ISLAMABAD: With poor utilisation of the Prime Minister’s Relief-cum-Economic Support Package to absorb Covid-related shock, the government on Wednesday rolled over almost two-thirds of the allocated funds into the new fiscal year through a major Rs540 billion supplementary grant.
A decision to this effect was taken at a meeting of the Economic Coordination Committee (ECC) of the federal cabinet presided over by Adviser to the PM on Finance and Revenue Dr Abdul Hafeez Shaikh. This is the biggest supplementary grant allowed in the first quarter of a fiscal for many decades, according to a finance ministry official.
He said the meeting was told that the prime minister’s total package announced in March in view of the Covid-19 pandemic amounted to Rs1.24 trillion but actual budgetary allocation was estimated at about Rs800bn after setting aside Rs280bn for wheat procurement and Rs155bn for tax refunds.
The ECC was informed by the ministry of finance that about Rs260bn could be utilised before the close of the fiscal on June 30, 2020 and Rs540bn remained unutilised. There were different views as to the procedural requirements for a technical supplementary grant and lapse of funds but then it was concluded that an approval of supplementary grant was necessary, the sources said.
ECC approves payment of $125m liabilities of Roosevelt Hotel
“The ECC also discussed and approved a supplementary grant of Rs540bn having remained unutilised due to procedural conditions under the Covid-19 relief measures,” said an announcement after the ECC meeting.
The ECC remained divided over the mechanism for provision of funds — whether it should be provided from the budget through a technical supplementary grant or out of the Federal Board of Revenue (FBR) collections as usual. However, Dr Shaikh is reported to have issued directives to ensure payment of refunds to taxpayers without any delay while the procedural and codal formalities could be decided by the stakeholders.
The meeting considered the proposal by the Revenue Division for arrangement of Rs40bn for payment of income tax refunds of up to Rs50 million pending since 2013. The ECC asked the Finance Division to arrange the required funds.
Mr Shaikh also directed the FBR to present a report on current status of pending refunds with the observation that payment of refunds to the taxpayers was the topmost priority of the government.
He said the taxpayers had already been given Rs250bn tax refunds in the outgoing financial year, which was more than double the amount of refunds paid to taxpayers in the previous year.
The ECC also approved in principle payment of $125 million (about Rs21bn) liabilities of Roosevelt Hotel, New York. An official statement said the meeting gave a go-ahead in principle to payment of all liabilities and responsibilities resulting from a debt of $105m secured by the Pakistan International Airlines Corporation (PIAC)-owned Roosevelt Hotel in Manhattan, New York.
The ECC, however, asked the Finance Division to engage with the Law Division, Aviation Division and Planning Commission to formalise the mode of payment/refinancing as per schedule of the loan contracted by Roosevelt Hotel to meet its financial challenges, and submit it to ECC in its next meeting for formal approval.
The PIAC board had recommended closure of the hotel in the backdrop of Covid-19 pandemic, saying the hotel industry had come under stress globally and Roosevelt Hotel had faced extreme cash flow constraints since March and even partial operations were unsustainable.
It was reported that the Roosevelt Hotel Corporation had already taken $105m loan from JP Morgan at an interest rate of 5.05 per cent that was due for repayment in April, 2021. The total interest rate for a year works out at $6m. However, JP Morgan has sold its $68m loan to another firm, MSD PCOF Partners, which has further complicated the situation for Roosevelt Hotel Corporation.
It said the MSD had been trying for years to become a joint venture partner in development of the Roosevelt Hotel site and could now leverage its position to take over the hotel through foreclosure laws due to any possible default because it also has air rights in the vicinity.
Therefore, the Roosevelt Hotel Corporation Board recommended that hotel operations be shut down and all union and non-union employees be severed against a severance payment of about $20m and the debt of $105m be repaid forthwith.
The ECC also approved a proposal by the Cabinet Division for re-allocation through a technical supplementary grant of lapsed funds of Rs8.01bn under the Sustainable Development Goals Achievement Programme to respective ministries and divisions.
The ECC also approved amendments to the Import Policy Order 2016 to streamline international trade in live animals and their meat products in accordance with international rules and practices.
The ECC also approved a proposal by the Finance Division to allow the Asian Development Bank (ADB) to launch $200m worth of offshore Pakistan Rupee (PKR)-linked bonds to non-residents based on conducive market conditions.
The ECC also okayed a proposal by the Ministry of Inter-Provincial Coordination for grant of exemption from payment of annual renewal fee of licences issued to travel- and tourism-related businesses. The financial impact of the one-year fee exemption comes to approximately Rs17m.
Published in Dawn, August 13th, 2020