Gold roars to another record high in Pakistan
- Bullion extends record-making run as rupee devaluation worsens.
- Gold in Pakistan overcost by Rs5,000 per tola vs Dubai market.
- Dealers think gold to remain unstoppable in the near term.
Gold prices in Pakistan roared to a new record high Monday, while the rupee continued to whimper versus the dollar after being thrown to the mercy of the unruly market forces to coax the International Monetary Fund (IMF) into unlocking a stalemated loan, dealers said.
According to All-Pakistan Sarafa Gems and Jewellers Association (APSGJA), the price of gold (24 carats) increased by Rs1,500 per tola and Rs1,286 per 10 grams to settle at Rs210,500 per tola and Rs180,470 per 10 grams, respectively.
The jewellers’ body also said that local gold was “overcost” by Rs5,000 per tola in Pakistan, compared to the Dubai bullion market.
Dealers, who were already eyeing the 200,000+ per tola rate since the current price hike spree, cited record-breaking rupee devaluation and a steep decline in the foreign exchange reserves in the country as major factors contributing towards the massive price hike in the bullion market.
Investors were, however, purchasing only gold bars, not jewellery, which had not only reduced goldsmiths’ profit margins but the labour force was also at the stake of losing jobs, as jewellery makers were moving towards other professions in absence of work, The News reported on Friday.
“There was a decline in purchasing power of the people as more people now use artificial jewellery,” a goldsmith said, adding that the majority of the gold makers are also moving towards artificial jewellery.
Gold in the international market edged up on a weaker dollar, as investor attention moved to several central bank meetings this week for more clarity on their rate hike strategies, with the key focus on the US Federal Reserve.
Spot gold gained 0.1% to $1,928.36 per ounce.
“Gold is easing away from a nine-month high as the US dollar and yields stabilise, as markets eagerly await the Fed’s latest policy guidance,” said Han Tan, chief market analyst at Exinity.
The dollar was 0.2% lower, making bullion, which is priced in the US currency, more attractive for customers holding other currencies.
Market participants widely expect a 25-basis-point (bps) interest rate increase from the US central bank at the end of its two-day policy meeting on February 1.
Expectations are for a slowdown in Fed rate hikes after economic data showed signs of cooling U.S. inflation, while US consumer spending fell for a second-straight month in December, putting the economy on a lower growth path heading into 2023.
Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.
Govt mulls slashing duty on mobile phones in budget
ISLAMABAD: The Federal Board of Revenue (FBR) is mulling options to reduce the duty on mobile phones in the federal budget for the fiscal year 2023-24 — which is expected to be unveiled on June 9 — keeping in view the suggestions of Pakistan Mobile Phone Traders, The News reported Monday.
Previously, the government was obliged to raise the duty on mobile phones by 100% to 150%, and resultantly, only Rs5 billion to Rs10 billion were being deposited in the national exchequer instead of Rs85 billion.
The number of mobile phone users in Pakistan has exceeded 186.9 million.
In order to cope with the financial crisis of the current financial year, in the new budget, a proposal for a conspicuous reduction in the rates of duties on cellular phones is under consideration, which is about 100% to 150% at present on small and big mobile phones.
The mobile industry is on the brink of collapse due to an increase in taxes. It not only affected traders but also made the life of millions of people difficult to earn a livelihood.
It has been learnt that a delegation of the Mobile Phones Traders Association has given recommendations to Finance Minister Ishaq Dar and other senior officials.
The delegation ensured that efforts would be made to include the recommendations in the budget. These proposals and recommendations are being reviewed to make them a part of the new budget.
It has been learnt that a 75% duty was imposed on cellular phones in Pakistan as compared to other countries of the region like Singapore, Bangladesh and Turkey where it is not at that level. That is the reason people are using smartphones without paying duties in connivance with FBR.
The additional 100% to 150% duty on cell phones has made it out of reach of the poor, labourers, daily wagers, students, professionals, the lawyer community, and civil society.
All Pakistan Mobile Phones Traders Association General Secretary Munir Beg Mirza said that due to the ban on the import of used mobile phones, smuggling has increased to give favour to a few companies.
Also, people are using smartphones illegally without paying heavy taxes to enjoy all functions of smartphones, which is inflicting a loss on the national kitty.
He said that not only every consumer would pay tax but also the government would get Rs100 billion instead of Rs5 billion on phones if an appropriate duty was imposed in the new financial year.
Pakistan agrees to share budget details with IMF to unlock stalled programme
- “Pakistan has already completed all conditions of IMF,” Ishaq Dar says.
- FinMin says some powers do not want economic stability in Pakistan.
- Financial czar slams Imran Khan-led govt for violating pact with IMF.
Finance Minister Ishaq Dar has revealed that the coalition government has agreed to share details of its upcoming budget details with the International Monetary Fund (IMF) in order to unlock the stalled funds.
“They have asked us for some more details like the details of (the) budget, we will give that to them,” Dar said while speaking on Geo News programme Jirga on Sunday.
He reiterated that the country has fulfilled all conditions laid forth by the Washington-based lender to revive the stalled $6.5 billion programme and urged the global lender to release the funds before the upcoming federal budget due next month.
The financial czar said some powers do not want economic stability in Pakistan and blamed the previous Pakistan Tehreek-e-Insaf (PTI) government for “destroying” the country’s economy.
“Record inflation was witnessed during Imran Khan’s tenure,” he said, adding that the former prime minister did not honour the agreement with the IMF.
The IMF’s $1.1 billion funding to Pakistan, which is part of the $6.5 billion rescue package agreed in 2019, has been held up since November.
The IMF and Pakistan held two weeks of talks in February in Islamabad to conclude the 9th review, but the lender has not yet released the money, which is critical for the country to unlock other bilateral and multilateral financings.
The federal minister further said that he would want the IMF to release the funds before the budget was presented, which is due in early June. He added, “We will not do the 9th and 10 reviews together. This is unfair.”
Pakistan is making last-ditch efforts with the IMF to revive the stalled Extended Fund Facility (EFF) programme, The News reported earlier this month.
The hopes are diminishing each day mainly because the ongoing programme of $6.5 billion under the EFF will expire on June 30.
The parleys between Pakistan and the IMF continue for the completion of the ninth review, which was due on November 3 of last year. The formal negotiations started on January 31 when an IMF delegation visited Pakistan for in-person talks.
However, the two sides could not reach a consensus during the course of scheduled talks that ended on February 9. Since then, multiple online sessions have been held but the differences persist on conditions set by the Fund for the Staff Level Agreement (SLA).
If the SLA is not struck ahead of the upcoming budget for 2023-24, scheduled to be unveiled on June 9, the ongoing programme will face a failure.
“There are a couple of options left for moving forward. The first is by signing the SLA on an immediate basis and forwarding Pakistan’s request before the IMF Executive Board for approving the next tranche of $1 billion and also securing an extension in the EFF programme period by a few months in order to accomplish the 10th and 11th Reviews,” sources, privy to the background discussions told the publication.
The second option could be combining the 9th and 10th reviews and for Pakistan to share upcoming budgetary numbers with the IMF.
Then the SLA should be signed after the announcement of the budget and in case of its approval from parliament, the IMF’s Executive Board could approve combined tranches and also grant an extension to the EFF programme for accomplishing the 11th Review by July or August 2023.
“There are no easy options available; both sides will have to work out modalities for evolving consensus. But with the existing approach of maintaining the status quo, no breakthrough can be achieved,” said the official who spoke on the condition of anonymity.
High electricity prices moving beyond consumers’ affordability: study
A study found that rising electricity tariffs are increasingly moving beyond the affordability of the masses and adversely impacting their consumption patterns.
The study was conducted by the Institute of Policy Studies, Islamabad titled “Impact of Rising Electricity Prices on Consumer Behavior: The Case of Power Distribution Companies in Pakistan”.
The research study covered over 1,000 households and 140 shop owners in the top 10 cities of Pakistan.
The survey results indicate that most of the respondents have experienced moderate to significant increases in their electricity bills in recent months.
The study further highlights the correlation between the magnitude of the bill increase and the extent of consumption reduction, indicating that higher price hikes lead to more significant efforts in reducing electricity usage.
However, despite the overall reduction in electricity consumption, a significant portion of the survey participants reported no noticeable decrease in their bills.
It recommends the need for improved governance and regulatory measures in the energy sector along with affordable electricity tariffs and alternative payment options to accommodate different economic circumstances.
The study also stresses the importance of addressing issues such as load shedding and raising consumer awareness about peak hours when electricity costs are higher.
Moreover, it also found that the alarming trend also caused a sharp decline in the recoveries of distribution companies (DISCOs) which can lead to difficulties in paying for power purchases from the generation companies, maintaining distribution networks, and servicing debts.
These factors further hinder the ability of DISCOs to invest in infrastructure upgrades, provide quality services, and improve the overall reliability of electricity supply.
The research emphasises effective measures to address power affordability concerns and suggests strategies for distribution companies to mitigate the negative effects of rising prices.
Overall, the study provides valuable insights into the impact of rising electricity prices on consumer behaviour in Pakistan and offers recommendations for DISCOs and policymakers to address affordability concerns and ensure a sustainable balance between electricity prices and consumers’ ability to bear these costs.
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