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$11.3 billion foreign exchange inflows seen in 2006-07

M RAFIQ GORAYA

ISLAMABAD (February 18 2007): $11.3 billion foreign exchange inflows - about $6 billion in foreign private investment and $5.3 billion through workers remittances - are expected during FY 2006-7. This was stated by Economic Advisor and head of the Data Office of Ministry of Finance Dr Ashfaque Hasan Khan while giving an exclusive interview to the Business Recorder here on Saturday evening.

Because of strong foreign exchange inflows, the widening current account deficit is not a problem since the country's balance of payment has been surplus, he maintained "The government acknowledges that due to domestic demand supporting growth momentum in the neighbourhood of 7 to 7.5%, the current account deficit has widened," he added.

"But as long as this deficit can be financed preferably through non-debt creating inflows such as foreign direct investment (FDI) portfolio investment, GDRs, privatisation proceeds, and grants and assistance, there is nothing to worry about external side of the economy," the advisor emphasised.

He said that large current account deficit could be a problem if it could not be financed through inflows and foreign exchange reserves used to meet the external account gap, resultantly the foreign exchange reserves decline."

"In Pakistan, we are witnessing massive surge in foreign private investment of about $6 billion which is not only financing the deficit but also adding to foreign exchange reserves this year," Dr Ashfaque asserted.

He said that the inflows of the worker's remittances in the first seven months of the current year, amounting to $2.959 billion also remained extremely buoyant showing an increase of 21% comparing with the corresponding period of the last year.

He said that total foreign investment in Pakistan during July-December 2006 amounted to $2.496.7 billion, whereas excluding the privatisation proceeds, it amounted to $2. 363.5 billion. When viewed against last year's figures for the same period the current performance appeared to present a totally different picture as total investment with and without privatisation registered an impressive growth of 68.6% and 92.8% respectively, the advisor said.

He said that portfolio investment on the other hand stood at $627.1 million as against $359.3 million last year - an increase of 74.5%; US has been the largest investor in Pakistan, accounting for 31.9% of the total FDI in the first six months followed by UK (24.7%), UAE (10.8%), Switzerland (3.7%), Kuwait (2.2%), Netherlands (2.0%) and other states.

He said that financial businesses along with communication sector have been the major attractions of foreign investors in Pakistan, accounting for 27.6% and 26.5% respectively, followed by energy sector (oil & gas and power) 21.7% and trade 5%. Three-fourth of the FDI has therefore, come to these sectors.


Copyright Business Recorder, 2007

good news but lets just hope this money is used in development purposes

this is private money, off course it will benefit the economy, but govt cant use this money for development. developement comes from tax money only

Government can only collect taxes, if there is economic activity, once funds start poring in it adds in to economic activity coupled with higher incomes, spendings and profits.

If I am not wrong last year was the record tax collection in our history, and staill it can be widened several times by improving tax net and collection system.

Target of tax collection for this year was 815 billion but it will pass 900 Rs billion easily and in next year 1 trillion. In next 4 years total revenues will hit 2 trillion which is around 34 billion $.

Good news.

Oh Boy,

You brought tears in my eyes.

When we started our nuclear programme we do not had $300 Million to finance it, we were asking for help around the world.

that is great news. i assuming they are widening the tax base rather than increasing taxes?

also just out of interest, is there any regulation regarding if a foreigner wanted to put money on the pakistani stock market or bank? in other words is there any capital inflow barriers for money other than to be used for investment?

I think the tax target for this year is 835 billion and it estimated to reach 900 billion.

Yes u r right it was 835 billion. If 25% growth in revenues continues then by 2010-11 total revenue will hit 2 trillion.

Let me rub bit salt in..... Well it is estimated and have been mentioned in many articles that our current collection only represents abt 1/4 of out total collectable tax. So imagine that, so our total collection as of now shud be around 3.340 Billion rupees ($55.67 billion)...

now the total of 2 trillion by 2010-11 is too small for me and we need hell alot of improvements. Considering our economy is growing rapidly and billions of dollars are being invested into pakistan so this would mean our collectable tax has increased for if we are to collect 2trilion by 2010-11 it still would be max 40-50% of total collectable tax. Now me saying 50% is far too much it might only be 35%. So we are losing abt 3/4 of our revenues due to lazy government. OUR whole tax system need repairing and this has to be done rapidly. Now if it means we need to import top level accountant to manage CBR than be it. If we are losing billions of dollars of tax due to lazy ppls than y not spend small amount of that importing ppl who can revamp the system. Im talking abt overseas paksitanis who have experience in accounting field.

The current system to my liking isnt effective and shud be phased out quickly and replaced by new system. Ive mentioned it b4 in other tax threads as well. Its just too annoying to see we losing so much. We can changte the shape of pakistan with the amount we are losing.

Development money can come from FDI, Foreign remittances, and tax money.

$11.5 bn is a huge sum. Lets hope we use it wisely.

CBR revenue collections have increased 25% YoY during the period of July-January. Thats quite an increase. Even if we can have 10% growth in revenues YoY for the next 10 years, it will be great.

Work on IPI pipeline should start in 6 months time. With dams and alternate avenues of energy we should be good after 5 years time. During these 5 years, we will be facing a lot of energy shortages.

SBP governor wants Pakistan to diverse its economy.

1pakistani,

hasn't the CBR been revamped in the last few yrs? i'm not in pakistan but i'm sure i've read articles on pdf lauding the CBR's collection efforts. agree that the tax base needs to be widened though.

I wonder with the massive projects such as dams and canals being envisioned for Pakistan, if this is really quite enough? Also what about the huge deficit we have in terms of of our exports and imports. How are we planning to address that??

First of all :

This is mashallah say first time ever in the HISTORY of Pakistan that we have touched this mark and which seems to be and will continue growing. Inshallah.

Sadly,

This is just one more reason why Musharraf MUST step down to make way for corrupt politicians so this amount can be looted again and sent to private swiss banks accounts.

They did do it and i remember reading it as well where it was compared to european systems. However as i said many times b4 when i went to pakistan ive seen many ppl who pay absolute no tax on their income and trust me their income goes beyond 20 lacs per annum. similarly ive seen ppl in Pindi/Islamabad areas where the CBR is bit too strict on this so ppl do pay tax but than again ive know ppl who pay abt 10,000 pa when their income is more than 3 million. Now in this case the tax shud have been more than 7 lacs as it happens in western countries but guess what on 10000 or so is paid. Now this is what im talking abt. The current system from what ive learned isnt good enough as the accountant collects the tax and passes on to CBR (if im wrong some1 correct me) now here half the money is kept by accountant and less than half is given to CBR.

Where as i propse that the job of the accountant shud be only to determine tax payable following strict procedures which needs to be established by CBR, once tax payable is determined the accountant shud forward the papers to CBR and CBR sends the tax payable to business name and to their nominated address or indivuals houses, this shud be in shape of a anyother bill and shud be payable at BANKS or POST OFFICES or anyother collection department. Now if certain individual or company dont pay up than CBR will have the record as bill wont be cleared so BANG SEND FINE and CONTINUOUS breach would mean jail term.

CBR also needs to establish strict tax procedures and only those accountant who have good experience in accounting be given the status of tax agent.