Budget Overview, Defence Spending Rises, Petroleum Levy Rises, Power Sector Subsidy Rises, Pak Borrowing Plan, EU Shifts Rights.

TOPLINE

• The budget is of Rs 18.9 trillion, with GDP growth target at 3.6%. Tax revenue target is Rs 13 trillion (38% increase). Non-tax revenue target is Rs 3.5 trillion. Rs 30 billion from privatization is planned. Zero-rated imports for solar panel, inverter, and battery raw materials. BISP allocation up by 27%. Focus on economic sustainability and IMF support to avoid default.
• Pakistan on Wednesday announced a nearly 15% hike in its defence spending and allocated Rs 2,122 billion in the 2024-25 budget, as compared to 23-24 when the government allocated Rs 1,804 billion for defence, which was higher than the Rs 1,523 billion allocated the previous year.
• The federal government has proposed increasing the petroleum levy to Rs 80 per liter on petrol and diesel to generate Rs 1,281 billion for the fiscal year 2024-25, exceeding the IMF's projection by Rs 201 billion. Additionally, the levy on other petroleum products will rise to Rs 75 per liter, while the rate for superior kerosene oil remains at Rs 50 per liter.
• The federal government has increased the power sector subsidy by 103.7% to Rs 1.190 trillion for 2024-25. Total subsidies rose by 28% to Rs 1.363 trillion, with the Inter-Disco tariff differential subsidy up 54.36% to Rs 276 billion, and the subsidy for agri tubewells in Balochistan remains at Rs 9.5 billion.
• Pakistan plans to borrow $23 billion in fiscal year 2024-25 for development and external financing needs, excluding an IMF loan for balance of payments support. The budget includes $20 billion in borrowing, with an additional $3 billion from the UAE earmarked for balance of payments support.
• The ground beneath the feet of EU leaders has shifted after voting across the 27-member bloc delivered a clear turn to the right in the European Parliament as European Commission President Ursula von der Leyen claimed victory after her center-right European People’s Party (EPP) maintained the most seats of any single group.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Cotton & Phutti Prices in Pakistan: Cotton prices in Sindh are Rs 20,400-20,500/maund, with Phutti (cottonseed) at Rs 9,000-10,000/40 kg. In Punjab, cotton prices range from Rs 20,500-21,500/maund, and Phutti costs Rs 10,000-12,000/40 kg. The Spot Rate is steady at Rs 19,700/maund, and Polyester Fiber is priced at Rs 367/kg. [BR]
• NAB Lahore Probes Sugar Scam: Director General of the National Accountability Bureau (NAB) Lahore, Amjad Majeed Aulakh, swiftly initiated an inquiry into a significant sugar scam involving Sheikh Raashid, a sugar broker accused of absconding with billions from investors across Punjab and Sindh. A high-level investigation team has been formed to probe the multi-billion rupee scam affecting numerous investors. [BR]
• Pakistan Tobacco Company: Pakistan Tobacco Company Limited (PSX: PAKT) was established in 1947 as a publicly listed company in Pakistan. It operates as a subsidiary of British American Tobacco (Investments) Limited, UK, with British American Tobacco p.l.c, UK as its ultimate parent company. The company's primary business involves manufacturing and selling cigarettes and tobacco products. Detailed profile provided in link. [BR]
• 2024-25 Budget Stringent Revenue Measures: In the 2024-25 budget, the government has introduced stringent new revenue measures. Traders failing to register under schemes like the Tajir Dost Scheme face penalties including shop sealing. Non-registration is proposed as an offense punishable by imprisonment for six months, a fine. [BR]
• Budget Boost for MNFSR: In the 2024-25 budget, the Ministry of National Food Security and Research (MNFSR) received Rs 12.56 billion under the PSDP, a significant increase from Rs 8.850 billion allocated in 2023-24. This represents a 70.46% rise to fund 21 ongoing projects and 13 new schemes throughout the year. [BR]
• APNS Opposes 10% GST on Imported Newsprint: The APNS vehemently opposes a 10% GST on imported newsprint, arguing it would worsen the financial crisis in the print media. They emphasize the industry's heavy reliance on imported materials and cite increased production costs due to currency depreciation. [BR]

ENERGY - WEATHER, WATER & POWER

• Petroleum Levy Increase Proposed: The federal government plans to raise the petroleum levy to Rs 80 per liter on petrol and diesel for fiscal year 2024-25, aiming to generate Rs 1,281 billion, exceeding the IMF's projection by Rs 201 billion. Additionally, the levy on other petroleum products will increase to Rs 75 per liter, while it remains at Rs 50 per liter for superior kerosene oil. [BR] [Dawn] [ET]
• Government Boosts Power Sector Subsidy: The federal government has increased the power sector subsidy by 103.7% to Rs 1.190 trillion for 2024-25. Total subsidies rose by 28% to Rs 1.363 trillion, with the Inter-Disco tariff differential subsidy up 54.36% to Rs 276 billion, and the subsidy for agri tubewells in Balochistan remains at Rs 9.5 billion. [BR] [Dawn] [ET]
• SBP Sells PIBs Below Target: The State Bank of Pakistan (SBP) sold Rs 90.43 billion worth of 5 and 10-year Pakistan Investment Bonds (PIB-PFL) in an auction, against a target of Rs 220 billion. The cut-off prices were Rs 96.5875 for the 5-year bond and Rs 94.4585 for the 10-year bond, with bids totaling Rs 287.75 billion for semiannual bonds and Rs 50 billion for quarterly bonds, though only semiannual bids were accepted. [MG]
• Karachi Water Crisis Addressed in Sindh Assembly: During a recent Sindh Assembly session, it was disclosed that nearly half of Karachi's population purchases water daily due to a 50% gap between supply and demand. Sindh's Local Government Minister Saeed Ghani highlighted the severity of the water crisis but also outlined initiatives planned by the PPP government to address and improve the situation. [Dawn]
• Protest Against Water Injustice in Sindh: Farmers and landowners from Naukot to Mirpurkhas protested against water distribution injustice, corruption in the irrigation department, and artificial water shortages in Nara, Jamrao, and Mithrao canals. Led by leaders including Prof Mohammad Yousuf Rajput and Mir Ajaz Talpur, they blocked the Hyderabad-Mirpurkhas road at the Jamrao Canal bridge, garnering public support along the way. [Dawn]
• Government's IMF Loan Strategy: For 2024-25, the government plans no IMF loans for budgetary support, compared to Rs 696 billion budgeted this year (later revised to zero). External resources are budgeted at Rs 5.906 trillion, up 17% from this year's revised estimate but nearly 18% lower than the initial Rs 7.169 trillion budgeted for this year. [BR]
• Increased 4G/5G License Revenue: The government has budgeted Rs 32.612 billion from 4G/5G licenses for 2024-25, up from Rs 7.597 billion last year, later revised to Rs 30.941 billion. The mobile handset levy remains at Rs 10 billion for 2024-25, despite being revised from Rs 10 billion to Rs 8 billion last year. [BR]
• Opinion: Inside Pakistan’s Oil Smuggling Paradox - “Pakistan grapples with a perilous oil smuggling dilemma, marked by recurring incidents at the western end of its Balochistan province. Following each catastrophe, the government issues reports, shuts the border and blames lesser-known oil smugglers, only to reopen the border shortly after. These short-term responses fail to address the underlying socio economic incentives, leading to continued unrest and a thriving informal market for smuggled petroleum products.” - By Muneeb Shah [ET]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Income Tax Law Overhaul: The government has introduced a new "Late Filer" category in the income tax law to increase taxes on those filing returns late. They aim to generate Rs 1,800 billion through new taxes by removing exemptions, raising property transaction withholding rates, and increasing taxes on salaried individuals, retailers, and certain imports like vehicles and steel products. The Finance Bill 2024-25 outlines varying tax rates for vehicles based on engine capacity, ranging from 0.5% to 2% of the vehicle's value. [BR] [BR] [BR] [BR] [Dawn] [Dawn] [ET] [ET] [The News] [The News] [The News] [MG]
• 2024-25 Budget Highlights: Proposed budget: Rs 18.9 trillion, GDP growth target: 3.6%. Tax revenue target: Rs 13 trillion (38% increase). Non-tax revenue target: Rs 3.5 trillion. Rs 30 billion from privatization planned. Increased petroleum levy on fuels. Zero-rated imports for solar panel, inverter, and battery raw materials. BISP allocation up by 27%. Focus on economic sustainability and IMF support to avoid default. [BR] [Dawn]
• Pakistan Defence Spending Budget: Pakistan on Wednesday announced a nearly 15% hike in its defence spending and allocated Rs 2,122 billion in the 2024-25 budget, marking a significant increase from last year amidst strenuous efforts to secure a fresh loan from the IMF to meet the cash-strapped nation's external liabilities. Last year, the government allocated Rs 1,804 billion for defence, which was higher than the Rs 1,523 billion allocated the previous year. The defence sector expenses are the second biggest component of the annual expenditure after the debt payments, which for the next year would be Rs 9,700 billion and constitute the single biggest expense of the debt-trapped country, which is dependent on loans from friendly nations like China. [BR] [Dawn] [BS]
• Finance Minister Prioritizes Privatization: Finance Minister Mohammad Aurangzeb highlighted in his budget speech that the government's top priority is privatization, starting with outsourcing Islamabad International Airport. He emphasized reducing government interference in commercial activities and promoting the private sector, aligning with the prime minister's vision. [Dawn]
• Government Targets 6.9% Fiscal Deficit: For 2024-25, the government aims for an unsustainable fiscal deficit of 6.9% of GDP, up from a revised -7.4% in 2023-24. The federal budget deficit is projected at Rs 8,500 billion, compared to Rs 7,506 billion budgeted last year, revised upwards to Rs 8,388 billion. The primary deficit target is 2% of GDP, contrasting with the IMF's projected 0.4% for the same period. [BR]
• Pakistan Plans $23 Billion Borrowing for 2024-25: Pakistan plans to borrow $23 billion in fiscal year 2024-25 for development and external financing needs, excluding an IMF loan for balance of payments support. The budget includes $20 billion in borrowing, with an additional $3 billion from the UAE earmarked for balance of payments support not yet included in official records. [ET]
• PTI Protests Senate Budget Session: Even before the budget discussion began in the Senate for the next financial year, PTI protested in the house on Wednesday, labeling the budget anti-people and condemning proposed tax increases. Leader of the Opposition Syed Shibli Faraz criticized the tax proposals immediately after the Finance Bill was presented in the house. [Dawn]
• Strained Coalition Dynamics: The PPP's relationship with the PML-N in the ruling coalition appeared strained as the PPP expressed dissatisfaction by attending the National Assembly's budget session only symbolically. Deputy Prime Minister Ishaq Dar urgently visited PPP Chairman Bilawal Bhutto-Zardari to persuade the party to participate fully after their concerns about the budget were ignored. [BR] [Dawn] [ET]
• Stock Market Ends Losing Streak: The stock market ended a seven-session losing streak on Wednesday, closing at 72,797.43 points with a gain of 207.94 points or 0.29%. Optimism about the government's privatization plan and debt rollover talks with China boosted sentiment, despite a 21.32% drop in trading volume to 293.08 million shares and a 9.52% decrease in traded value to Rs 10.54 billion day-on-day. [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• US Market Moves: Fed officials penciled in just one interest-rate cut this year and projected four cuts in 2025. Individual Fed officials’ views on the best path forward for borrowing costs differed. The central bank’s “dot plot” showed four policymakers anticipating no cuts this year. Still, in its post-meeting statement Wednesday, the central bank noted “modest further progress toward the committee’s 2% inflation objective.” After the rate decision and inflation data, the S&P 500 hit fresh highs, topping 5,400, while Treasury yields pared their slide. Stocks and bonds will shrug off a hawkish central bank, and the US benchmark will keep rallying regardless of what policymakers do. [BBG] [BBG]
• EU Elections Signal Rightward Shift: The ground beneath the feet of European Union leaders has shifted after voting across the 27-member bloc delivered a clear turn to the right in the European Parliament, shaking up governments in member states and leaving mainstream groups at a crossroads. European Commission President Ursula von der Leyen claimed victory after her center-right European People’s Party (EPP) maintained the most seats of any single group in the legislative body. [AlJazeera] [AlJazeera] [DW]
• Cyprus Wildfire Prompts Emergency Response: A large wildfire in southwestern Paphos, Cyprus, suspected to have started from an illegal landfill, prompted a national emergency response on Tuesday. Civil defence evacuated five mountain villages near Giolou. On Wednesday, Greece and Jordan deployed aircraft, including two air tractors from the Royal Jordanian Air Force and two planes from Greece, to assist in combating the blaze in challenging terrain. [ET]
• Mixed Movement in Grain Futures: Chicago wheat futures edged lower on Wednesday after a strong rally on Tuesday, while concerns over weather impacts on the Russian crop supported prices. Corn prices declined, and soybeans saw modest gains ahead of upcoming US supply-demand reports. The main wheat contract on the CBOT was down 0.2% at $6.25 per bushel as of 0242 GMT. [BR]
• IEA Forecasts Oil Surplus by 2030: The International Energy Agency (IEA) predicts a major surplus of oil by 2030 as global production increases and clean energy adoption moderates demand. By the end of the decade, global oil demand is expected to stabilize at 106 million barrels per day (bpd), while supply capacity could reach 114 million bpd, resulting in an anticipated surplus of eight million bpd, according to the IEA's annual report. [Dawn]
• Steady Oil & Palm Oil Prices: Oil prices held steady on Wednesday despite predictions of declining global inventories later in 2024. Brent crude futures rose 13 cents to $82.05 per barrel, and US West Texas Intermediate (WTI) crude futures increased 6 cents to $77.96. Meanwhile, palm oil on the Bursa Malaysia Derivatives Exchange closed 30 ringgit higher at 3,961 ringgit ($840.08) per metric ton, marking a three-day high. [BR] [BR]

OPINION(S) & REMAINDERS

• Privatization Goals for 2024-25: In 2024-25, the government aims to raise Rs 30 billion from privatization, including selling stakes in 25 state-owned entities like PIA and Utility Stores Corporation. The IMF-backed plan targets completing the sale of a 51% stake in PIA's core business by June 2024. [BR]
• BISP Budget Increases by 27%: In the financial year 2024-25, the Benazir Income Support Programme (BISP) has been budgeted at Rs 598.71 billion, marking a 27% increase from the Rs 471.23 billion allocated in the outgoing financial year. This budget increase exceeds BISP's own estimate, which projected a 20% rise to Rs 550 billion for 2024-25, according to reports from informed officials. [BR]
• Opinion: Privatizing Power Distribution - “A widely held perception, if not an unshakeable belief, is that the energy sector presents an existential threat to Pakistan’s economy, with no likely respite if it remains fixated on its poor policies and a mode of governance managed by over 20 organizations.  A key area of concern is the high 17pc transmission and distribution losses of the system — with a 50pc share of the latter — compared to 3.6pc of South Korea, 5pc of the US and 8pc of China.” - By Shahid Kardar [Dawn]
• Opinion: Street Forests Can Prevent Encroachers from Usurping Karachi’s Urban Spaces - “While we all worked together in a spirit of cooperation for decarbonization and greening of the area, the qabza group has continued undeterred with their multistoried construction audaciously taking over the remaining ancient graveyard space in the rear. As if that was not enough, with no fear of retribution, the group has mercilessly hacked down the graveyard’s century old trees.” - By Dr Yasmeen Lari [BR]