Protecting Germs While Fighting Growth – Journal
The policy shift to move out of stabilization mode and into growth mode is being synchronized by the government with the first signs of recovery and a surge in earnings triggered by large corporate stimulus measures. This, despite the downside risks associated with Covid-19, has improved the outlook for capital spending necessary for higher economic growth. Other incentives are expected to be announced in the 2021-2022 budget to stimulate economic activities.
Net profits for the top 94 companies listed on the Pakistan Stock Exchange, and included in the KSE-100 index, jumped 82% year-on-year to a record high of Rs 243 billion in January-March, against 133 rupees. 65 billion published for the first quarter of last year.
In the eight months of the current fiscal year, foreign manufacturing companies have turned over an additional 50% of profits to their parent companies, or $ 418 million compared to $ 278 million in the same period last year. Large-scale manufacturing output in July-March increased 8.99% year-over-year despite lower output in February and March. In the corresponding period, growth of 43.61% was recorded in the information technology and telecommunications sector.
The federal public sector development program is significantly improved to reach Rs 900 billion, but the allocation and use of its funds is slower than expected and the completion of projects is often delayed
Improving financial performance of major national and multinational companies was followed by 186% growth to 2,185 new companies registered by Pakistan’s Securities and Exchange Commission in April compared to the number in the same month last year . They included 47 companies with foreign capital. Nothing boosts private sector investment more than solid profits when paired with a growing economy.
For the first time, 194 companies – the highest number in a month – were registered in the IT sector, followed by the commercial sector with 180 companies. Officials estimate that the IT sector has the potential to increase exports from $ 1 billion to $ 8 billion. Finance Minister Shaukat Tarin said the sector will be fully supported in the next budget, hoping it will be a game-changer for Pakistan in the next five to ten years.
The measures proposed for the next budget, as indicated in official statements, are briefly summarized as follows. A special vehicle will be created to consolidate the industry and attract foreign direct investment. To make industry and exports competitive, a real corporate culture would be introduced. In a related development, Amazon has decided in principle to add Pakistan to the list of sellers. The platform will allow exporters to sell products.
Inflation, incomes, the energy sector, agriculture and economic growth have been identified as the main challenges facing the economy. The main focus will be on development and incentives will be provided to industry, agriculture and housing to create employment opportunities and maintain the growth of industries.
For harmonized intersectoral growth, short, medium and long-term plans necessary for large-scale sustainable and inclusive growth are being prepared by the Economic Advisory Council for 12 sectors identified by the Ministry of Finance.
By adopting innovative methods, the tax / GDP ratio would be improved by 1 to 2% per year. For example, to broaden the revenue envelope, the housing industry and small and medium-sized enterprises will be encouraged
The electricity tariff will not be increased and the tax revenue target will be significantly revised downward from the targets set by the International Monetary Fund (IMF) previously agreed by the authorities. The government would give the Fund another plan to contain circular debt in the electricity sector.
Mr Tarin told a National Assembly panel that a mechanism had been prepared to reduce the general sales tax (GST), now at a very high rate of 17%, while work is underway on a sales tax system for small businesses. It is proposed to reduce tariffs on raw materials for textiles, pharmaceuticals, chemicals, dairy, food processing, engineering, footwear, etc., said Mr. Razak Dawood, adviser. of the Prime Minister for Trade and Investment.
Responding to the position taken by Pakistan, IMF Communications Director Gerry Rice said, “We are ready to help Pakistan overcome the difficult situation it is facing due to the Covid crisis while at the same time helping to ensure the goal of debt sustainability with strong and sustainable growth. As of April 2020, the Fund had granted Pakistan $ 1.4 billion under the rapid financing instrument to respond to the pandemic shock.
Speaking at a May 6 press briefing, Rice said the IMF looked forward to continuing discussions with Pakistani authorities at the time of the sixth review. Dr Hafeez Pasha believes the IMF program could be put on hold because renegotiations may not be acceptable to IMF staff after approval by the IMF board.
In the revised budget strategy, Train says “we will treat agriculture as a major industry” and spend money to lift the sector out of the current stagnant production. He noted that there was a large disparity in farm-to-market prices as middlemen eliminated 40-50% of the gap by exploiting producers. Cold stores would be established across the country by a proposed special enterprise where farmers would unload their produce and go to the commodity market. A Kamyab Kissan program will be launched to reduce poverty and promote prosperity.
Prime Minister Imran Khan told his economic team at a recent meeting that development for the next fiscal year should be a tool to move from stabilization to growth. The Federal Public Sector Development Program (PSDP) is being dramatically improved to reach Rs 900 billion. Apparently, this is a tall order. The allocation and use of funds for the federal PSDP is slower than expected and the completion of projects is often delayed, affecting their viability.
Federal development spending fell 22.5 percent to 264 billion rupees in the first nine months of the current fiscal year, from 340 billion rupees in the same period last year. It has now been decided that timely completion of projects will be ensured through “constant monitoring” of ongoing projects.
During the corresponding period, provincial development expenditure increased by 2% to 390 billion rupees from 382 billion rupees. However, Sindh Chief Minister Syed Murad Ali Shah laments that his province’s development spending has been cut because it only received 70% of its share of the divisible tax pool of the National Finance Commission. during the 2019-20 fiscal year.
Posted in Dawn, The Business and Finance Weekly, May 17, 2021