PAR News - Tues, 06 Feb 2024

PAR News Bulletin - Tues, 06 Feb 2024

PAR News - Tues, 06 Feb 2024
PAR News - Tues, 06 Feb 2024
PAR News
February 6, 2024
News

TOPLINE

  • Pakistan's trade deficit shrank by 32.66% in the first seven months of fiscal year 2023-24, standing at $13.167 billion compared to $19.553 billion in the same period last year.
  • Auto industry insiders predict stable automobile prices post-2024 elections, foreseeing a potential boost in sales with anticipated interest rate reductions of 5% to 6%.
  • NEPRA raised the electricity tariff by Rs 4.56 per unit in fuel adjustment charges for December 2023, impacting power consumers. issues in power distribution companies drove a Rs 396 billion addition to Pakistan's circular debt in FY 2022-23, per Nepra's Industry Report.
  • The IMF has agreed to review a proposal to reduce the industrial sector's subsidy burden by 91%, potentially lowering Pakistani exporters' monthly bills by up to 29%.
  • The OECD increased its 2024 global economic growth forecast to 2.9 percent, citing strong performance in the United States and emerging markets.
  • Wall Street's main indexes fell as Federal Reserve Chair Jerome Powell dismissed speculations of imminent rate cuts, citing the need for more evidence on sustained inflation downtrends.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

  • Cement Despatches: January 2024 Analysis - Cement despatches in January 2024 saw a significant drop of 14.79% compared to the same period in the previous fiscal year, with local despatches declining by 17.30% to 2.967 million tons. Despite the overall decline, exports increased by 6.82% from 418,067 tons in January 2023 to 446,595 tons in January 2024 according to data from the All Pakistan Cement Manufacturers Association. [BR]
  • Fortnightly Cotton Growth: January 31 Update - Cotton production in the fortnight ending January 31 showed a modest 1.1% growth compared to the previous fortnight, reaching 8.35 million bales, significantly higher than the 4.764 million bales recorded during the same period last year. Both Punjab and Sindh contributed equally to the total production, with Punjab experiencing a 1.9% month-on-month increase and a significant 46.5% yearly increase in cotton arrivals. [The News]
  • Post-2024 Elections: Stable Auto Prices & Sales Boost - Auto industry insiders predict stable automobile prices post-2024 elections, foreseeing a potential boost in sales with anticipated interest rate reductions of 5% to 6%. Despite high inflation and stabilized exchange rates, optimism stems from balanced current accounts and improved macroeconomic conditions. [ET]
  • DRAP Halts Contaminated Materials Use: Pharmaceutical Industry Alert - The Drug Regulatory Authority of Pakistan (DRAP) has directed the pharmaceutical industry to halt the use of recently imported materials contaminated with diethylene glycol (DEG) and ethylene glycol (EG) due to serious threats to consumers. Additionally, the industry must recall affected finished products, hold batches, and test for contamination before releasing them into the supply chain, according to a DRAP warning issued on Friday. [BR]
  • Soybean Import: Rs 2.64 billion was the import value of soybean oil in Dec 2023, up 7.4% from Dec 2022. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

  • Nepra Raises Electricity Tariff: Impact on Consumers - The National Electric Power Regulatory Authority (Nepra) raised the electricity tariff by Rs 4.56 per unit in fuel adjustment charges for December 2023, impacting power consumers. The increase will result in additional charges for electricity consumers in February 2024, excluding Lifeline consumers. [BR]
  • New Tariff Structure: Power Division's Directive - The Power Division, has devised a new tariff structure aimed at reducing cross-subsidies to domestic consumers by 25%, with the goal of stimulating export-oriented industrial growth and gaining IMF approval. The plan, to be presented by top Finance Ministry officials, includes cutting subsidies for domestic consumers using less than 400 units from Rs 592 billion to Rs 431 billion. [The News]
  • Nepra Report: Power Sector Inefficiencies Deepen Circular Debt - Persistent inefficiencies and governance issues in power distribution companies drove a Rs 396 billion addition to Pakistan's circular debt in FY 2022-23, per Nepra's Industry Report. Nepra recommends a forensic audit for staff accountability and transparency, as DISCOs failed to meet loss targets, worsening the circular debt crisis. [ET]
  • Record Petroleum Levy Collection: FY 2023-24 Update - During the first six months of fiscal year 2023-24, the federal government collected Rs 472.77 billion in petroleum levy (PL), which accounts for 54% of the total budgetary estimates for PL on petroleum products for the current fiscal year. This collection is 166% higher compared to the same period last fiscal year, with Rs 222 billion collected in the first three months of fiscal year 2023-24. [BR]
  • Pakistan's January 2024 Petroleum Sales Decline: Petroleum product sales in Pakistan fell by 4.0% year-on-year to 1.38 million tons in January 2024, attributed to higher prices and economic slowdown. Specifically, Motor Spirit (MS) sales dropped by 5.0% to 0.61 million tons, while High-Speed Diesel (HSD) sales decreased by 12% to 0.51 million tons. Conversely, furnace oil (FO) sales increased by 28% to 0.18 million tons during the same period. [BR]
  • Government Urges Refineries: Sustain Fuel Supply to PSO - The government has urged local refineries to keep supplying fuel to Pakistan State Oil (PSO) despite its cash crunch due to mounting circular debt, as per a letter from the petroleum ministry. [The News]
  • CDWP to Review Rs 241 Billion Projects: Balochistan Road Controversy - The CDWP will review four projects costing Rs 241 billion, including two water sector projects and a controversial Rs 43 billion road project in Balochistan, despite objections from the Planning Commission and the Reko Diq Copper-Gold Project management's reluctance. [Dawn]
  • PIA Privatization Before Elections: Caretaker Government's Plan - The caretaker government is preparing to sell Pakistan International Airlines (PIA) before the upcoming elections, a move supported by the minister in charge and other officials. This decision aligns with Pakistan's commitment to IMF reforms amid a deep economic crisis, including privatizing state-owned enterprises like PIA, as agreed upon in a $3 billion bailout deal signed in June. [BR]
  • Caretaker Administration Scandal: Urea Delivery Delay - The caretaker administration's inability to establish a urea delivery mechanism is causing a significant scandal, with money being embezzled by fertilizer dealers. Despite importing 220,000 tons of urea worth nearly Rs 30 billion, sent to NFML warehouses on December 25 last year, farmers have yet to receive supplies for planting the current wheat crop. [ET]
  • FBR Imposes 20% Customs Duty on Solar DC Ceiling Fan: The Customs Classification Committee (CCC) of the Federal Board of Revenue (FBR) has decided to impose a 20 percent customs duty on "Complete Solar DC Ceiling Fan without blades," resolving a dispute on its classification under tariff headings. The fan is now classified under Pakistan Customs Tariff (PCT) heading number 8414.5190. [BR]
  • SNGPL Disconnects 461 Gas Connections, Imposes Fines: In the ongoing crackdown against gas theft, SNGPL disconnected 461 connections in Punjab, Khyber Pakhtunkhwa, and Islamabad, imposing fines totaling Rs 6.63 million. In Lahore, 20 connections were cut for illegal gas use and 9 for compressor use, while in Rawalpindi, 97 connections were disconnected for gas theft and 5 for compressor use, with a fine of Rs 0.42 million imposed and one FIR lodged. [BR]

AGRI UPDATES & PAKISTAN POLICY

  • ECP Prints 260M Ballot Papers for 2024 Elections: The Election Commission of Pakistan (ECP) has printed 260 million ballot papers for the 2024 elections, with National Assembly ballots on green paper and Provincial Assembly ballots on white. Distribution is finalized in most districts except for 31. Printing, which began on January 14, concluded on February 3, and in compliance with a Supreme Court directive, some ballots underwent reprinting, with the originals set for destruction. [BR]
  • Imran Khan & Wife Sentenced, Disqualified from Elections: Former Pakistan Prime Minister Imran Khan and his wife Bushra Khan were sentenced to seven years in prison for their 2018 marriage deemed illegal by a court. This is the third ruling against Khan this week, preceding national elections on Thursday, from which he is disqualified. Khan, 71, also faces previous sentences of 10 years for leaking state secrets and 14 years for illegally selling state gifts, with plans to appeal all three cases. [Reuters] [UPI] [BBC]
  • IMF to Review Proposal: 91% Cut in Industrial Subsidy - The IMF has agreed to review a proposal to reduce the industrial sector's subsidy burden by 91%, potentially lowering Pakistani exporters' monthly bills by up to 29%. Virtual discussions between Pakistan and IMF authorities are scheduled, with the initiative aiming to make exporters more competitive regionally. If approved, electricity bills for industrialists and manufacturers could decrease by 16% to 29%. [ET]
  • Pakistan's Trade Deficit Shrinks by 32.66%: Pakistan's trade deficit shrank by 32.66% in the first seven months of fiscal year 2023-24, standing at $13.167 billion compared to $19.553 billion in the same period last year, according to the Pakistan Bureau of Statistics. Exports increased by 7.89% to $17.782 billion, while imports decreased by 14.11% to $30.949 billion during this period. [BR]
  • Government Signs Agreements for Fiscal Surplus Targets: The federal government has signed agreements with provinces to achieve a fiscal surplus of at least Rs 600 billion and avoid further debt in key commodity operations until June, aiming to regain fiscal space lost under the 7th National Finance Commission. [Dawn]
  • Caretaker Government's Record Borrowing: Rs 4 Trillion from Banks - Under Prime Minister Anwaarul Haq Kakar's caretaker government, record borrowing of nearly Rs 4 trillion from banks has occurred, surpassing the total borrowed in the entire fiscal year 2022-23. State Bank of Pakistan data shows borrowing of Rs 3.99 trillion from July 1 to January 19, 2023-24, reflecting a 185% increase compared to the same period last year. [Dawn]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

  • IMF Chief Warns Against Premature Interest Rate Cuts: IMF Managing Director Kristalina Georgieva warns of greater risks to the global economy if central banks cut interest rates too soon rather than slightly late. Recent months have seen central banks maintaining elevated rates to address post-pandemic inflation surges, but attention is now shifting to when to start rate cuts to stimulate investment and growth. [BR] [WP] [BBG] [Barrons] [Reuters]
  • OECD: 2024 Growth Up, Middle East Conflict a Risk - The OECD increased its 2024 global economic growth forecast to 2.9 percent, citing strong performance in the United States and emerging markets, with inflation declining faster than expected in 2023. [BR] [Nikkei] [OECD]
  • Kremlin Warns West Against Using Russian Assets for Ukraine: The Kremlin cautioned the West against using frozen Russian assets as collateral for raising funds for Ukraine, warning that such actions would be illegal and could lead to prolonged litigation. [BR] [Reuters] [USN] [Politico]
  • Germany Plans $17 Billion Subsidy for Hydrogen-Capable Gas Plants: Germany's government plans to subsidize gas power plants capable of switching to hydrogen with $17 billion, aiming to support renewable energy and transition to low-carbon generation. The decision follows last year's promise of a hydrogen strategy and involves a tender process for four gas plants with up to 10 gigawatts of total capacity. [BR] [Reuters] [CSIS] [BMBF]
  • Sri Lanka Targets $5 Billion in Foreign Funds After Debt Restructuring: Sri Lanka aims to attract $5 billion in foreign funds over the next two years after restructuring its overseas debt following a default in May 2022 due to a severe shortage of foreign exchange reserves. Progress has been made on restructuring about $11 billion of bilateral debt, with agreements expected with all key creditors, including bondholders, by May. [BR] [BT] [EAF] [IMF] [IMF] [PRN]
  • Britain's King Charles Diagnosed with Cancer, Duties Delayed: Britain's King Charles, aged 75, has been diagnosed with cancer and will delay public-facing duties, Buckingham Palace announced. [BR] [BBC] [WP] [CNN] [Independent]
  • Wall Street Falls as Powell Dismisses Rate Cut Speculation: Wall Street's main indexes fell as Federal Reserve Chair Jerome Powell dismissed speculations of imminent rate cuts, citing the need for more evidence on sustained inflation downtrends, while investors analyzed corporate earnings. Minneapolis Fed President Neel Kashkari suggested in an essay that a resilient economy might delay rate cuts. [BR]

PAKISTAN - REMAINDERS

  • Caretaker PM Kakar Chairs SIFC Apex Committee Meeting: The Apex Committee of the SIFC, chaired by caretaker PM Anwaar-ul-Haq Kakar, approved FBR reforms and Strategic Canals Vision 2030. The SECP published a consultation paper seeking stakeholder feedback on adopting AAOIFI's Shariah standards. Additionally, the SECP introduced amendments in Listed Companies Regulations, 2017, for protecting minority shareholders of the target company. [BR] [Dawn] [BR]
  • Pakistani Leaders Visit Muzaffarabad for Kashmir Solidarity Day: Prime Minister of Pakistan Anwarul Haq Kakar, Prime Minister of Azad Jammu and Kashmir Chaudhry Anwar Ul Haq, and COAS General Syed Asim Munir visited Muzaffarabad to mark Kashmir Solidarity Day, paying tribute to martyrs by laying a floral wreath at the Martyrs' Monument. [BR] [Dawn] [ET] [The News] [PO]
  • Islamic Finance Benchmark Debates: The global Islamic finance sector, nearing $4 trillion in assets, including over Rs8 trillion in Pakistan, often debates the use of conventional benchmarks like Kibor or Libor in transactions or Sukuk. [ET]
  • Foreign Investors Return to Pakistan's Treasury Bills & Bonds: In January, treasury bills and domestic bonds attracted a $19.4 million investment after a prolonged period of disinterest from foreign investors due to the pandemic's onset in March 2020. [Dawn]
  • Opinion: Budgetary Outcome in First Half of FY24 - “The most depressing aspect of public finances today is the virtually full displacement of development spending at the federal level by the exponential growth in current expenditure, like debt servicing and subsidies. Believe it or not, federal development spending in the first six months of 2023-24 is only Rs 130 billion, even less than the level of Rs 136 billion in the corresponding period of 2022-23. This is equivalent to 0.1% of the GDP.” - By Dr Hafiz A Pasha [BR]
PAR News - Tues, 06 Feb 2024

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