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Express Tribune
a day ago
- Business
- Express Tribune
Heavier gas burden
Listen to article As Pakistan's economic managers scramble to plug widening fiscal gaps and meet IMF benchmarks, the weight of their decisions continues to fall squarely on those least able to bear it. The latest move — a 50% increase in fixed charges on residential gas bills — is yet another blow to already struggling households. Without changing the per-unit gas tariff, the state has quietly increased the mandatory monthly cost of gas, turning an essential utility into a luxury for many. The decision, approved by the Economic Coordination Committee (ECC) of the Cabinet, will push fixed charges for protected domestic consumers from Rs400 to Rs600, regardless of how little gas they actually consume. This disproportionately penalises low-income households — the very segment these "protected" categories are meant to shield. Even those who use minimal gas to conserve energy will now see their bills swell, simply for staying connected to the grid. The timing of the decision — just days before the start of the new fiscal year — is also telling. It reflects the Finance Ministry's growing reliance on regressive measures to meet revenue targets in the face of mounting debt obligations. Furthermore, gas tariffs for non-residential consumers — including industries and power plants — have been increased by an average of 10%. While this may be aimed at rationalising subsidies and improving circular debt recovery, it risks compounding inflationary pressures and stifling industrial competitiveness. Yet, no clear roadmap has been presented for energy sector diversification or investment in sustainable alternatives. The lack of a progressive taxation model and repeated reliance on indirect levies do not show fiscal prudence and are making survival harder for ordinary Pakistanis. Austerity without accountability is not reform. And unless the state starts prioritising equity in its fiscal decisions, public trust will continue to deteriorate.
Express Tribune
2 days ago
- Business
- Express Tribune
Govt urged to end bank subsidies
Listen to article An independent think tank has urged the government to choose between subsidising already-profitable banks or diverting limited fiscal resources toward productive sectors by ending the policy of banks guaranteed returns on government borrowing. The Economic Policy and Business Development (EPBD), a new policy research institute, released the statement the same day a federal cabinet body criticised excessive subsidies to banks in the name of attracting remittances. The Economic Coordination Committee (ECC) of the Cabinet was informed Friday that banks had claimed Rs200 billion under the Pakistan Remittances Initiative during the current fiscal year — Rs115 billion more than the budgeted subsidy. The EPBD stated that the current fiscal structure forces a choice between supporting economic growth and subsidising banking profits through guaranteed government payments. It argued that Pakistani businesses face structural disadvantages compared to regional peers who enjoy policies that enhance rather than restrict productive economic activity. The think tank stressed that economic growth requires policy alignment with development objectives — not bank profit maximisation. The current approach of keeping policy rates at 11% while allocating Rs7.2 trillion for domestic debt servicing ensures stagnation, while regional competitors grow their industrial and export capacity. The government has allocated Rs8.2 trillion for total debt servicing — equal to 46% of the 2024-25 budget. Of this, Rs7.2 trillion will go to domestic banks holding government securities. With 59% of public debt held in floating-rate instruments, the think tank argued that reducing policy rates from 11% to 6% would yield immediate savings. The government worsened this burden by issuing Rs2 trillion in fixed-rate Pakistan Investment Bonds (PIBs) at peak interest rates of 22% over the past two years, locking in excessive costs to the benefit of banks, it added. By cutting interest rates to 6%, in line with falling inflation, the government could save Rs3 trillion on debt servicing. Even a portion of this amount, the think tank said, could lower business costs and stimulate employment. A 6% rate would still offer banks real returns while easing debt burdens. The savings could support manufacturing revival, industrial expansion, SME financing, technology upgrades, and export growth. The statement added that Pakistan's future depends on diverting resources from guaranteed banking profits to investments that create jobs, enhance productivity, and ensure long-term growth. Pakistani businesses cannot expand or generate employment while banks earn risk-free profits from public funds. In contrast, regional economies maintain 5.5% policy rates, allocate only 25% of budgets to debt servicing, and still achieve 6% GDP growth by prioritising business development. The EPBD challenged the claim that lower interest rates fuel current account deficits. It cited the $19 billion deficit in 2021-22, which it attributed to exceptional, non-interest-sensitive imports such as $3.2 billion in COVID-19 vaccines, $15.6 billion in fuel, and $1.7 billion in smartphones. It said high interest rates did nothing to limit those imports and instead suppressed domestic activity. The think tank added that guaranteed profits have led banks to retreat from commercial lending, opting instead for risk-free government bonds. With 97.3% of bank investments tied up in government debt, virtually no capital remains for working capital, expansion, or technology adoption. Manufacturers struggle to finance inventory, exporters lose global competitiveness, and small businesses are excluded from credit. Pakistan's banks have effectively become bond traders, contributing no value to the real economy while earning from taxpayer-backed securities. The think tank also criticised the remittance structure, noting that Rs87 billion went to banks for basic transfersfunds that could instead support small businesses and entrepreneurship. Its statement came as the ECC met to deliberate the future of remittance-linked subsidies. The finance ministry has decided to end the subsidies in 2024-25 due to pressure from banks and International Monetary Fund (IMF) constraints. The State Bank of Pakistan told the ECC it could no longer offer implicit support under IMF rules. Although the ECC requested a transition plan, the finance ministry said no study has determined any positive impact of these subsidies. Officials noted that funds largely benefit banks and exchange companies, not overseas Pakistanis sending remittances. The central bank informed the ECC that remittance promotion schemes have existed since 1985, but their effectiveness remains unverified. Without reform, the remittance subsidy bill could swell to Rs500 billion in coming years, warned a finance ministry official. The think tank reiterated that businesses do not need subsidies or special treatment — just a level playing field. Reducing interest rates to 6% would bring Pakistan in line with regional rivals, restore manufacturing competitiveness, and improve global market access for exporters. Such a move would also accelerate technology adoption and job creation across sectors, the EPBD argued. Although manufacturing capacity exists, it remains underutilised due to lack of financing. With 97% of banks' balance sheets locked in public debt, there is little scope to support private sector growth. Regional countries have demonstrated that supporting businesses through growth-oriented credit policies can deliver 6% growth while maintaining fiscal stability, it added.
Express Tribune
2 days ago
- Business
- Express Tribune
Govt raises gas prices by 10% for commercial users
Finance Minister Muhammad Aurangzeb chairs the Economic Coordination Committee meeting of the Cabinet on Friday, June 27, 2025. Photo: APP In line with structural benchmarks set by the International Monetary Fund (IMF), the Economic Coordination Committee (ECC) of the Cabinet on Friday approved a new natural gas pricing framework, including an average 10 per cent tariff hike for bulk, industrial and power sector users. Meanwhile, to shield domestic users from additional burden, the ECC decided to maintain existing gas prices for households while allowing an upward revision of fixed charges in the domestic sector to recover asset costs. Chaired by Finance Minister Muhammad Aurangzeb, the ECC also approved a summary moved by the Petroleum Division for a revised pricing structure to take effect from July 1, 2025, under the fiscal year 2025–26. Under the new framework, the government will notify revised consumer gas prices within 40 days of a determination by the Oil and Gas Regulatory Authority (OGRA), as required under the OGRA Ordinance. Read More: OGRA greenlights hike in gas price The pricing mechanism is aimed at ensuring cost recovery, regulatory compliance, and fulfilling IMF commitments, including rationalising captive power tariffs and replacing cross-subsidies with targeted support for low-income consumers. In other decisions, the ECC gave in-principle approval to a risk coverage scheme for small farmers and underserved areas, set to launch on August 14. The scheme aims to bring 750,000 new borrowers into the formal financial system through agricultural loans of up to Rs750,000. A total of Rs300 billion in new agricultural lending will be disbursed over the next three years. For risk coverage and administrative costs of banks, Rs37.5 billion will be required between FY2027 and FY2031. Also Read: Double-digit fuel inflation looms The ECC also approved a Rs15.839 billion technical supplementary grant (TSG) for the Ministry of Defence to meet a shortfall in employee and non-employee-related expenditures. The allocation covers dues under the Prime Minister's package for the families of martyrs from the recent Pakistan-India conflict. Additionally, the committee considered a proposal from the Ministry of National Food Security and Research for the import of sugar to stabilise domestic prices. The meeting was attended by Minister for Power Sardar Awais Leghari, Minister for Petroleum Ali Pervaiz Malik, and Special Assistant to the Prime Minister on Industries and Production Haroon Akhtar Khan, among other senior officials.
Express Tribune
14-06-2025
- Business
- Express Tribune
Fertiliser reaches Gwadar via transit trade
Listen to article Federal Minister for Maritime Affairs Muhammad Junaid Anwar Chaudhry on Saturday welcomed the successful berthing of the second Afghan transit trade ship at Gwadar Port. The vessel, carrying 20,000 metric tons of di-ammonium phosphate (DAP) fertiliser, marks another milestone in enhancing regional trade connectivity. He noted that the fertiliser shipment originated from Townsville, Australia and represented the second successful docking under the revised Afghan transit trade framework, following the arrival of MV Beyond 2 on February 4, 2025. "This is part of our sustained efforts to operationalise Gwadar Port as a strategic trade gateway for landlocked Afghanistan," the minister remarked. "Gwadar's growing role in transit trade reflects our commitment to enabling smooth access for Afghanistan to international markets." He emphasised that the recent decision by the Economic Coordination Committee (ECC) to replace the bank guarantee requirement with an insurance guarantee for Afghan transit trade through Gwadar had significantly improved ease of doing business and expedited cargo clearance processes. He added that the arrival of MV ASL Rose was a strong indicator of increasing international trust in Gwadar's operational readiness and infrastructure, highlighting Pakistan's role in promoting efficient and reliable transit trade in the region. Junaid Anwar directed Gwadar Port authorities to ensure quick berthing and seamless cargo unloading and reiterated that the port was fully equipped to handle rising volumes of transit goods under the Afghanistan-Pakistan Transit Trade Agreement (APTTA). He expressed confidence that the development would help lower transit costs, increase trade efficiency and reinforce economic ties between Pakistan and Afghanistan.
Express Tribune
11-06-2025
- Business
- Express Tribune
NA nod sought for Rs345b spending
Listen to article The government has sought ex-post facto approval from the National Assembly for nearly Rs345 billion in additional spending incurred during the current fiscal year without prior parliamentary approval. No war-related expenditures with India were booked in the accounts. A Rs60 billion supplementary grant was allocated for defence purposes in the outgoing fiscal year, but it was not war related. Pakistan's armed forces met war-related expenses with India from their regular approved budgets, said Finance Minister Muhammad Aurangzeb. The National Assembly's approval is being sought along with the new budget. While the Rs344.6 billion figure appears high, especially against the government's claim of strict expenditure control, it is still lower than in the previous fiscal year. Under the Constitution, the federal government can approve supplementary grants for unforeseen expenditures without prior National Assembly approval. However, it must later follow the same approval process as for the new budget. Over time, this constitutional provision has been used routinely rather than exceptionally. Details show that Rs345 billion in additional spending was incurred on unbudgeted items by diverting funds from other heads. This has not impacted the overall budget size, but the volume of these grantsmost approved by the Economic Coordination Committee of the Cabinetreflects poor budgeting and financial control. Under the $7 billion International Monetary Fund (IMF) bailout package, the federal government has committed that – in order to ring fence the fiscal programme – no supplementary grants will be allowed beyond the approved budget, except in case of severe natural disasters. It has also pledged to seek ex-ante approval from the National Assembly for any spending exceeding budgetary appropriations. Sources said discussions also took place at the IMF level about discouraging supplementary grants made through internal fund reallocation, to improve fiscal discipline. The Pakistan Muslim League-Nawaz (PML-N)-led government approved these additional grants for all kinds of expenditures, including power subsidies, the Special Investment Facilitation Council (SIFC), armed forces, helicopter repairs, hosting the Shanghai Cooperation Organisation (SCO) summit, and discretionary spending on parliamentarians' schemes and civil armed forces' capacity building. The single largest supplementary grant was for power sector subsidies, accounting for 37% of total additional spending. The government gave Rs115 billion in supplementary grants to pay independent power producers, while Rs308 million was allocated for structural reforms in the power sector. An additional Rs14 billion was given to settle liabilities for solarising agricultural tube wells. A Rs258 million grant was issued for financial compensation to families of Chinese nationals killed in a terrorist attack that Pakistani authorities attributed to foreign involvement. The government allocated Rs59.5 billion to the armed forces in supplementary funding. This included Rs23.3 billion for Pakistan Army's counter-terrorism capacity enhancement, Rs8 billion for defence force projects, and Rs7 billion for the Jinnah Naval Base in Omara, according the finance ministry's budget book. Additionally, Rs8 billion and Rs4 billion were allocated for the Special Security Division South and North, respectivelyunits that have existed for years and should be part of the regular budget. The government also approved Rs5 billion for internal security duty allowances and Rs2 billion for technological upgrades at the Inter-Services Public Relations (ISPR). A Rs1.3 billion supplementary grant was provided for fence maintenance along the Afghanistan and Iran borders, while Rs800 million was allocated for developing the naval air station in Turbat. Another Rs1.8 billion supplementary grant has been allocated toward overhauling engines of VVIP aircraft, according to the finance ministry's budget documents. The Reko Diq mining project received Rs3.7 billion in additional funds. A Rs1 billion grant was given for hosting the SCO summit, as per the budget book. Despite some concerns, Rs2 billion was allocated to restructure Pakistan Revenue Automation Limited (PRAL) — a company and not a federal entity. An additional Rs2 billion was granted for Federal Board of Revenue (FBR) officers, and Rs1.6 billion for setting up anti-smuggling posts. For transition accommodation of FBR officers, Rs430 million was approved, and Rs869 million was provided to enhance the organisation's operational efficiency. Despite this, the FBR has posted a record Rs1.03 trillion shortfall in tax collection for the current fiscal year, with one month remaining. A compulsory Rs1.3 billion grant was given to the Election Commission of Pakistan for holding local government elections. Rs7.2 billion was allocated for Sindh-specific discretionary spending on small schemes and for operationalising the Green Line Bus Rapid Transit project. The interior ministry received a Rs4.3 billion development grant for initiatives such as transforming the National Forensic Agency, building women's facilities in tribal areas, setting up check posts, and launching water supply schemes. A Rs30 billion supplementary grant was provided for flood-affected areas of Sindh, and Rs19.2 billion was allocated for small development schemes executed by the now-defunct Pakistan Public Works Department. Sindh also received Rs9 billion in additional financial support for projects, but the finance ministry did not detail the projects. An additional Rs7 billion was given for parliamentarians' schemes and Rs23.4 billion grant was approved for the federal Directorate of Immunisation.
