreement.

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Govt plans austerity measures by slashing Rs1.9tr expenditures




  • Govt decides reducing operational spending on devolved ministries.
  • Recommends ban on new posts, hiring daily wages/other staff, etc. 
  • Considers implementing cost-sharing mechanism of BISP with provinces. 

ISLAMABAD: The caretaker government is planning to take austerity measures by cutting down expenditures by Rs1.9 trillion including banning new posts, purchasing security vehicles, and slashing down allocation for development, The News reported Friday. 

The government has also considered making a treasury single account (TSA) and asking the federal ministries and attached departments to shift the money into the federal government account to save up to Rs424 billion.

It has been calculated that 10% of the expenditures incurred on running the federal government in FY22 could save Rs54 billion as worked out by the World Bank. 

The government has also decided to reduce the operational spending on devolved ministries to save up to Rs328 billion for the whole financial year 2023-24. 

In the aftermath of the 18th Amendment, different subjects were transferred to the provinces but the centre continued spending, causing losses to the national exchequer.

A detailed working of the government considered by the high-profile Cabinet Committee on Economic Revival (CCER) so far proposed certain austerity measures to cut down the expenditures by up to Rs1.9 trillion on a short-term basis. 

However, it is yet to be seen if these measures will be implemented in letter and spirit. 

It recommended that the federal and provincial governments both take austerity measures to reduce the expenditures by Rs54 billion for six months such as slapping a ban on new posts, hiring of daily wages/other staff, ban on purchasing new vehicles including from project funding, ban on purchase of machinery and equipment except medical, ban on travel abroad including official visits, medical treatment, cabinet members to forego pay and government vehicles and security vehicles to be withdrawn.

The ambitious plan also envisages that the triage of 14 loss-making entities will potentially save Rs458 billion for the whole financial year. The reduced operational spending on devolved ministries is going to save up to Rs328 billion during the current financial year.

The Ministry of Finance has estimated that the devolution of the Higher Education Commission (HEC) to the provinces would save Rs70 billion per annum. Education had become a provincial subject in the aftermath of the 18th Amendment but the Center recontinued with the HEC at the federal level. 

The caretaker regime has placed it as an agenda to devolve the HEC to the provinces so it is yet to see how much they are going to succeed on this front. 

Moreover, it is also considering implementing the cost-sharing mechanism of the Benazir Income Support Programme (BISP) with the provinces to save Rs217 billion on an annual basis.

The federal government is also considering re-focusing the Public Sector Development Program (PSDP) spending only on federally mandated projects which could save Rs315 billion annually. 

Caretaker Minister for Finance Dr Shamshad Akhtar had already directed the minister for planning to work out details of projects of a provincial nature for their removal from the list of PSDP to cut down the expenditures by Rs315 billion for the current fiscal year. 

The last Pakistan Democratic Movement (PDM)-led regime had allocated Rs950 billion for the PSDP in budget 2023-24.

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PKR on track to become top-performing currency this month: Bloomberg




  • Pakistani currency rose around 6% this month against dollar.
  • Authorities curb leakages happening through illegal channels. 
  • Crackdown on illegal dollar traders helps local currency. 

The Pakistani rupee is on track to become the top performer globally in September as the caretaker government continues its crackdown on illegal dollar trade, Bloomberg reported Thursday.

The local currency rose around 6% this month against the dollar — an amazing feat despite the Thai baht and South Korean won tumbling against the greenback.

Major currencies lost ground against the dollar on speculations that the US interest rates will stay elevated for longer.

The rupee increased 0.1% to 287.95 per dollar on Thursday, after sliding to a record low of about 307 this month. Pakistan’s currency market will remain closed for the Eid Miladun Nabi holiday on Friday.

“Many leakages were happening through illegal channels of hawala and hundi trade from the open market,” Khurram Schehzad, chief executive officer of Alpha Beta Core Solutions Pvt Ltd, told Bloomberg.

“When the dollar rate reverses everybody, the hoarders, the exporters who are holding their export proceeds, start selling their dollars,” Schehzad said.

The interim rulers have intensified efforts by launching a crackdown on people involved in the illegal dollar trade, allowing the currency to gain some lost ground.

The Federal Investigation Agency, Bloomberg reported, conducted raids across the country and security officials in plainclothes were deployed at money exchanges to monitor dollar sales as part of the crackdown.

Caretaker Prime Minister Anwaar-ul-Haq Kakar this week said the rupee’s gain is “fostering optimism for stability.”

For its part, the State Bank of Pakistan raised the capital requirements of smaller exchange companies and ordered large banks to open their own exchange companies to make the retail foreign exchange market more transparent and easier to monitor.

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