‘IMF Stands Ready to Support Pakistan,’ Says

Lagarde After Meeting PM Khan

Prime Minister Imran Khan on Sunday met International Monetary Fund (IMF) Managing Director Christine Lagarde
on the sidelines of the World Government Summit taking place in Dubai.
The prime minister tweeted that there was “a convergence of views” between him and Lagarde when it came to
“the need to carry out deep structural reforms”.
He said that these reforms would “put the country on the path of sustainable development in which the most
vulnerable segments of society are protected”.
A press release issued by the IMF said Lagarde’s meeting with the premier had been “good and constructive”.
The meeting was held to discuss conditionalities that have held up Pakistan’s accession to the Fund’s bailout
programme.
“We discussed recent economic developments and prospects for Pakistan in the context of ongoing discussions
toward an IMF-supported programme,” Lagarde was quoted as saying by the statement.
“I reiterated that the IMF stands ready to support Pakistan.”
The IMF chief said she highlighted during the conversation that Pakistan could “restore the resilience of its
economy” through “decisive policies and a strong package of economic reforms”.
Citing the PTI government’s policy agenda, Lagarde said protecting the poor and strengthening governance were
“key priorities to improve people’s living standards in a sustainable manner”.
“The technical staff-level contact through video-link is due this week and may be followed up by Finance Minister
Asad Umar next week,” said a senior government official, adding the two sides might still meet at the staff level if
needed, Dawn reported.
“A lot of work still needs to be done, but a final agreement should be in place by April and implementation start
rolling in June,” said the official, adding that all policy actions would revolve around the next year budget. “We have
reached broad understanding and will stay engaged.”
Sources said the revenue collection target for the next fiscal year would be worked out by the IMF and it could be
well above Rs4.7 trillion, compared to about Rs4.39tr this year fixed by the government. More upward adjustments
in central bank’s policy rate and exchange rate depreciation would be part of the understanding, they said.
Further adjustments in energy prices, expansion in revenues, reduction in losses of public sector entities, further
autonomy to the State Bank of Pakistan, market-based currency exchange rate and deep-rooted structural reforms
are key areas under the future assistance package from the IMF. The two sides had already agreed on the way
forward but had differences over the sequencing as the government wanted the passing of ‘further pain’ on to
people next year.
A statement released by the Ministry of Finance on Twitter said deliberations between Pakistani authorities and
IMF staff will continue “to finalise an agreement on the contours of a programme”.
The ministry said that the premier “appreciated IMF’s support to Pakistan and shared his vision for nation-building”.
Prime Minister Khan also expressed the government’s commitment to undertake structural and governance
reforms and to strengthen social protection in the country, the statement added.
It also said that the IMF managing director recognised the steps taken so far by the government to bring stability to
the economy. She expressed the Fund’s desire to remain engaged with Pakistan in ensuring that economic
recovery is sustained.
Earlier, Information Minister Fawad Chaudhry had said the Khan-Lagarde meeting would “give us a chance to
understand the IMF views and we will be able to give our version to [the] IMF chief”, Radio Pakistan reported.
Chaudhry stated that Pakistan wants “a fair deal that can actually help Pakistan in the short-term without affecting
our long-term economic goals”.
Meanwhile, Foreign Minister Shah Mehmood Qureshi stressed that Islamabad wanted to proceed with the bailout
package under conditions that would not put an unjustified burden on the common man.
Stumbling issue in IMF bailout talks
The IMF is asking for an adjustment of around Rs1,600-2,000 billion over three to four years. It also wants some
corrective measures to put Pakistan’s economy on the right track after witnessing the highest-ever current account
deficit.
But the stumbling issue in the talks is the pace of adjustments in the current expenditure. The emphasis on current
expenditures comes as a result of a focus on what is known as a ‘primary balance’ in the parlance of public
finance.
A senior official involved in the negotiations earlier told Dawn, there is some space for a cut in certain expenditures
where Pakistan is in a comfortable position. “This agreement in cut will pave way for accession to the programme,”
the official claimed, adding it will be a politically difficult decision.
A cut in the current expenditures still seems to put the government in an awkward position by making adjustments
in subsidies and other special grants.
The IMF has been demanding that the burden of any expenditure cuts should fall on current expenditures that
include debt service, defence, and subsidies. Previous governments decreased development expenditures when
undertaking the Fund’s adjustment and usually left current expenditures alone (other than subsidies).
But the official had said there is certain non-development spending which cannot be discontinued or reduced.
The primary balance of a government’s budget is the difference between revenues and expenditures after
removing interest payments. It tests whether the path of debt accumulation of any country is sustainable or not.
If this is in deficit then it means that at least some of the interest payments due in the given year will have to be
made through borrowing.
Cutting the primary deficit requires a cut in current expenditures, and usually becomes necessary when reducing
debt-to-GDP ratio is a priority.
Finance Division’s Spokesperson Dr Khaqan Najeeb had told Dawn that productive dialogue continues with IMF on
all areas including fiscal, energy, structural reforms and monetary policy. Discussions are part of regular ongoing
interaction between government and IMF and will continue in coming weeks as well, he had said, adding that
“technical level subject-specific discussions also support the process of overall dialogue”.
According to Najeeb, the government has already taken several policy measures including an increase in interest
rate, gas and electricity tariffs along with revenue measures.
The Ministry of Finance recently announced that the Federal Board of Revenue’s (FBR) target would not be revised
downward following a revenue shortfall of Rs191bn in the first seven months.
The FBR has been asked to take administrative measures including revival of tax on mobile phone cards to cover
up the shortfall in reaching the budgetary target.
The Fund has also asked for further monetary tightening as well as a complete free float of the exchange rate.
“We are already moving towards the target in these areas,” the official had said, adding the IMF has acknowledged
these measures.
According to the official, the finance minister has already conveyed to the IMF during recent parleys that only those
measures will be taken which are favourable for the country’s economic growth.
Although the government has secured breathing space through Saudi Arabian and United Arab Emirates loans, an
IMF programme is essential to unlocking access to resources from other multilateral lenders like the World Bank
and the Asian Development Bank, as well as global capital markets.

An Economic Miracle For Pakistan By Naseem

Javed
Once Pakistan’s midsized business economy gets professionally digitalised and is fully globally accessible. This
will enable small and medium sized businesses of the nation showcased on national platforms to project their
identity, talent, production of quality goods and services and open for global inter-connectivity. Four amazing things
will happen; quadrupling of exports, extra foreign exchange and a boosting of the entrepreneurial talents with
superior global image around the world. This will also awaken the most valuable but currently dormant Pakistani
diaspora to bounce with this massive mobilization. An economic miracle is a possibility. But what will happen if all
this was achieved within 300 days?
Two critical hurdles; This is not possible, without anew understanding of global age economic transformation and
demands creating top level world-class real hardcore debates, bringing right thought leadership, engaging with
blueprints and global expertise leading to consensus and acceptance to become an aggressively driven digitally
minded nation. Secondly, lay out national agenda with full knowledge that such deployments of national
mobilisations are primarily knowledge and execution centric and have less to do with new funding.
The following are four critical steps to creating an economic miracle:
Every big and small enterprise, right across the nation should be allowed free access to massive national digital
platforms to enable cross-fertilization and showcase their talents, goods and services. This national and global
exposure with world-class quality will create trading opportunities and will mobilize the dormant Pakistani diaspora.
Not to be confused with current old-style websites and disorganized social media buzz, this is an ultra-
sophisticated global-scale maneuver.
Every national trade association and every major chamber of commerce across the nation must be mandated to
share such national umbrella platforms with cross-fertilization and large pools of knowledge shared to enable
vertical sector growths. All this activity will further enhance already structured trade groups via fast digital to open
flood gates to new global customers
Every entrepreneur of the nation must be allowed to showcase their talent ideas, no matter how big or small but
recognized to be part of custom designed national platform. This fully digital national entrepreneurial deployment
programs with detailed profiles showcasing special expertise will create cross-fertilization with national and global
alliances creating expansion and innovative excellence. This is not to be confused with start-ups, existing pools of
large but disconnected data as these are global age savvy marketing and image building platforms curated to
intelligently representsmart and experienced entrepreneurs of the nation of all ages.
Every national trade association and every major chamber of commerce across the nation must be mandated to
share such national umbrella platforms with cross-fertilization and large pools of knowledge shared to enable
vertical sector growths. All this activity will further enhance already structured trade groups via fast digital to open
flood gates to new global customers. Not to be confused with current newsletter and broken mailing lists, this is
very advanced footwork on global stage.
Immediately: This work will also make it possible for national mobilization of massive unlearning programs to drift
away from the past procedures and new relearning of the future and global age skills, across the million frontline
workers in both public and private sectors. Furthermore, across the vast nation, this deployment and framing will
boost the morale of small and midsize businesses the real but currently stalled economic engines of Pakistan.
Digitalization will open a brand-new world for those missing global accessibility and limited on showcasing of their
talents on trading and creating foreign exchange possibilities.
Can Pakistan’s midsize Economy become fully digital within300 days… yes, but with some difficulty.
Can midsize economy gatekeeper and owners become digitally oriented…yes, but with great difficulty.
Can leaders of trade groups and trade associations agree to mobilize…yes, but with extreme difficulty.
Can there be a high-level debate and discussion to explore any miraculous option… yes, very easily.
Failure to achieve such speedy executions will only force the populace to lose faith in any economic revival. How
can the digitalization of Pakistan’s midsize business economy become a miracle for the nation? Your call!

Pakistan Banao Plan | Editorial

The Prime Minister has always held a special affinity for Overseas Pakistanis- he has credited them for their
contributions to the Pakistani economy, and to his own project, Shaukat Khanum Hospital, time and again, even
before taking office. It is apparent that the government sees overseas Pakistanis as a useful asset for the
economy- and now it is setting in place policies to utilise this asset.
On Thursday, the Prime Minister and the Finance Minister, while lauding the charitable efforts of overseas
Pakistanis and the contribution that expats have made to the economy by way of remittances, formally launched
‘Pakistan Banao Certificates’ (PBCs) to tap into the savings of over eight million overseas Pakistanis for securing
much-needed foreign exchange reserves to stabilise the country’s economy. According to Finance Minister, the
PBCs are available with three-year and five-year maturity period at profit rates of 6.25 per cent and 6.75pc per
year, respectively. The scheme also involves several further incentives for investors including exemptions from
withholding tax and compulsory deduction of Zakat, and the option to encash the certificates prematurely in
Pakistani rupee without any deduction.
A new economic policy was direly needed considering the past few months have been difficult. Hikes in prices of
electricity, gas and other commodities have hit the lower-income consumers particularly hard, and foreign debt is
high. The announcement was a response from the government to alleviate the hardship afflicted by the harsh
economic conditions.
Pakistan makes most of its revenue through its foreign remittances and it is a good initiative of the government to
increase incentives for investment from Overseas Pakistanis. Remittances had slowed down massively in late 2018
and it is hoped this step by the government brings back trust in the economy. However, Pakistan should not be a
country overly dependent on its expats-this should not be the only step the government takes to increase foreign
reserves.

Monetary Policy Statement | Editorial

THE State Bank’s recent monetary policy statement, and its attendant action of hiking the key discount rate by a
quarter per cent, provides a cleverly nuanced insight into the state of the economy at the present moment. This is
the halfway mark of the new government’s first fiscal year, the crucial period when it has to capture the imagination
of the public, establish its credibility in the eyes of its creditors and stakeholders in the economy, push through
tough decisions and set a direction for economic and institutional reform. This is not an exhaustive list of course,
because accompanying the list of expectations on the economic front, the government also has to set the tone in
the political space and build its relationship with the other tiers of the state. In short, the moment has a big agenda,
and given the serious economic pressures that the government inherited, there is also an added sense of urgency
to find its footing and get on with the task of running the affairs of state.
So on this halfway point, what does the State Bank tell us about how the economy is faring? It rightly points out that
there are “visible signs of deceleration in domestic demand”, the crucial plank upon which the government’s
economic policy must be built, given the growing deficits on the fiscal and external accounts. It also rightly points
out that this deceleration owes itself to “stabilisation measures implemented during the last twelve months”,
meaning if the government inherited an economy drifting towards crisis, it also inherited the policy direction through
which it has sought to arrest this drift. It notes that the external deficit is narrowing, but still remains high despite the
nearly $4bn worth of support from “friendly countries”, so much remains to be done and victory remains a far-off
goal. Beyond this, the fiscal deficit “remains elevated” and core inflation is “persistently high” despite a near
doubling of interest rates since January of 2018.
The result is that the economy continues to slow drastically, and the government is financing itself through massive
printing of money, where borrowing from the State Bank jumped to Rs3.775tr between July 1 and Jan 18, “which is
4.3 times the amount borrowed during the same period last year”. The fiscal deficit will remain elevated, the State
Bank says, and “fiscal policy will have to be proactive” in the remaining months of the fiscal year. Even though the
State Bank does not spell this out, it takes only a little common sense to note that this means an emphasis on
greater revenue mobilisation, something the government is shying away from. The picture is painted carefully, but it
is unmistakable: the economy needs a firmer hand on the tiller, and the drift towards crisis has been temporarily
arrested, but not reversed

Circular Debt | Editorial

WITH the approval of a plan to float Rs200bn worth of Sukuk bonds to partially settle some claims of the circular
debt, the government has chosen to walk down an oft-tried road. Since the first floatation of Term Finance
Certificates in 2009 for the same purpose, this will be the fourth major retirement of the outstanding amounts in the
power sector in a decade. Along the way, there have been other such retirement exercises or liquidity injections,
but none have succeeded in dealing with the problem in a sustainable manner. The largest such exercise was
undertaken in 2013, when the PML-N government was sworn in, while making promises that the circular debt
would not be allowed to return. Yet today, it is higher than it ever was, standing Rs1.4tr, and threatening to choke
the power sector all over again.
Retiring at least a portion of these outstanding amounts from government funds is probably the only option
available today, as it was in the years past. But simply retiring the amount without bringing about any deep-rooted
changes in the billing and recovery systems of the power sector, as well as reforming the pricing and governance
regime will be a fruitless exercise. That is how we have run this circle for decades. Sadly, accompanying the
announcement of the plan for Sukuk bonds, there was also the announcement that the power division had backed
away from its commitments to bring about improvements in system efficiency. As of now, more than six months into
its term, the government has advanced no vision and no big ideas about how it intends to reform the power sector
to improve its liquidity position and streamline its governance. So the Sukuk bond looks like nothing but a
temporary measure at the moment. The amount is not large enough to make a meaningful dent in the problem, yet
is big enough to impact public indebtedness. The time to bring forward a vision for reform of the power sector has
long arrived.

Towards a Comprehensive Saudi-Pakistan

Partnership By Mohammed Al-Sulami
An understanding of political realities and historical analysis clearly confirms that the approach adopted in Saudi-
Pakistan bilateral relations has always been of a cooperative nature since the two countries have common
historical, religious, cultural and human relationships, which continue to embody the true principles of solidarity and
brotherhood, as well as both countries standing shoulder to shoulder in the face of domestic and mutual global
challenges. The official positions adopted by the two countries, highlight the significant and extensive coordination
between the two countries whenever crises have occurred. There is a joint desire by both countries to advance
their cooperation in all fields leading to a comprehensive partnership, which could help the two countries realize
their common interests.
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Relations between the two pivotal regional countries have grown deeper over time in light of their shared mutual
visions and their commitment to moderate political systems, as well as their desire to promote peaceful coexistence
and tolerance instead of narrow intellectual prejudices and sectarian fanaticism. The two countries share similar
views on encouraging greater openness to the world based on common norms, laws, and cooperating closely in
international forums and sharing concordant positions on regional and international issues.
Saudi-Pakistani strategic cooperation can be found in the religious, political, military, economic and cultural
spheres. This cooperation is currently at a pivotal stage preceded by diplomatic cooperation, with the two countries
expected to forge an ever closer strategic partnership to enhance joint coordination in addressing regional and
global issues. This will help both countries to attain their mutual interests and improve their standing as
heavyweights in their respective geographic spheres of influence: the Middle East for Saudi Arabia and South Asia
for Pakistan. The scope of cooperation and bilateral relations between the two countries has been highlighted by
their participation in a number of conferences and other events.
Economically, the Kingdom of Saudi Arabia hosts about 2.7 million Pakistani nationals (according to statistics
issued by the Pakistani Consul General to the Kingdom, Shahriar Akbar Khan, in March 2018). These expatriates
have formed a bridge between the two brotherly countries, playing a positive role in helping to advance the
tremendous progress and development witnessed by both countries. The two countries jointly launched the Saudi-
Pakistan Trade Mission on January 14, 2019, with some 116 Saudi-Pakistani companies participating. This comes
at a time when the two countries have revived the Saudi-Pakistani Business Council to develop bilateral trade and
investment relations. Meanwhile, April 2019 will see the Pakistani Investment Forum in Riyadh with around 300
Pakistani investors participating in the event, promoting greater interaction between the Saudi and Pakistani private
sectors.
When Pakistan experienced financial turbulence recently, the Kingdom was the first country to help Islamabad,
offering the country a $ 3 billion bailout package to re-stabilize the country’s financial situation and boost Pakistan’s
foreign exchange reserves.
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Besides, Saudi Arabia offered other facilities by granting Pakistan a one-year grace period on payment for oil
imports worth $ 3 billion. Saudi Arabia also intends to set up a $ 10 billion oil refinery at Pakistan’s Gwadar port
overlooking the Indian Ocean.
Strategic relations between the two countries date back to Pakistan’s independence in 1947 when military
cooperation and joint defence agreements were signed. This alliance advanced further when Islamabad joined the
Riyadh led Islamic military alliance to fight terrorism, which was announced in December 2015. It is headed by one
of the former best leaders of the Pakistani army Gen. Raheel Sharif. This alliance aims to fight all forms of terrorism
and to support moderation, laying a foundation for deep-rooted ties between Riyadh and Islamabad in the face of
regional and international challenges especially in light of Gen. Sharif ’s statement in 2016 that any threat to Saudi
Arabia would provoke a strong response from Pakistan. The two countries also hold joint military drills, most
notably the Samsam manoeuvres held in February 2018.
The deep-rooted bilateral ties resulted in the newly appointed Pakistani Prime Minister Imran Khan making Saudi
Arabia his first point of call on his international tour in September 2018 shortly after he took office. The visit opened
the door for further diplomatic exchanges between the two countries’ senior officials, which resulted in signing
deals and protocols of cooperation in all fields. During one of these visits, on September 5, 2018, the Pakistani
Information Minister, Fawwad Choudhary, announced, that Pakistan will never allow any party whatsoever to pose
a threat to the Two Holy Mosques and to the Kingdom, adding that any attack on the Kingdom would be viewed as
an attack on Pakistan itself.
Similarly, the expected visit by Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) to Pakistan will see the
two sides signing a host of commercial and investment agreements worth billions of dollars. The aim of signing
these deals will be to strengthen bilateral ties and open up more horizons between the two countries. The visit will
come at a time when the Kingdom is adopting a reformist vision to strengthen the key pillars of state and society.
Pakistan is taking similar steps in introducing reforms to build a new state and society. The Saudi vision is based
on promoting a moderate Islamic identity, which rejects extremism and radicalism. This vision is enhanced by
Saudi society’s pride in its Arab and Islamic identity, which it strives tirelessly to preserve.
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Saudi Arabia seeks to boost ties with Pakistan based on all the aforementioned factors and to jointly strengthen
regional peace and security in a way that ensures the territorial integrity of the countries in the volatile Middle East.
The region is restive due to the reckless actions of some regional countries which aspire to revive their imperial
past at the expense of regional states and their territorial integrity. These forces target regional nations and their
resources, turning these countries into failed states plagued by corruption and terror.
The Kingdom also seeks to achieve regional integration based on reciprocal respect for a nation’s sovereignty,
non-intervention in the affairs of other nations, and forming bridges with regional countries and the world. This
could be achieved by forging cross-border partnerships that advance development, promote security and stability,
and combat all forms of terror and extremism.
The Kingdom, which has never had imperial ambitions or a colonial legacy, either historically or ideologically, does
not seek to annex lands. Nor is it covetous of others’ wealth, being one of the world’s largest holders of foreign
exchange reserves and ranking first in the Arab world and fourteenth globally in terms of gold reserves. It certainly
does not need any more oil, having the second-largest reserves globally. The point is not to boast by pointing out
these facts, but to underline that Saudi Arabia’s foremost priority is to bring stability to the region.
The Kingdom’s desire to attain regional security impels it to provide near-limitless support to numerous Arab and
Islamic countries in the political, economic and humanitarian spheres, with Pakistan receiving a considerable share
of Saudi Arabia’s direct and indirect support. The Kingdom also sends humanitarian aid to friendly countries
regionally and globally when tragedies and crises strike. The Kingdom also works tirelessly to help resolve crises
and restore security and stability wherever possible, regionally and globally; among other successes, Saudi Arabia
contributed to ending the bloody 10-year military conflict between Djibouti and Eritrea, as well as coordinating with
Pakistan and other friendly countries to resolve the Afghan crisis by encouraging direct dialogue between the
warring parties in the hope of restoring peace to Afghanistan. Indeed, the Kingdom and Pakistan regularly work
together to combat terror and extremism across the Middle East and South Asia.
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In conclusion, Saudi and Pakistani citizens look forward to a new era of deep-rooted cooperation between the two
brotherly countries that will boost political harmony, economic cooperation and security coordination as well as
unifying their positions on regional and international issues. The upcoming visit of MbS will mark a quantum leap in
the relationship between Riyadh and Islamabad.

Age of Geo-Economics By M Ziauddin

The globalization process has turned the world into an increasingly interdependent entity. No nation state or a
country can now claim to be absolutely sovereign, in both socio-economic or/and military sense. However, without
an irreducible minimum sovereignty over its economy and culture as well as its military prowess no country can
escape being turned into a subservient state fated to trade its independence for survival.
Such nations find themselves constantly threatened by the fate that the nuclear armed Soviet Union had to face in
the cold war.
As globalization is firstly an economic process, it is understandable that security has shifted from the military to the
economics. Economic security takes into account, particularly, the new risks occurring from the combination of the
globalized competition and the incredible new role of information and telecom, for example threats on data, attacks
on public research centers, attacks from financial predators against state currencies, stock market manipulations,
short selling exports to damage competitors in the world market etc.
When Indian Prime Minister Narendra Modi threatens to punish Pakistan with international isolation, he is not
talking about political isolation of a nuclear Pakistan. This he cannot achieve even if he were to succeed in
mobilizing majority of world opinion against this country.
What, however, we should guard against is being rendered isolated in the geo-economic terms. Already
unconfirmed reports are circulating in the region that by heavily subsidizing its textile, leather and surgical exports
India is inching towards capturing Pakistan’s markets for these goods which make up nearly 90 per cent of our
export earnings. This is something to be looked into urgently and steps taken to neutralize the Indian economic
offensive.
Already India has entered into increased manpower export agreements with to GCC countries and Saudi Arabia
that are likely to eat into our own share of this market. Kuwait is already out of bounds for our manpower export.
More seriously, the US seems to be working in tandem with India in the latter’s effort to push Pakistan into
economic isolation. Though these voices are still very feeble what we should be mindful of is that this is the second
time that the US is thinking of creating economic problems for Pakistan. It was at the fag- end of the late senior
Bush’s presidency—1990— that sanctions were imposed on Pakistan invoking the Pressler amendment for what
Washington said crossing the nuclear ‘Red Line’.
If it is our economic isolation that is being contemplated by India, it is time we do something concrete for our
economic security. In the context of politics and international relations economic security is the ability of a nation
state to follow the policies of its choice to develop the national economy in the manner desired. In today’s complex
system of international trade, characterized by multi-national agreements, mutual inter-dependence and availability
of natural resources etc., economic security today forms, arguably, as important a part of national security as
military policy, perhaps even more.
Globalization has produced a redefinition of economic security in light of the risks posed by cross-border networks
of non-state actors and by the economic volatility of the new global environment. The relationship between
economic globalization and undesirable economic and political outcomes must be specified precisely and assessed
carefully, however. Judgments about economic security must weigh the effects of increased volatility introduced by
globalization against the benefits of improved economic performance in the longer run. National institutions will
remain central to the provision of economic security under conditions of globalization.
A new index called Comprehensive National Power (CNP) has been developed by China. It can be calculated
numerically by combining various quantitative indices to create a single number held to measure the power of a
nation-state. These indices take into account both military factors (known as hard power) and economic and
cultural factors (known as soft power).
The index uses critical mass, economic capacity and military capacity. Due to its indicators, it is often repeatable
and easy to define, making it comparable to the Human Development Index in understanding and reliability.
Since Pakistan nurses a passionate desire to safeguard an irreducible minimum of its sovereignty in this
interdependent and globalized world, one would have taken it as a given that by now our policy makers and geo-
strategists would have developed our own CNP index at least on stand-alone basis without any reference to the
indices of our close neighbors.
The biggest threat that our economic security faces and which in turn has the potential to seriously undermine our
CNP index is the shortage of energy resources. Energy consumption in this day and age generally indicates a
nation’s level of industrialization, productivity and standard of living. One hopes our official strategists are aware of
this shortcoming and have up their sleeve a fail-safe plan to overcome the problem within shortest possible time.
In this context one would like to suggest that we need to master without much loss of time advanced technologies
like artificial intelligence, autonomous vehicles and the internet of things which are merging with humans’ physical
lives. Think of voice-activated assistants, facial ID recognition or digital health-care sensors.
Indeed, technological changes are drastically altering how individuals, companies and governments operate,
ultimately leading to a societal transformation similar to previous industrial revolutions.
The First Industrial Revolution started in Britain around 1760. It was powered by a major invention: the steam
engine. The steam engine enabled new manufacturing processes, leading to the creation of factories.
The Second Industrial Revolution came roughly one century later and was characterized by mass production in
new industries like steel, oil and electricity. The light bulb, telephone and internal combustion engine were some of
the key inventions of this era. The inventions of the semiconductor, personal computer and the internet marked the
Third Industrial Revolution starting in the 1960s. This is also referred to as the “Digital Revolution.”
The Fourth Industrial Revolution is different from the third for two reasons: the gap between the digital, physical
and biological worlds is shrinking, and technology is changing faster than ever.

WEF In Davos And Oxfam Issues Report: Is It

Time To Tax The Super-Rich? – OpEd By Dr.
Arshad M. Khan
The World Economic Forum met this week (January 22-25) for its 48th annual meeting since its inception. It costs
$60,000 (or Swiss Francs) to become a member and another 27,000 to attend. However civil society groups,
NGOs, and UN and government officials can attend free.
It has been a difficult year: Emmanuel Macron received a standing ovation last year. This year the gilets jaunes
(yellow vests) with their weekly Saturday protests in Paris have removed some of the veneer off the right-wing
leader. Donald Trump is absent, citing his wall — ironic to be a prisoner behind it — and Theresa May is in the
throes of Brexit.
Meanwhile the stock market has become erratic. From its October high of 27,000 for the Dow Jones Industrial
Index, it has been down 20 percent in December before recovering to a current 10 percent under. It is now about
the same as January 2018.
It doesn’t stop the billionaires. Their fortunes increased by $2.5 billion a day while the poorest half of the world saw
their total wealth decline by 11 percent and 10,000 people die every day in developing countries from lack of
healthcare. So elaborates the Oxfam 2019 report. A figure that has been dropping for some time, now only 26 top
billionaires own as much as the poorest half (3.8 billion people) of the world.
In India, 4 billionaires own as much as the bottom half, and the richest, Mukesh Ambani, has more money than the
country spends on public health, medical care, sanitation and water supply.
The Oxfam report also blames governments for underfunding public services while taxes on corporations and the
wealthy are at the lowest in decades. With 82 percent of the wealth generated in 2017 going to the top 1 percent, it
is no surprise if a new billionaire is created every two days. Again according to Oxfam, increasing taxes by just
one-half percent on the top 1 percent would raise enough money for healthcare saving 3.3 million lives and
educate 262 million children.
Tax rates for corporations in rich countries have fallen from about 62 percent in 1970 to 38 percent in 2013, with
the average rate in poor countries at 28 percent. As of January 2018, the 2017 Republican tax bill under President
Donald Trump cut the corporate tax rate from 35 percent to 21 percent in the U.S.
Perhaps most shameful of all, in a relatively poor country like Brazil the poorest 10 percent paid more in taxes than
the wealthiest 10 percent. Global inequality is not an easy struggle when with this backdrop Brazil elects Jair
Bolsonaro, its own Donald Trump.
So while corporate chieftains schmooze with political leaders, and vice versa, and corporate jets cause a traffic jam
at Davos airport, what can the rest of us do to alleviate the miseries of inequality. One answer is to elect people
who will work to reverse the legislative excesses of the past half century Coincidentally, these also tend to be
sympathetic to combating climate change.
*About the author: Dr. Arshad M. Khan is a former Professor based in the US. Educated at King’s College London,
OSU and The University of Chicago, he has a multidisciplinary background that has frequently informed his
research. Thus he headed the analysis of an innovation survey of Norway, and his work on SMEs published in
major journals has been widely cited. He has for several decades also written for the press: These articles and
occasional comments have appeared in print media such as The Dallas Morning News, Dawn (Pakistan), The Fort
Worth Star Telegram, The Monitor, The Wall Street Journal and others. On the internet, he has written for
Antiwar.com, Asia Times, Common Dreams, Counterpunch, Countercurrents, Dissident Voice, Eurasia Review and
Modern Diplomacy among many. His work has been quoted in the U.S. Congress and published in its
Congressional Record.
Economic Reform or Tinkering By Dr Pervez Tahir
The measures announced by Finance Minister Asad Umar in the National Assembly on Wednesday are a welcome
set of incentives (and disincentives) for a large number of economic activities, but hardly the economic reform for
which a great hype was being created. These measures could easily have been part of the last minibudget. It
seems the two stages were part of a plan, leaving reform for an agreement with the IMF. The assurance given by
the finance minister that this would be the last IMF programme, said as much. Reform would entail correction of
direct-indirect tax imbalance, reduced number of taxes, and expansion of the tax base and an efficient tax-
collection machinery. It is possible that the forthcoming medium-term framework will contain reform measures. This
would be a mere wish-list until presented before parliament for legislation.
Except for the poor whose assistance was declared by the finance minister as a constitutional duty, the package
has something for everybody. There is no prioritisation and no knowing what the bill is and who bears the burden
eventually. In any case, it is not a minibudget. A desire to live within means was expressed, nonetheless. Banks
extending credit to small and medium enterprises, agriculture and housing will have their tax liability reduced by
half. A tight monetary policy has already pushed the interest rate into double digit. Commercial banks are known to
have preferred to pay penalties than to enter into these neglected areas. Whether the tax incentive will change this
is anybody’s guess. A revolving fund of Rs5 billion has been proposed for interest-free loans for smaller houses.
This may provide real relief if not undermined by complicated procedures. Another real relief is the removal of
withholding tax on filers. An attempt has also been made to boost agriculture by increasing the value of Produce
Index Units to 6,000, lowering regulatory duty on diesel engines and lower fertiliser price by adjusting the Gas
Infrastructure Development Surcharge.
Traders, property owners, buyers and makers of cars, newspaper owners, marriage halls all get their pound of
flesh. When it comes to taxing the traders, discretion has been considered the better part of valour. A start has
been promised from Islamabad. Exporters get a Promissory Note against refunds. Industrialists, considered as the
PML-N constituency, receive the maximum focus. Literally hundreds of import duties have been slashed down.
Special zones have been allowed free imports other than plant and machinery as well. Outside these zones,
greenfield industry will enjoy a five-year tax holiday. An important step is the extension of this tax holiday to the
local manufacture of renewable energy equipment. Besides the annual reduction in the corporate income tax
already in place, big corporates have been spared the tax on retained earnings and the discomfort of taxman’s
intrusion into intercorporate dividends. The tax on retained earnings aimed to encourage declaration of dividend.
However, the stock market has been compensated in other ways. Withholding tax is down and the offsetting of
losses allowed.
Ease of Doing Business is the name of the game — a piecemeal way of doing away with business irritants. The
emphasis is on improving the score on this index rather than taking a holistic view of the investment climate. The
current atmosphere of the activism of NAB, FIA and other agencies has thrown a lot of sand in the traditional
grease of doing business. There is in evidence a do-nothing attitude of bureaucracy and wait-and-see approach of
the businesses. Fear, uncertainty and political polarisation persist. This is economy, stupid, not a game of cricket!

Expectations From Energy-Rich Qatar | Editorial

Prime Minister Imran Khan had a two-day visit of Qatar culminating yesterday. During the visit, Khan met Emir of
Qatar Sheikh Tamim bin Hamad Al-Thani and Prime Minister Abdullah bin Nasser bin Khalifa Al Thani, besides
addressing Qatar’s business community as well as the Pakistani community. Khan was accompanied by his
economic team — comprising Finance Minister Asad Umar, Petroleum Minister Ghulam Sarwar Khan, PM’s
Adviser Abdul Razak Dawood, Chairman Board of Investment Haroon Sharif and Chairperson of the Task Force on
Energy Nadeem Babar — besides his Foreign Minister, Shah Mahmood Qureshi. The composition of the visiting
delegation shows that the agenda of the visit was heavy on business, economy and investment.
The prime focus of the talks with Qatari rulers, though, was on availing an assistance package for Pakistan to meet
its energy needs, similar to the ones obtained from Saudi Arabia and the UAE. What’s reportedly requested is a
reduction in the price of LNG and its supplies on delayed payments under an existing 15-year supply contract that
the previous Pakistani government, led by the PML-N, had signed with Qatar.
The contract — featuring the import of LNG by Pakistan at a price equivalent to 13.39% of the international
benchmark crude oil price — had been bitterly opposed by the PTI while in the opposition, with Khan even calling it
a mother of all corruptions, accusing the former Pakistani government officials of receiving kickbacks in the deal.
Now leading the government, the PTI announced abiding by the 15-year contract before the PM’s visit to Qatar, as
well as another 10-year contract with another supplier that formed the basis of finalising the LNG price — in what is
seen as yet another U-turn by the ruling elite.
Qatar is regarded as the most advanced Arab state with a high-income economy, backed by the world’s third-
largest natural gas and oil reserves. Besides, a 2.6 million-strong Qatar has a 2.3 million expatriate population
which shows that the state is hugely dependent on foreign human resource and can help Pakistan with its
unemployment woes. Pakistani rulers must not risk relations with such Muslim brotherly states for their petty
internal politics.

Revisiting NFC Award By Dr Ikramul Haq

The 9th National Finance Commission (NFC), in its maiden meeting, chaired by Finance Minister Asad Umar, held
in Islamabad on February 6, 2019, discussed besides other issues recommendations for improving the distribution
of resources among provinces and smooth communication between the centre and provincial administrations. The
last NFC Award of December 2009 is often described as “historic” as it was agreed upon after a lapse of 20 years
and substantially increased the overall share of provinces under Article 160 of the Constitution.
Prior to the meeting, Asad Umar in response to a question whether the Federal Government planned to ask the
provinces to give up 7% of their share responded: “We are not starting discussions from a fixed position”. “We will
explain to the provinces the economic and financial issues confronting the country and try to reach a consensus on
the points that need to be addressed,” he added.
Under the previous government of Pakistan Muslim League (Nawaz), the 9th NFC was constituted on April 24,
2015. In its first meeting of April 28, 2015, four working groups were constituted to undertake thematic studies and
put forth their recommendations. What happened thereafter is history-a sad reflection on fulfilling the constitutional
obligations by entire political leadership. It went largely unnoticed as the so-called vibrant media (sic) remained
busy in Baghdadi-like manazaras (debates) to ignite conflicts among the already highly divided and disturbed
nation.
The star Finance Minister of PMLN informed the nation in budget 2016-17, “the shares of the provinces in the
divisible pool have been worked out in accordance with the 7th NFC Award, 2009”. In 2016, he was shamelessly
following the Award of 2009 and that too without fresh census required under the supreme law of the land! Yet, he
claimed “ours is the best government Pakistan has ever had!” The provinces were also guilty of not agitating the
matter-happy to get more money!!
The Federal Board of Revenue (FBR) has reportedly informed Asad Umar that it would be able to collect only Rs.
4.1 trillion this year. It means less than promised share for the provinces. In the Budget 2019, the revenue target of
FBR was fixed at Rs. 4435, which was reduced to Rs. 4398 billion by the PTI Government and now FBR wants
further reduction of 335 billion vis-à-vis original target slashing substantially the share of provinces promised for
2018-19!
It is an undeniable fact that the federal and provincial governments have not been concerned with the fundamental
issue of judicious and even handed distribution of taxation rights amongst Centre and federating units that can help
empowerment of masses and ensure prosperity for all. In 2009, the representatives of provinces and federal
government showed “satisfaction” over the 7th NFC Award. In fact, there was a mood of jubilation that a consensus
had been reached. This validated the hollowness of our ruling classes as they failed to comprehend the real issue
faced by the federation that was how to empower the provinces to enjoy full autonomy in fiscal and administrative
matters.
The issue was and still is not only devising a just and fair formula for distribution of the net proceeds of the taxes-
commonly known as Divisible Pool-but the revisiting of Article 142, 160 of the Constitution vis-à-vis bringing the
less privileged and under developed areas at par with big sprawling cities where mass influx of people is playing
havoc with law and order situation besides creating pressure on available civic amenities. Article 160 of the
Constitution, dealing with the NFC Award, does not prescribe any particular formula for distributing the net tax
proceeds among provinces. It, in fact, requires equitable sharing and distribution of resources among federation
and provinces. The matter is, thus, not that of vertical or horizontal distributions of taxes and resources, for which
six new working groups have been constituted, but giving the provinces complete autonomy that includes exclusive
right of levying harmonised sales tax on goods and services emanating in their respective areas.
Depriving provinces of the right to levy sales tax on goods is the fundamental flaw of our constitution. It was
available to them before independence. The Constituent Assembly took away the right of levying sales tax on
goods from provinces in 1948 with the promise to give it back as soon as financial position of Centre improved-a
promise that remains unfulfilled with none of the provinces ever raising its voice to seek fulfilment. Balochistan
should have exclusive right to levy indirect taxes on natural gas and Khyber Pakhtunkhwa on electricity, just to
mention two for illustration. This can make them rich. Their present share in sales tax from Divisible Pool is as low
as 9% and 14% respectively. They have rich natural resources and wealth of oil, gas and electricity but due to low
population get a small share for goods they produce. The same is the case for Sindh.
The Centre has been brazenly encroaching upon the rights of the provinces by levying presumptive taxes on
services under the Income Tax Ordinance, 2001, sales tax on gas, electricity and telephone services and Federal
Excise Duty (FED) on a number of services. Despite federal high handedness in levying unjust taxes and denying
the provinces their legitimate shares, the Centre has miserably failed to overcome the burgeoning fiscal deficit. Had
provinces been allowed to generate their own resources by levying sales tax etc on goods produced by them, the
present chaotic situation on fiscal front could have been averted.
It is regrettable that the provinces have been denied even pre-partition available right of levying sales tax on goods.
They have been purposefully made dependent on the federal government-this is a considered policy of control for
maintaining hegemony over federating units. On the one hand, the provinces have not been allowed to levy taxes
on goods generated within their boundaries and on the other the federal government has utterly failed to tap the
real revenue potential, which is not less than Rs. 8 trillion-the roadmap to realise it is available in ‘Towards Flat,
Low-rate, Broad & Predictable Taxes’ (PRIME, 2016). Collection to this extent will make the entire Pakistan prosper
and not only a few urban areas. The Federal Board of Revenue (FBR) has reportedly informed Asad Umar that it
would be able to collect only Rs. 4.1 trillion this year. It means less than promised share for the provinces. In the
Budget 2019, the revenue target of FBR was fixed at Rs. 4435, which was reduced to Rs. 4398 billion by the PTI
Government and now FBR wants further reduction of 335 billion vis-à-vis original target slashing substantially the
share of provinces promised for 2018-19!
The pathetic performance of FBR affects the provinces as they are heavily dependent on share/transfers from the
Divisible Pool. Pakistan is, thus, caught in a dilemma: Centre is unwilling to grant the provinces their legitimate
taxation rights and has at its own collects too little to meet the national overall demand. Since the size of cake
(Divisible Pool) is small, the provinces lack sufficient resources for the welfare of their people. In this scenario, the
real sufferers are the masses. The taxation rights under the prevalent constitutional scheme needs reconsideration
to empower provinces to raise adequate resources which will also help in overcoming overall fiscal deficit faced by
the country.