PAR News - Mon, 18 Aug 2023

TOPLINE

• The Pakistani rupee is expected to maintain its upward trajectory against the US dollar due to increased export earnings and remittances following government actions to curb speculative activities, which reduced the demand for dollars in the unofficial market.
• Pakistan's textile group exports dropped by around 9.49 percent in the first two months of the fiscal year 2023-24, totaling $2.766 billion compared to the same period in the previous year.
• Hafiz Naeemur Rehman, the head of the Karachi chapter of Jamaat-e-Islami (JI), has called for a citywide shutdown on September 19 to protest against rising inflation and high electricity bills.
• The government of Pakistan plans to create joint check posts involving multiple security agencies and enhance border management systems to combat smuggling into Afghanistan more effectively.
• Justice Qazi Faez Isa was sworn in as the 29th chief justice of Pakistan, succeeding Umar Ata Bandial who retired due to reaching the age of superannuation.
• The Supreme Court, in a 2-1 verdict, has ordered the restoration of corruption cases against public office holders, including politicians like Zardari, Nawaz Sharif, Shehbaz Sharif, Fazlur Rehman, and Rana Sanaullah.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Pakistani Rupee Gains Ground Against Dollar: The Pakistani rupee is expected to maintain its upward trajectory against the US dollar due to increased export earnings and remittances following government actions to curb speculative activities, which reduced the demand for dollars in the unofficial market. The rupee closed at 301.16 per dollar on Monday but strengthened to 296.85 by Friday, marking a 1.43 percent increase or a gain of 4.31 rupees against the dollar in the week's five sessions. [The News]
• Textile Exports Decline in Fiscal Year 2023-24: Pakistan's textile group exports dropped by around 9.49 percent in the first two months of the fiscal year 2023-24, totaling $2.766 billion compared to the same period in the previous year. However, in August 2023, textile exports showed a 10.95 percent month-on-month growth, reaching $1.455 billion, but they were down by 7.65 percent compared to August 2022. [BR]
• Steady Cotton Prices Amidst Whitefly Threat: Cotton prices remained steady in the past week, with a Rs 1,000 per maund increase in spot rates. However, a severe whitefly attack on cotton crops is causing concern, as it is expected to have a significant negative impact on the crop. Government officials and agricultural experts are taking active measures to combat the whitefly infestation, including the use of helicopters and drones for spraying pesticides. [BR]
• Surge in Food Prices Linked to Fuel Hike: A survey conducted by Business Recorder has revealed that prices of essential food items, such as vegetables and groceries, have significantly risen in the open market due to the recent unprecedented increase in fuel prices. A visit to local markets confirmed that the prices of vegetables have witnessed a substantial increase. [BR]

AGRI-INPUTS, WEATHER, WATER & POWER

• Three Days of Rain Forecast for Sindh: The Meteorological Department has predicted three days of intermittent rain across the province, beginning on Monday, due to the penetration of moderate monsoon currents in eastern Sindh. This weather system is expected to bring moderate dust-thunderstorms and rain to the Karachi division on Monday evening and September 19-20. [Dawn]
• Karachi Braces for Citywide Shutdown Over Inflation: Hafiz Naeemur Rehman, the head of the Karachi chapter of Jamaat-e-Islami (JI), has called for a citywide shutdown on September 19 to protest against rising inflation and high electricity bills. He urged the residents of Karachi to participate in a complete protest by blocking major roads, and he plans to address a sit-in protest at Shahrah-e-Faisal later in the day. [BR]
• Gas Tariffs & Economic Recovery: During a press conference, caretaker federal ministers cautiously mentioned slight economic recovery signs but warned of higher gas tariffs and the need to revise development programs for fiscal improvement. Minister for Finance Dr. Shamshad Akhtar highlighted the government's prudent approach to addressing inherited challenges by controlling expenses and boosting revenue. [Dawn]
• Tackling Energy Sector Debt: Caretaker Energy Minister Muhammad Ali stated that discussions are ongoing with the World Bank and Asian Development Bank to address power distribution company issues. He also mentioned a total circular debt of Rs 5400 billion, with Rs 2500 billion in the power sector and Rs 2900 billion in the gas sector, along with a significant interest payment of about Rs 1000 billion by the government. [BR]
• Crackdown on Power Theft: Minister for Power and Energy, Muhammad Ali, reported that the crackdown on power theft has been successful and emphasized that it will continue as an ongoing project to enhance and broaden its impact. He made this announcement during a press conference alongside Caretaker Ministers for Information and Broadcasting, Murtaza Solangi, and Finance, Dr. Shamshad Akhtar. In a week-long campaign against power theft in Khyber Pakhtunkhwa, Peshawar Electric Supply Company (Pesco) has removed over 1,500 illegal connections and collected fines exceeding Rs 150 million. More than 300 electricity thieves have faced FIRs, with additional cases filed against over 1,200 individuals involved in power theft, and some have been arrested on the spot. [ET] [BR]
• Revamping Coal Power Pricing: The government plans to update the fuel price adjustment formula for coal power producers to bring it in line with international prices, according to the National Electric Power Regulatory Authority (NEPRA). NEPRA will conduct a public hearing on September 21 to assess the current mechanism, which hasn't been revised since 2016 and relies on a fixed benchmark weightage for various coal origins and heat values. [The News]
• K-Electric Seeks Gas Supply: K-Electric has requested an additional 60 MMCFD of gas to run its BQPS-II plant for 45 days instead of using expensive furnace oil due to a reduction in supply from the Jhimpir Wind Farm. The CEO, Syed Moonis Abdullah Alvi, has written a letter to Minister for Energy, Muhammad Ali, seeking intervention from the Energy Ministry's top officials. This request comes as the NTDC is planning a 45-day outage period from mid-September to late October 2023 for its network. [BR]
• Stakeholder Engagement for Discos' Future: The country's main intelligence agency has advised the government to involve all stakeholders in deciding the future of power Distribution Companies (Discos) to ensure a transparent and successful transition. Discos currently face annual financial losses of about Rs 600 billion due to various factors, and the intelligence agency, known for its role in negotiating power agreements, has provided input on finding solutions. [BR]
• SNGPL's Crackdown on Gas Theft: The Regional Directorate of Sui Northern Gas Pipelines Limited (SNGPL) has initiated a major crackdown on those involved in the theft of gas to reduce the Unaccounted for Gas (UFG) ratio. As part of these operations, they have discovered over 323 illegal connections and collected Rs75.4 million in fines from offenders. [BR]
• Border Security Measures Against Smuggling: The government of Pakistan plans to create joint check posts involving multiple security agencies and enhance border management systems to combat smuggling into Afghanistan more effectively. This decision was made during a meeting of the apex committee in the province, chaired by KP Caretaker Chief Minister Muhammad Azam Khan. [BR] [Dawn]
• Protests Erupt Over Fuel Price Hike: The business community, along with transporters and political parties, has strongly opposed the recent significant hike in petroleum product prices and has called on the government to retract it immediately. Local transporters have additionally announced a wheel-jam strike in protest against rising fuel costs and have cautioned that they may unilaterally raise fares if the government does not reverse its decision promptly. [BR]
• Irsa Releases Excess Water from Rim Stations: On Sunday, the Indus River System Authority (IRSA) released 229,800 cusecs of water from various rim stations, with an inflow of 244,100 cusecs. The water level at Tarbela Dam in the River Indus was 1,547.05 feet, well above its minimum level of 1,398 feet, with an inflow of 146,000 cusecs and outflow of 120,000 cusecs. [BR]
• OGDCL Aims for 50,000 BPD: The Oil and Gas Development Company Limited (OGDCL) is working to boost crude oil production to 50,000 barrels per day to meet growing consumer demand and reduce the need for imports in Pakistan, given the shortage of US dollars. The new Managing Director, Ahmed Hayat Lak, has set up a working group to optimize production using modern technologies. [ET]
• KP's Crude Oil Contribution: During a briefing on the Khyber Pakhtunkhwa Oil & Gas Company Limited (KPOGCL) to the Caretaker Provincial Minister for Energy & Power and Mineral Development, Engineer Ahmad Jan, it was revealed that Khyber Pakhtunkhwa is contributing approximately 31,000 barrels per day out of the total national crude oil production of 71,000 barrels per day. [BR]

AGRI UPDATES & PAKISTAN POLICY

• Justice Isa's Historic Oath: Justice Qazi Faez Isa was sworn in as the 29th chief justice of Pakistan, succeeding Umar Ata Bandial who retired due to reaching the age of superannuation. During the oath-taking ceremony, Justice Isa's wife, Serena Isa, made a notable and unprecedented appearance on stage with a walking stick in hand to stand by her husband as President Dr. Arif Alvi administered the oath. [BR]
• Supreme Court Restores Corruption Cases: The Supreme Court, in a 2-1 verdict, has ordered the restoration of corruption cases against public office holders, including politicians like Zardari, Nawaz Sharif, Shehbaz Sharif, Fazlur Rehman, and Rana Sanaullah. This decision comes after Imran Khan's plea challenging changes to the accountability law, with the court instructing NAB and other authorities to return case records to relevant forums within seven days. Justice Shah dissented, arguing that Parliament has the authority to make, repeal, and amend laws. [Dawn]
• Caretaker PM's UNGA Diplomatic Mission: Caretaker Prime Minister Anwaar-ul-Haq Kakar has embarked on a five-day official visit to participate in the 78th session of the United Nations General Assembly (UNGA) in New York. During his visit, he will engage with global leaders on the sidelines of the UNGA, attend a significant conference on climate change, interact with international media, and visit prominent US think tanks. [The News]
• FBR Releases List of Tax-Exempt Entities: The Federal Board of Revenue (FBR) has published an updated list of 9,190 government entities, including hospitals, educational institutions, local government departments, and defense institutions, that have obtained Free Tax Numbers (FTNs) for tax exemptions. The list provides details such as the taxpayer's name, the relevant tax office's jurisdiction, and the registration date for obtaining FTNs. [BR]
• Roshan Digital Account with Higher NPC Returns: To incentivize overseas Pakistanis to invest in the homeland via the Roshan Digital Account (RDA), the government has increased the rate of return on Naya Pakistan Certificates (NPC) by up to 6 percentage points for both foreign and local currency-based savings bonds. This change, which took effect on September 1, 2023, is intended to bolster foreign currency reserves and strengthen the Pakistani rupee against currencies like the US dollar. [ET]
• Rs 20 Billion for Home Remittance Promotion: Caretaker Finance Minister Dr. Shamshad Akhtar announced that the government has provided Rs 20 billion to the State Bank of Pakistan to promote home remittances through formal channels. This allocation is part of a larger Rs 80 billion fund aimed at supporting home remittance schemes. [BR]
• KIBOR Plummets After SBP's Rate Decision: The Karachi Interbank Offered Rate (KIBOR) saw a sharp decline following the State Bank of Pakistan's decision to keep the policy rate at 22 percent. Notably, the six-month KIBOR fell by 159 basis points to 23.09 percent, while other KIBOR rates also dropped significantly. [BR]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Stable Interest Rates Amid Economic Uncertainty: The US Federal Reserve is anticipated to maintain stable interest rates in light of mixed economic data, while keeping the possibility of further rate hikes open if necessary. Over the past 18 months, the Fed has raised interest rates 11 times, pushing its main lending rate to a level not witnessed in 22 years as it addresses persistently high inflation above its two percent target. [BR]
• China's Economy Faces Challenges Amid Mixed Data: China saw faster growth in factory output and retail sales in August, but the property sector's investment decline poses a threat to the economy's stability. Policymakers are facing challenges in reviving growth due to persistent property industry weaknesses, currency struggles, and sluggish global demand for their manufactured goods, despite initial post-COVID recovery. [BR]
• Kim Jong Un's Russia Visit Raises Arms Support Concerns: North Korean leader Kim Jong Un has completed his visit to Russia, solidifying ties with Vladimir Putin. The visit raised concerns in the West about potential arms support for Russia's actions in Ukraine, as Kim's tour focused on military matters, including meetings with military officials and visits to defense-related facilities. [BR] [Dawn]
• Russian Authorities Foil Ukrainian Attack on Crimea: Russia reported that it had foiled a coordinated Ukrainian attack on Crimea on Sunday. Additionally, drones targeted Moscow, leading to disruptions in air traffic within the capital and causing a fire at an oil depot in the southwest of Russia. There have been increased attacks deep inside Russia, away from the front lines, with Moscow's mayor confirming that at least two drones were shot down in the region around the capital on Sunday. [Dawn]
• Derna Flood Survivors Await Aid Amidst Unclear Death Toll: A week after a catastrophic flood inundated the Libyan city of Derna, the primary focus on Sunday shifted towards providing care for the survivors. Due to the chaotic rescue operations in the war-torn country, there has been a wide range of death toll estimates, ranging from more than 3,000 to over 11,000 casualties. [BR]
• Oil Hits 10-Month High on Saudi Cuts and Chinese Demand: Oil prices reached a 10-month high on Friday, marking their third consecutive weekly gain. The surge was driven by Saudi Arabia production cuts and optimism about Chinese demand. Brent crude settled at $93.93 a barrel, up 0.3%, while US West Texas Intermediate closed at $90.77 a barrel, up 0.7%. Both contracts traded at 10-month highs earlier in the week and recorded a weekly gain of approximately 4%. Bursa Malaysia Derivatives Exchange closed up 24 ringgit, or 0.64% at 3,785 ringgit ($808.42) per metric ton, rising for the third consecutive session. [BR] [BR]

PAKISTAN - REMAINDERS

• Interim Government Empowered to Decide on PIA Privatization - Caretaker Prime Minister Anwaar ul Haq Kakar has expressed optimism about the outcomes of the Special Investment Facilitation Council (SIFC) and suggested that the effects would become evident soon. He also noted that the legal framework for privatization permits the caretaker government to make decisions regarding the privatization of Pakistan International Airlines (PIA). [BR]
• Pakistani Pharma Company Registers First in UAE - Searle Company Limited (SEARL) has achieved a significant milestone by becoming the first pharmaceutical company from Pakistan to register its manufacturing facility in the United Arab Emirates (UAE) market. The UAE Ministry of Health and Prevention has granted approval for this registration, which represents a noteworthy development for Pakistani pharmaceutical exports. [ET]