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IMF tells Argentina not to risk ‘scarce’ reserves after bond buyback

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IMF tells Argentina not to risk 'scarce' reserves after bond buyback

The International Monetary Fund said on Wednesday it would prefer that Argentina’s government, which announced a $1 billion buyback of foreign currency bonds, not undermine the targets of their multi-billion-dollar program.

“We do have targets in the program for reserves. Reserves are scarce, and we would prefer not to have actions that undermine the reserve accumulation that we’re assuming in the program,”

Nigel Chalk, deputy director of the IMF’s Western Hemisphere department, said when asked whether the buyback fits with the program objective of accumulating foreign reserves.

Argentina’s bond repurchase program was announced on Jan. 18. The government has spent some $404 million in market purchases of bonds with a nominal value of more than $1.1 billion, according to Portfolio Personal Inversiones (PPI), a local brokerage.

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Moody’s considered it a “distressed exchange” tantamount to a default, while S&P Global Ratings called it “opportunistic” and equivalent to a debt restructuring as it affirmed its rating on the sovereign.

“The team has been working with the Argentine authorities on this plan with the debt buyback … first on the scale of it, how it’s being operated and then how it fits in with the program,” Chalk said in an interview with Reuters.

He added that the upcoming program review – a regular assessment that determines whether the next round of cash will be freed to the Argentine authorities – will judge whether targets were met at the end of December.

“But obviously, that review has a forward-looking element to it, and we want to have some comfort that reserves will also be met on a forward basis as well.”

Argentina’s gross FX reserves total some $42.3 billion, according to its central bank as of Jan. 27, while calculations by Moody’s and PPI see net reserves closer to $6 billion.

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“According to our estimates, the net reserve stock closes January at $6.1 billion, receding almost $2 billion in the month mainly due to coupon payments for $1.05 billion,” the brokerage told Reuters.

Argentina has the largest active IMF program, an Extended Fund Facility for $44 billion at the time it was announced on March 2022. About $24 billion has already been disbursed, most of which has been used to repay the fund what it is owed from a failed 2018 program.

The program’s original targets ask for Argentina to accumulate $4.0 billion more in reserves this year.

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Budget 2024-25: Sindh announces up to 30pc increase in salaries

Budget 2024-25: Sindh announces up to 30pc increase in salaries

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Budget 2024-25: Sindh announces up to 30pc increase in salaries

The Sindh government has proposed up to 30 percent increase in salaries of its employees in the budget for next fiscal year 2024-25. 

Chief Minister Murad Ali Shah, who also holds the portfolio of finance minister, presented the budget in the provincial assembly on Friday. 

He said the government had proposed 30pc increase in salaries of officials from Grade 1 to 6, adding that there was 25pc increase for officials of Grade 7 to 16. Similarly, officers from Grade 17 to 22 would get 22pc hike in their salaries. 

Furthermore, the provincial government has propsed 15pc increase in pension of the retired employees. 

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Presenting the budget with a total outlay of Rs3,352 billion, he said, the government had decided to allocate Rs959 billion for development projects.

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Rs37,000 minimum wage: Sindh follows in the footstep of federal govt, Punjab

Rs37,000 minimum wage: Sindh follows in the footstep of federal govt, Punjab

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Rs37,000 minimum wage: Sindh follows in the footstep of federal govt, Punjab

The Sindh government has revised the minimum wage for unskilled labourers to Rs37,000 in line with decisions of the federal and Punjab governments. 

The minimum salary has been increased by Rs5,000 as previously it stood at Rs32,000. The proposal was laid forth by Chief Minister Murad Ali Shah while presenting the budget for the fiscal year 2024-25. 

Meanwhile, the Sindh government has proposed up to 30 percent increase in salaries of its employees in the budget for next fiscal year 2024-25. 

The chief minister said the government had proposed 30pc increase in salaries of officials from Grade 1 to 6, adding that there was 25pc increase for officials of Grade 7 to 16. Similarly, officers from Grade 17 to 22 would get 22pc hike in their salaries. 

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Furthermore, the provincial government has propsed 15pc increase in pension of the retired employees.

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Budget 2024-25: Let’s figure out the cost of essentials

Budget 2024-25: Let’s figure out the cost of essentials

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Budget 2024-25: Let's figure out the cost of essentials

The federal government has announced a staggering Public Sector Development Programme (PSDP) worth Rs1,500 billion. 

According to the budget document, all federal divisions have been allocated budget, except the Poverty Alleviation and Special Safety Division, which deals directly with matters concerning 95 million people who are living in abject poverty. 

Sadly, the Poverty Alleviation and Special Safety Division gets nothing in the PSDP 2024-25. 

Worse still, the Ministry of Poverty Alleviation and Social Safety does not have any minister as its head, rendering it almost moribund for more than 10 months. Earlier, Dr Sania Nishtar was chairing it during the PTI government, followed by Shazia Marri during the PDM government. 

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Last year, 12.5 million people slipped into poverty, which took it from 34.2pc to 39.4pc, according to the World Bank. 

The government has conveniently ignored the poor in the budget. Other than announcing Rs598.71billion under the Benazir Income Support Programme (BISP), no substantial amount has been earmarked for reducing poverty. 

Your next read: BUDGET 2024-25 – A LAYMAN’S GUIDE 

Analysts believe that 27 percent increase in BISP from Rs471.3 billion to Rs598.71 billion has been made to placate the Pakistan Peoples Party, which may take the wind out of PML-N’s sails anytime. 

BURGEONING TAXES 

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On the other hand, if we delve into the details of burgeoning taxes, Sales Tax stands out in afflicting the poor the most. 

Now a sales tax of 10pc will be charged on stationery items. 

Tribal area residents who have been experiencing extreme poverty will now have to pay 6pc tax on the supply and import of plant machinery as well as electricity on both residential and commercial connections. 

Following the similar trajectory, a 10pc sales tax will be charged on the local supply of vermicelli, buns, poultry feed, cattle feed, sunflower seed meal, newsprint, books, oil cakes and tractors. 

On mobile phones whose value is less than $500 (Rs139,240), 18pc tax has been imposed. If the value of purchased phone exceeds $500, an existing rate of 25pc will remain unchanged. 

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Earlier, the retailers of leather and textile products who paid 15pc sales tax will now have to pay 18pc tax. 

Drug prices will increase massively as the sales tax on raw materials used in production of pharmaceutical items has been raised to 18pc from 1pc. This will be applicable on medical treatment, diagnostic equipment, heart surgery, neurosurgery, electrophysiology, endoscopy, endosurgery, oncology, urology, gynaecology, disposables and other medical equipment.

Besides, 20pc sales tax on import of syringes, needles, catheters, cannulae, blood collection tube of glass and blood collection tube of PET.

Moreover, charitable hospitals with 50 or more beds will pay 18pc sales tax on imported medical goods. 

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