logo
Govt moves to abolish hidden subsidies

Govt moves to abolish hidden subsidies

Express Tribune22-03-2025

The government on Monday approved to transfer Rs330 billion worth subsidized export financing schemes from the central bank to the federal exchequer as part of its commitment with the International Monetary Fund to abolish hidden subsidies and bring transparency.
The Economic Coordination Committee (ECC) of the cabinet took the decision to move the long-term financing facility from the State Bank of Pakistan's balance sheet to the Export-Import Bank (Exim) bank. The ECC also approved Rs1 billion subsidies for financing the scheme for the remainder of this fiscal year.
Finance Minister Muhammad Aurangzeb chaired the ECC meeting.
Under the $7 billion bailout package, Pakistan has assured the IMF that it would end the central bank's involvement in the refinancing schemes and completely transfer these schemes by the year 2028. With the fresh decision, about 30% of the total subsidized schemes are being shifted to the Exim Bank.
A Finance Ministry handout stated that the ECC discussed a summary presented by the Finance Division regarding the phasing out of the State Bank of Pakistan's long-term financing facility (LTFF) to Exim Bank. The ECC decided that the SBP's LTFF portfolio of Rs330 billion would be phased out to the Exim Bank, with an allocation of Rs1 billion through a Technical Supplementary Grant to meet the LTFF subsidy requirement for the new portfolio for FY 2025.
The long-term facility is offered to the exporters at 3% lower than the policy rate and the government also pays 2% interest cost to the Exim bank for managing the scheme.
According to the Memorandum for Economic and Financial Policies (MEFP), the government has assured the IMF that it will refrain from involvement, or influence in, decisions allocating credit. It will also refrain from sectoral disbursement targets and instead accelerate work to remove barriers to credit in the respective sectors.
Till a few years ago, the central bank was highly subsidizing the Export Facilitation Scheme and the Long-Term Financing Facility, which had made the tight monetary policy ineffective and created monetary transmission issues.
The government was required to prepare an action plan for better targeting of the subsidized schemes by end-December 2024 and starting its implementation by end of this month.
The IMF had been informed that the commercial banks have managed the transition smoothly and capacity at Exim Bank has been strengthened sufficiently. The commercial banks are handling the Export Finance Scheme from their own liquidity but the Finance Ministry is paying the interest rate differential from the budget.
In addition to handling the Rs330 billion transferred portfolio, the Exim Bank will also handle a fresh long-term financing portfolio of Rs210 billion, bringing the total size of these subsidized loans to Rs540 billion.
The taxpayers will bear the subsidy cost of Rs91.5 billion on the total Rs540 billion portfolio till the year 2036 when these loans would mature.
The ECC also approved a summary from the Ministry of Information and Broadcasting, seeking a supplementary grant of Rs2 billion from its allocated budget of Rs5.6 billion. The approved grant will be used to meet the liabilities of payments for outstanding advertisement dues owed to media houses, according to the Finance Ministry.
The ECC further approved a proposal from the Ministry of Defence for a supplementary grant of Rs430 million for the execution of schemes in the province of Punjab during the current financial year.
The Committee also approved the allocation of Rs250 million as the government's paid-up capital for the operations of the Jinnah Medical Complex & Research Centre (JMC&RC) Company. This allocation will support the establishment of a state-of-the-art, 1,000-bed academic medical centre in Islamabad, it added. However, the ECC directed the company to provide a detailed breakdown of the expenditures and activities to be covered by the approved Rs250 million before seeking further allocations.
The ECC also approved a summary from the Finance Division for a supplementary grant of Rs24.6 million or $87,671at an exchange rate of Rs280.1 per dollar to Mrs. Lia Bomba of JAED Textile Pvt Ltd, Sydney, Australia, in compliance with the instructions of the Supreme Court of Pakistan.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Budget: Pakistan govt projects $19.9bn foreign assistance
Budget: Pakistan govt projects $19.9bn foreign assistance

Business Recorder

timean hour ago

  • Business Recorder

Budget: Pakistan govt projects $19.9bn foreign assistance

ISLAMABAD: The government has budgeted foreign assistance of $19.922 billion at dollar rate of Rs290 — (Rs5.78 trillion) from external resources for 2025-26 compared to $19.393 billion budgeted for the outgoing fiscal year 2024-25. The foreign assistance includes $3.1 billion (Rs899 billion) borrowing from foreign commercial banks against $3.8 billion (Rs1.114 trillion) for 2024-25. The government has budgeted $410 million (Rs118.900 billion) from the International Monetary Fund (IMF). $400 million (Rs116 billion) has been budgeted from bonds compared to Rs295 billion which was later revised to zero. The government has budgeted $9 billion under the head of time deposits including $4 billion SAFE China deposit and $5 billion KSA time deposit. The government has budgeted $1 billion from SFD (oil facility), $1.923 billion from Asian Development Bank (ADB), $1.663 billion from IDA, $419.55 million from IBRD, $700 million from IsDB (short-term), $609 million from Naya Pakistan Certificates and $105.419 million from AIIB. Copyright Business Recorder, 2025

KSE-100 crosses 124,000 level as PSX reacts positively to budget
KSE-100 crosses 124,000 level as PSX reacts positively to budget

Business Recorder

timean hour ago

  • Business Recorder

KSE-100 crosses 124,000 level as PSX reacts positively to budget

The Pakistan Stock Exchange (PSX) opened with a bang, as the benchmark KSE-100 Index surged past the 124,000 level amid a gain of over 2,000 points during the opening hours of trading on Wednesday. At 11am, the benchmark index was hovering at 124,126.24 level, an increase of 2,101.80 points or 1.72%. Across-the-board buying momentum was observed in key sectors including automobile assemblers, cement, commercial banks, oil and gas exploration companies, OMCs and power generation. Index-heavy stocks including HUBCO, PSO, WAFI, MARI, OGDC, PPL, POL, HBL, MCB, MEBL and UBL traded in the green. The upswing at PSX comes as the government did not announce any 'major changes on taxation', said Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder. 'Capital gain dividends are retained at 15%,' he added. Finance Minister Muhammad Aurangzeb presented the federal budget 2025-26 to the parliament on Tuesday, with a total outlay of Rs 17.573 trillion, targeting a GDP growth rate of 4.2 per cent against 2.7 per cent in the outgoing year. Aurangzeb termed the budget the start of a strategy to create a competitive economy and economic productivity to increase exports and fundamentally change the economy's DNA. The government has set an inflation target of 7.5% for the next fiscal year. Regarding the fiscal deficit, the government projected a target of 3.9% of the GDP — or Rs5,037 billion — from the outgoing fiscal year's target of 5.9%. The primary surplus is targeted at 2.4% of the GDP against the budgeted 2% in the current fiscal year, which has been revised to 2.2%. Internationally, share markets and the dollar on Wednesday offered a guarded welcome to the latest signs of progress in US-China trade talks, while awaiting more detail of what was decided and whether it would stick for long. Bond investors were also hunkered down for a reading in US inflation that could show the early impact of tariffs on prices, and a Treasury auction that will test demand for the debt. Over in London, negotiators from Washington and Beijing said they had 'agreed a framework on trade' that would be taken back to their leaders. US Commerce Secretary Howard Lutnick added the implementation plan should result in restrictions on rare earths and magnets being resolved, but again offered no specifics. The law was another hurdle as a federal appeals court allowed President Donald Trump's most sweeping tariffs to remain in effect on Tuesday while it reviews a lower court decision blocking them. Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%. Japan's Nikkei added 0.4% and Australian stocks firmed 0.4%. This is an intra-day update

KSE-100 crosses 123,000 level as PSX reacts positively to budget
KSE-100 crosses 123,000 level as PSX reacts positively to budget

Business Recorder

time2 hours ago

  • Business Recorder

KSE-100 crosses 123,000 level as PSX reacts positively to budget

The Pakistan Stock Exchange (PSX) opened with a bang, as the benchmark KSE-100 Index surged past the 123,000 level during the opening minutes of trading on Wednesday. At 9:40am, the benchmark index was hovering at 123,463.86 level, an increase of 1,439.42 points or 1.18%. Across-the-board buying momentum was observed in key sectors including automobile assemblers, cement, commercial banks, oil and gas exploration companies, OMCs and power generation. Index-heavy stocks including HUBCO, PSO, WAFI, MARI, OGDC, PPL, POL, HBL, MCB, MEBL and UBL traded in the green. The upswing at PSX comes as the government did not announce any 'major changes on taxation', said Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Limited, told Business Recorder. 'Capital gain dividends are retained at 15%,' he added. Finance Minister Muhammad Aurangzeb presented the federal budget 2025-26 to the parliament on Tuesday, with a total outlay of Rs 17.573 trillion, targeting a GDP growth rate of 4.2 per cent against 2.7 per cent in the outgoing year. Aurangzeb termed the budget the start of a strategy to create a competitive economy and economic productivity to increase exports and fundamentally change the economy's DNA. The government has set an inflation target of 7.5% for the next fiscal year. Regarding the fiscal deficit, the government projected a target of 3.9% of the GDP — or Rs5,037 billion — from the outgoing fiscal year's target of 5.9%. The primary surplus is targeted at 2.4% of the GDP against the budgeted 2% in the current fiscal year, which has been revised to 2.2%. Internationally, share markets and the dollar on Wednesday offered a guarded welcome to the latest signs of progress in US-China trade talks, while awaiting more detail of what was decided and whether it would stick for long. Bond investors were also hunkered down for a reading in US inflation that could show the early impact of tariffs on prices, and a Treasury auction that will test demand for the debt. Over in London, negotiators from Washington and Beijing said they had 'agreed a framework on trade' that would be taken back to their leaders. US Commerce Secretary Howard Lutnick added the implementation plan should result in restrictions on rare earths and magnets being resolved, but again offered no specifics. The law was another hurdle as a federal appeals court allowed President Donald Trump's most sweeping tariffs to remain in effect on Tuesday while it reviews a lower court decision blocking them. Investors, who have been badly burned by trade turmoil before, offered a cautious response and MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2%. Japan's Nikkei added 0.4% and Australian stocks firmed 0.4%. This is an intra-day update

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store