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Pakistan striving to rebound strongly from current economic challenges: SBP chief

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  • SBP chief briefs investors, fund managers on current challenges, way forward.
  • Says challenges largely driven by “adverse global shocks, domestic developments”.
  • Inflation expected to ease in coming months; financing uncertainty to end after IMF deal.

State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that the country was striving to rebound strongly from the current economic challenges, including external financing woes and record inflation.

He stressed that Pakistan’s economy had “always rebounded strongly after undergoing severe shocks”.

“No doubt, this time, we have faced not one but a series of domestic and global shocks. But we strive to rebound strongly from the current challenges as well.”

He made the remarks while addressing international investors and fund managers at an event organised by Barclays in Washington, United States on Pakistan’s economic challenges and the way forward.

A statement issued by the central bank said Ahmad briefed the attendees about the challenges Pakistan is facing, the policy responses and the way forward.

The SBP chief noted that the economic challenges, including high inflation and balance of payments pressures, were largely driven by “adverse global shocks and domestic developments”.

Even though global commodity prices had fallen from the peak reached in 2022, they were still “significantly high” and thus, were taking a toll on domestic inflation and the current account, he elaborated. The rupee has depreciated sharply over the last few months, which has increased the cost of living for consumers in the heavily import-dependent country.

At the same time, the SBP chief said, tightening global financial conditions have made it harder for emerging markets such as Pakistan to access international financial markets. Consequently, this put stress on the country’s foreign exchange reserves, which have fallen to critically low levels in recent months, and the exchange rate. The devastating floods of 2022, which caused damages of $30 billion, had worsened the country’s economic distress, he pointed out.

Ahmad also spoke about the country’s external balance of payments situation, noting that Pakistan had met all its obligations in a timely manner contrary to earlier market expectations. 

“The country’s debt repayments have been rather front-loaded, whereas inflows have been gradual,” he explained.

He said the country was receiving fresh financing in addition to loan rollovers ahead of the expected revival of a loan programme with the International Monetary Fund (IMF).

Policy response

Elaborating on the central bank’s policy measures, the SBP chief said it had raised the benchmark interest rate by 1,400 points to 21% in the last 18 months and tightened regulations to rein in inflation and reduce the current account deficit.

In addition, the exchange rate had adjusted over the last few months, which he termed the “first line of defence against emerging external imbalances”.

The fiscal deficit had reduced due to the government’s contractionary fiscal policy, despite flood rehabilitation-related expenditure. The primary balance was also in surplus so far compared to a deficit last year, he noted.

“The country is on its way to achieving macroeconomic stability, as the impact of policy measures is already playing out in the economy. The current account deficit has narrowed and foreign exchange reserves, albeit low, are increasing,” he remarked.

Inflation was expected to decrease in the coming months while the revival of the IMF programme would remove uncertainties regarding external financing, Ahmad added. 

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Tajir Dost app: traders don’t seem interested in registering

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To tax retailers in Pakistan, the Tajir Dost app was released. The sources stated that the government hopes to tax 3.5 million merchants through the app.

Ajmal Baloch, the president of All-Pakistan Anjuman-e-Tajran, stated that he made reservations with FBR on the SRO within a week.

The Federal Board of Revenue (FBR), according to him, cannot be a “Tajir Dost” because of its unethical actions.

Baloch believed that since electricity bills allow traders to pay a predetermined advance income tax, further taxes are unnecessary.

The trader, according to him, is already paying thirteen different kinds of taxes on the commercial meter. “A trader already pays between Rs. 15,000 and Rs. 20,000 in taxes annually, but you are requesting Rs. 1,200 per month in taxes.”

Mr. Ajmal summoned representatives of the Federal Board of Revenue (FBR) to a meeting with the trade associations to talk about the indirect taxes that the merchants are paying.

Additionally, he claimed that FBR officers are charging the traders, the majority of whom are less educated, “monthly charges.”

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Donald Lu visits Finance Minister Aurangzeb at the World Bank headquarters.

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Wednesday saw Minister for Finance and Revenue Muhammad Aurangzeb meet US Assistant Secretary of State for South and Central Asian Affairs Donald Lu and Principal Deputy Assistant Secretary Elizabeth Horst.

The finance minister briefed US officials on Pakistan’s reform plan at the World Bank. Meeting both delegations decided to improve bilateral ties.

Meeting topics included alternative energy, agriculture, climate, and tech industry. Boosting the Pakistan-US economic partnership was another finance ministry priority.

With US officials, Pakistan’s Finance Minister Muhammad Aurangzeb addressed IT, agriculture, and other business potential.

Pakistan would collaborate with the US International Development Finance Corporation and Exim Bank, according to Muhammad Aurangzeb.

His name is Donald Lu.
Over 30 years of US government service for Lu as a foreign service officer.

What Pakistan calls the “cipher” dispute involves the American official. The Pakistan Tehreek-e-Insaf (PTI) founder claimed that a supposed official letter between Washington and Islamabad proved his ousting as PM was a US conspiracy.

Washington has strongly refuted Khan’s allegations.

The State Department’s top South and Central Asia diplomat is Donald Lu, assistant secretary of state.

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Huge investment potential exists in the telecom and IT sectors. Shaza Fatima

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According to Shaza Fatima Khawaja, Minister of State for IT and Telecommunication, there are numerous investment prospects in Pakistan’s IT and telecom sectors.

She noted that the current administration is dedicated to fostering foreign investment in the nation, in line with the Prime Minister’s goal.

According to a news release, CEOs Wateen Adil Rashid and Muhammad Shahbaz Khan of Taavun (Pvt) Limited, who paid her a visit on Tuesday, spoke with Minister of State for IT and Telecommunication Shaza Fatima Khawaja.

She declared that the private sector would receive complete support because it is essential to growing our exports.

Regarding youngsters, she stated that they are our greatest asset and that efforts are being made to further their growth.

Sheikh Nahyan bin Mubarak Al Nahyan of the United Arab Emirates was thanked by Shaza Fatima for his particular interest in promoting additional investment in Pakistan’s telecom industry.

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