PAR News - Tues, 21 Nov 2023

TOPLINE

• Pakistan has committed to the IMF to increase petroleum levy collection to a record Rs 920 billion in the current fiscal year, up from the initial target of Rs 869 billion. The government assured the IMF of an additional Rs 50 billion to compensate for revenue losses from other non-tax sources. The IMF Executive Board is tentatively set to approve the Staff-Level Agreement with Pakistan on December 7 for the first review of the $3 billion Stand-By Arrangement, leading to a disbursement of approximately $700 million on December 8.
• Rs 18.8 billion was the export value of Basmati rice in Oct 2023, up 65.1% compared to Rs 11.4 B in Oct 2022.
• Foreign Direct Investment (FDI) in Pakistan rose by 7% to $525 million in the first four months of fiscal year 2023-24, compared to $490 million in the same period last fiscal year. During this time, FDI inflows reached $749 million, with outflows at $225 million. The country's current account deficit also decreased by 66% during this period.
• Pakistan issued an urgent international tender for a Liquefied Natural Gas (LNG) cargo on Monday to address an anticipated winter shortage.
• The CPPA is requesting a Rs 3.55 per unit fuel cost adjustment, aiming to raise Rs 33 billion in December from consumers.
• Gold prices declined on Monday due to an increase in US Treasury yields, with investors awaiting minutes from the Federal Reserve's last meeting for insights into the central bank's interest rate trajectory. The dollar index also reached its lowest in over two months on Monday. Brent and US crude futures surged over 2.5%, gaining $2 per barrel on Monday, driven by expectations of further supply cuts in OPEC+ production in the coming weeks.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Basmati Export: Rs 18.8 billion was the export value of Basmati rice in Oct 2023, up 65.1% compared to Rs 11.4 billion in Oct 2022, according to the PBS. [ET]
• Cotton & Phutti Price Ranges in Pakistan - Cotton rates in Pakistan vary across regions, with prices per maund in Sindh ranging from Rs 15,500-18,000, in Punjab from Rs 16,000-18,000, and in Balochistan at Rs 17,000-17,500. The rates for Phutti (raw cotton) also differ, with prices per 40 kg ranging from Rs 5,000-7,200 in Sindh, Rs 6,500-8,400 in Punjab, and Rs 6,500-8,000 in Balochistan. [BR]
• Almond-Walnut Customs Revisions: The Directorate General of Customs Valuation Karachi has recently adjusted customs values for imported almonds and walnuts through valuation rulings 1825 and 1826 of 2023. The revised values apply to almonds from the USA and Australia, as well as walnuts from China, USA, and Chile/Argentina, with 15% loading recommended for value-added almonds. [BR]
• IT Services Growth - IT and IT-enabled Services (ITeS) export remittances, covering computer and call center services, rose by 4.4% to $893 million in the first four months of fiscal year 2023-24, compared to $855 million in the same period last year. In October 2023, there was a 15% month-on-month increase, reaching $238 million, and a 7.6% year-on-year growth compared to October 2022. [BR]
• Global Connectivity: Pakistan's E-Phyto Hub Integration - Pakistan has achieved a trade facilitation milestone by connecting to the International Plant Protection Convention’s (IPPC’s) e-Phyto Hub. Through the Pakistan Single Window (PSW), the National Plant Protection Organization (NPPO) can now electronically exchange phytosanitary certificates with 127 countries worldwide, streamlining the process for the Department of Plant Protection (DPP) in Karachi. [BR]
• Hyderabad Glass Bangle Industry Faces Crisis: 80% Units Closed - Approximately 80% of the 48 small and large glass bangle manufacturing units in Hyderabad have closed due to the industry's challenges with high gas tariffs and inflation. Without a substantial and immediate subsidy on gas tariffs, the industry could face complete closure, leading to the unemployment of 250,000-300,000 people associated with it. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

• Winter Shortage Mitigation: LNG Bid - Pakistan issued an urgent international tender for a Liquefied Natural Gas (LNG) cargo on Monday to address an anticipated winter shortage. The tender by Pakistan LNG Limited sought bids for a standard LNG cargo with a targeted delivery on January 8-9, with bids to be opened on November 24. Last month, Pakistan received three bids for additional LNG cargoes for peak winter demand at a higher premium over the spot market after a year-long gap. [Dawn]
• CPPA Seeks Rs 3.55/Unit Fuel Adjustment: The CPPA is requesting a Rs 3.55 per unit fuel cost adjustment, aiming to raise Rs 33 billion in December from consumers. This adds to recent tariff increases, and despite 76% electricity generation from cheaper domestic fuels, consumers may see limited benefits due to the significant charge on units consumed in October. The CPPA attributes over Rs 28 billion to past adjustments, resulting in an additional cost of Rs 2.95 per unit. [Dawn]
• IMF Agreement: Rs 920 Billion Target, Up from Rs 869 Billion - Pakistan has committed to the IMF to increase petroleum levy collection to a record Rs 920 billion in the current fiscal year, up from the initial target of Rs 869 billion. The government assured the IMF of an additional Rs 50 billion to compensate for revenue losses from other non-tax sources. The petroleum levy, charged at Rs 60 per liter on petrol and diesel, aims to offset the challenges in fully recovering the Gas Infrastructure Development Cess (GIDC) from certain industries. [ET]
• Comparing Fiscal Years: Circular Debt Growth - The circular debt stock in the country's power sector reportedly rose to Rs 2.537 trillion in the first quarter (July-September) of 2023-24, indicating a 10% monthly increase of Rs 75.7 billion despite recovery efforts through an anti-theft drive. The debt stock, which was Rs 2.310 trillion at the end of the previous fiscal year, has grown by Rs 227 billion, compared to Rs 185 billion in the same period of 2022-23. [BR]
• Azerbaijan for Rabi Season Urea: The Trading Corporation of Pakistan (TCP) is reportedly in discussions with Russian company M/s Uralchem to import 0.2 million tons of urea for the Rabi season. China, Pakistan's usual choice, is not an option due to Chinese export restrictions on fertilizers. Azerbaijan is considered a second option, but challenges include limited urea production by M/s SOCAR, high Black Sea prices, and uncertainties regarding delivery by the January 13, 2023, deadline. [BR]
• Chaman ATT Partially Suspended Amidst Sit-in: The Afghan transit trade through Chaman is partially suspended due to a sit-in against new travel rules, leading to a Senate debate. The Balochistan government issued a stern warning against hindering official policies on undocumented immigrants and terrorists, emphasizing Pakistan's stance. [Dawn]
• Electricity Overbilling Scandal Unearthed in Pakistan: A major scandal in Pakistan involving the overbilling of electricity consumers, totaling billions of rupees, has been uncovered. Consumers faced exorbitant charges through overbilling, leading to distribution companies accumulating substantial amounts, prompting intervention from the National Electric Power Regulatory Authority (Nepra). The scandal came to light in August. [ET]
• Exploration Success: PPL in Sindh Province - Pakistan Petroleum Limited (PPL) has made a gas and condensate discovery in the Jhim East X-1 exploration well in Block 2467-16 (Shah Bandar) in Sindh province. This marks the second discovery in the Shah Bandar Block, with PPL operating with a 63 percent working interest and joint venture partners Mari Petroleum Company Limited (MPCL) holding 32 percent, and Sindh Energy Holding Company Limited and Government Holdings Private Limited each holding 2.5 percent working interest. [BR] [Dawn] [ET]
• Justice Shahid Karim's Order on Environment Petitions: The Lahore High Court (LHC) has directed the caretaker Punjab government to notify the Saturday closure of public schools, colleges, universities, and all other educational institutions until the end of January 2024 due to smog. Justice Shahid Karim's written order on environment-related petitions also instructs the government to implement two days of work from home in Punjab. [Dawn] [Dawn]

AGRI UPDATES & PAKISTAN POLICY

• Senate Chairman Blocks Resolution on Supreme Court's Verdict: Members of mainstream political parties continued their protest in the Senate, disowning the hastily passed controversial resolution supporting military courts and demanding its withdrawal. Senate Chairman Sanjrani prevented attempts to table a separate resolution in support of the Supreme Court's verdict, citing it as a "sub judice matter" due to appeals filed by the federal and provincial governments. [Dawn]
• Staff-Level Agreement for SBA: The IMF Executive Board is tentatively set to approve the Staff-Level Agreement with Pakistan on December 7 for the first review of the $3 billion Stand-By Arrangement, leading to a disbursement of approximately $700 million on December 8. The SLA was reached on November 15, allowing Pakistan access to around $700 million and bringing the total disbursements under the nine-month SBA to almost $1.9 billion. [Dawn]
• Optimism Fuels Bond Rally - Hopes for increased international financial support, particularly from the IMF, lifted Pakistan's government bonds to their highest level in at least 15 months. Despite ongoing debt challenges, the bonds have nearly doubled in value since late May. The rally, sparked last month, is driven by optimism around the scheduled February election, expected to bring political stability and economic certainty. The 2036 dollar-denominated bond gained 2.4 cents to 57.76 cents on the dollar, and the 2025 maturity rose just under 2 cents to 82.37 cents, its strongest level since May 2022. The rally is fueled by expectations of political stability and economic certainty from the February election. [BR] [BR]
• Positive Trends: Fiscal Year 2023-24 FDI Report - Foreign Direct Investment (FDI) in Pakistan rose by 7% to $525 million in the first four months of fiscal year 2023-24, compared to $490 million in the same period last fiscal year. During this time, FDI inflows reached $749 million, with outflows at $225 million. The country's current account deficit also decreased by 66% during this period, primarily due to a substantial reduction in the goods imports bill, providing relief to foreign exchange reserves, according to analysts. [BR] [BR]
• Sharp Improvement: Pakistan's Current Account Deficit Falls 66% - Pakistan's current account deficit for the first four months of fiscal year 2023-24 fell sharply by 66%, amounting to $1.06 billion, attributed to a significant contraction in the goods imports bill. The State Bank of Pakistan reported the improvement, reducing pressure on foreign exchange reserves. In October 2023, the monthly current account deficit decreased by 91%, reaching $74 million compared to $849 million in October 2022. [BR] [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Fourth Gazan Hospital Attacked: Arab and Muslim ministers in Beijing called for an immediate Gaza ceasefire, urging the West to reject Israel's self-defense justification, and the tour aims to engage with UN Security Council members. Israeli strikes killed at least 12 more people after the surrounding of an Indonesian Hospital in Gaza, the fourth hospital attacked since October 7. Journalist Ismail Al Ghoul reported Israeli forces shooting at people trying to leave, describing the situation as catastrophic. Israeli ships are a “legitimate target”, Yemen’s Houthis warned on Monday after their seizure of an Israel-linked cargo vessel opened a new dimension in the ongoing genocide in the region. [BR] [Dawn] [Dawn] [Dawn] [Dawn] [ET] [ET] [Al Jazeera] [Reuters] [Xinhua] [CGTN]
• Gold Prices Slide on Rising US Treasury Yields: Gold prices declined on Monday due to an increase in US Treasury yields, with investors awaiting minutes from the Federal Reserve's last meeting for insights into the central bank's interest rate trajectory. Spot gold fell 0.4% to $1,972.60 per ounce, while US gold futures dropped 0.5% to $1,975.00, influenced by technical factors and higher rates, according to Bart Melek, Head of Commodity Strategies at TD Securities. [BR] [UP] [Price Today]
• Dollar Index Hits 2-Month Low on Rate Cut Speculation: The dollar index reached its lowest in over two months on Monday, extending a slide from the previous week as investors believe the US Federal Reserve has completed its interest rate hike cycle and are now assessing the possibility of rate cuts. The index hit 103.46, its weakest level since September 1, after a nearly 2% drop last week, marking the largest weekly percentage decline since mid-July. [BR] [Reuters] [Reuters] [UBS] [US Bank] [MW]
• Climate Talks in Dubai: Countries' pledges to cut greenhouse gas emissions are set to exceed key limits, potentially leading to a catastrophic 2.9 degrees Celsius of warming this century, warns the UN Environment Programme's Emissions Gap report. Released ahead of the COP28 climate talks in Dubai, the report emphasizes the urgent need for global action, stating that "we are out of the road" to prevent significant climate impacts. The findings will contribute to the official assessment of the failure to curb warming so far. [Dawn]
• Invesco's Aerospace & Defence ETF Attracts Over $100 Million: Investors are increasing investments in defense-focused exchange-traded funds (ETFs) since October, anticipating higher military budgets in the US and Europe due to geopolitical conflicts. The Invesco Aerospace & Defence ETF received over $100 million in net inflows this month, in addition to nearly $180 million in October. Peers, including iShares US Aerospace & Defence ETF and SPDR S&P Aerospace & Defence ETF, also saw significant net inflows of $178.4 million and $163.6 million, respectively, since October. [BR]
• Delhi's AQI Drops to 336 - Delhi, the world's most polluted capital, reopened schools and some construction sites as air pollution slightly receded. Despite a government commitment to improvement, the air quality index (AQI) on Monday remained "hazardous" at 336, down from Thursday's level of 509, according to IQAir. Toxic foam was also observed in stretches of the Yamuna river flowing through the city. [BR]
• OPEC+ Production Cuts Drive Monday's Oil Price Rally: Brent and US crude futures surged over 2.5%, gaining $2 per barrel on Monday, driven by expectations of further supply cuts in OPEC+ production in the coming weeks. Brent crude futures rose $2.19 to reach $82.80 a barrel, while US West Texas Intermediate crude increased by $1.98, or 2.6%, to $77.87. The active January futures for WTI gained $2.12 to $78.16, marking a 2.79% increase. [BR] [Dawn]

PAKISTAN - REMAINDERS

• Jazz Investments: Rs 20.6 Billion invested in '4G for All' Initiative in the first nine months of 2023, mainly for its "4G for All" initiative, bringing its total investment in Pakistan to $10.6 billion. Despite a 27% year-on-year growth in local currency revenues, Jazz's revenue declined by 3.5% in USD terms in the third quarter of 2023. [BR]
• Opinion: Violence on Borderlands - “The ongoing deportation of Afghan refugees from Pakistan has stirred a debate, within and without. But this is a debate which involves little nuance. Overall, this policy of the great push westwards is to be supported and cheered because in a country where we have perfected the art of ‘othering’ even our own, there has been little effort to even understand outsiders, such as Afghan refugees who have been in and out of the country for decades now.” - By Arifa Noor [Dawn]