Pakistan to lose Rs628bn by June, says govt report

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Pakistan-economy

–PSX facing loss of Rsbn250 whereas Petroleum Division may lose Rs87bn due to COVID-19 outbreak 

–NCC body urges govt to announce fiscal and tax incentive, give concessions to contain economic fallout of coronavirus 

ISLAMABAD: Due to an adverse impact of coronavirus on the economy, Pakistan will record a loss of over Rs628 billion by the end of the current financial year, said a report prepared by the sub-committee of the National Coordination Committee (NCC) for COVID-19.

The report ‘COVID-19: Preliminary Macroeconomic and Socioeconomic Assessment’ said almost all the departments of the country were going in a loss due to lack of human activity in the wake of the pandemic that has killed over 200,000 people worldwide.

Giving a breakdown of the losses, the report said the Aviation Division will face an estimated financial loss of Rs13.6bn; the Pakistan Stock Exchange Rs250bn; Petroleum Division Rs 87bn; Ministry of Energy (Power Division) Rs136bn; Pakistan Railways over Rs7 bn; National Food Security Rs 55bn; Overseas Pakistanis over Rs 76bn; Ministry of Information Technology Rs1-5bn under the head of withholding tax; and Maritime Affairs will report a loss of Rs30 million.

It further said that the Federal Board of Revenue will face a total estimated revenue shortfall of Rs600bn in the last three months of the current financial year.

The report also suggested the way forward to deal with losses, saying some measures have already been taken.

As per the report, industrial units to be provided financial support in the form of incentive packages subject to an undertaking that no worker will be laid off during the stipulated period. It also recommended the suspension of EOBI; provincial social security; restoration of 10 per cent tax credit on machinery; revival of zero-rated regime for one year; extension in tax deadline by two months; extension in export finance scheme requirement to 360 days (already done upto 270 days).

It said the government may allow the EFS to indirect exporters; grace period on LTFF loans; defer loan payments of PIA and resumption of flight operations.

It further said the government sector entities [NBP, EOBI etc] must extend support to capital markets by investing in equities through mutual funds, urging that the CGT be reduced to 5pc.

It said continuity of insurance service be ensured by including it as an essential service by provincial and federal government in case of lockdown. It floated the utilization of electronic mediums for premium payments, claims handling and disbursements, policy documents delivery and other operational aspects of policies, increase in grace period for payment of renewal premiums to facilitate customers.

It said the provision of personal protective equipment (PPE) to all front-line health care workers and the provision of hospital equipment and diagnostic lab equipment was essential.

It urged tax exemptions for IT companies so they could manage their cash flow and cost of service till June 2020, in addition to tax exemption on utilities and the internet till September 2020.

It urged payment of past years tax refunds and disposal of tax disputes, except where there are gross contraventions established.

The Ministry of Finance/FBR/SBP may explore the possibility of provision of incentives to overseas employment promoters in the shape of the provision of tax relief, provision of interest-free funds to the tune of Rs 1 to 2 million to each promoter.

Likewise, refineries may be asked to accept crude oil/condensate produced by E& P companies for smooth production of oil and gas, while import of oil and LNG may be reduced, oil marketing companies and refineries losses may be compensated to avoid the collapse of OMCs and refineries, close coordination with key suppliers (well owners) and government bodies to ensure streamline supply of natural gas and in case of stoppage of RLNG supplies, a company may have to declare force majeure.

It said close coordination with the power sector and other stakeholders, reduced imports of other petroleum products, maximum utilization of LNG in power and fertilizer sectors and reduction in the production of natural gas where possible.

It recommended options for distance learning to safeguard 350,000 students registered with the federal board and protecting the academic year. Similarly, it said in order to facilitate parents, monthly fee vouchers be issued electronically.

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