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Govt withdraws sales tax increase on dairy products

July 19, 2021 (MLN):  After attracting indignation from livestock farmers, bodies representing the livestock sector, and food experts, the government have decided to withdraw the increase in general sales tax (GST) on dairy products and assign zero-rating to the sector, media reports claimed on Saturday.

The government has also changed the dairy sector’s status to zero-rating on persistent demand from the livestock farmers.

“With inflation a threat to growth, we welcome government’s decision to zero-rate milk and reduce GST on other dairy items,” the Pakistan Business Council said while lauding the announcement. “[It] shows prime minister, finance minister, Advisor Commerce and the Federal Board of Revenue’s desire to provide affordable nutrition, formalize and develop this [dairy] sector.”

The government had increased sales tax on dairy products from 10% to 17% in the FY2021-22 budget in view of raking in additional revenue. However, the move was widely criticized by all stakeholders in the dairy product value chain warning the move could cause inflation in the coming months.

Finance Minister Shaukat Tareen’s announcement shocked dairy producers who said the move would be counterproductive and would lead to a reduction in dairy consumption in the already malnourished country.

Analysts had also warned that the increase in ST on dairy products will eventually result in an increase in National CPI over the upcoming months as dairy and related products account for nearly 10% in the food group index of CPI.

Before the budget, stakeholders were urging the government to assign zero-rating to the dairy sector in order to ensure that the general public’s nutritional needs were filled without making them costlier.

It is estimated that the government will bear a revenue loss of Rs5 billion from reduction in GST.

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Pakistan’s trade deficit increases by 30% YoY in 11MFY21

July 19, 2021 (MLN):  Pakistan's trade deficit for 11months (July-May) FY21 was USD27.463 billion compared to a deficit of USD21.054 billion from the corresponding period from FY20, depicting a growth of 30% YoY.

According to data released by the Pakistan Bureau of Statistics (PBS), the trade deficit for the month of May 2021 was recorded at USD3.63 billion compared to a deficit of USD3.024 billion from April 2021 showing an improvement of 20.27 percent.

Compared to the May 2020 deficit of USD1.46 billion, the trade deficit jumped by a whopping 148.94%.

Exports decreased by 24.6 percent to USD1.67 billion compared to USD2.28 billion in April 2021. While on yearly basis, the exports exhibited a growth of 19.7 percent from $1.39 billion in May 2020.

Imports in May 2021 decreased marginally by 1.26 percent, clocking in at USD5.308 billion compared to USD5.242 billion in April 2021. Compared to the corresponding period last month, the imports showed a significant increase of 85.79 percent from $2.857 reported in May 2020.

Overall, the 11month exports stood at USD22.57 billion compared to USD19.79 billion from the corresponding period of last year, showing an increase of 14.05 percent. Similarly, Imports during the period increased by 22.5 percent to USD50.039 billion compared to USD40.849 billion from the same period of FY20.

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Electricity generation in May rises 8.3%

July 19, 2021 (MLN): Electricity generation in May rose by 8.3% year-on-year to 13,010 GWh, the latest data released by the National Electric Power Regulatory Authority (Nepra) showed on Saturday.

On a month-on-month basis, generation in May increased by 24% compared to 10,481 GWh in April.

Cumulatively, total electricity generation during the 11MFY21 stood increased by 7% to 115,862 GWH with hydel contributing 29.8%, RLNG 21%, coal 21.5% and gas at 11.3%.

Despite higher production, various cities across Pakistan are experiencing massive load shedding. The incumbent government has said that the outages are primarily a result of the weak transmission and distribution system.

Minister for Energy Hammad Azhar said the country was experiencing load-shedding due to transmission faults.

He said that although, revenue-based load-shedding in high theft areas and any infrastructure/transmission breakdown in localities will continue however forced load-shedding has now been stopped.

The government has allocated Rs596 billion in subsidies for FY22 in order to insulate consumers from higher consumer tariffs.

Of the total sum, Rs245bn has been set aside for Water and Power Development Authority/Pakistan Electric Power Company, Rs85bn for the K-Electric, and Rs266bn for Power Holding Private Ltd/Independent Power Producers (IPPs).

Earlier this month, the government also released the first tranche of Rs89bn in three equal chunks of cash, 10-year Pakistan Investment Bonds, and five-year sukuks to clear long-standing dues of IPPs.

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SBP and JazzCash join hands to increase financial literacy...

June 19, 2021: National Institute of Banking and Finance (NIBAF) – a subsidiary of the State Bank of Pakistan (SBP), and JazzCash, Pakistan’s leading FinTech Company, have signed a Memorandum of Understanding for increasing financial literacy amongst the youth of Pakistan.

The two parties aim to jointly promote financial literacy through the engaging and interactive game called “PomPak – Learn to Earn” developed under SBP’s project, National Financial Literacy Program for Youth (NFLP-Y).

PomPak utilizes a story-based narrative by following the journey of two families who set up a small entrepreneurial venture. This helps to keep the players engaged while effectively inculcating ethical behavior and financial skills such as budgeting, saving, and banking. PomPak is available in both English and Urdu for three age groups: children (9-12); adolescents (13-17); and youth (18-29). Anyone who completes the course is awarded a certificate of financial literacy jointly from NIBAF and NFLP-Y.  It can be played on a desktop computer or can be downloaded from Google Play and the App Store for other devices.

JazzCash, under its partnership, is going to provide SBP access to more than 26 million Pakistanis by promoting the PomPak application on its platform. This will help the application reach a wider audience, thus increasing its usage and eventually promoting the financial literacy of the nation resulting in a highly positive socio-economic impact.

Riaz Nazarali Chunara, Managing Director, NIBAF stressed the role of increased financial literacy in promoting financial inclusion. He said that being Pakistan’s first e-learning financial literacy game, PomPak has revolutionized the way financial education is delivered. He went on to add that NIBAF is really proud of what PomPak has achieved since its launch and this partnership with JazzCash will contribute majorly towards our commitment to provide free-of-cost financial education to all.

While emphasizing the significance of the MOU, Mr. Erwan Gelebart, Chief Executive Officer JazzCash, said that there is ample scope for financial enablement and education through JazzCash. Creating a strong business and building a better Pakistan in parallel are key contributors to long-term success for JazzCash. This agreement will contribute to achieving the aforesaid objectives as we look forward to upskilling the youngsters of Pakistan, he said.

 Under the guidance of SBP, NIBAF is implementing National Financial Literacy Program for Youth to impart essential financial education to Pakistani youth and school-going children. In the last three years, the project has successfully reached more than 45 districts of Pakistan making over 750 thousand financial literates in this category.

Press Release

World Bank approves USD442mn for water, sanitation projects in...

June 19, 2021: The World Bank’s Board of Executive Directors approved $442 million on Friday in financing to support Pakistan in improving access to water and sanitation services for the most vulnerable rural communities in Punjab province.

The Punjab Rural Sustainable Water Supply and Sanitation Project (PRSWSSP) will help upgrade water supply and sanitation infrastructure and services that ensure equitable and sustainable access to drinking water and safe wastewater management. The project prioritizes rural settlements, where water contamination and poor sanitation practices are more prevalent, causing high levels of illness and child stunting.

“PRSWSSP will help more than six million rural residents in the poorest districts of Punjab to reduce child stunting and address areas at high risk to droughts and water scarcity,” said Najy Benhassine, World Bank Country Director for Pakistan. “The World Bank is committed to the government in improving sustainable water resource management. This project will support investments that increase climate resilience, including flood protection, rainwater harvesting and water conservation in these districts.”

The project will implement tailored, cost-effective solutions for both large and small rural settlements, using scalable technologies that help facilitate solid and animal waste management at the household and community levels. It will also establish a water-quality monitoring system to ensure compliance with national standards for drinking water and wastewater. The PRSWSSP will promote safe water handling, hygiene, and water conservation practices at the household level, with a focus on maternal, newborn and child health.

“The project is expected to yield substantial benefits to rural communities. It will help improve health outcomes by reducing water-borne illnesses and ensure service quality and customer care through a financially sustainable public company,” said Farhan Sami, Task Team Leader for the project.

The project will cover 16 districts, with 50 percent of districts drawn from south Punjab, and 25 percent each from central and north Punjab, benefiting 2,000 villages and more than six million people in rural areas. It will also provide training of village councils and community caretakers, which will have complementary responsibilities for operations and maintenance, monitoring and evaluation, and customer service.

“Child stunting is endemic and a huge constraint on Pakistan’s potential,” said Ghazala Mansuri, co-Task Team Leader for the project. “It impacts a child’s cognitive development and immune system, reducing educational attainment, making illness more likely, and leading to lower productivity and income. Its effects are inter-generational, transmitted from parent to child. This project would provide the template for a transformational shift in human capital accumulation since it addresses all the determinants of stunting.”

The project design was informed by a 2018 flagship report, When Water Becomes a Hazard: A Diagnostic Report on The State of Water Supply, Sanitation and Poverty in Pakistan and Its Impact on Child Stunting, that examined linkages in Pakistan between water and sanitation services, and child stunting. This study also supported environmental sustainability and the need to provide information and support behavioral change in poor rural communities to reduce health risks.

Press Release

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