Exports, NEPRA hike, Northern Areas Flooding, Debt Sustainability & Reserves, India Rice Ban, Oil & Palm Oil Prices

TOPLINE

• Pakistan's textile industry is facing a crisis, with exports declining by 10% as Pakistan's non-textile exports declined by 9.87% to $11.23 billion in the fiscal year 2022-2023.
• NEPRA permits state-run power distribution companies to charge consumers an additional Rs 1.9039/unit in July bills for fuel cost adjustments in May 2023.
• Flash floods have wreaked havoc in Chitral and Gilgit-Baltistan, where threat of GLOF has also been issued.
• Pakistan's debt sustainability is facing serious threats, with the country's non-Paris Club external debt obligations having reached $31 billion. Pakistan's total liquid foreign exchange reserves rose to $14 billion.
• China has agreed to reschedule over $2 billion of Pakistan's publicly guaranteed debt for a period of two years.
• India has imposed an immediate ban on the export of non-basmati white rice due to concerns about a potential production shortfall caused by the late arrival of the seasonal monsoon rains.
• Oil prices increased due to lower US crude inventories and strong crude imports by China. Malaysian palm oil futures rose to a four-month peak amid concerns over supplies after Russia's exit from the Black Sea grain deal.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Textile Exports Decline by 10%: Pakistan's textile industry is facing a crisis, with exports declining by 10% due to the sudden withdrawal of concessions promised under the Textile Policy 2020-2025. Exports dropped from $18.5 billion in FY 2021-22 to just over $16.6 billion in FY 2022-23. Industry representatives had set an ambitious $25 billion export target for FY 2022-23, but challenges, including rising bank lending rates, raw material availability issues, and the removal of concessional gas and electricity tariffs impacted export growth. In the value-added leather sector, exports of leather garments fell by 7.03%, and exports of raw leather decreased by 19.45%. The Pakistan Tanners Association is struggling to meet the European Union's new protocols, with only 50 out of approximately 800 members expected to comply with the required standards by December 2023. [BR]
• Cotton Association Raises Spot Rate: The Karachi Cotton Association's Spot Rate Committee increased the spot rate by Rs 200 per maund, closing it at Rs 17,500 per maund. [BR]
• Pakistan's Other Exports Decline: Pakistan's non-textile exports declined by 9.87% to $11.23 billion in the fiscal year 2022-2023, compared to $12.46 billion in the previous year. The non-textile sector faced stagnation in export proceeds due to reduced demand in the buyers' market, with no growth in exports since September 2022. [Dawn]
• Pulses Import: Rs 16.8 billion was the import value of pulses in June 2023, up 87.17% compared to Rs 8.9 billion in June 2022. [ET]
• Readymade Garments Export: Rs 91.6 billion was the export value of readymade garments in June 2023, up 21.54% compared to Rs 75.35 billion in June 2022, according to the PBS. [ET]
• Punjab Enforces Nutrition Labeling: The Punjab Food Authority (PFA) has ordered fast food restaurants and hotels in the province to provide clear nutrition information on food packaging for consumers. By December 2023, the PFA will enforce revised limits of 2 grams of trans fatty acid per 100 grams in food items with the requirements to apply to all pre-packaged food, while hydrogenated fats will be banned to reduce health risks. [Dawn]
• Sugar Prices Skyrocket: The retail price of sugar has surged by Rs 50 per kg in the past seven months due to government inaction. The price has risen from Rs 100 to Rs 150 per kg, with reports of increased sugar smuggling to Afghanistan. To tackle the issue, the Punjab government has decided to crackdown on hoarders of flour and sugar, assigning monitoring responsibilities to the Special Branch to prevent smuggling and control prices. [ET]
• Shehbaz Sharif Sets Ambitious IT Goal: Prime Minister Shehbaz Sharif expressed dissatisfaction with Pakistan's current IT exports and urged for their enhancement to $25 billion annually. He also aimed for $20 billion IT investments within two to three years, with a streamlined one-window operation mechanism for investors. Speaking at an IT seminar, he emphasized the need to double IT exports and sought support and expertise to achieve this ambitious goal. The event was attended by Chief of Army Staff (COAS) Gen Syed Asim Munir. [Dawn]

AGRI-INPUTS, WEATHER, WATER & POWER

• Flash Floods Wreak Havoc in Gilgit-Baltistan: Two workers were injured after being struck by lightning in Gilgit-Baltistan on Thursday. Flash floods damaged over a dozen homes and a powerhouse, and key roads like the Karakoram Highway and the Jaglot-Skardu Road were temporarily blocked. Intermittent rain caused electricity disruptions in many areas. The Pakistan Meteorological Department issued an alert for potential glacial lake outburst floods in GB on Friday. [Dawn]
• Devastating Flood Hits Upper Chitral: In Upper Chitral, Khyber-Pakhtunkhwa, a devastating flood caused by the swollen Yarkhon River due to melting glaciers and snow has destroyed at least 18 houses and crops across hundreds of acres. Hundreds of residents have evacuated, seeking emergency assistance for shelter and food. Urgent aid and support are being sought from the district administration and provincial government to help those affected. [ET] [APP]
• PPDA Strike Over Margins: The Pakistan Petroleum Dealers Association (PPDA) has announced a strike starting from Saturday, July 22nd, in protest of inadequate margins for dealers. The association claims that financial losses are being incurred due to rising business costs and sales of smuggled petrol and diesel from Iran, and they demand concrete action from the government to resolve the issue, asserting that the current margin of Rs 6 per liter is insufficient compared to the agreed-upon five percent margin set in 1999, resulting in difficulties running their fuel stations. [ET] [The News]
• Pakistan-Iran Fertilizer Investment Talks: Pakistan plans to send an official delegation to Iran for negotiations on joint investment in fertilizer production. An understanding was reached during a visit by an Iranian delegation, discussing potential investment projects under a trilateral arrangement involving Pakistan, China, and Iran. The Iranian Embassy also requested a list of Chinese companies in Pakistan's power sector interested in tripartite cooperation, with further discussions planned in China for cooperation opportunities in the power sector. [BR]
• Sindh Agriculture Condemns Fertilizer Black Market: The Sindh Chamber of Agriculture (SCA) senior vice president has condemned the black market in urea fertilizer in Pakistan, especially in Sindh. The SCA is concerned about the skyrocketing prices of urea fertilizers, leading to a bag being sold at Rs 4,000 instead of the official Rs 3,100. [Dawn]
• FBR Boosts Trade with Green Channel Expansion: The Federal Board of Revenue (FBR) has taken a significant trade facilitation step by increasing the clearance of imports and exports through the "green channel" facility from 35% to 66%. [BR]
• OGRA Warns Against Media Defamation: OGRA warns OCAC and OMCs against using media to defame organizations. Regulator firmly rejects one-sided statements on fuel price reduction, emphasizing adherence to government-approved pricing formulas. OGRA encourages stakeholders to submit grievances in writing and upholds an open-door policy for addressing concerns. [BR]
• K-Electric's License Renewed: NEPRA provisionally renews K-Electric's distribution license for six months, effective from the date of expiry or until a final determination is made. The application for renewal was submitted on December 1, 2022, and K-Electric requested a non-exclusive license, along with an integration plan with the Competitive Trading Bilateral Contract Market (CTBCM) model. [The News]
• Nepra Allows Fuel Cost Adjustment: NEPRA permits state-run power distribution companies to charge consumers an additional Rs 1.9039/unit in July bills for fuel cost adjustments in May 2023. The Central Power Purchasing Agency filed a petition seeking to pass on the Rs 2.0536 per unit increase in actual fuel cost compared to reference charges. Low power plant utilization and forced outages were noted, impacting consumers and the national exchequer. Most efficient RLNG power plants in May 2023 were Quaid-e-Azam Thermal Power Plant and two power plants managed by National Power Parks Management Company Limited. [ET] [PT] [INCPak] [The News] [ProPakistani]
• Wapda Union Opposes Sindh Government's Takeover: The All Pakistan Wapda Hydro Electric Central Labour Union is opposing the Sindh government's plan to take over Hyderabad Electric Supply Company (HESCO) and Sukkur Electric Power Company (SEPCO). The union fears that the provincial government will privatize these utilities under a public-private partnership once they are under its control. [Dawn]

AGRI UPDATES & PAKISTAN POLICY

• Challenges & IMF Re-Profiling: Pakistan's debt sustainability is facing serious threats, with high risks due to elevated debt levels, significant financing needs, and low reserves, leading to the need for debt reprofiling before seeking a fresh loan program from the IMF after March 2024. The country's non-Paris Club external debt obligations, particularly to China and Saudi Arabia, have reached $31 billion. The financial pressures are formidable, with large debt service payments and reduced external market financing, causing weak confidence and credit rating downgrades. The IMF has also emphasized the importance of timely structural reforms, including addressing undercapitalized banks, to ensure stability in the country's financial sector. [Dawn] [The News]
• Pakistan's Forex Reserves Surge: Pakistan's total liquid foreign exchange reserves surged to $14 billion by the end of last week, with $4 billion inflows from the IMF and other friendly countries. The State Bank of Pakistan's reserves increased to $8.727 billion, up from $4.52 billion a week earlier, thanks to inflows of $2 billion from Saudi Arabia, $1.2 billion from the IMF, and $1.0 billion from the UAE. This influx has helped avert default risk and ease pressure on the external account, bolstering the country's sliding foreign exchange reserves. Commercial banks' net forex reserves also rose to $5.338 billion, up $23 million during the week. [BR]
• China Reschedules Pakistan's Debt: China has agreed to reschedule over $2 billion of Pakistan's publicly guaranteed debt for a period of two years, providing significant relief to the government amid efforts to rebuild foreign exchange reserves. The Economic Coordination Committee (ECC) of the Cabinet approved the revised agreement between Pakistan and China, with the finance minister chairing the meeting. The debt is related to the financing of nuclear power plants in Karachi, and China's decision to pause repayments for two years will ease financial pressure on Pakistan. [ET]
• Pakistan's Foreign Loans Shortfall: Pakistan received approximately $12 billion less in foreign loans during the last fiscal year than the budgeted estimates due to the stalled IMF bailout package. The country received around $10.8 billion in foreign loans during FY 2022-23, which was 53% less than the budgeted amount of $22.6 billion. Major international creditors stayed away due to the government's failure to revive the $6.5 billion Extended Fund Facility (EFF) with the IMF in a timely manner. The IMF's staff level report also highlights the high risk of sovereign stress in Pakistan due to elevated debt levels and low reserve buffers. [ET]
• Ukraine Seeks Pakistan's Support in Territorial Integrity Fight: During a two-day official visit to Islamabad, Ukrainian Foreign Minister Dmytro Kuleba sought Pakistan's support in its fight for sovereignty and territorial integrity against Russia. Both sides denied any arms deal between Ukraine and Pakistan. Pakistan has pledged to work towards restoring the Black Sea grain deal, considering it vital for the world, after Russia's decision to withdraw from it. [BR] [ET] [Dawn]
• ECC Grants Funds for Elections & SIFC: The Economic Coordination Committee of the Cabinet (ECC) has approved Rs 42.5 billion as a technical supplementary grant (TSG) for the Election Commission of Pakistan (ECP) to conduct the general elections in the country. Additionally, the ECC has also approved Rs 200 million for the Special Investment Facilitation Council (SIFC) for the current fiscal year. The ECC agreed to release Rs 10 billion as the initial installment, with further releases as needed for the electoral process. [Dawn] [The News]
• Govt to Prosecute Ex-PM Imran Khan Under Official Secrets Act: The government plans to prosecute former Prime Minister Imran Khan under two sections of the Official Secrets Act based on an alleged confession by his former principal secretary, Azam Khan. The charges relate to Khan's purported retention of a confidential cipher in an alleged attempt to prevent his removal from power. Four members of the federal cabinet criticized Khan during separate press conferences, and the Federal Investigation Agency (FIA) is scheduled to summon him on July 25 to investigate the matter under sections 3 and 5 (a), (b) of the Official Secrets Act. [Dawn]
• Pakistan General Elections Confirmed, No Delay Expected: The Election Commission of Pakistan (ECP) confirmed that there will be no delay in the general elections, which will take place before October 11, if the national and provincial assemblies are not dissolved before August 12. The ECP is fully prepared to hold the elections within a 60 or 90-day timeframe. Watermark papers for ballot papers and other essential election materials have been procured, and preparations, including the coordination with printing presses, have been completed. The elections will be conducted based on the previous census and delimitation, ruling out the possibility of fresh delimitation of constituencies before the electoral exercise. [Dawn]
• Terrorist Attacks in Bara & Peshawar: 5 policemen were martyred and 12 people, including nine personnel and three civilians, were injured in two terrorist attacks in Bara and near Peshawar. Two suicide bombers were intercepted by police at a compound entrance, leading to a gun battle where one attacker was killed, and the other blew himself up, causing part of the building to collapse. [Dawn]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• India's Non-Basmati Rice Ban: India has imposed an immediate ban on the export of non-basmati white rice due to concerns about a potential production shortfall caused by the late arrival of the seasonal monsoon rains. While heavy rains since the last week of June have erased the rain deficit, they have also resulted in significant crop damage. The export ban aims to ensure sufficient availability of non-basmati white rice in the domestic market and prevent a rise in prices. [BR] [Bloomberg]
• Greenland's Ice Sheet Vanished 416,000 Years Ago: Greenland's mile-thick ice sheet vanished around 416,000 years ago during a natural warming period, causing significant global sea-level rise. This challenges the long-held view of Greenland as an impregnable fortress of ice over the past 2.5 million years and highlights its vulnerability to human-induced climate change. The study used an ice core from Northwest Greenland, revealing evidence of an ice-free landscape, possibly covered by an ancient forest where wooly mammoths roamed. Luminescence dating provided insights into Greenland's past climate by determining the age of buried sediment. [Dawn]
• Pakistan's Defence Minister's Successful Kabul Visit: A high-level delegation led by Pakistan's defence minister, Khawaja Asif, visited Kabul and secured a "fresh commitment" from the Afghan Taliban to address the renewed threat posed by the banned Tehreek-e-Taliban Pakistan (TTP). The delegation included DG ISI, Foreign Secretary, and Special envoy on Afghanistan. The visit was previously unannounced, and officials familiar with the development stated that the outcome was positive, with the Afghan side showing receptiveness. [ET]
• Oil Prices Rise, Malaysian Palm Oil Hits Four-Month Peak: Oil prices slightly increased on Thursday due to lower US crude inventories and strong crude imports by China. However, concerns over weaker demand outlook kept investors cautious. September Brent futures rose by 38 cents, reaching $79.84 a barrel, while August US West Texas Intermediate (WTI) crude gained 65 cents, reaching $76 a barrel. In addition to oil, Malaysian palm oil futures also surged to a four-month peak amid concerns over edible oil supplies from the region following Russia's withdrawal from the Black Sea grain deal. The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange closed up 152 ringgit, or 3.9%, reaching 4,047 ringgit ($891.41) per metric ton, the highest level since March 15. [BR] [BR]

PAKISTAN - REMAINDERS

• Nawab of Junagadh, who championed accession, passes away at 67. [Dawn]

Opinion: Contending with increasingly dangerous heat - “Based on average temperatures thus far, 2023 could be the hottest year since reliable temperature records have been maintained. Such high temperatures are extremely dangerous for human health, and have varied associated adverse impacts as well.” - By Syed Mohammad Ali [ET]