Latest news with #Rs1.275
Business Recorder
26-06-2025
- Business
- Business Recorder
PBA terms federal budget ‘a step towards inclusive growth and stability'
ISLAMABAD: The Pakistan Banks Association (PBA) has expressed full support for the federal budget 2025–26, describing it as a significant step towards inclusive growth and economic stability. In an official press release, the PBA emphasized that the banking sector, as a key partner in Pakistan's economic development, continues to play a vital role in supporting national priorities and advancing structural reforms. In close coordination with the Ministry of Finance (MoF), the State Bank of Pakistan (SBP), and other stakeholders, and under the leadership of the Finance Minister and the SBP Governor, the sector is proud to contribute to a series of transformative initiatives introduced in the federal budget. A landmark achievement cited by the PBA is its catalytic role in concluding the Rs1.275 trillion Circular Debt Resolution transaction — one of the largest and most complex financing efforts in the country's history. The Association worked closely with the MoF, SBP, and the Central Power Purchasing Agency (CPPA) to resolve intricate issues and secure vital regulatory concessions. This cashflow-backed solution, with minimal additional burden on consumers, is expected to stabilize the power sector and help reduce electricity costs. One of the most forward-looking measures in the budget is the launch of the National Subsistence Farmers Support Initiative (NSFSI). This initiative aims to empower smallholder farmers through digital, cash flow-based loans of up to Rs1 million, directly disbursed to digital wallets and redeemable at POS-enabled merchants for essential agricultural inputs. The programme also provides tech-enabled agri-advisory services, complemented by an Electronic Warehouse Receipt (eWhR) solution to enhance rural financing. The SME sector has also gained fresh momentum. The SBP-led SME Risk Coverage Scheme, introduced last year, has already disbursed over Rs311 billion to more than 95,000 businesses. As a result, SME financing has increased by 36% to Rs641 billion, with a 51% rise in the number of beneficiaries. The scheme puts the government on track to meet its Rs1.1 trillion credit target for SMEs by 2028. In the housing sector, a government-backed subsidy scheme for affordable housing is being rolled out to support low- and middle-income buyers. In partnership with banks, the scheme will offer 20-year mortgages at subsidized rates, aiming to increase Pakistan's mortgage-to-GDP ratio from the current 0.3% to 5% by 2030. To promote a greener and more inclusive mobility ecosystem, the government, in collaboration with PBA, is launching a targeted financing scheme for electric two- and three-wheelers. This initiative will provide subsidized, collateral-light loans to gig workers, women, and small business owners. It is expected to reduce carbon emissions and urban pollution while offering cost savings for citizens amid rising fuel prices. Youth remain at the heart of the government's development strategy. Under the Prime Minister's Youth Business and Agriculture Loan Scheme, Rs200 billion has been earmarked to provide concessional financing to MSMEs, with a focus on agriculture. The scheme also includes green loans of up to Rs2.5 million to help solarize diesel-powered tube wells, contributing to a more sustainable and climate-resilient agri-economy. In a landmark move, Pakistan's banking sector, in collaboration with the British Asian Trust (BAT), is launching the country's first-ever Pakistan Skills Impact Bond (PSIB). This innovative financing model shifts from traditional target-based funding to outcome-based financing, where success is measured by real employment outcomes. Designed to address long-standing inefficiencies in the technical and vocational education sector, the PSIB aims to attract global outcome funders and CSR contributors to scale its impact—marking a transformative step in results-driven public finance. Commenting on these developments, Zafar Masud, Chairman PBA, said, 'These bold reforms and targeted interventions underscore the evolving role of the banking industry — not merely as a financial intermediary but as a strategic driver of national transformation. As a key enabler, the PBA continues to lead from the front—fostering collaboration between the public and private sectors, shaping progressive policy dialogue, and championing innovation that delivers real impact.' As Pakistan advances on the path of economic stability and inclusive growth, the banking sector remains fully aligned with the nation's development agenda and committed to long-term resilience. Copyright Business Recorder, 2025
Business Recorder
25-06-2025
- Business
- Business Recorder
Pakistan banking sector backs federal budget for FY2025-26
ISLAMABAD: The Pakistan Banks Association (PBA) has expressed full support for the federal budget 2025–26, describing it as a significant step towards inclusive growth and economic stability. In a press release issued on Wednesday, the PBA emphasised that the banking sector, as a key partner in Pakistan's economic development, continues to play a vital role in supporting national priorities and advancing structural reforms. In close coordination with the Ministry of Finance (MoF), the State Bank of Pakistan (SBP), and other stakeholders, and under the leadership of the finance minister and the SBP governor, the sector is 'proud to contribute to a series of transformative initiatives introduced in the federal budget'. Budget 2025-26: Pakistan targets 4.2% growth as Aurangzeb presents proposals 'for a competitive economy' An achievement cited by the PBA is its role in concluding the Rs1.275 trillion Circular Debt Resolution transaction—one of the largest and most complex financing efforts in the country's history. The association said it worked closely with the MoF, SBP, and the Central Power Purchasing Agency (CPPA) to resolve intricate issues and secure vital regulatory concessions. 'This cashflow-backed solution, with minimal additional burden on consumers, is expected to stabilise the power sector and help reduce electricity costs. One of the most forward-looking measures in the budget is the launch of the National Subsistence Farmers Support Initiative (NSFSI).' The PBA said the initiative aims to empower smallholder farmers through digital, cashflow-based loans of up to Rs1 million, directly disbursed to digital wallets and redeemable at POS-enabled merchants for essential agricultural inputs. 'The programme also provides tech-enabled agri-advisory services, complemented by an Electronic Warehouse Receipt (eWhR) solution to enhance rural financing.' The SME sector has also gained fresh momentum, according to the association. 'The SBP-led SME Risk Coverage Scheme, introduced last year, has already disbursed over Rs311 billion to more than 95,000 businesses. As a result, SME financing has increased by 36% to PKR 641 billion, with a 51% rise in the number of beneficiaries. The scheme puts the government on track to meet its Rs1.1 trillion credit target for SMEs by 2028. 'In the housing sector, a government-backed subsidy scheme for affordable housing is being rolled out to support low- and middle-income buyers. In partnership with banks, the scheme will offer 20-year mortgages at subsidised rates, aiming to increase Pakistan's mortgage-to-GDP ratio from the current 0.3% to 5% by 2030.' To promote a greener and more inclusive mobility ecosystem, the government, in collaboration with PBA, is launching a targeted financing scheme for electric two- and three-wheelers. 'This initiative will provide subsidised, collateral-light loans to gig workers, women, and small business owners. It is expected to reduce carbon emissions and urban pollution while offering cost savings for citizens amid rising fuel prices,' the PBA said. Pakistan's banking sector, in collaboration with the British Asian Trust (BAT), is launching the country's first-ever Pakistan Skills Impact Bond (PSIB), the press release read. 'This innovative financing model shifts from traditional target-based funding to outcome-based financing, where success is measured by real employment outcomes. Key highlights of Pakistan budget for 2025-26 'Designed to address long-standing inefficiencies in the technical and vocational education sector, the PSIB aims to attract global outcome funders and CSR contributors to scale its impact—marking a transformative step in results-driven public finance.' Commenting on these developments, Zafar Masud, Chairman PBA, said: 'These bold reforms and targeted interventions underscore the evolving role of the banking industry—not merely as a financial intermediary but as a strategic driver of national transformation. As a key enabler, the PBA continues to lead from the front—fostering collaboration between the public and private sectors, shaping progressive policy dialogue, and championing innovation that delivers real impact'.
Express Tribune
22-06-2025
- Business
- Express Tribune
Pakistan's moment for structural reforms
Listen to article After years of economic stagnation and firefighting to avert default, the government is finally pivoting towards long overdue structural reforms, buoyed by a markedly improved macroeconomic outlook. Inflation, which had surged to 38% in mid-2023, has plunged to a six-decade low, prompting the central bank to slash interest rate from 22% to 11%. The exchange rate has stabilised around Rs280 per dollar, foreign currency reserves now cover nearly three months of imports and falling global oil prices have eased fiscal pressures. With this breathing space, the government is seizing the opportunity to take bold decisions and advance long-pending reforms. Among the boldest reforms underway is the overhaul of Pakistan's import tariff regime. The government has rolled out a five-year plan to transition from one of the most inward-looking and protectionist economies to a more open, export-oriented model akin to East Asian success stories. The reform sets an ambitious target: reducing the maximum tariff rate from over 100% to just 15%. This includes the complete removal of regulatory duties, currently ranging from 5% to 90%, and additional customs duties of up to 7%. Pakistan's current tariff structure is not only excessively high but also deeply fragmented, riddled with exemptions and privileges extended to favoured sectors and industries. These special treatments cost the government an estimated Rs550 billion annually, nearly half of all customs revenue. Removing such distortions will help level the playing field, especially for small and medium enterprises (SMEs) that form the backbone of the economy. Lower tariffs will lower input costs for domestic manufacturers, enhance competitiveness and encourage firms to target export markets. A detailed analysis shows that these changes are likely to increase productivity, attract foreign investment and stimulate job creation. Consumers will also benefit through greater access to high-quality, affordable products. In short, this is not just a trade policy shift; it is a foundational move to unlock economic dynamism. Complementing tariff reform is a drive to cut red tape. The government has finalised 63 regulatory reforms aimed at simplifying and digitising business procedures. These will be rolled out over the next 15 to 90 days, easing compliance and reducing the cost of doing business. The power sector, long a major constraint on growth and fiscal stability, is undergoing significant reform. Following a review of independent power producer (IPP) contracts, a key breakthrough has been the approval of a financial restructuring plan to eliminate Rs1.275 trillion in circular debt through an agreement with commercial banks. Electricity tariffs have been reduced by over 30% for industry and by more than 50% for 18 million protected households. Distribution companies (DISCOs) are now overseen by professional boards and improved governance has already cut losses by Rs140 billion in just nine months. Debt management has seen a breakthrough with Pakistan's first debt buyback programme. Debt worth Rs1 trillion has been repurchased, saving over Rs850 billion in interest payments under refinancing arrangements. Combined with fiscal consolidation and restrained development spending, the overall fiscal deficit has narrowed to 5.6% of GDP in FY2025, down from 6.9% in the previous year. State-owned enterprises (SOEs), long a major fiscal drain costing over Rs1 trillion annually, are finally on the path to reform. Privatisation is gaining real traction: five serious investor consortiums have expressed interest in acquisition of Pakistan International Airlines (PIA), slated for privatisation in FY2025-26. Meanwhile, the process is advancing steadily for seven electricity distribution companies and two generation companies (Gencos). Reforms in the pension system, a politically sensitive area, have also begun. These include linking pension increases to the Consumer Price Index (CPI), limiting pension duration to 10 years after a pensioner's death (for spouses only), capping multiple pensions and requiring pensioners re-employed in the public sector to choose between a salary or a pension. Pakistan now stands at a rare moment of opportunity. The economic fundamentals are stabilising, inflation is down, the rupee is steady and fiscal discipline is improving. At the same time, a coherent set of structural reforms is being rolled out, targeting tariffs, electricity, SOEs, debt and the business environment. These are not cosmetic changes, but deep, systemic shifts designed to make the economy more competitive, equitable and future-ready. What matters now is persistence. Reforms will face resistance from vested interests, from inertia within institutions and from shifting political winds. But if this momentum can be maintained, Pakistan could finally escape the cycle of boom and bust and move towards sustained, inclusive growth. The writer is a Senior Fellow with the Pakistan Institute of Development Economics (PIDE). Previously, he has served as Pakistan's ambassador to WTO and FAO's representative to the UN at Geneva
Express Tribune
20-06-2025
- Business
- Express Tribune
Rs1.275tr loans signed to ease circular debt
Pakistan has signed term sheets with 18 commercial banks for a Rs1.275 trillion ($4.50 billion) Islamic finance facility to help pay down mounting debt in its power sector, government officials said on Friday. The government, which owns or controls much of the power infrastructure, is grappling with ballooning "circular debt", unpaid bills and subsidies, that has choked the sector and weighed on the economy. The liquidity crunch has disrupted supply, discouraged investment and added to fiscal pressure, making it a key focus under Pakistan's $7 billion IMF programme. Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult. "Eighteen commercial banks will provide the loans through Islamic financing," Khurram Schehzad, adviser to the finance minister, told Reuters. The facility, structured under Islamic principles, is secured at a concessional rate of 3-month KIBOR, the benchmark rate banks use to price loans, minus 0.9%, a formula agreed on by the IMF. "It will be repaid in 24 quarterly instalments over six years," and will not add to public debt, Power Minister Awais Leghari said. Existing liabilities carry higher costs, including late payment surcharges on Independent Power Producers of up to KIBOR plus 4.5%, and older loans ranging slightly above benchmark rates. Meezan Bank, HBL, National Bank of Pakistan and UBL were among the banks participating in the deal. The government expects to allocate Rs323 billion annually to repay the loan, capped at 1.938 trillion rupees over six years. The agreement also aligns with Pakistan's target of eliminating interest-based banking by 2028, with Islamic finance now comprising about a quarter of total banking assets.
Express Tribune
20-06-2025
- Business
- Express Tribune
Govt secures Rs1.275tr to address power sector debt
Listen to article The government has signed term sheets with 18 commercial banks for a Rs1.275 trillion ($4.5 billion) Islamic finance facility to help pay down mounting debt in its power sector, government officials said on Friday. The government, which owns or controls much of the power infrastructure, is grappling with ballooning "circular debt"—unpaid bills and subsidies—that has choked the sector and weighed on the economy. The liquidity crunch has disrupted supply, discouraged investment, and added to fiscal pressure, making it a key focus under Pakistan's $7 billion IMF programme. Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult. Read More: Pakistan signs '$1b' loan facility "Eighteen commercial banks will provide the loans through Islamic financing," Khurram Schehzad, adviser to the finance minister, told Reuters. The facility, structured under Islamic principles, is secured at a concessional rate of 3-month KIBOR (the benchmark rate banks use to price loans) minus 0.9%, a formula agreed on by the IMF. "It will be repaid in 24 quarterly instalments over six years," and will not add to public debt, Power Minister Awais Leghari said. Existing liabilities carry higher costs, including late payment surcharges on Independent Power Producers of up to KIBOR plus 4.5%, and older loans ranging slightly above benchmark rates. Also Read: Banking sector expands 15.8% in 2024 Meezan Bank, HBL, National Bank of Pakistan, and UBL were among the banks participating in the deal. The government expects to allocate Rs323 billion annually to repay the loan, capped at Rs1.938 trillion over six years. The agreement also aligns with Pakistan's target of eliminating interest-based banking by 2028, with Islamic finance now comprising about a quarter of total banking assets.
