ISLAMABAD: The government’s National Export Development Board (NEDB) headed by the Prime Minister may become redundant after the government begins implementation of the International Monetary Fund conditions for the ongoing Extended Fund facility programme loan.
The agreed conditions include reforms to the tariff schedule to reduce complexity and avoid using tariffs to promote industrialization and protect sectors unable to compete to be self-reliant, foster a more efficient allocation of credit by taking stock of the State Bank of Pakistan’s (SBP) system of subsidized loans to exporters, cover SBP’s refinancing schemes that are being phased out and new schemes operated by Exim bank.
The IMF’s harsh upfront conditions have been disseminated at a time when the Commerce Ministry is in the process of formulating a new National Tariff Policy 2025-29 and consultations with business community and exporters who are pressing the government for more fiscal incentives if exports are to rise.
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The Prime Minister Office (PMO) has sought an update on directions issued by the Prime Minister a couple of months ago during a meeting with leaders of business community.
Prime Minister had directed Commerce Ministry and other concerned entities like Finance Division, FBR and SBP to resolve issues raised by exporters in the meeting within two weeks and to then brief the Prime Minister. He had further directed that sectoral discussions by concerned Ministries must be held to identify the Issues and work out/propose resolution of the same and unresolved issues, if any, be taken up in an internal meeting at PMO for consideration. However, nothing concrete has been done on the directions of Prime Minister as commitments made to the Fund do not allow any fiscal or credit incentive to industry.
During interactions with the IMF Staff, Commerce Ministry officials maintained that tariffs erode Pakistan’s competitiveness by increasing the cost of inputs and protecting inefficient producers, impose costs on consumers, and create an anti-export bias.
Commerce Ministry officials informed the IMF that as National Tariff Policy 2019–24 draws to a close with successful progress in rationalizing and simplifying the tariff structure, they will continue with trade liberalization reforms in its 2025-29 iteration.
The Authorities has pledged to the Fund that they will not increase Pakistan’s trade-weighted average customs duties. In addition, trade-weighted average tariffs (defined for these purposes as customs duties, additional customs duties and regulatory duties, taken together) will decrease every year during FY25-29.
The Authorities further stated that they will also continue to improve Pakistan’s integration into world trade by reducing non-tariff barriers and refrain from implementing (or prolonging) preexisting trade-distortive measures such as export subsidies or local content requirements as defined under WTO agreements.
“We will continue our efforts to simplify import/export documentation processes and improve processing times by end-FY26 the Pakistan Single Window platform will be expanded beyond the federal level to also include provincial departments,” said IMF in its recently uploaded report citing Pakistani authorities.
The sources said, Commerce Ministry has informed the Prime Minister Office that the Commerce Minister approached provinces through their Chief Ministers, and a response was received from the Government of Punjab and the Government of Sindh. Meetings of I6 Sectoral Councils were held with active participation from the provinces.
A meeting was held with Additional Secretary MNFSR and it was apprised that there was no ban on the export of value-added products of wheat. However, Cereal Association of Pakistan was interested in the export of wheat as a commodity and not in the export of value-added products.
According to sources, Ministry of Commerce is currently developing the agenda for the next NEDB meeting based on the decisions of the third NEDB meeting, and consultations with Sectoral Councils and input from concerned Ministries/Provincial Government. The proposed agenda will be deliberated in the Executive Committee of the NEDB chaired by the Commerce Minister which is tentatively scheduled for the current month.
On the issue created through imposition of super tax, and business community’s demand to restore final tax regime, Commerce Ministry has reported that no response has been received from Finance Division/FBR on this point.
Regarding demand of rice sector for its inclusion in the Export Facilitation Scheme, Commerce Ministry has reported that FBR has stated that it has consulted Chairman Rice Exporters Association of Pakistan (REAP) who has clarified that REAP was facing issues in the Export Finance Scheme. The same has been forwarded to Ministry of Finance for taking it up with the SBP.
On allocation of gas as per demand of winter and summer, Petroleum Division has sent its response in which it has stated its position on the following points: (i) energy efficiency audit of captive power plants; (ii) removal of cross subsidy; (iii) supply of gas on competitive tariff and fixation of blended ratio; and (iv) allocation of first priority.
On setting up Export Processing Zones (EPZs) no information has been shared by Ministry of Industries and Production.
IMF, in its Staff Report stated that removal of subsidies and relaxation of trade barriers create resource misallocation, adding that weaker confidence and supply/trade disruptions act as a drag on economic growth.
Authorities have informed the IMF that on trade-based money laundering (TBML), the SBP has imposed nominal sanctions (amounting to Rs 242 million in fines and other administrative actions such as warnings and forfeiture of bonuses) against several banks for violations involving TBML of solar panels and is revising its risk-based supervisory framework to align with the NRA (including ensuring that sanctions are effective, proportionate, and dissuasive). With support from the ADB, the Financial Monitoring Unit (FMU) is strengthening its financial intelligence capacities within its GoAML system to identify risks of TBML.
“We will pursue efforts to ensure transparency of beneficial ownership information consistent with the Financial Action Task Force standards. In this regard, the SECP continues to increase compliance with beneficial ownership information requirements by registered companies (now at 30 percent) and exerting efforts to ensure risk-based verification of the information,” the Pakistan authorities pledged.
Copyright Business Recorder, 2024
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