S&P raises Pakistan rating, says outlook stable

Finance minister says willing to negotiate opposition bill on Panama leaks

ISLAMABAD: As pressure mounts on the government to take action against those whose names have surfaced in the Panama leaks, the federal cabinet will approve on Wednesday a bill that will bind companies and their directors to disclose their foreign investments.

In order to address the challenges posed by offshore companies, an enhanced disclosure regime for officers and members of those companies has been provided under the Draft Companies Bill that the federal cabinet will approve on Wednesday, announced Finance Minister Ishaq Dar on Monday.



Stringent penalties have been introduced in case companies give false information or do not disclose such details, Dar told a news conference.

The move coincides with the Pakistan Tehreek-e-Insaf’s threat to lock down the capital on November 2 over the government’s failure to act against those whose names have appeared in the Panama leaks despite the lapse of seven months.

Dar also announced that Standard & Poor’s -- an international credit rating agency -- has improved Pakistan’s long-term credit rating from B negative (B-) to B with stable outlook. “This comes as a result of the government’s improved policymaking, strong performance of the economy and good prospects for the country’s fiscal and external positions,” he added.

Panama leaks

Dar said the federal cabinet will approve on Wednesday the Draft Companies Bill 2016 that will also address the issue of the Panama leaks. He said the decision to bring Panama-related changes was taken after April when the names of Pakistanis holding offshore companies appeared in the media.

Early this month, Securities and Exchange Commission of Pakistan Chairman Zafar Hijazi said that current laws did not require any disclosure with regard to foreign investments made by directors in their personal capacity; therefore, the SECP has suggested special provisions in the Draft Companies Bill, 2016 to plug this lacuna.

Hijazi had said that once the Companies Act was enacted, companies would be required to maintain the record of foreign investment in the shape of the Companies Global Register of Beneficial Ownership. Under the provision, every shareholder, director and officer of the companies has to report the beneficial ownership or any other interest outside Pakistan. The companies will also be required to report their foreign equity investments to the SECP. Dar said the government was willing to negotiate with the opposition on a bill that the opposition parties have moved in parliament. However, he said the opposition was targeting the prime minister despite the fact that he was not named in the Panama leaks. Responding to a question, Dar said the opposition’s agitation may damage Pakistan’s economy because the 2014 protests of the PTI caused irreparable loss to the economy.



The finance minister also provided an update regarding the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which Pakistan signed in July this year.

The minister said the federal cabinet during its Wednesday’s meeting will also ratify the convention, which will fulfil the last legal requirement.

The government on Monday also notified a nine-member committee for the Pilot Project on Automatic Exchange of Information under the OECD Convention. The committee includes members of the FBR, the SBP, SECP, OECD and UK tax authorities.



Dar said Pakistan’s signing of the convention reaffirms the government’s commitment to fight tax fraud and evasion at the international level, and underlines Pakistan’s pledge to exchange information under the automatic exchange provisions of the convention.

S&P’s decision

Standard & Poor’s has improved Pakistan’s long-term credit rating from B negative to B with stable outlook, said Dar. The government’s reform programme, according to Dar, has helped in restoring macroeconomic stability, reduce fiscal and external vulnerabilities, and promote growth-supporting reforms.

Standard & Poor’s while issuing Pakistan’s revised rating has also revised upwards its forecasts of Pakistan’s economy, anticipating that it will grow at a pace of 5% over 2016-2019 from the earlier estimate of 4.7%. The S&P’s also projected that Pakistan’s debt to fall below 60% of GDP by 2018.

Published in The Express Tribune, November 1^st , 2016.