Pakistan's Trade deficit - belatedly controlled

Latest trade data suggests August's Trade deficit clocking at $3.5b, 18% decline YoY. However, on monthly basis, it's up 21%.

The declining trend from highs is promising and stability inducing. The worrying signs started July-September 2021 when the Trade deficit hovered around USD 4.2-4.4B.

Until then remittances data and low commodity prices were keeping nerves under control. Nonetheless, pressure on PKR had started to build up.

Congratulations Pakistan: Goods Exports crossed $3b in March!

Finally the needle is moving. In last 10-12 years, we had completed ignored exports. This takes long term policies. Competitive energy, fairly valued PkR, affordable financing & right tax framework. PTI did double up. No reason to get over excited & let the guards down. There is a long way to go. Diversify the products away from textile into high tech, value added & high skills GVCs. That requires bringing foreign technology in the country. Also, don't twist the good policies. Gain confidence.

Pakistan's energy mess- Thar Coal to save $400m/year

Being a net fuel importer, Pakistan was inevitably exposed to imported inflation. With numerous Balance of Payment crises - primarily due to low exports & lack of import substitution - our ship can not sail high tides. Add terrible timing to that. Covid's rebound caused heightened demand amid supply shortages for energy & metals. Local producers immediately had to cut export to feed domestic demand, further fueling (exporting) global inflation. With inelastic demand, Pakistan is a price taker.

SBP changes FX limits - Limit speculative trading?

In it's recently issued Circular, SBP is taking one more step to curb the demand for USD in local markets. PkR is under pressure from: a) rising import bill owing to global commodity inflation
b) energy prices remaining elevated
c) return of travel reducing remittances inflow & increasing demand for outward travel
d) rising domestic demand for imported goods

Below are the salient features of the regulation:

Inter-corporate dividends tax - inefficient & unwarranted

Let's suppose Company "S (subsidiary)" earns Rs 100m (after paying all taxes) and pays dividends to their share holders. It's fine to tax those.

1/n But if Company "P (parent)" owned 70% stake in Company S, and wishes to pay dividends to Company P's shareholders, why should it pay another layer of tax? This has to stop.

2/n

Mera Pakistan Mera Ghar scheme is one of the best projects launched by the government. Subsidized targeted loans - sharia compliant ones - have given fresh catalyst to the housing market.

Rs 10b ($60m) disbursed in three months. Whereas the demand is already Rs 154b. Good start. With borrower able to borrow at cheaper single interest rate for first 5 and 10 years - similar to rental yields - housing has actually become within reach. Notwithstanding the rising construction costs. Connectivity via public transport will connect suburbs to the downtown.

SBP to the rescue - Roshan Apna Ghar & Financing for under-construction projects!

Construction sector has been the much touted savior of the economy. Even before assuming power, PTI believed that this sector alone can lift the economic growth in the country. Factors such as construction amnesty, financing for projects, SBP's mandated lending to the sector, low interest rate, low cost housing, Mera Pakistan Mera Ghar policy, simplification of builders etc have propelled the sector.

Prime Minister Khan tried to cement the Economy with Construction Package:

- Fixed Tax Regime for Builders & Developers: No Withholding Tax on building materials except Cement, Steel & other services. - Moreover, imputing income equal to 10x the tax paid under this regime is allowed in declaring net wealth

- No Source of Income : Exemption till June 2022 on purchase of land & constructing any structure on already owned, or first purchase of newly constructed, property.