PAR News - Mon, 22 Apr 2024

TOPLINE

• Pakistan spent about $1 billion on wheat imports in FY24 to tackle a domestic shortfall, with the government allowing private sector imports without subsidies due to inadequate local production.
• Rs 23.1 billion was the export value of Basmati rice in March 2024, up 18.75% compared to Rs 19.5 billion in March 2023, Rs 12.12 billion was the export value of cotton yarn in March 2024, down 36.4% compared to Rs 19.1 billion in March 2023. according to the Pakistan Bureau of Statistics.
• ECC approved a price increase for indigenous gas supplied to Fatima Fertilizer and Agritech, raising it to Rs 1,238.68/MMBtu following OGRA's revenue requirement determination for FY 2023-24. The gas was supplied at Rs 1,050/MMBtu with no subsidy.
• Pakistan is negotiating a new, larger loan with the IMF expected to finalize in May, as their current $3 billion deal expires in April. Finance Minister Muhammad Aurangzeb, who met with the IMF's Managing Director, anticipates an IMF mission in Islamabad by mid-May to define the loan's terms, while also preparing for a return to international debt markets.
• Israel launched deadly strikes in Gaza amid escalating violence, while clashes intensified in the occupied West Bank. Despite global criticism, the United States approved $13 billion in new military aid to Israel.
• The House overwhelmingly approved an updated bill targeting TikTok, possibly leading to its shutdown by the US government. The Senate will vote next week, with President Biden expected to sign.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Basmati Rice Export: Rs 23.1 billion was the export value of Basmati rice in March 2024, up 18.75% compared to Rs 19.5 billion in March 2023, according to the Pakistan Bureau of Statistics. [ET]
• Tea Import: Rs 16.3 billion was the import value of tea in March 2024, up 51.5% compared to Rs 10.8 billion in March 2023, according to the Pakistan Bureau of Statistics. [ET]
• Pakistani Products' Global Export Potential: Speakers at a seminar highlighted over 200 indigenous Pakistani products, mainly agricultural, with high export potential if marketed effectively globally. Consultant Peter Damary emphasized the importance of geographical indication registration for products like mangoes, oranges, chilies, basmati rice, dates, and handicrafts like the Sindhi cap and ajrak, all suitable for global trade. [ET]
• Flour Prices Drop Due to Decreased Wheat Rates: The Chakki Atta Association has reduced flour prices by Rs 5 per kilogram due to decreased wheat rates, reported by ARY News. Prices have dropped from Rs 170 to Rs 165 per kilogram. Flour mills have also reduced prices by Rs 25 per kilogram, with a 20-kilogram bag now costing Rs 2,300 instead of Rs 2,800, and a 10-kilogram bag priced at Rs 1,100 instead of Rs 1,400. [ARY]
• Billion-Dollar Wheat Gap: Pakistan spent about $1 billion on wheat imports in FY24 to tackle a domestic shortfall, with the government allowing private sector imports without subsidies due to inadequate local production. Despite producing 27 million metric tons, the country faced a shortage of up to 3 million metric tons last year, as domestic consumption reached 31 million metric tons. [BR]
• Balochistan Cabinet Plans Wheat Procurement for Relief: The Balochistan cabinet has decided to procure 500,000 metric tons of wheat this year to ensure availability and provide relief. They've set the support price equal to that of Sindh and will change the procurement method, opting for modern eco-friendly bags. [BR] [ET]
• Punjab Wheat Procurement Marred by Mafia Exploitation: Wheat is being procured from Punjab's farmers at low prices and stored in secret warehouses by a hoarding mafia, exploiting the conflict between farmers and political circles. The mafia plans to sell the wheat to flour mills at higher rates later on, leading to increased flour prices. Despite a reduction in the ex-mill rate of flour, people in Punjab are still not receiving full relief. [ET]
• Cotton Yarn Export: Rs 12.12 billion was the export value of cotton yarn in March 2024, down 36.4% compared to Rs 19.1 billion in March 2023. [ET]
• Empowering Cotton Picker Women: A team from Sindh’s Directorate of Literacy and Non-Formal Education visited two Adult Literacy Centers for cotton picker women in Matiari district, set up by Sindh Communication Foundation. Dr. Aftab Ahmed Shaikh, the director, praised the women's dedication and emphasized how literacy and skill development can empower them towards better jobs and economic independence. [BR]
• Pakistan Agriculture: Rising Costs, Falling Prices - Pakistan's agriculture faces significant challenges: doubled production costs since 2023 and a 25% drop in major crop prices, reports PKI. PKI President Khalid Mahmood Khokhar notes farming has become financially unviable, exacerbated by an extra Rs 300 billion paid due to urea black marketing in 2023. [ET]
• Declining International Cotton Prices Impact Local Market: International cotton prices are dropping, leading to a local decline with spot rates decreasing by 700 rupees per maund. Sindh’s Agriculture Minister calls for fixing cotton intervention prices in Sindh at 10,000 to 11,000 rupees. Punjab's government plans to reduce cotton cultivation area to 40 lac acres, equal to sugarcane and rice. Rising electricity tariffs and a potential 35% water decrease pose risks to crop yields. [BR]
• Mixed Trends in Food Prices: A recent survey by Business Recorder showed mixed trends in essential food commodity prices. Live chicken remained costly at Rs 520/kg, while farm egg prices slightly decreased to Rs 280/dozen from Rs 300. Cow meat prices were above the official rate, costing Rs 900/kg with bone and Rs 800/kg without, and mutton beef varied between Rs 2200 and Rs 2400/kg, up from Rs 2200. [BR]
• Crackdown on Illicit Cigarettes: In response to the widespread presence of illicit cigarettes, covering 63 percent of its market, the Federal Board of Revenue (FBR) launched a nationwide effort to check digital tax stamps on products like cigarettes, sugar, and fertilizer. During the inspections, RTO Rawalpindi sealed a shop for selling counterfeit cigarettes. [BR]
• Boosting Carpet Exports: Usman Ashraf of the Pakistan Carpet Manufacturers and Exporters Association (PCMEA) has submitted a 14-point recommendation to the Ministry of Commerce and TDAP, aimed at boosting carpet exports. The recommendations include reducing duty tariffs in key markets and subsidizing international freight charges to counter competitive concessions from rivals. [BR]

ENERGY - WEATHER, WATER & POWER

• Deadly Rains in Khyber Pakhtunkhwa: The Provincial Disaster Management Authority (PDMA) of Khyber Pakhtunkhwa reported that heavy rains have resulted in 63 deaths and 78 injuries. The casualties include 33 children, 15 men, and 15 women, while the injured comprise 17 women, 37 men, and 24 children. Additionally, the severe weather caused the damage of 3,202 houses across the region, with 477 completely destroyed and 2,725 partially damaged. [BR] [ET] [ET]
• Saudi Investment Talks: Pakistani Finance Minister Muhammad Aurangzeb met with the CEO of the Saudi Fund for Development in Washington to discuss Saudi investments in projects like a dam and a highway in Pakistan. This meeting occurred during the IMF and World Bank spring meetings and follows Saudi Arabia's recent commitment to expedite $5 billion in investments in Pakistan. [BR]
• China Eyes Pakistan Roads: Chinese companies have expressed interest in major Pakistani road projects, contingent on post-election political stability. However, rising costs and economic challenges are pushing the National Highways Authority to consider restructuring and potentially retendering these projects, including offering parts of the M-9 Motorway separately due to lack of comprehensive bids. [BR] [BR]
• Petroleum Price Deregulation Push: Amid warnings of supply chain issues and potential price increases of up to Rs 27 per liter in Gilgit-Baltistan, oil sector stakeholders have recommended a gradual two-year deregulation of petroleum prices to reduce political pressure. They also suggest the government should allow the industry to set competitive margins for dealers and contractors. [Dawn]
• Gas Price Hike Proposal: The Ministry of Energy has requested the Economic Coordination Committee (ECC) to approve a price increase for indigenous gas supplied to Fatima Fertilizer and Agritech, raising it to Rs 1,238.68/MMBtu following OGRA's revenue requirement determination for FY 2023-24. Previously, the gas was supplied at Rs 1,050/MMBtu with no subsidy, as directed by the ECC. [BR]
• Shanghai Electric's Cash Crunch: Shanghai Electric has reported to the Prime Minister that delayed payments from the Central Power Purchasing Agency-Guaranteed (CPPA-G) since its Commercial Operation Date on February 5, 2023, are causing severe cash flow problems. Furthermore, CPPA-G has stated it cannot supply electricity to Rashakai SEZ (RSEZ) without formal approval from the federal government, as discussed in a recent Board of Investment meeting. [BR] [BR]
• Securing CPEC Investments: The Ministry of Planning, Development and Special Initiatives in Pakistan has requested details on security spending for 28 China Pakistan Economic Corridor (CPEC) projects, totaling $21.666 billion. This action follows increased terrorist attacks on foreign workers, including a deadly attack on Chinese engineers and a narrowly-avoided attack on Japanese nationals in Karachi. [BR]
• Boosting Crisis-Resilient Aid: The World Bank plans to provide $270 million in extra funding for the Crisis-Resilient Social Protection program to bolster its adaptive and crisis-resilient features. This additional financing, expected to be approved by the World Bank's Board of Directors in late May, will extend the project's timeline by a year, ending in June 2026 instead of June 2025. [BR]
• Textile Scam Unraveled: The Collectorate of Customs, Adjudication II in Karachi has uncovered a Rs 233 million scam involving a textile unit, imposing a Rs 100 million penalty and additional surcharges, resulting in a total of Rs 333 million due. The discovery followed an FIR lodged by Post Clearance Audit South after finding significant irregularities in the unit's import operations under the Export Facilitation Scheme (EFS). [BR]
• PIA Eyes European Skies: Pakistan International Airlines (PIA) plans to resume flights to Europe and the UK in June 2024 after passing the International Aviation Safety Assessment (IASA) audit and reporting its first operating profit in 13 years. Concurrently, the privatization of PIA is expected to conclude by the end of June, with Finance Minister Muhammad Aurangzeb indicating that bids will be received soon and expressing optimism about foreign investment in the Islamabad airport by mid-year. [BR] [The News]
• KP Government: Afghan Citizens Mustn't Face Harassment: The Khyber-Pakhtunkhwa government stressed that legally residing Afghan citizens in Pakistan should not be harassed or deported to avoid straining Pakistan-Afghanistan relations. Barrister Muhammad Ali Saif, the provincial government’s spokesperson, assured that only illegally residing Afghans had been repatriated, with no action taken against those living legally in the country. [ET]
• Textile Machinery Import: Rs 2.64 billion was the import value of textile machinery in March 2024, down 49.4% from Rs 5.21 billion in March 2023. [ET]
• Opinion: Powering Pakistan - “For years, Pakistan’s energy sector has grappled with the burden of a so-called rationalized national uniform tariff system, which undermines efficiency and incentivizes operational inefficiencies. Under this regime, well-managed Discos shoulder the financial burden of their less efficient counterparts, stifling innovation and progress. To break free from this cycle, the energy value chain must undergo a fundamental restructuring, starting with the dismantling of the national uniform tariff.” - By Sajid Mehmood Qazi [BR]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Negotiating Larger IMF Loan: Pakistan is negotiating a new, larger loan with the International Monetary Fund (IMF) expected to finalize in May, as their current $3 billion deal expires in April. Finance Minister Muhammad Aurangzeb, who met with the IMF's Managing Director, anticipates an IMF mission in Islamabad by mid-May to define the loan's terms, while also preparing for a return to international debt markets. [BR]
• Iranian President's Islamabad Visit: Iranian President Ebrahim Raisi will visit Pakistan from April 22 to 24, accompanied by a high-level delegation, marking the first state visit to Islamabad since the February 8 elections. The Ministry of Foreign Affairs confirmed the visit, noting that extensive security preparations have been made following a review by Raisi's security team. [BR] [The News]
• Pakistan Courts Credit Agencies: At the IMF/World Bank Spring Meetings in Washington D.C., Pakistan's Finance Minister Muhammad Aurangzeb met with representatives from S&P Global and Fitch Ratings. He highlighted Pakistan's positive economic indicators following the Standby Arrangement with the IMF, as noted in a recent press release. [BR]
• Ban Corrupt Politicians: Siraj ul Haq, the Chief of Jamaat-e-Islami, emphasized the importance of articles 62 and 63 of the constitution, which mandate honesty and trustworthiness for public office holders. In his statement, he declared that morally and financially corrupt politicians should be barred from the political landscape, as corruption is not tolerated by the public in major democracies. [BR]
• Recalling Unspent Government Funds: As part of the preparations for the 2024-25 federal budget, the Ministry of Finance has instructed all government entities to surrender any unspent funds by May 15. This action is required under the Public Finance Management Act of 2019, which mandates that surplus funds be returned annually by May 31 to facilitate the closing of fiscal year books and the planning of the next year's budget. [Dawn]
• Pakistan's Saudi Investment Pitch: Pakistan is enticing Saudi investors with projected investment returns of 14% to 50%, promising priority in the smooth repatriation of profits. According to government sources, these conditions are expected to allow investors to recoup their capital within three to nine years, depending on the project type. [ET]
• Islamic Banking's Strong Surge: Pakistan's Islamic banking industry saw remarkable growth of nearly 22% in the third quarter of 2023, reaching a record high of Rs 8.417 trillion in total assets. Deposits crossed Rs 6 trillion, rising from Rs 5.021 trillion a year earlier. Islamic banking assets and deposits now constitute 19.6% and 22.5% of the overall banking industry, respectively. [The News]
• Record High for Pakistan Stock Exchange: The Pakistan Stock Exchange recorded a significant uptrend, reaching an all-time high during the week ending April 19, 2024, as the KSE-100 index surged 595.18 points to close at 70,909.90. This growth was driven by aggressive buying from both local and foreign investors, with trading volumes increasing by 35.8% and the average daily traded value rising by 30.9%. [BR]
• Pakistan Condemns 'Politically Motivated' US Sanctions: Pakistan strongly objected to the "politically motivated" US decision to impose sanctions against commercial entities accused of links with Pakistan's ballistic missile program. Foreign Office spokesperson Mumtaz Zahra Baloch criticized the lack of evidence behind such listings, noting previous occurrences without evidence sharing. [BR]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israel-Gaza Violence Escalates, US Approves Aid: Israel launched deadly strikes in Gaza amid escalating violence, while clashes intensified in the occupied West Bank. Despite global criticism, the United States approved $13 billion in new military aid to Israel. Fears of wider conflict eased somewhat after Iran downplayed Israel's reported retaliation to last week's attack. [BR] [ET]
• Turkey Urges Palestinian Unity Amid Gaza Conflict: Turkish President Recep Tayyip Erdogan urged Palestinian unity amid Israel's Gaza conflict after meeting with Hamas chief Ismail Haniyeh in Istanbul on Saturday. Despite efforts, Erdogan has struggled to mediate the conflict as Gaza braces for potential Israeli actions and reports of Israeli attacks on Iran. [BR]
• US House Approves Bill Targeting TikTok Over Chinese Influence: The House overwhelmingly approved an updated bill targeting TikTok, possibly leading to its shutdown by the US government. The Senate will vote next week, with President Biden expected to sign. The bill aims to counter Chinese propaganda on TikTok and is part of a foreign aid package for Ukraine, Israel, and Taiwan. [The Guardian] [ET]
• Copper Prices Hit Near Two-Year Highs on Supply Worries: Copper prices surged to nearly two-year highs on Friday due to supply concerns, with funds continuing to buy. Nickel also rose amid speculation of Chinese government purchases for stockpiles. Three-month copper on the London Metal Exchange (LME) climbed 1.4% to $9,866 per metric ton by 1610 GMT, reaching its highest level since April 2022 at $9,913.50. [BR]
• Oil Prices Dip Over 1% Amid Israel-Iran Tensions: Oil prices declined by over 1% on Monday as market attention shifted to fundamentals after Israel and Iran downplayed the risk of escalation following Israel's limited strike on Iran. Brent futures dropped $1.21 to $86.08 a barrel, while the May contract for U.S. West Texas Intermediate (WTI) crude fell 97 cents to $82.17 a barrel, with the June contract also declining to $80.99 a barrel. [Reuters]

OPINION(S) & REMAINDERS