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Pakistan to brief IMF mission on additional taxation measures today

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  • Pakistan, IMF will kick-start toughest ever parleys from today.
  • IMF is asking govt to fill Rs600bn on fiscal front.
  • National Austerity Committee suggests all ministries slash expenditures.

ISLAMABAD: In order to break the deadlock with the International Monetary Fund (IMF) and pave the way for striking a staff-level agreement, the government is expected to share its plan with the visiting review mission for taking additional taxation measures, The News reported Tuesday.

The discussion will revolve around Pakistan’s plan for taking additional taxation measures to fetch over Rs200 billion through the Presidential Ordinance, rationalising expenditure, and hiking both electricity and gas tariffs for erasing the monster of the circular debt.

The IMF’s review mission led by Nathen Porter arrived in Islamabad on Monday and now both sides would kick-start toughest ever parleys from today (Tuesday) for making renewed efforts to accomplish the pending ninth review under the $7 billion Extended Fund Facility (EFF).

The Washington-based lender is suggesting the toughest prescriptions on all fronts of the economy at a time when the foreign exchange reserves are persistently on the decline and touched the lowest ebb of $3.6 billion.

Although, the government had already implemented two major conditions including allowing adjustment of the rupee against the dollar and hiking record levels of a surge in petroleum prices ahead of kick-starting parleys with the IMF.

The IMF is asking the government to fill the yawning gap of Rs600 billion on the fiscal front through additional taxation measures or cutting down on expenditures in order to restrict the budget deficit and primary deficit within the desired limits.

Differences persisted over the exact fiscal gap and both sides will hold parleys to evolve consensus over the exact estimates for taking additional taxation measures through the upcoming mini-budget.

Pakistan and the IMF will hold technical-level talks from today to Friday and then the policy-level talks will commence finalising the Memorandum of Financial and Economic Policies (MEFP) document.

The IMF further demanded an increase in electricity tariff within the range of Rs12.50 per unit as Islamabad seemed to agree to hike the electricity tariff of Rs7.50 per unit in a staggered manner. 

The government may be agreed to withdraw the un-targeted power sector subsidies of the electricity and gas sector to powerful groups during the upcoming parleys with the IMF. The gas tariff will also be hiked in the range of 74% for consumers.

“We will have to swallow bitter pills because the gap widened so much that now the economy cannot run with the approach of status quo. The country’s middle class will have to face the burden. 

“We have made a plan to protect vulnerable and poor segments of the society while implementing the IMF conditions” top official sources stated while talking to a select group of reporters on Monday night.

The senior officials in a background discussion stated that the government wanted to insulate the poorest of the poor from swallowing bitter pills as the government would make all-out efforts to focus on two areas including introducing reforms and protecting poor and vulnerable segments from arising inflationary pressures.

The official said that Finance Minister Ishaq Dar was trying to secure $4-5 billion from bilateral friends for engaging the IMF with the point of strength but it could not be materialised so there was no other option but to make renewed efforts to revive the stalled IMF programme.

The Federal Board of Revenue’s (FBR) high-ups are estimating that the recent devaluation of the exchange rate will help tax authorities jack up its revenue collection by Rs100 billion in the remaining period of the current fiscal year.

While referring to recommendations given by the National Austerity Committee to Prime Minister Shehbaz Sharif, the committee finalised recommendations to suggest all ministries including the Ministry of Defence slash expenditures by 15%.

The committee asks for surrendering all plots obtained by influential segments to more than one. In all, the committee’s recommendations if implemented could be Rs600-700 billion on a per annum basis. But there are big ifs and buts that who is going to implement these bold decisions which are now necessary to undertake for averting crisis situations.

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Finance Minister Meets With World Leaders at World Economic Forum in Davos

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During his attendance at the World Economic Forum in Davos, Switzerland, Finance Minister Muhammad Aurangzeb has met with officials of organisations and leaders of many nations.
Bangladesh’s Chief Advisor, Muhammad Younas, met with Mohammad Aurangzeb.
On the fringes of the World Economic Forum’s Annual Meeting 2025 Opening Banquet, there was an informal meeting.
Additionally, the Finance Minister met with Anwar Ibrahim, the Prime Minister of Malaysia.
Both leaders discussed economic cooperation and bilateral ties.
Muhammad Aurangzeb also had a meeting with Dp World’s Rizwan Soomro and Yuvraj Narayan.
They talked about how to strengthen Pakistan’s logistics and infrastructure systems to support trade.
“The Pakistani government is committed to advancing joint projects and values partnerships in both business-to-business and business-to-government cooperation,” the finance minister added.

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China will establish a $250 million EV production facility in Pakistan.

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As Islamabad looks to Beijing to work with it to establish industrial zones for the production of electronic vehicles, the media said Wednesday that China’s ADM Group would invest $250 million to establish an electric vehicle manufacturing unit in Pakistan.

With an even more ambitious target of 90 percent by 2040, the Pakistani government established the National Electric Vehicles Policy (NEVP) in 2019 with the goal of having 30 percent of all passenger cars and heavy-duty trucks be electric by 2030.

By 2030, the policy aimed to achieve 50% of new sales for two- and three-wheelers and buses, and by 2040, 90%.

As part of the Special Investment Facilitation Council’s efforts to draw in foreign investment, Radio Pakistan reported that the Chinese company ADM Group had announced an investment of $250 million to establish an EV manufacturing plant in Pakistan.

“The switch to EVs is anticipated to save billions of dollars by reducing the cost of fuel imports.”

More than 3,000 electric vehicle charging stations will be installed throughout Pakistan, a South Asian nation, as part of ADM Group’s $350 million investment in the EV industry last year.

Pakistan announced earlier this month that, as part of its ongoing energy sector reform aimed at increasing demand, it would reduce the power rate for operators of electric vehicle charging stations by 45 percent.

Additionally, financial programs for e-bikes and the conversion of gasoline-powered two- and three-wheeled vehicles are planned by the government.

On January 15, the government approved a lower tariff of 39.70 rupees ($0.14) per unit, which will take effect in a month. The previous tariff was 71.10 rupees.

The government anticipates that investors in the industry will see an internal rate of return of over 20 percent.

There are currently over 30 million two- and three-wheeled cars in Pakistan, and they use more than $5 billion worth of petroleum each year, according to a report that Power Ministry adviser Ammar Habib Khan provided to the government and that was covered by Reuters.

The paper estimates that the ministry will save around $165 million in gasoline import expenses each year by converting 1 million two-wheelers to electric motorcycles in a first phase, at an estimated net cost of 40,000 rupees per bike.

In September, BYD Pakistan, a joint venture between China’s BYD and the Pakistani automaker Mega Motors, informed Reuters that, in accordance with international goals, up to 50% of all vehicles purchased in Pakistan by 2030 will be electrified in some way.

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The government has introduced a comprehensive strategy to enhance industrial investment.

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Authorities are poised to execute an ambitious investment promotion strategy through a collaborative initiative between the National Institute of Public Administration (NIPA) and the Pakistan Administrative Staff College, aiming for substantial enhancements in industrial investment and economic development.

The Special Investment Facilitation Center (SIFC) will be instrumental in this transformative drive by establishing “Business Facilitation Centers” aimed at optimizing investment processes and attracting both domestic and foreign capital.

Principal features of the comprehensive plan encompass:

  1. Forming collaborative working groups to augment domestic and international investment prospects
  2. Formulating a comprehensive strategy to eradicate obstacles to industrial development
  3. Formulating a novel model to tackle issues in the execution of industrial projects
  4. Striving to enhance Pakistan’s international business rating by 50 points
    Targeting $20 billion in foreign industrial investments within the next five years.

The approach prioritizes digital transformation to enhance the transparency and efficiency of the investment process. SIFC’s strategy emphasizes fostering a favorable atmosphere for investors by streamlining bureaucratic processes and offering strategic assistance.

National administration officers are conducting ongoing study to identify and mitigate potential investment barriers, while a specialized research group is formulating a comprehensive strategy to solve current hurdles in industrial growth.

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