End of amnesty scheme slows down dollar inflows
KARACHI: The end of an amnesty scheme for investment in the construction industry on June 30 has created hurdles in the dollar inflow in the country and is likely to hurt growth of the sector, industry sources told Dawn on Saturday.
Anyone investing in the construction sector was not questioned about their source of income which boosted the construction industry and inflows from the foreign countries — especially at a time when the pandemic threatened global economies.
Bankers said the inflows under the scheme had slowed down. However, no data was available to substantiate the statement. Meanwhile, currency experts estimate the inflow under the scheme reduced up to 50 per cent.
Prime Minister Imran Khan had announced the package for the construction industry in April 2019. The amnesty scheme that had been offered till December 2020 was later extended for another six months to facilitate those intending to invest their untaxed money in the construction projects. The facility for non-disclosure of income sources was finally extended till June this year.
“It is difficult to estimate at this stage how the end of scheme would damage construction sector and to what extent but inflows will reduce for sure,” said Kamran Khan, a builder and developer in Karachi.
However, Chairman Exchange Companies Association of Pakistan Malik Bostan told Dawn that the inflow reduced to $6 to $8 million per day compared to average estimated inflow of $15m per day.
The country has been enjoying record growth of 27pc in FY21, with the government believing that the momentum would continue in FY22.
The government has been trying hard to activate the housing and construction sector which could bring growth while creating jobs for thousands of skilled and unskilled workers.
The latest State Bank data shows that housing and construction finance in FY21 saw an increase of Rs111 billion or 75pc to reach Rs259bn. The SBP said that 97pc target for housing sector was achieved.
In July, the SBP mandated banks to increase their housing and construction finance portfolio to at least 5pc of their private sector advances by December 2021.
However, despite the 75pc increase in the financing for housing and construction in FY21, the builders and developers maintain this is peanuts for a country of 220m people. The country needs over 10m houses to fill the rising housing gap.
He said this low inflow would also hurt the cumulative inflows including remittances.Banks are still reluctant to extend loans for the housing sector fearing defaults. The SBP in its latest report said the formal credit to private sector in Pakistan has declined to one of the lowest among the emerging markets and developing economies.
What's Your Reaction?