Govt manages the real economy, but challenges remain

There is a lot of talk in the print media about the assessment of economy from FY14 to FY18 since a political dispensation is going to complete its tenure in May 2018.

Average gross domestic product (GDP) growth remained around 4.7% over this period along with a benign inflation. Fortuitously, international crude oil prices played a pivotal role in reducing inflation. However, there are certain positives and negatives of the Pakistani economy.

On the positive front, the real economy has started to show signs of broad-based recovery. Agriculture, industrial and services sectors have performed well in the last two years since energy situation has improved a lot.

Credit goes to the current dispensation in improving this situation a great deal.

A lot of generation capacity has been added to the electricity system along with extension in the transmission network, though the problem of line losses and bill recovery remains. Similarly, the shortage of gas has been addressed through re-gasified liquefied natural gas (RLNG).

Budget 2018-19: As non-filers barred from purchasing new vehicles, auto sector set for a surprise

Another major positive is the restoration of business confidence to some extent. Improvement in the energy situation has played a significant role in this regard.

On top of that, law and order situation has gradually improved across major cities.

It is hoped that local and foreign investors would complement each other in the years to come since projects related to the China-Pakistan Economic Corridor (CPEC) will roll out in due course.

On the taxation front, the performance remained better given the constraint of the narrow tax base.

It is evident that the tax base is narrow, which is quite usual in developing economies, and it requires gradual and consistent efforts on the part of successive governments.

The government has at least tried to rein in tax evaders through withholding tax on their bank transactions.

In addition, the Federal Board of Revenue (FBR) introduced new valuation tables related to property across many cities which, in turn, increased tax collection manifold. This also helped to minimise speculation in property transactions.

On top of that, there is a suggestion that only tax filers can buy property starting July 2018.

This step would go a long way in improving the tax-to-GDP ratio in the country.

However, this is easier said than done. These steps are not easy for a political government since such moves hurt its voters a great deal.

Budget 2018-19: Focus is more on voters rather than economy

On the export front, the government has faced a lot of challenges since it came to power. On the international front, the prices of many commodities went down, which pushed down the absolute value of exports.

Starting 2017, the government introduced an export package to compensate the exporters who had started to feel the pinch of stable rupee-dollar parity. The announcement of this package acted as a pain reliever for a crying patient.

On the external financing front, the government followed the trail blazed by the successive governments. Every government approaches the International Monetary Fund (IMF) to ease the balance of payments constraint.

During the tenure of former president Pervez Musharraf, the government opted for an IMF programme.

Similarly, Pakistan Peoples Party went for a standby loan from 2008 to 2011. And the Extended Fund Facility of the IMF from 2014 to 2016 was not an exception in this regard.

Now the ground is set for the upcoming government to negotiate a new IMF programme.

Along with the IMF programme, the government tapped the international debt market a couple of times and even took expensive short-term commercial loans to bolster foreign exchange reserves. All these external financing arrangements helped the economy to grow fast.

In a nutshell, the political dispensation performed well on the real economy side. However, it adopted a conventional approach to manage the external financing front. The biggest challenge for the upcoming government would be the composition of exports, which could not fetch precious foreign exchange.

Given this, the management of external financing would remain tricky for the upcoming government.

The writer is an Assistant Professor of Economics at SDSB, Lahore University of Management Sciences (LUMS)

Budget 2018-19: As non-filers barred from purchasing new vehicles, auto sector set for a surprise

Pakistan requires all its citizens whose taxable income for the year exceeds Rs400,000 to file income tax returns. The process is the government’s way of keeping a record on revenue collection, accumulation of wealth and generally, verify if tax submitted is in line with earnings for the year.

However, in a country of 207.7 million, only 1.26 million returns were filed last year. The proportion of returns filed to overall population stands at 0.6%, and conveys the dismal picture of tax collection in the country.

With this in mind, the PML-N government has taken upon itself to introduce various measures that penalise non-filers, and motivate them through punishment to file returns during its tenure.

The latest measure in the series of punishments is disallowing non-filers from purchasing new vehicles, a move that has the potential to drastically change the auto industry’s landscape, increase consumer financing, as well as encourage citizens to file tax returns.

However, the reaction to the measure – that went largely unnoticed on the day of the budget – has been an adverse one from the industry.

“It will jeopardise all our efforts to counter the menace of premium, as the decision will motivate investors to buy cars and sell to non-filers on a hefty premium,” an industry official told The Express Tribune.

The official recommended the government to increase the difference in tax applicable for filers and non-filers on purchase of vehicles. Currently, non-filers already have to pay a higher amount in withholding taxes and vehicle registration costs.

“This will increase the government’s revenue as well.

“We are hopeful that government will consult stakeholders before the step is implemented. It directly affects one of the biggest industries in Pakistan.”

The budget measure comes at a time when the country’s auto sector is undergoing a massive growth period, and sales figures have touched 192,734 units in nine months of 2017-18, a 22% year-on-year increase.

Motivated by the growth, new auto players are also vying to make a place by setting up assembly/manufacturing plants in the country.

Ghandhara Nissan has already announced the launch of Datsun vehicles, and is expected to roll out variants in 2019.

Lucky Cement is involved in a joint venture with Kia Motors, while Nishat Mills and Hyundai Motor Company are also in the process of entering the market. The three new players would add to the existing three Japanese companies operating in Pakistan, adding spice to the fight for a share in the growing market.

However, the budget measure could possibly dent the auto sector’s growth, says the industry official.

On the other hand, the government looks to be firm in its decision.

“Those on the ATL will be able to buy cars. It will be the responsibility of the companies to see if their customers feature on the list,” FBR’s Member Inland Revenue-Policy and spokesman Dr Muhammad Iqbal told The Express Tribune.

The move to disallow non-filers from vehicle purchase could give rise to changes in the auto sector. It is likely to increase the prices of used cars due to greater demand, while also forcing non-filers to look for alternatives.

The historic budget

One choice for non-filers could be to purchase vehicles in the names of their trusted compatriots who are filers.

However, Iqbal said the move would be a risk on part of the filer of income tax returns.

“This is a risk the market will take. If a filer allows the non-filer to buy the vehicle he will have to explain the source of income (in his returns).”

Analysts believe that while non-filers may find a way out of the conundrum, it is likely to dent sales of the auto sector that has seen its market capitalisation shoot in recent years.

“Right now, the only way out I see is if people start filing tax returns,” said an analyst. “The other way that could work is if you lease the vehicle through a bank. Even then, you will have to become a filer by the time the lease period ends.”

The move, if implemented in its form, is likely to boost consumer finance and be a positive for banks that are expected to see interest-rate hikes this year. It could also lead to greater awareness on tax returns, eventually meaning a higher number of filers.

Four journalists among 25 people killed in Kabul twin blasts

At least 25 people were killed, including Agence France-Presse (AFP) chief photographer Shah Marai and three other journalists, when two suicide blasts ripped through Kabul early on Monday, the health ministry has confirmed.

At least 30 people were wounded and rushed to hospitals, where some are in critical condition, spokesman Wahid Majroh told the Tolo News, warning the toll could rise.

The second explosion came minutes after the first and targeted reporters who were on the scene, police spokesman Kabul Hashmat Stanikzai told.

This undated file photo shows AFP photographer Shah Marai in Kabul. — AFP
“The bomber disguised himself as a journalist and detonated himself among the crowd,” he said. A security source also confirmed both were suicide blasts.

The first blast was detonated by an assailant on a motorcycle and left at least four dead and five injured, according to the interior ministry. The initial attack occurred shortly before 8:00am (0330 GMT) near the headquarters of the Afghan intelligence services, Danish added.

No group has claimed responsibility for the two blasts, the interior ministry said.

It comes days after the Taliban kicked off their spring offensive in an apparent rejection of calls for the militants to take up the Afghan government's offer of peace talks. During the announcement, the group vowed to target US forces and “their intelligence agents” as well as their “internal supporters”. The Taliban said the offensive was partly a response to US President Donald Trump's new strategy for Afghanistan announced last August, which gave US forces more leeway to go after insurgents.

US diplomat released after brief detention over hitting bikers

ISLAMABAD: Another incident of hitting bikers occurred in Islamabad when a US diplomat’s vehicle struck a bike, injuring two persons late on Sunday. While police have released the diplomat from the Secretariat Police Station after a brief detention. As per details, US diplomat Chad Rex Ausburn, who struck bikers on Sunday night in a fresh incident, has been released from Secretariat Police Station after a brief detention. Soon after the accident, area police arrived at the scene and took US official into custody. Shortly after, several locals and foreigners arrived in the Police Station after that he was released. The injured were immediately were shifted to nearby medical facility where their condition is said to be stable.This is the forth road accident in recent years in which US diplomats have hit and killed or injured people in Islamabad.

Two injured as US diplomat's car rams into motorcycle in Islamabad: sources

Two motorcyclists were injured after a US diplomat's car rammed into their vehicle late Sunday, sources.

The accident happened at the Secretariat Roundabout on Shahra-e-Dastoor at 9.40pm.

The injured persons were shifted to PIMS hospital, sources added. 

Earlier this month, on April 8, US Defence and Air Attaché Joseph Emanuel Hall's car ran a red light and rammed into a motorcycle in the federal capital, killing one man on the spot and injuring another.

The Foreign Office had later summoned the United States Ambassador to Pakistan David Hale to protest the killing of the young man. According to Foreign Office spokesperson, Foreign Secretary Tehmina Janjua recorded a strong protest with the US envoy, who expressed grief over the incident and assured full cooperation from the US embassy in investigating the incident.

The diplomat was let go by police after registration of a case after the Foreign Office (FO) said he enjoyed diplomatic immunity. The victim's family then petitioned the Islamabad High Court (IHC) seeking the placement of the diplomat's name on the Exit Control list. The court had observed that diplomatic immunity does not permit killing someone.

The federal government on April 24, however, informed the court that the diplomat could neither be arrested nor tried. The Deputy Attorney General (DAG) Raja Khalid asserted that the diplomat’s name was in the 'black list' so he could not leave the country, however, he added that placing the official’s name in the ECL was a 'long process.'

He added that the Vienna Convention ensured immunity to any accident of diplomats occurring during official duty. "A trial can only be held if the immunity is withdrawn," the reply stated further.

Rid Karachi of those who held it hostage: CM Murad

Chief Minister of Sindh Murad Ali Shah has said that with the waning influence of MQM in Karachi, the metropolis has been rid of a hostage situation thanks to PPP.

He criticized PML-N and MQM for playing myopic politics for petty gains. He said that MQM has not done anything for Karachi all these years and PML-N turns towards it only in election days.

CM Murad expressed that PPP show in Liaqatabad would demonstrate PPP power in the city. He visited the site of the rally today and also said that there is no no-go area for PPP in Karachi.

PPP leader said that the founder of the party, Zulfiqar Bhutto also held rally at the same venue. On this occasion, MQM sector in-charge along with workers announced joining PPP.

Pakistan Peoples’ Party (PPP) is set to hold a political rally at the Tanki Ground in Fc area, hoping to snatch the constituency from MQM in the upcoming elections.

Indian national handed over to Border Security Force

Pakistan on Sunday handed over an Indian national to India’s Border Security Force (BSF) after he mistakenly crossed the border.

23-year-old Dalwinder Singh had crossed borders near Kasur on March 6 and had entered Pakistan’s territory.

According to the Inter-Services Public Relations (ISPR), the Indian national was returned to his country after completing necessary security procedures.

Upon his departure, Dalwinder thanked the Pakistani authorities for their appreciable treatment and hospitality.