PAR News - Mon, 22nd May 2023

TOPLINE

• The failure of the Sindh govt to lift the ban on wheat transportation from within Sindh to Karachi has led to a shortage of wheat stock, forcing residents to buy expensive flour. The KP Food Department has allowed local dealers to purchase flour from the Rahim Yar Khan district attempting to lower flour prices.
• Rs 41.74 billion was the import value of raw cotton in March 2023, up 48.7% compared to Rs 28.07 billion in March 2022. Rs 4.5 billion was the import value of textile machinery in April 2023, down 55% from Rs 10.2 billion in April 2022. Rs 9.3 billion was the import value of tea in April 2023, up 11.5% compared to Rs 8.4 billion in April 2022.
• Rs 1.3 billion was the export value of tobacco in April 2023, up 47.30% compared to April 2022. The FBR is to collect about Rs 200 billion from the tobacco industry by the end of 2022-23 after a rise in federal excise duty rates on cigarettes.
• WASA has initiated the de-silting process of Nullah Leh ahead of the monsoon season to prevent urban floods in the twin-cities, which is estimated to cost around Rs 60 million.
• Pakistan experienced a decrease in electricity production during the first 10 months of the current financial year, primarily due to increased power generation from expensive fuels, while NEPRA has approved an additional increase of Rs 1.55 per unit in the cost of electricity for Karachi, from May to July 2023.
• ECC has approved a technical supplementary grant of Rs 1.146 billion to address the budget shortfall for trade missions abroad, while the SBP has warned of a significant economic slowdown.
• Imran Khan sought the help of US Congresswoman Waters to address human rights violations and a crackdown on his party members. Khan has also expressed anticipation of being arrested when he visited Islamabad for pre-arrest bail.
• The IEA does not expect the recent actions taken by the G7 nations to counter price evasion on Russian energy to impact the global supply of oil products, while Joe Biden announced that the G7 nations had reached a consensus on adopting a united approach towards China. Moreover, G7 leaders emphasized the need to evaluate the impact of generative AI and announced their plan to initiate discussions on its responsible use.
• Despite the agreement on an upcoming one-week ceasefire between rival generals in Sudan, heavy clashes resumed in Khartoum. Russian mercenaries announced victory in the 8 month battle for the town of Bakhmut.

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COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Raw Cotton Import: Rs 41.74 billion was the import value of raw cotton in March 2023, up 48.7% compared to Rs 28.07 billion in March 2022, according to the Pakistan Bureau of Statistics. [ET]
• Tobacco Export: Rs 1.3 billion was the export value of tobacco in April 2023, up 47.30% compared to Rs 900 million in April 2022, according to the Pakistan Bureau of Statistics. [ET]
• Tea Import: Rs 9.3 billion was the import value of tea in April 2023, up 11.5% compared to Rs 8.4 billion in April 2022, according to the PBS. [ET]
• Karachi Braces for Flour Crisis: Karachi is facing concerns over a potential flour crisis as wheat reserves in the city's flour mills have significantly depleted. The failure of the Sindh government to lift the ban on wheat transportation from within Sindh to Karachi, despite an agreement with the Flour Mills Association, has led to a shortage of wheat stock, forcing residents to buy expensive flour. [ET]
• Permits Granted for Flour Purchase: The KPK Food Department has granted permits to local dealers allowing them to purchase flour from Punjab's Rahim Yar Khan. This decision, after the lifting of the flour supply ban, is expected to lower flour prices in KPK, providing stability to the market. The PFMA-K-P had concerns about the ban and urged the removal of check posts that impede wheat transportation between provinces. [ET]
• Punjab CM Promotes Cotton Growth: Caretaker CM Punjab Naqvi emphasized the importance of meeting cotton production targets and announced cash prizes for farmers achieving higher yields, along with support for essential items such as water, seeds, and manure. The meeting discussed measures to prevent water theft, combat sale of counterfeit medicines and seeds, and explore the possibility of conducting a crop survey through satellite technology. [BR]
• Challenges in Pakistan's Textile Sector: Pakistan's textile exports, which are the country's main source of foreign exchange, declined by 29.1% in April 2023 compared to the same month last year, marking the seventh consecutive month of decline. The cumulative textile exports for the period of July to April in the current fiscal year also contracted by 14.2%, posing economic challenges as it is a major contributor to foreign exchange earnings and employment generation. [The News] [Dawn]
• Action Against Profiteers and Hoarders: PM Sharif has directed the authorities to ensure that the reduction in petroleum prices benefits the people through decreased transport fares and lower prices of food items. The cabinet meeting also focused on taking strict action against profiteers and hoarders, endorsed the decision to try protesters under the Army Act, and discussed bilateral cooperation with Iran in various sectors. The establishment of an insurance tribunal in Rawalpindi and the inauguration of a border trade market and power transmission line were also approved during the meeting. [Dawn]
• Rise in Tobacco Taxes Boosts Revenue: The Federal Board of Revenue (FBR) expects to collect approximately Rs 200 billion from the tobacco industry by the end of 2022-23 following a significant increase in federal excise duty rates on cigarettes. A study revealed that higher tobacco taxes have led to a decrease in cigarette sales in Pakistan, with a notable number of smokers being compelled to quit due to the increased prices, allowing them to allocate their savings for other necessities like food, education, and utilities. [BR]
• Gilgit-Baltistan Cherry Trade: A delegation of 14 Chinese businessmen concluded their successful visit to Gilgit-Baltistan in Pakistan after signing multiple Memoranda of Understanding (MoUs) related to cherry trade. The delegation inspected local cherry production, packaging units, and cold storage facilities to evaluate the potential for importing cherries to Chinese markets, in accordance with a newly signed protocol between the two countries. [Dawn] [ET]
• Opinion: Wheat crop spurs bike sales - “A bumper wheat crop of 27.5 million tonnes this year has brought a ray of hope among the stakeholders in the two-wheeler industry in reviving the sales of bikes in the rural areas, especially after a massive overall sales drop in 10MFY23. However, industry players are not upbeat about bike sales in urban areas owing to soaring food prices and inflated power and gas bills.” - By Aamir Shafaat Khan [Dawn]
• Opinion: Higher cropping intensity to ensure food security - “Pakistan’s population is growing at a rate of over 4.5 million a year, which is nearly equivalent to or greater than the population of several countries. In absolute terms, worldwide, Pakistan’s annual number of new births is extremely high, surpassed only by India, China, and Nigeria. Due to this population explosion, the country’s per capita availability of arable land has decreased from 0.65 hectares in 1961 to just 0.14 hectares in 2020.” - By Khalid Saeed Wattoo & Rahema Hasan [Dawn]

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AGRI-INPUTS, WEATHER, WATER & POWER

• Textile Machinery Import: Rs 4.5 billion was the import value of textile machinery in April 2023, down 55% from Rs 10.2 billion in April 2022. [ET]
• Historic Trade Milestone: Pakistan is preparing to receive its first container ship directly from Russia at Karachi Port on May 25, marking the opening of a new sea route for direct shipping between the two countries. The agreement between Pak Shaheen and Neco Line will enable Pakistani products to have immediate access to the Russian market, with payments made through the local banking channel in Chinese yuan. This development is expected to enhance trade opportunities, increase mutual trade, and greatly benefit Pakistani exporters. [ET]
• Nullah Leh De-silting Begins: The Water and Sanitation Agency (WASA) has initiated the de-silting process of Nullah Leh ahead of the monsoon season to prevent urban floods. The project, estimated to cost around Rs 60 million, will involve dredging the main drain of the garrison city from Katariyan Bridge to Gwalmandi Bridge and Ammar Shaheed Chowk, as well as de-silting 14 sewage drains that feed into Nullah Leh. The aim is to increase the depth of the drain and remove obstructions to ensure the smooth flow of rainwater during heavy downpours. [ET]
• Upper Sindh Mercury Soars to 48°C: Heat wave-like weather on Saturday spurred temperatures to the highest degrees of the season in the country, as upper Sindh sizzled with 48 Celsius, the Met Off said. [BR]
• Upcoming Weather Relief for Punjab: Wind-dust/thunderstorm and rain are expected in the upper and central parts of Punjab in the coming weeks, bringing respite to people from the current heatwave. [Dawn]
• Costly Power Generation: Pakistan experienced a decrease in electricity production during the first ten months of the current financial year, primarily due to increased power generation from expensive fuels. Despite the decrease in production, the cost of power generation rose by 12.8%, resulting in higher costs for electricity consumers. [The News]
• Rise in Electricity Tariff for Karachi Residents: The National Electric Power Regulatory Authority (Nepra) has approved an additional increase of Rs 1.55 per unit in the cost of electricity for Karachi, to be reflected in the bills from May to July 2023. The decision comes after Nepra's hearing on the federal government's request to maintain a uniform tariff in the country. Earlier, Nepra had already announced a Rs 3.93 per unit increase in power tariff for K-Electric consumers on account of fuel cost adjustment for March 2023. [ET]
• Implications of Proposed Gas Sector Subsidies: The government of Pakistan is considering allocating Rs 76 billion for gas sector subsidies in the new budget, which falls significantly short of the Ministry of Energy's demand of Rs 230 billion. This proposed allocation may lead to further increases in gas prices for exporters and domestic consumers, as it is approximately 66% less than what the ministry sought to provide cheaper gas and clear pending arrears. [ET]
• Empowering Khyber’s Entrepreneurs: A qualitative study conducted by National Influencers in Khyber Pakhtunkhwa's tribal district Khyber highlights the need for policy reforms, awareness programs, and training sessions to support local entrepreneurs in the mines and mineral sector. The study emphasizes the crucial role of Micro, Small, and Medium Enterprises (MSMEs) in promoting inclusive development, job creation, and innovation, but notes their sensitivity to regulatory frameworks. The study specifically examines the impact on crush plants and mining in the district. [BR]
• Opinion: Kacho area’s plight - “The Kacha, or riverine area, is mostly spread over Sindh, where it runs all the way from Ghotki in the north to the coastal areas. However, it also constitutes the two southern Punjab districts of Dera Ghazi Khan and Rajanpur/Rahim Yar Khan. The area has the lowest per capita government spending, as infrastructure like schools, hospitals, roads and markets cannot be laid as they can come in the way of the course of seasonal waterways.” - By Aijaz A. Nizamani [Dawn]

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AGRI UPDATES & PAKISTAN POLICY

• Enhancing Revenue Collection: The Pakistani government has collected Rs 9 billion through the capital value tax (CVT) on local and foreign assets. The Federal Board of Revenue (FBR) explained to the Senate Standing Committee on Finance that the implementation of this tax aims to enhance revenue collection and reduce the fiscal deficit by shifting towards direct taxes that place the burden on individuals with the ability to pay, rather than low-income individuals affected by regressive indirect taxes. The CVT is imposed on foreign assets of resident individuals exceeding Rs 100 million in value and on motor vehicles surpassing certain engine capacity or battery power thresholds. [BR]
• Budget Shortfall Addressed: The Economic Coordination Committee (ECC) of the Cabinet has approved a technical supplementary grant (TSG) of Rs 1.146 billion to address the budget shortfall for trade missions abroad. The Ministry of Commerce highlighted that the depreciation of the rupee led to a decrease in the allocated budget for trade missions, and this additional funding will support the ministry's efforts to explore new export markets and establish a commercial presence internationally. [BR]
• Pakistan's Economy Faces Significant Slowdown: The State Bank of Pakistan (SBP) has warned of a significant economic slowdown, attributing it to devastating floods, fiscal consolidation measures, financial constraints, and inflationary pressures. Real GDP is projected to be much lower than previously estimated, aligning with revised forecasts from international financial institutions. Inflation is expected to remain high, mainly due to rising food and energy prices. Pakistan faces additional challenges such as a balance of payments crisis, declining foreign reserves, and uncertain progress on the IMF bailout. [The News]
• Imran Khan Expects Detention in Islamabad: Former Prime Minister and PTI Chairman Imran Khan has reportedly sought the help of US Congresswoman Maxine Waters to address what he claims are human rights violations and a crackdown on his party members in Pakistan. PTI Chairman Imran Khan expressed his anticipation of being arrested on Tuesday when he visited Islamabad for pre-arrest bail in various cases. In an interview, he alleged that the opposition alliance, PDM, was aligned with the army and working to dismantle the democratic system to keep him out, pointing to the arrest of thousands of party workers and the imprisonment of the party's senior leadership.  [The News] [Dawn] [ET]
• Opinion: Let next elected govt present budget - “There is a real danger that if Dar is allowed carte blanche to formulate the budget, as is patently evident, then there is a real danger that he may revert to these very flawed policies which would be the final nail in the economy’s coffin.” - By Anjum Ibrahim [BR]

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INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Optimism Amid Debt Ceiling Impasse: President Joe Biden criticized Republican demands for spending cuts as a condition for raising the US government borrowing authority, calling them "unacceptable." However, he expressed optimism that a solution can still be reached before a potential default, emphasizing the need to avoid a disastrous outcome. [BR]
• Diversifying Supply Chains: During a press conference following the G7 summit, President Joe Biden announced that the G7 nations had reached a consensus on adopting a united approach towards China, emphasizing the need to diversify supply chains and reduce reliance on a single country. Biden also hinted at the possibility of engaging in a conversation with China's president, highlighting the goal of de-risking and diversifying the relationship with China while standing united against economic coercion and harmful practices that affect workers. China delivered the latest salvo in an escalating semiconductor war with the US, announcing that Micron products failed to pass a cybersecurity review. Beijing warned operators of key infrastructure against buying the company’s goods, saying it found “relatively serious” risks in Micron products sold in the country. The tech sector has become a key battlefield over national security between the two countries. Meanwhile, US President Joe Biden said he expected ties with China to improve “very shortly” after the US shooting down of what he described as a “silly balloon” soured relations. [ET] [Reuters] [Bloomberg] [Bloomberg]
• G7 Conference: G7 leaders have emphasized the urgent need to evaluate the impact of generative artificial intelligence (AI) and announced their plan to initiate discussions on its responsible use. The G7 will establish a working group to address various issues related to generative AI, including copyright concerns, disinformation, and the potential misuse of AI-generated content. The International Energy Agency (IEA) does not expect the recent actions taken by the G7 nations to counter price evasion on Russian energy to impact the global supply of crude oil and oil products, according to IEA Executive Director Fatih Birol. The G7's imposition of price caps on Russian seaborne crude oil and oil products aims to reduce Moscow's revenues but is not anticipated to significantly affect the global energy supply, and the IEA does not currently see a need to change its analysis in response. [BR] [BR]
• Xi Jinping's Plan for Central Asia: Chinese President Xi Jinping announced a comprehensive plan for the development of Central Asia, aiming to enhance infrastructure and trade in the region, traditionally dominated by Russia. Xi expressed China's readiness to collaborate with Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan to promote their modernization and strengthen regional peace and stability, highlighting the positive impact of the China-Central Asia Summit on the countries' development and revitalization. [BR]
• Russian Mercenaries Declare Victory: On Saturday, mercenaries from the Russian private military contractor, the Wagner Group, announced their victory in the eight-month battle for the Ukrainian town of Bakhmut. [ET] [Al Jazeera]
• Italy Grapples with Deadly Deluge: Devastating floods in northern Italy have resulted in at least 14 deaths and the evacuation of 36,000 people, prompting authorities to advise limiting travel in the affected areas. The heavy rainfall, causing rivers to overflow and submerge towns. Similar climate-related disasters have also affected Croatia, Bosnia, and Slovenia, highlighting the increasing frequency of such events in southern Europe. [EN]
• Sudan's Tenuous Ceasefire Resumes: Despite the agreement on an upcoming one-week ceasefire between rival generals in Sudan, heavy clashes resumed in the capital, Khartoum, shortly after the announcement. The ceasefire, set to start on Monday, follows a series of violated truces, and while it includes international support and monitoring, residents remain skeptical about its effectiveness. [BR]
• Collaboration for Persian Gulf Security: Iran's Chief of Staff of the Armed Forces, Mohammad Bagheri, stated that Iran and neighboring countries are capable of collaborating to ensure the security of the Persian Gulf, the Strait of Hormuz, and the Sea of Oman. This announcement comes in the wake of maritime tensions with the United States, as the Gulf waters, which transport a significant portion of the world's seaborne oil, have experienced incidents since 2018 due to strained relations between Iran and the US. [ET] [The News]
• Oil Prices: Oil prices reversed course to fall on Friday after US House Republicans and President Joe Biden’s administration paused talks about raising the government’s debt ceiling, threatening a default that could cut energy demand. Brent futures settled 28 cents, or 0.8%, lower at $75.58 a barrel, while West Texas Intermediate US crude for July expiry fell 25 cents, or 0.3%, to $71.69. [BR]
• Opinion: If the Capital is Sinking - “Former Indonesian President Joko Widodo, prior to his national leadership role, faced the formidable challenge of saving Jakarta, the country's capital city. Jakarta, plagued by overpopulation, congestion, pollution, and sinking due to groundwater depletion and rising sea levels, prompted Joko Widodo to prioritize the concerns of ordinary residents, including their desire for clean air, reliable water supply, and improved traffic conditions.” - By Hannah Beech [NYT]
• Opinion: Adapting Rice to a Hotter World - “Rice cultivation is facing severe challenges due to the increasing global temperatures, posing a threat to the food security and livelihoods of billions of people. Farmers and scientists are adopting various strategies to cope with the impacts of climate change, such as adjusting planting schedules, developing heat and salt-resistant seed varieties, and implementing water-saving practices. However, extreme weather events and water scarcity continue to disrupt rice production worldwide, leading to projected declines in output and forcing farmers to make difficult adaptations to sustain their livelihoods.” - By Somini Sengupta & Tran Le Thuy [NYT]

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PAKISTAN - REMAINDERS

• First air taxi launched in the country catering to rural areas as well. [ET]
• Prices of life-saving drugs jacked up by 14%. [ET]
• Pre-budget meetings deferred on data delays. [Dawn]
• CGT proposed on disposal of immovable property. [The News]
• Majestic migratory birds of nature find haven in Karachi’s Clifton Urban Forest. [Dawn]
• World Bank funded Punjab Family Planning project gets nod. [Dawn]
• Federal Shariat Court strikes down transgender law for being ‘against Islam’. [Dawn]
• Rs 97.2 billion was the loss reported by PIA Corp for the year ended Dec 31, 2022, up 81.7% from the loss of Rs 53.5 billion last year. [ET]
• Factors Impacting Auto Financing: Banks in Pakistan experienced a 10th consecutive month of declining credit to individuals purchasing automobiles in April. The decrease in auto loans can be attributed to factors such as increased interest rates, measures to reduce demand, higher car prices, and plant closures, resulting in a 15.7% year-on-year decline in auto financing. [The News]
• Advancing Pakistani Filmmaking: The government of Pakistan has approved Rs 400 million under the Public Sector Development Programme (PSDP) to establish the National Film Production Institute (NFPI) in Islamabad. The NFPI will feature a state-of-the-art studio complex and film institute, aiming to promote local film production, provide professional training, and improve the quality and quantity of films produced in the country. This initiative has been welcomed by artists and members of the film industry, who see it as a significant step toward enhancing opportunities for local talent and transforming the Pakistani cinema landscape. [BR]‍
• Opinion: Climate chaos - “The provincial bureaucracy has recently drafted a policy for resettlement and rehabilitation of people displaced by development projects. The policy was opened to public debate at the commissioner’s office in Hyderabad on Feb 9, 2023. An overriding objective of this policy is to provide reasonable compensation to people dislocated from sites and to mitigate their difficulties. However, it can be argued that it will not be sustainable without land reforms and subsequent redistribution of land and redefining land ownership rights. Also, the policy has deliberately ignored victims of climate disasters. It must, therefore, be revised keeping the ravages of climate change in view.” - By Dr Shuja Ahmed Mahesar[Dawn]