Day: January 14, 2022

The World Bank’s Board of Executive Directors will consider the “Pakistan Housing Finance-Additional Financing” project next month, with the objective to increase access to housing finance for households and support capital market development in the country.

Official documents seen by ProPakistani reveal that Pakistan Mortgage Refinance Company is the implanting agency of the project with a total cost of $85 million, to be financed by the International Bank for Reconstruction and Development (IBRD). This additional financing of the Housing Finance Project is an integral part of a triad of World Bank (WB) operations designed to develop the housing sector in Pakistan; all three of these operations will be delivered in Fiscal Year (FY) 22.

The WBGs integrated interventions in Pakistan’s land and housing sectors address constraints on both the demand and supply side to deepen the housing market, this is aligned to the GoP’s reform program in the sector. WB’s engagement in Pakistan’s housing sector began in 2018 with the Pakistan Housing Finance Project (the parent project-P162095).

This project sought to improve access to housing finance for low- and middle-income households. Building on the accomplishments of the 2018 operation, the WB will deliver three complementary projects in FY22. First, the Punjab Urban Land Systems Enhancement (PULSE, P172945) project will support the digitization of land records in urban and rural areas and create a province-wide parcel-based cadaster. Access to land has historically been a key bottleneck in housing supply, and secure land records are essential for housing finance.

First, it will create more secure land rights records and help developers quickly identify developable land in urban areas through a comprehensive public land inventory. Second, the Punjab Affordable Housing Program (PAHP, P173663) will help strengthen housing institutions and systems to enhance housing supply, including affordable housing for lower-income households in Punjab. It will also raise awareness of housing finance options among eligible beneficiaries.

Third, this additional financing (AF) (P172581) will support a significant scale-up of the credit risk-sharing facility under the parent project to promote access to mortgage loans for low- and informal-income households. While PULSE and PHAP will support the Punjab Government in its efforts to increase housing supply for lower-income households, where the housing deficit is most acute, the AF will ensure that households of this profile have access to housing finance to benefit from the increasing supply of affordable housing.

The improved policy environment and revitalized market conditions around the supply of housing and demand for housing finance have resulted in the unprecedented growth of the sector. The current administration came into office two months after the Parent Project became effective in 2018 and launched an ambitious affordable housing program in early 2019 (i.e., the Naya Pakistan Housing Program – NPHP).

The Naya Pakistan Housing & Development Authority (NaPHDA) was established in 2019 under the Prime Minister’s Office to implement the NPHP. The Authority has wide-ranging powers to promote and foster growth in affordable housing. The Authority initially developed four distinct housing products to promote:

a. Tier 0: houses up to,1,250 sqft, built on public or private land, specifically targeted to the microfinance sector with loans up to Rs. 2.0 million ($12,763).

b. Tier 1: 850 sqft houses, built on public or private land, with mortgage loans up to Rs. 2.7 million ($17,230).

c. Tiers 2 and 3: 1250 to 2,000 sqft houses, built on private land, with mortgage loans up to Rs. 6.0 million or 10 million, respectively ($38,290 or 63,816).

d. The proposed AF of the parent project has been conceived to complement and support the government’s ambitious housing program and will entail a capitalization ($85 million) of sub-trust of the Risk Sharing Facility (RSF) under Component 2 of the parent project. The RSF provides credit risk cover to lenders (50-60 percent) for selected borrowers under the MPMG.

e. Lenders will pay an upfront premium for this guarantee. The need for larger RSF has become critical given the government’s policy pronouncements, especially given the mandatory targets under MPMG – a borrower segment that is not the traditional client base of PMLs. The SBP has imposed lending targets on banks based on the tacit understanding that through the RSF, the GoP will share some of the risks of this rapid expansion into an untested market segment.

f. Direct lending targets complemented by such deep subsidies can potentially be distortive. However, given the very small size of Pakistan’s mortgage market (0.3 percent of GDP) and the very narrow focus of MPMG on lower-income households, at this stage of market development, the risk of a systemic distortion is quite limited.

g. The RSF will only provide risk cover to mortgages being originated under the MPMG. While banks have made steady progress in meeting their broader targets, their progress on MPMG targets has been somewhat muted. Since its inception 10 months ago, there have been 42,956 applications (of value Rs. 200 billion – $1.18 billion) under MPMG and only 17,129 of these applications (of value Rs. 78 billion – $458 million) have been approved (indicating only a 40 percent approval rate). Disbursements are still lower at Rs. 17 billion ($100 million).

h. The proposed additional funding into the RSF will give banks comfort as they move towards lending to an untested market segment and will have a direct impact on the rate of approvals and disbursements going forward. The pilot RSF in the parent project has also been realigned to meet the needs of the MPMG program (i.e. only loans under this scheme qualify for coverage).

i. The AF will entail the initial capitalization of a sub-trust of the RSF under component 2 of the parent project – the pilot RSF ($10 million) will now be complemented by a scaled-up RSF ($85 million). Like the pilot RSF, the salient features of the scaled-up RSF (RSF–phase 2) will be fully aligned with the government’s MPMG program.

j. The premium structure, investment policy, and coverage model of the RSF-phase 2 is designed to ensure it remains a sustainable fund that will remain part of the housing finance market infrastructure well beyond the life of the project.

k. Additionally, the AF design considers the government’s tight fiscal position, and as such, the salient features and governance of the RSF-phase 2 have been developed to limit the government’s fiscal exposure. The RSF-phase 2 will provide a 50 percent credit risk cover, as opposed to 40 percent in the pilot.

l. The increase in risk coverage is based on extensive consultations with the regulator, lenders, and other key stakeholders. The coverage accorded under the RSF-phase 2 will likely be revised as more empirical data is generated on portfolio performance as the RSF gains momentum. Like in the parent project, a premium will be charged by the RSF-phase 2 for coverage. However, going forward, the premium will be priced higher for the higher income groups and will range between 2-4 percent.

m. The premium structure is currently designed to cross-subsidize coverage between tiers; more affluent borrowers (under tier 2 and 3) will be charged a higher premium. The premium structure, like the coverage, will be reevaluated as more empirical data becomes available to inform the operations and sustainability of the RSF – phase 2. The coverage model will also carry indicative targets (i.e., tier-wise allocation of the number of loans covered) to ensure that the RSF-phase 2 predominantly benefits lower- and middle-income households.

n. Pakistan Mortgage Refinance Company will be managing and administering the Risk Sharing Facility on behalf of the Government of Pakistan.

o. PMRC has developed an ‘operations and governance structure’ to administer the RSF as part of the parent project; this will be scaled up as the RSF increases in size with the implementation of the AF. An RSF Committee under the PMRC Board will monitor implementation progress and five designated staff will manage the day-to-day operations of the facility. This staffing may increase as the portfolio under coverage increases.

p. Additionally, a multi-stakeholder RSF Implementation Monitoring Committee will also be established. This committee will have representatives from the Ministry of Finance, SBP, NAPHDA, and PMRC (as Trust Administrator). Its main objective will be to ensure the RSF’s salient features and coverage remain aligned to GoP’s priorities and market realities.

Source: Pro Pakistani

The Pakistani Rupee (PKR) has reversed yesterday’s losses against the US Dollar (USD) and posted gains in the interbank market today. It gained 31 paisas against the greenback after hitting an intra-day high of Rs. 176.00 against the latter during today’s open market session.

It appreciated by 0.18 percent against the USD and closed at Rs. 176.07 today after losing 15 paisas and closing at 176.38 in the interbank market on Thursday, 13 January.

The rupee reported gains against the USD a little less than 24 hours after the National Assembly finally passed the Finance (Supplementary) Bill 2021 that is also known as the ‘mini-budget’, during a long session with fierce resistance from the opposition benches.

While the new tax laws and associated withdrawal of tax exemptions are aimed at supporting the economy amid fears of rising inflationary concerns, the local exchange unit is expected to remain under pressure due to the dollar’s excessively volatile demand both at home and abroad.

Moreover, foreign exchange reserves are taking big hits for the fifth straight week. According to a weekly report released by the State Bank of Pakistan (SBP), the country’s total liquid foreign exchange reserves went down by $118 million on 7 January 2021 to $23,9 billion. The central bank’s reserves fell by $88 million to $17.59 billion during the week under review as compared to $17.68 billion on 31 December 2021.

Commenting on the rupee’s near-term outlook earlier in the day, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, tweeted, “Net Reserves with SBP & Total Fx Reserves slid for [the] 5th [straight] week. Net Reserves with Banks too have dipped. Since February, [the] bank’s chunk has fallen from $7.1bn to $6.3bn, which could be due to shift[s] in portfolio[s]. SBP & TOTAL LIQUID FX RESERVES touched LIFETIME HIGH in AUG/21”.

The PKR made an impressive comeback against other major currencies and reversed losses in the interbank currency market today. It posted gains of 27 paisas against the Euro (EUR), 58 paisas against the Australian Dollar (AUD), and 29 paisas against the Pound Sterling (GBP).

Moreover, it gained seven paisas against the Saudi Riyal (SAR) and eight paisas against the UAE Dirham (AED) in today’s interbank currency market.

Source: Pro Pakistani

The inflows of remittances maintained its sustainability from the recent past which continued to surge the overall values to a handsome level of $15.8 billion in the first half of the financial year 2021-22.

The remittances grew by 11.3 percent during the first half of FY22 over the same period last year.

The inflows of remittances may swell to $30 to $31 billion in the current financial year provided the inflows continue with similar growth. According to the State Bank of Pakistan, workers’ remittances inflows stand at $2.5 billion in December 2021. In terms of growth, remittances increased by 2.5 percent (m/m) and 3.4 percent (y/y) in December 2021.

Remittance inflows during December 2021 were mainly sourced from Saudi Arabia ($626.6 million), the United Arab Emirates ($453.2 million), the United Kingdom ($340.8 million), and the United States of America ($248.5 million).

Proactive policy measures by the government and SBP to incentivize the use of formal channels and altruistic transfers to Pakistan amid the pandemic have positively contributed towards the sustained inflows of remittances since last year.

The July-November FY22 data of workers’ remittances has been revised upward to reflect inflows into Roshan Digital Accounts (RDA) that are related to local consumption (like payment of utility bills, transfer to local PKR account, etc.).

Since data on these conversions was not previously available by country, these were reported under ‘other private transfers’ in the balance of payments statistics. The December 2021 data is also compiled accordingly, and this treatment will be followed going forward.

Source: Pro Pakistani

The Federal Board of Revenue (FBR) has decided to integrate the foreign exchange dealers with its Point of Sale (POS) system to keep an eye on the trading activities of the forex market.

According to the draft, prepared by the tax collection authority, some amendments have been suggested in Rule 33G, in Schedule 1, which is related to the integration of retailers with the POS system. Rule 33G says, “the Federal Board of Revenue shall ensure to provide a facility on its website to a customer of an integrated enterprise Person to verify and ensure that the invoice or bill issued to him has been duly communicated to the Board’s Computerized System and in case of non-verification, he may upload the image of invoice or bill to the Board’s portal.”

According to the rule, 12 categories have been included in the list of retailers on Tier 1 including the big restaurants, hotels, motels, guest houses, marriage halls, marquees, and clubs including courier services and cargo service, big beauty parlors, medical practitioners and consultants, accountants, photographers, hospitals or medical care centers providing medical consultation, hospitalization or other ancillary services, etc.

According to the new SRO 50, all foreign exchange dealers and companies have been added to the list of businesses that have to install POS on their sale points.

Spokesman FBR told ProPakistani that around 2,250 retailers had so far been integrated with the FBR POS system. He said around 11,000 outlets of retailers of Tier-1 had been integrated with the POS system, adding that a total of 16,000 cash counters were also integrated with the POS system.

The spokesman said FBR would take action against the retailers who still had not installed the POS system in their cash counters. He said FBR teams were reaching such retailers and legal notices were being served on them.

Commenting on the SRO, General Secretary Exchange Companies Association of Pakistan, Zafar Paracha, welcomed the steps taken by FBR. He said this would help document the economy. He said it was necessary for the economy to discourage the gray market in forex, adding that the organization believed that the forex market should be operating in accordance with the law of land and it should contribute to the process of economic growth.

According to the spokesman, FBR has also announced a prize scheme for the shoppers of the POS integrated retailers, and the first balloting, in this connection, will be held on 15 January.

According to FBR, thousands of prizes worth Rs. 100,000 would be distributed among the winners after computerized balloting to be held every month. Those who shopped from POS integrated retailers in December 2021 will be included in the balloting. “People are encouraged to actively participate in the balloting to win prizes after buying from POS integrated retailers,” he concluded.

Source: Pro Pakistani

Advisor to the Prime Minister on Commerce, Abdul Razak Dawood, has accepted the recommendation of the Pakistan-Afghanistan Joint Chamber of Commerce and Industry (PAJCCI) to set up banking counters on the Pak-Afghan border.

The advisor promised President PAJCCI, Zubair Motiwala, that progress regarding banking counters will be visible within a week, reported Dawn.

Razak Dawood said that trade in perishables and poultry is allowed in local currency. He added that pharmaceuticals and rice were under consideration by the authorities, and PAJCCI will be updated regarding any updates in the policy.

He revealed that the State Bank of Pakistan (SBP) had issued a notification as per the instructions given by the Ministry of Finance (MoF), and the PAJCCI could discuss the cash-on-counter facility with it.

The advisor stated that the government of Pakistan would internally deliberate these issues and discuss the relevant issues with the Afghan government and announce what policy should be adopted to enhance trade and economic activity with Afghanistan.

A press release issued by PAJCCI states that the government had shared a list of 40 items with the Afghan government, but it had not received any response from the neighboring country.

President PAJCCI apprised the advisor of the issues that would affect the trade with Afghanistan in the long term. He suggested that both countries should develop a system for barter trade. He opined that the countries should promote trade in local currencies and suggested the withdrawal of the cash-on-counter facility.

Motiwala also pointed other issues such as the requirement of advance payments, the unwillingness of correspondence banks to accept third-party payments in the case of Afghanistan, and congestion on the border.

He said that Afghanistan lacked an operational banking system and dollar reserves. He added that the traders were not allowed to carry more than Rs. 10,000 through the border, meaning that cash payments cannot be made. This would result in traders buying dollars in Pakistan and impact the country’s foreign exchange reserves, he stated.

He further stated that the business community understood the international laws given by Financial Action Task Force (FATF), however, trading in rupees was the only solution given the condition of the Afghan economy.

Motiwala recommended that bank counters on the Pak-Afghan border should be established to ensure on-the-spot payments without delayed shipments and border congestion.

Source: Pro Pakistani

The Sensitive Price Indicator (SPI) for the week ended 13 January 2022 recorded a decrease of 0.43 percent, stated the Pakistan Bureau of Statistics (PBS).

During the week, out of 51 items, prices of 16 (31.37 percent) items increased, nine (17.65 percent) items decreased, and 26 (50.98 percent) items remained stable, stated the PBS in weekly SPI data.

The commodities, which recorded increase in their average prices include onions (14.65 percent), bananas (1.51 percent), firewood (whole) 40 kg (1.30 percent), match box (1.14 percent), mustard oil (0.95 percent), pulse masoor (0.91 percent), mutton (0.87 percent), pulse maash (0.60 percent), beef with bone (0.50 percent), pulse gram (0.43 percent), milk fresh (0.37 percent), toilet soap (0.34 percent), cooked daal (0.26 percent), gur (0.18 percent), rice irri-6/9 (0.07 percent) and pulse moong (0.05 percent).

The commodities which recorded a decrease in their prices during the period under review include chicken (3.40 percent), eggs (2.99 percent), potatoes (1.65 percent), tomatoes (1.26 percent), LPG (1.15 percent), wheat flour bag 20 kg (0.61 percent), garlic (0.47 percent), sugar (0.17 percent) and curd (0.16 percent).

The year-on-year (YoY) trend depicts an increase of 19.82 percent, mainly due to an increase in electricity for Q1 (84.86 percent), cooking oil 5 liter (53.49 percent), gents sponge chappal (50.25 percent), LPG (50.18 percent), vegetable ghee 2.5 kg (49.68 percent), vegetable ghee 1 kg (49.34 percent), washing soap & mustard oil (45.85 percent) each, gents sandal (44.49 percent), pulse masoor (39.14 percent), petrol (36.13 percent) and diesel (28.07 percent), while a major decrease was observed in the prices of tomatoes (40.82 percent), pulse moong (25.37 percent), chilies powdered (6.71 percent) and sugar (0.40 percent).

According to the latest data, the SPI went down from 168.12 percent during the week ended January 6, 2022, to 167.39 percent during the week under review.

The SPI for the consumption groups up to Rs. 17,733, Rs. 17,733 to Rs. 22,888, Rs. 22,889 to Rs. 29,517, Rs. 29,518 to Rs. 44,175, and for above Rs. 44,175, decreased by 0.30 percent, 0.38 percent, 0.42 percent, 0.46 percent and 0.44 percent, respectively.

The commodities whose prices remained unchanged during the period included rice basmati broken, bread plain (small size), powdered milk Nido 390 gm polybag each, cooking oil Dalda or other similar brands (sn), 5-liter tin each, vegetable ghee Dalda/Habib 2.5 kg tin each, vegetable ghee Dalda/Habib or other superior quality 1 kg pouch each, salt powdered (national/shan) 800 gm packet each, chilies powder national 200 gm packet each, tea Lipton yellow label, cooked beef, tea prepared, cigarettes capstan, long cloth 57″ Gul Ahmed/Al Karam, shirting, lawn printed Gul Ahmed/Al Karam 1 meter, georgette, gents sandal bata pair, gents sponge chappal bata pair, ladies sandal bata pair, electricity charges for Q1, gas charges, energy saver Philips, Sufi washing soap, petrol super, hi-speed diesel and telephone call charges.

Source: Pro Pakistani

The National Assembly has passed the National Information Technology Board (NITB) Bill, which would not only enable the Board to harness the latest solutions ICT’s have to offer but would also induct and mainstream these technologies in the processes of the federal government while promoting the integration of digital technologies across the country.

Federal Minister for Information Technology and Telecommunication moved the NITB bill in the national assembly that was passed with a majority.

Ministry of IT welcomed the development stating it will promote and accelerate the process of digitization including e-governance in a transparent and effective manner.

The Bill was presented by the Federal Minister for Information Technology and Telecommunication Syed Amin Ul Haque on Thursday in the National Assembly, which was passed with a majority of votes.

Talking to ProPakistani, the Minister for IT and Telecom said that the Government of Pakistan gives high priority to the Information and Communication Technology (ICT) sector as an enabler of socio-economic development.

The core objective of the establishment of the National Information Technology Board in 2014, through the merger of Pakistan Computer Bureau (PCB) and Electronic Government Directorate, was to create an organization with the technical capacity to promote and integrate ICT programs across the Federal Government.

However, its existing structure (as an attached department) hampers its ability to harness the latest technical expertise, skill sets, and work experience required to deliver on its mandate. The mandate in itself has been long due for reconsideration as well, keeping in view the evolving nature of ICT technologies.

The reorganization of the NITB (as an autonomous body) would not only enable harnessing the latest solutions ICTs have to offer but would also induct and mainstream these technologies in the process of the Federal Government while promoting the integration of digital technologies across the country

It is expedient to provide for the establishment of the National Information Technology Board for e-governance across the country in line with the vision and policy of the Federal Government to serve the public in a more effective and efficient manner through due advisories and consultancies and provision of e-governance software applications to Federal Ministries and divisions including their attached departments, subordinate offices, and autonomous bodies so as to focus on cross-cutting e-governance applications and initiatives that can be replicated across multiple public organizations for better government to government and government to Citizens services and communication, and for matters connected therewith and ancillary thereto?

The composition of the Board will consist on

a. Federal Minister of the division Concerned (Chairman)

b. Secretary of the division concerned (Member ex-officio)

c. Secretary, Finance Division (Member ex-officio)

d. Secretary of the division to which business of Science and Technology Stands allocated (Member ex-officio)

The CEO (NITB) shall be answerable to the Board for all administrative, fiscal, and Technical matters of the Board. The Board may delegate such administrative and financial powers to the CEO for carrying out day-to-day affairs of the Board as it deems necessary.

The Ministry of Information and Technology had earlier asked the federal cabinet to issue an executive order for running the affairs of the National Information and Technology Board (NITB). The NITB has already been declared an autonomous body by the Cabinet. However, the NITB Ordinance lapsed on April 19, 2020, whereas the bill was pending legislation.

In the interim period, legal cover for NITB’s continuation as an autonomous body with an independent board was required through an executive order.

The NITB is providing e-governance services to all Federal Government divisions and departments. These include government to government services, government to business services, government to citizen services, and government to employees services.

In addition to this, the NITB is also responsible for developing standards for ICT services, cyber security, ICT procurement, IT capacity building of federal government employees, building collaborative platforms, and also the provision of consultancy services to federal government divisions on governance.

The federal minister for information and telecommunication in his statement said that the government of Pakistan gives priority to the information and communication technology sector as an enabler of socio-economic development.

He said the core objective of the establishment of the National Information Technology Board in 2014, through the merger of Pakistan Computer Bureau and Electronic Government Directorate was to create an organization with the technical capacity to promote and integrate ICT programs across the federal government. However, its existing structure hampers its ability to harness the latest technical expertise, skill sets, and work experience required to deliver on its mandate. The mandate in itself has been long for reconsideration as well, keeping in view the evolving nature of ICT technologies.

Syed Amin Ul Haque said through this act, the reorganization of the NITB would not only enable harnessing the latest solutions ICT’s have to offer but would also induct and mainstream these technologies in the process of the federal government while promoting the integration of digital technologies across the country.

National IT Board Act 2021 states that it is expedient to provide for the establishment of National Information Technology Board for e-governance across the country, in line with the vision and policy of the federal government, to serve the public in a more effective and efficient manner through due advisories and consultants and provision of e-governance software application to federal ministries, and divisions including their attached departments, subordinate offices, and autonomous bodies so as to focus on cross-cutting e-governance applications and initiatives that can be replicated across multiple public organizations for better government to government and government to citizen services and communication and for matters connected therewith and ancillary.

According to NITB ACT 2021, the Federal Minister of the concerned division will be chairman of the board, whereas the finance secretary, secretary of the concerned division will be ex-officio members of the board. Secretary of the division to which business of ex-officio science and technology stand allocated will also be a member of the board.

The CEO NITB shall be answerable to the board for all administrative, financial, and technical matters of the organization. Board is empowered to delegate administrative and financial powers to CEO for carrying out day to day affairs of the organization as it deems necessary.

The NITB aims to address the operational challenges of all government departments and Ministries. NITB specializes in key automation, design, development, and implementation of robust IT technologies to promote the e-governance culture in all public departments and holistically develop plans, technologies, and infrastructures to boost the performance of the public sector.

Source: Pro Pakistani

Banks’ loans to the private sector dropped from 5.3 percent of GDP to 1.2 percent in the last 20 years, as per the World Bank (WB) data showing credit trends from 2001 to 2020.

The WB is busy streamlining a picture of the current situation where the US dollar sells at around Rs. 180. The State Bank of Pakistan (SBP) has provided the relevant data on 2020-21 credit provision from the banking sector while the Ministry of Finance is firming up figures on this count for the July-December period of 2021.

The private loans disbursed in 2001 at 5.3 percent of the GDP helped the business community purchase dollar at Rs. 67-77 while the current rate of dollar stands at Rs. 178. The loan volume that was slashed to 1.2 percent of the GDP leaves investors in dire want of liquidity for business and equity for acquiring bank credit, according to market players.

This has happened in a financial year when the growth of the GDP slid from four percent to three percent and the Sales Tax rate climbed from an average of 12 percent to 17 percent.

The volume of the non-performing loans in this period has also increased from nine percent of the GDP to 9.1 percent, which is deterring the banking sector from extending credit on easy terms. The feasibility conditions for acquiring credit have been toughened and discourage equity-building and investment trends in the innovation-driven sectors.

The anti-investment environment leaves the large and medium scale investors to the restricted option of dealing in a safer and smaller-volume business activity like sale-purchase of gold, dollar, attractive property deals, and stocks that offer lower but safer gains.

Sources from the Ministry of Finance said that the most critical sectors like producing an export surplus of competitive quality and using the proceeds in foreign exchange for enhancing the operation of production lines remain ignored in this environment.

They added that this discouraging trend has been preventing new investors from engaging in the newly launched Public-Private Partnership deals for beefing up the state infrastructure financed at an average of over 500 billion rupees per annum during the past two decades.

They also pointed out that the credit slash of the private sector has also happened during these two decades on account of a growing policy rate from four percent to the current 8.5 percent. Only the government could avail of bank credit at the commercial and non-commercial loans at this rate of profit, which resulted in a situation where the private sector could neither acquire credit for their wholly-owned business nor for projects under the Public-Private Partnership regulations.

Source: Pro Pakistani