Pakistan

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On 03 April 2020 The Government of Pakistan (GoP) announced a special incentive package for construction industry

On 30 March 2020 GoP has approved the fiscal stimulus package of Rs. 1.2 trillion and Supplementary Grant of Rs. 100 billion for the "Residual/Emergency Relief Fund" in relation to provision of funds for mitigating the affect of COVID-19 for the impacted population.

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

• 29 September 2020 SBP issued instructions that all applications approved by Banks/DFIs up till September 30, 2020 will be eligible for refinance under Refinance Facility for Combating COVID-19/Islamic Refinance Facility for Combating COVID-19. Hence, LCs established under these approved applications will be eligible for refinance even if these LCs are established after September 30, 2020.
• 21 September 2020 The Monitory Policy Committee (MPC) reduced the policy rate by a cumulative 625 basis points from 13.25 percent to 7 percent. The major factors prompting aggressive reduction in the policy rate was a sharp fall in inflation and continued economic slowdown. Taking note of the improved outlook for growth and rising inflation, MPC is of the view that current monetary policy stance is appropriate to support the emerging recovery, while keeping inflation expectations well-anchored and maintaining financial stability.
• 20 August 2020 SBP extends time for settlement of Foreign Currency Loans amid COVID-19 Pandemic. Continuing with its commitment to support the industry amid COVID-19 pandemic, SBP has further facilitated the exporters and importers by allowing extension up to 180 days in settlement of their export and import loans under FE-25 Scheme.
• 08 July 2020 SBP reduced the end user mark-up rates on TERF from 7% to 5% to further improve the incentive under the scheme. SBP will now be providing refinance to banks at 1% with banks' maximum margin of 4%. Further, SBP has also allowed the TERF facility in cases where LCs/Inland LCs were opened prior but retiring after the introduction of the scheme on March 17, 2020.
• 07 July 2020 SBP announced validity of Deferment of Principal amount facility was extended until September 30, 2020. This facility, however, will be available for Small & Medium Enterprise Financing, Consumer Financing, Housing Finance, Agriculture Finance and Micro financing only. The facility was not extended to corporates and commercial borrowers since a significant amount of their loans had already been deferred.
• 8 May 2020 SBP to provide further stimulus to investment in the country in the context of COVID-19's impact on the economy, allows financing under TERF for modernizing or expanding manufacturing / production units. However, financing is allowed for purchase of new imported and locally manufactured plant and machinery only against LC and inland LC. The funding under the facility cannot be used for procurement of second-hand machinery, land or carrying out civil works.

Fiscal and Monitory Measures

• 04 April 2020 The Securities and Exchange Commission of Pakistan (SECP) on Wednesday allowed all lending Non-Bank Finance Companies (NBFCs) including Non-Bank Microfinance Companies (NBMFCs) to defer repayment of principal loans by their borrowers for one year, under the present circumstances owing to the outbreak of COVID-19 (coronavirus) pandemic.
• 01 April 2020 The federal cabinet approved launching domestic Sukuk bond for generating Rs700 billion for financing the escalating budget deficit and meeting the increasing financial requirements for combating COVID-19
• 29 March 2020 Central Bank has relaxed the DBR for consumer loans from 50% to 60%.
• 29 March 2020 Banks and DFIs will defer the payment of principal on loans and advances for one year.
• 29 March 2020 Keeping in view the steep decline in share prices, margin call requirement of 30% vis-a-vis banks' financing against listed shares has been significantly reduced to 10%.
• 29 March 2020 The regulatory limit on extension of credit to SMEs has been permanently increased from Rs. 125 million to Rs. 180 million
• 25 March 2020 The Central Bank will refinance banks to provide financing at reduced end-user rate of 3 percent for 5 years for the purchase of equipment to detect, contain and treat the Coronavirus.

Relaxation in trade and cash/ government subsidy

• 23 September 2020 ECC allowed the exemption from re-lending of the funds for Pakistan National Emergency Preparedness and Response Plan for Covid-19 to cover the country's requirements for 12 months through emergency operations. In order to administer the program Asian Development Bank shall provide a loan of US$ 100 million and an additional US$ 5 million will be from the government of Norway as a grant administered by ADB.
• 10 April 2020 the government has taken some major decisions, including approval of clinical trials of plasma therapy and locally made ventilators for treatment of critically ill patients and permission for manufacturing of sanitizers and production of Chloroquine, the medicine for malaria
• 10 April 2020 The Central Licensing Board of the Drug Regulatory Authority of Pakistan (DRAP) has approved local manufacturing of Chloroquine phosphate active pharmaceutical ingredient (API)—a drug used in management of SARS-CoV 2 infected patients
• 10 April 2020 The Economic Coordination Committee (ECC) of the Cabinet has approved the deferment of monthly and quarterly fuel adjustments in the electricity bills for power consumers for the next three months (till June 2020) under the government relief package
• 10 April 2020 The Asian Development Bank (ADB) has repurposed $50 million from Pakistan's National Disaster Risk Management Fund (NDRMF) to support the government of Pakistan's preventive and response efforts to fight the outbreak of the novel coronavirus (COVID-19) in the country.
• 06 April 2020 Power Division has reportedly prepared power tariff freezing for three months aimed at minimizing financial burden on the Coronavirus-hit consumers, estimated financial impact of which will be Rs 381 billion
• 03 April 2020 The Government of Pakistan (GoP) announced a special incentive package for construction industry:
  • Establishment of construction industry development board for development of construction industry
  • Complete amnesty has been proposed and no questions will be asked about the source of investment made till 30 June 2022
  • Reduction of project approval time preferably to 45 days;
• 30 March 2020 The Government of Pakistan (GoP) has approved the fiscal stimulus package of Rs. 1.2 trillion and Supplementary Grant of Rs. 100 billion for the "Residual/Emergency Relief Fund"  in relation to provision of funds for mitigating the affect of COVID-19 for the impacted population.
• 30 March 2020 Rs. 200 billion of cash assistance for the daily wagers working in the formal industrial sector and who had been laid off as a result of COVID-19 outbreak.

Relaxation in trade and cash/ government subsidy

• 30 March 2020 Rs. 50 billion for Utility Stores Corporation to provide essential food items to the vulnerable section of the society at subsidized rates.\
• 26 March 2020 Pakistan is in negotiation with the International Monetary Fund (IMF) to seek additional $1.4 billion fast-track and upfront payment package to fight of Corona Virus
• 17 March 2020 SBP announced Temporary Economic Refinance Facility (TERF) and its Shariah compliant version to stimulate new investment in manufacturing. The total size of the scheme is Rs 100 billion, with a maximum loan size per project of Rs 5 billion and maximum end-user rate of 7 percent for 10 years. It can be accessed by all manufacturing industries, with the exception of the power sector.

Main sources of information

• Ministry of Finance
• State Bank of Pakistan
• Pakistan: Tax relief for construction sector (COVID-19)

• Recovery plan : Pakistan
• Budget : PKR 1.2 trillion

Recovery Plan of Economy

Government of Pakistan has announced that PKR 1.2 trillion (approx. $8 billion USD) would be spent through a multi-sectoral relief package to address the challenges arisen due to the outbreak of Covid-19.

The overall economic package includes:

• PKR 200 billion for relief to daily wage workers;
• PKR 150 billion for cash transfers to low-income families;
• PKR 100 billion for accelerated tax refunds to export industry;
• PKR 100 billion for financial support to support the Agriculture sector and SMEs;
• PKR 280 billion for accelerated procurement of Wheat;
• PKR 50 billion for financial support to Utility Stores;
• PKR 70 billion for relief in Fuel prices [Rs. 15/liter decline in prices of gasoline and diesel];
• PKR 15 billion to support health and food supplies;
• PKR 110 billion relief to people in electricity bill payments;
• PKR 100 billion for Emergency Energy provision; and
• PKR 25 billion for transfer to National Disaster Management Authority (NDMA) to purchase necessary equipment to deal with pandemic.

Measures to Boost Economy

• United Nations Development Programme (UNDP) is supporting the Planning Commission in establishing a secretariat for multi-sectoral planning, financing, coordination and programmatic implementation.
• World Health Organization (WHO) is supporting Ministry of National Health Services, Regulation and Coordination (NHSR&C) to coordinate response to COVID-19 through provision of technical support to the development of National Action Plan for of COVID-19, leading the development of Strategic Preparedness and Response Plan for the Government and UN.
• United Nations Population Fund (UNFPA) is engaged in advocating for specific quarantine arrangements and services for women and girls. Moreover, UNFPA is advocating for the provision of reproductive health services to the most vulnerable population during this crisis.
• Pakistan Poverty Alleviation Fund (PPAF) has partnered with 19 organizations and covers 109 Union Councils in the 19 poorest districts across Khyber Pakhtunkhwa, Balochistan and Sindh.
• Since inception till 30th September 2020, a total of 62,056 households have received economic revival assistance in the form of livestock fodder, food packages, agricultural inputs, emergency interest free loans, small enterprise and kitchen gardening. During September 2020, 5821 households who received economic revival assistance.
• 40 laboratories in the major cities across the country have been designated to support COVID diagnostics, and are undergoing trainings to collect the samples from suspected cases on bio-safety and bio-security standards.
• Till mid October, execution of 52 development projects in FY 2021 has been authorized by Ministry of National Health Services, Regulations & Coordination.
• 28 development projects of Ministry of Federal Education and Professional Training are authorized by mid of October.
• The government launched “Ehsaas Emergency Cash Program” with total allocation of Rs 144 billion to provide immediate cash relief of Rs 12,000 to 12 million families of daily wage earners. Ehsaas Emergency Cash Program has completed its original target of distribution of funds to over 12 million beneficiaries, the government has set a new target of 16.9 million beneficiaries and budgetary allocation raised to Rs 203 billion.

Industries/Sectors/Areas affected

Steel, Automobile, Cement, Textile, Agriculture, Banking, Insurance, Real Estate, Aviation, Education, Tourism.

Tax: Rana Nadeem Akhtar – rananadeem@kpmg.com
Legal: Shaheen Qureshi – shaheenqureshi@kpmg.com