PAR News - Wed, 25th Jan 2023

25/01/23 - Textile Woes, Rice Forecast, Petroleum Tax Levy, Forex Dollar Cap Removed, Flood Loans

PAR News

January 25, 2023

News

TOPLINE

The textile industry in Pakistan is facing a crisis due to a shortage of raw materials, with business owners stating that they have only 60 days left before the industry will shut down. The country has only produced 4.5 million bales of cotton this year, while the industry needs 15 million bales. The export-focused industry is also expecting a downward trend in global shipments in the current fiscal year. Additionally, 30-50% of mills nationally have been shut down.
The USDA forecasted national output of rice at just 6.6 million metric tons (MMT) for 2022-23, with 4 MMT in exports. By Dec 2022 close, working capital loans to rice processors rose by 62% over Sep close, against 65% during the same period last year. Export volume declined at a record pace during 6M-FY23, falling by 23% over the corresponding period last year.
The government has projected to collect Rs 76 billion additional revenue if it maximizes the petroleum levy to Rs 50 per liter on all petroleum products in the remaining five months (February-June).
The Exchange Companies Association of Pakistan announced on Tuesday that it would remove the cap on the US dollar from January 25 (today) and allow the dollar to act in accordance with market metrics.
Of the $4.2 billion worth loan that the Islamic Development Bank (IsDB) had pledged at the Geneva conference for the reconstruction of the flood-damaged infrastructure, $3.6 billion has been given for oil financing as part of its regular Pakistani operations with the majority of the $9.7 billion being repurposed funds.
The Trans-Caspian Middle Corridor is a promising alternative to push export and energy links from Europe to Kazakhstan, the Caspian Sea, Azerbaijan and Georgia and from there via the Black Sea to Türkiye. The Middle Corridor will see cargo movement increase six-fold in 2023 due to the Russian sanctions and COVID.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

Textile Shortages & Restrictions: The textile Industry needs 15 million bales of cotton out of which 1.7 million bales have been ordered from the US. Pakistan has only produced 4.5 million bales this year. The $19.3 billion export-focused industry is expecting a downward trend in global shipments in the current fiscal year (2022-23). 30-50% of the mills in Punjab, K-P and Sindh have been completely or partially shut. Businessowners believe that the Textile industry is left with only 60 days of raw material and if the imported cotton is not released, then the industry will completely shut down. In this crisis, there are indications that some global shipping companies are considering boycotting Pakistan as thousands of containers are still stuck at port. [ET] [Dawn]
Rice Procurement: USDA’s latest monthly update shows that the Ag-agency is standing steadfast with its initial prediction, forecasting national output of just 6.6 million metric tons (MMT) for marketing year 2022-23, with 4MMT in exports. Yet, despite warnings of nearly one-third of national production being washed away, borrowing has followed in the footsteps of last year. By Dec 2022 close, working capital loans to rice processors rose by 62% over Sep close (end of marketing year), against 65% during the same period last year. Export volume declined at a record pace during 6M-FY23, falling by 23% over the corresponding period last year. [BR]
Flour Prices: The sale of subsidized flour at Rs 650 per 10 kg bag has been stopped by the Sindh government while chakki owners have also shut their operations against price fixing by the Karachi commissioner. [Dawn] [ET]
Wheat Stock: The Regional food Department has sufficient stock of wheat including 760.330 metric tons imported and 59,613.350 metric tons locally purchased wheat in its godowns. [UP]
Imported Wheat Clearance: Ministry of Commerce (MoC) has proposed the government to allow Trading Corporation of Pakistan (TCP) to carry on pre-shipment inspection of wheat consignment through its already qualified pre-qualified Pre-Shipment Inspection Agencies (PSIAs). [BR]
Palm Oil Prices: International palm oil prices have stabilized, having hit record highs last year. Pakistan’s import unit cost for palm oil in December 2022 at $1,043/ton was the lowest in 21 months – having hit a high of $1646/ton six months ago. Import quantities have largely remained unchanged for 1HFY23 despite significant increase in retail prices. [BR]
Dairy Farm: Prime Minister Shehbaz Sharif has sought a report from the Punjab Livestock and Dairy Development Department about the closure of the 100-year-old and Asia's largest dairy farm in Jhika Gali in Murree which remains shut since 1971. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

Power Outage: Admitting that the teams have not yet been able to determine the exact source of fault in the system even after the passage of 48 hours, Minister for Power, Khurram Dastgir Khan announced conducting a safety audit of the whole transmission network including the aspect of hacking of the system. [BR] [Dawn]
Import of LNG: The Economic Coordination Committee (ECC) of the Cabinet is all set to approve the pact between Pakistan LNG Limited (PLL) and Azerbaijani company, M/s SOCAR/ SOCAR Trading, for import of one LNG cargo monthly, official sources told Business Recorder. [BR]
Post Flood: 6 months since extreme flooding submerged a third of Pakistan, 5 million people remain living in flooded areas, while food insecurity and malnutrition in the country has intensified, the IRC has said. [Dawn]
Gas Recovery in Guddu: The government is likely to allow a one-year extension to Oil and Gas Development Company Limited (OGDCL) in Extended Well Testing over Umair SE-1 discovery Guddu. [BR]
POL Products: The government has projected to collect Rs 76 billion additional revenue if it maximizes the petroleum levy to Rs 50 per liter on all petroleum products in the remaining five months (February-June) based on current fuel consumption and international oil prices. [BR]
Demurrage & Port Charges: Businesspeople have hailed the government’s decision about waiving the demurrage and port charges, which were imposed on the containers stuck at ports, but have also urged the shipping companies, freight forwarders and port handlers to scrap their fee in this crisis for the trade and industry. [ET]

AGRI UPDATES & PAKISTAN POLICY

Forex Cap on Dollar Rate Removed: The Exchange Companies Association of Pakistan (ECAP) announced on Tuesday that it would remove the cap on the US dollar from January 25 (today) and allow the dollar to act in accordance with market demand and supply metrics. [BR] [Dawn] [ET] [ET] [PT] [DP] [The Nation] [ARY] [PO]
PTI Lawmaker Resignations: National Assembly Speaker Raja Pervaiz Ashraf on Tuesday accepted 43 more resignations of the Pakistan Tehreek-e-Insaf lawmakers. The total number of resignations of PTI’s members from the NA (accepted by the Speaker) to date has risen to 113 members. [BR] [ET] [The News] [Dunya] [Samaa]
Toshakhana Data: The federal cabinet gave permission on Tuesday for making all the data of Toshakhana public and approved a nationwide public awareness drive for conservation of power, water, gas and other resources. [ET]
Karachi LG Polls: The Provincial Election Commission, Sindh, on Tuesday issued consolidated results of local bodies polls for 229 Union Committees of Karachi, according to which Pakistan Peoples Party emerged as the largest political entity bagging 91 UCs. [The News]
Austerity Measures: Amid the National Austerity Committee’s recommendation to review the practice of doling out billions of rupees to parliamentarians, the government decided to further increase the discretionary spending budget to a whopping Rs 90 billion. The National Austerity Committee recommended slashing the federal cabinet to just 30 members from the current almost 77, including special assistants to the prime minister. [ET]
IMF Demands: Prime Minister Shehbaz Sharif Tuesday said the International Monetary Fund (IMF) has been given a clear message today that the government is ready to sit and negotiate with the Fund on its conditionalities to conclude the ninth review. [BR] [Dawn] [ET] [The News]
Geneva Conference: Of the $4.2 billion worth loan that the Islamic Development Bank (IsDB) had pledged at the Geneva conference for the reconstruction of the flood-damaged infrastructure, $3.6 billion has been given for oil financing as part of its regular Pakistani operations, sources told The Express Tribune. The majority of $9.7 billion pledged during the Geneva Conference are repurposed funds. [ET]
US Delegation Talks: A high-level US delegation will be reaching Pakistan today (Wednesday) for talks on economic cooperation between Pakistan and the United States. [The News]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

Middle Corridor Freight Movement: The Trans-Caspian Middle Corridor is a promising alternative to push export and energy links from Europe to Kazakhstan, the Caspian Sea, Azerbaijan and Georgia and from there via the Black Sea to Türkiye. The Middle Corridor will see cargo movement increase six-fold in 2023 due to the Russian sanctions and the security the route provides compared to other alternatives. [AA] [Daily Sabah]
Earthquake in Nepal: At least one person has been killed and two others injured after an earthquake struck western Nepal, a local official told AFP, with authorities still searching for damage. The magnitude 5.6 quake’s epicenter was in the hilly and remote Bajura district, 400 km (250 miles) west of the capital Kathmandu, according to the United States Geological Survey. An earthquake of magnitude 6.2 struck Santiago Del Estero, Argentina region on Tuesday, according to the European-Mediterranean Seismological Centre (EMSC). [Al Jazeera] [Reuters] [Economic Times] [Reuters] [IB]
Oil Prices: Crude oil prices slipped on Tuesday on concerns about a global economic slowdown and an expected build in US oil inventories. Brent futures for March delivery fell $2.06, or 2.3%, to $86.13 a barrel. US crude fell $1.49, or 1.8%, to $80.13 per barrel. [BR] [BR]
Turkey Postpones Talks on Scandinavian NATO Bid: Turkey postponed a key meeting with Sweden and Finland that was intended to hash out differences over their bid to join the North Atlantic Treaty Organization, Turkish officials said Tuesday, intensifying a standoff over an expansion of the alliance in response to Russia’s invasion of Ukraine. [ET] [The News] [Al Jazeera] [WSJ]
Israel-Jordan Ties: Israeli Prime Minister Benjamin Netanyahu flew to Amman to meet with Jordan’s King Abdullah II today following an escalation in tensions in Jerusalem. [ET] [AP] [JP] [Bloomberg] [Al-Monitor] [Times of Israel]