Wheat Import, Inflation, Severe Weather, LPG Prices & Russian Crude Oil, IMF Funds, IK & Punjab Elections, Turkey Elections, Iran-Afghanistan Clash

TOPLINE

●     PFMA urgently seeks permission to import one million tonnes of wheat to prevent flour crisis caused by hoarding during provincial procurement, while wheat flour prices in Hazara Division dropped to Rs 2650 for a 20 kg bag, decreasing continuously for two weeks. Moreover, Multan Division achieved 80% of the revised wheat procurement target.

●     Prices of kitchen essentials decreased, while cooked food items and non-perishable items showed no changes in the twin cities. High inflation persisted at 45.49%.

●     Severe windstorm, hail and rain, caused significant damage to crops in south Punjab, while the arrival of a new western weather system in Balochistan is bringing heavy rain, thunder, gales, and hailstorms to interior Sindh.

●     LPG Industries Association requested 3rd party access to the SSGC LPG facility to construct LPG storages, aiming to increase Pak LPG reserve stock from 2 days to 30 days. Pakistan made its first discounted purchase of Russian crude oil. Moreover, total petroleum imports decreased by 17.96% in the first 10 months of the current fiscal year.

●     Finance Minister Ishaq Dar stated that the country will share detailed budget information with the IMF to unlock the delayed funds.

●     Marriyum Aurangzeb rejected negotiations with Imran Khan due to alleged attacks on the state, while Imran Khan made organizational changes in PTI, appointing Shah Mahmood Qureshi as potential successor and Omar Ayub Khan as new secretary general. Moreover, ECP released registration schedule for electoral groups/panels in Punjab for local govt elections. Resignations from the PTI continued over the weekend.

●     Turkish President Recep Tayyip Erdogan secured a victory in a runoff election, extending his rule until 2028.

●     Iraq initiated a $17 billion project to connect its major commodities port, Grand Faw Port, to the Turkish border through rail and road infrastructure, while 2 people were killed and several others were injured in a shootout between Taliban fighters and Iranian border guards near a border post between Iran and Afghanistan.

●     President Joe Biden finalized a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025, and said the deal was ready to move to Congress for a vote.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

●     Dry Fruits & Nuts Import: Rs 860 million was the import value of dry fruits and nuts in April 2023, up 10.2% from Rs 780 million in April 2022, according to the PBS. [ET]

●     Art, Silk & Synthetic Export: Rs 9.5 billion was the export value of art, silk and synthetic textile in April 2023, up 24% compared to Rs 7.7 billion in April 2022, according to the PBS. [ET]

●     Roti Prices Remain Unaffected: Residents are expressing frustration over the unchanging price of roti (bread) despite the supply of subsidized wheat to mills by the provincial government. Complaints have been raised against the district administration and food department for their failure to control the high roti prices, as nanbais (bakers) continue to sell roti at an inflated rate despite the reduction in the cost of flour. [Dawn]

●     Urgent Wheat Import Request: The Pakistan Flour Mills Association (PFMA) has urgently requested permission from the federal government to import one million tonnes of wheat to prevent an upcoming flour crisis caused by hoarding during the provincial procurement drive. The PFMA warns that failure to take prompt action could lead to an artificial scarcity of flour. The proposal for wheat import is currently under review by the Ministry of National Food Security and Research, and if approved, it would provide a cost advantage compared to locally grown wheat, potentially alleviating the rising prices of flour in the market. [ET]

●     Wheat Flour Prices Plummet in Hazara Division: The price of a 20 kg wheat flour bag in Hazara division has significantly decreased to Rs 2650, marking a continuous decline over the past two weeks. Previously, due to the ban on wheat flour supply from Punjab, prices had reached a record high of Rs 168 per kg, with some areas seeing prices exceeding Rs 3700 for a 20 kg bag. However, after the issuance of a wheat flour permit from Punjab to Khyber Pakhtunkhwa (KP), prices have significantly reduced in the Hazara division. [PO]

●     Successful Wheat Procurement Drive in Multan Division: The food department in the Multan division has achieved 80% of its revised wheat procurement target by purchasing over 543,474 metric tons of wheat. The wheat procurement drive has been conducted at 48 centers across the division. Strict monitoring is in place to prevent wheat smuggling and hoarding, resulting in the confiscation of over 11,565 metric tons of wheat and the registration of 24 FIRs related to hoarding and smuggling. [The Nation]

●     Cotton Weekly Review: The prices of cotton remained stable last week with low trading volume, while partial arrival of the new crop has begun with five ginning factories working partially. The rate of cotton in Sindh as per quality is in between Rs 17,000 to Rs 20,500 per maund. The rate of Phutti is in between Rs 6,500 to Rs 8,000 per 40 kg. The rate of cotton in Punjab is in between Rs 19,000 to Rs 21,000 per maund while the rate of Phutti is in between Rs 8,000 to Rs 9,500 per 40 kg. The Spot Rate Committee of the Karachi Cotton Association kept unchanged the rate of cotton at Rs 20,000 per maund. [BR] [BR] [Dawn] [BR]

●     Pakistani Rice Prices: A report from the Asian Development Bank highlights that the prices of Pakistani rice in domestic and international markets are almost the same, suggesting the need for an export tax on the commodity. The report also states that Pakistan, Thailand, and Vietnam, three of the world's major rice exporters, have similar price dynamics due to the absence of relevant policies, with price increases observed in certain rice varieties while wheat and maize prices experienced slight declines during the specified period. [Dawn]

●     High Inflation Persists: The Sensitive Price Index (SPI) data released on Friday showed that short-term inflation remained high at 45.49% for the week ending May 25, although it slightly eased from previous weeks. Factors such as the depreciation of the rupee, higher petrol prices, increased sales tax, and rising electricity bills contributed to the inflationary trend, with 18 items experiencing price increases, 16 seeing drops, and 17 remaining unchanged in the SPI basket. [Dawn]

●     Price Decrease in Essential Kitchen Items: A recent survey conducted by Business Recorder reveals a decrease in prices of essential kitchen items such as chicken, eggs, pulses, wheat flour, cooking oil/ghee, and vegetables. However, there have been no changes in the prices of cooked food items, sugar, spices, milk, detergents, and other non-perishable items, while discrepancies between official and market prices persist. [BR]

●     Revitalizing Fruit & Vegetable Sector: Businessmen in Pakistan are urging the government to allocate Rs 100 million for research and development (R&D) to develop new varieties of fruits and vegetables. The call comes in response to the decline in Kinnow exports, a popular fruit in Pakistan, due to an outdated variety that is prone to diseases and has a shorter shelf life. Enhancing R&D efforts and introducing new varieties is seen as vital for boosting exports and meeting domestic demand. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

●     Severe Weather Alert: The arrival of a new western weather system in Balochistan is bringing heavy rain, thunder, gales, and the possibility of hailstorms to rural districts in Sindh. However, the weather in Karachi is expected to remain hot and humid over the next few days. The Pakistan Meteorological Department has issued warnings about potential property and crop damage due to strong winds in upper Sindh, advising people to seek shelter in safe places. [ET]

●     IRSA Water Release: 176,600 cusecs of water was released from various rim stations on Sunday. [ET]

●     Avalanche Tragedy Strikes Northern Pakistan: At least 11 people were killed and more than 10 injured in a remote area of northern Pakistan when an avalanche struck a group of nomads near the Shounter Pass. Rescue efforts have been hampered by poor weather and limited accessibility, but local residents are taking the lead in the rescue operation in the difficult-to-reach area. [BR]

●     Crops Ravaged by Severe Storm in South Punjab: A severe windstorm, accompanied by hail and rain, caused significant damage to crops in several districts of south Punjab, resulting in injuries to two individuals. The hailstorm and rain affected cotton, vegetable, and fodder crops, with a large portion of the cotton crop in the district being partially damaged. No compensation will be provided to farmers as there is still time for the affected crops to be replanted. [Dawn] [The News]

●     Rising Waste Production: The increase in urbanization and human activity in Pakistan has led to a significant rise in garbage production, turning waste disposal into a lucrative industry. The Sindh Solid Waste Management Board (SSWMB) has requested an additional Rs 2 billion to manage the increasing quantity of waste, citing a doubling in the daily collection from 5 tonnes to 10 tonnes and the resulting higher costs for waste collection. This request comes after the SSWMB had already received an allocation of Rs 12 billion for the current financial year. [ET]

●     Provinces Divided Over Urea Subsidy Burden: Balochistan and Sindh provinces are hesitant to share the subsidy burden on imported urea for farmers. Although Punjab and Khyber-Pakhtunkhwa agreed to provide subsidies, they have not provided any funding yet, leading the federal government to approve additional grants to cover the subsidies due to the disruption of the initial plan. [ET]

●     Decline in Pakistan's Petroleum Imports: The import of petroleum products and the overall petroleum group in Pakistan decreased in the first 10 months of the current fiscal year, according to data from the Pakistan Bureau of Statistics. Imports of petroleum products declined by 28.07%, while the total imports in the petroleum group went down by 17.96% compared to the same period in the previous fiscal year. [ET]

●     Balochistan Flood Recovery: The World Bank has approved $213 million in financing to Pakistan to aid in improving livelihoods, essential services, and risk protection for communities affected by the 2022 floods, particularly in Balochistan. The funding will support the rehabilitation of irrigation and flood protection infrastructure, as well as provide livelihood support, enhancing resilience to future climate-related disasters and natural hazards. [Dawn]

●     Rice Seeds for Balochistan Flood Victims: The FAO, in partnership with the Balochistan government, Asian Development Bank, and JFPR, is distributing rice seeds, tools, and footwear to help flood-affected communities in Balochistan. The initiative aims to improve livelihoods, enhance food security, and specifically support women engaged in safe rice transplanting activities. [Dawn]Challenges of Cross-Border Dacoits in Sindh: The Sindh police are facing a challenge as dacoits from Punjab enter the province through the border area of Kashmore, adding to the ongoing operation against dacoits in rural areas. The police have established posts to prevent bandits from reaching the CPEC, and in Ghotki, significant progress has been made with the killing and arrest of numerous robbers, as well as the recovery of land occupied by dacoits. [ET]

●     Sindh's Carbon Credit Opportunity: The federal government has allowed Sindh to earn $200-220 million over the next two decades for its efforts to expand mangrove forests. This is in line with Pakistan's commitments to reduce greenhouse gas emissions under the Paris Agreement. The mangrove forests will help to absorb carbon dioxide from the atmosphere, which will help to mitigate climate change. The project is expected to create jobs and boost the local economy. [Dawn]

●     Expanding LPG Reserves: The LPG Industries Association of Pakistan has requested the federal government to permit third-party access to the SSGC LPG (Pvt) Limited facility at Port Qasim for commercial use in constructing LPG storages in the country. The association aims to increase Pakistan's LPG reserve stock from two days to 30 days, which would help maintain a continuous supply chain of LPG at affordable prices and bridge the demand and supply gap during market fluctuations and shortages of natural gas, petrol, and diesel. [BR]

●     Russian Crude Oil Purchase Strengthens Ties: Pakistan has made its first purchase of Russian crude oil at a discounted price, benefiting both countries as Russia seeks new outlets for its oil and Pakistan aims to address its balance of payments crisis. This move could potentially strengthen the relationship between Islamabad and Moscow amidst a changing global landscape and Pakistan's growing alignment with China and other regional players. [Dawn]

AGRI UPDATES & PAKISTAN POLICY

●     Pakistan to Share Budget Details with IMF: Pakistan's Finance Minister Ishaq Dar stated that the country will share detailed budget information with the IMF to unlock the delayed funds. The funds, part of a rescue package, have been pending since November, and Pakistan aims to receive them before presenting its upcoming budget. Additionally, US Ambassador Donald Blome met with Finance Minister Ishaq Dar to discuss mutual interests and strengthen bilateral relations, highlighting the strong economic ties between the two countries. [BR] [BR]

●     Rejecting NRO & Pursuing Justice: Minister for Information and Broadcasting Marriyum Aurangzeb dismissed the possibility of negotiations with Imran Khan, stating that talks cannot be held with individuals who have attacked the state and should instead face punishment. She criticized Imran Khan, accusing him of seeking an "NRO" (National Reconciliation Ordinance) and emphasized the need to bring to justice those who have committed acts of vandalism and attacked sensitive installations, including the General Headquarters, memorials, ambulances, hospitals, and schools. [BR]

●     Imran Khan Makes Key Appointments in PTI: Imran Khan, facing isolation and a wave of resignations from his party, Pakistan Tehreek-e-Insaf (PTI), has made organizational changes within the party. He named Shah Mahmood Qureshi as his potential successor, appointed Omar Ayub Khan as the new secretary general, and formed a Negotiation Committee for discussions with the government regarding the upcoming elections. This move follows the recent attacks on military installations and Imran Khan's arrest in a corruption case, which led to a significant exodus from the PTI. [ET]

●     Punjab Prepares for Local Government Elections: The Election Commissioner of Pakistan (ECP) has issued a schedule for the registration of electoral groups/panels in Punjab in preparation for the local government elections. Independent candidates are required to form electoral groups, as no independent candidates will be allowed to contest the elections. Registration forms can be obtained from authorized officials starting June 5, and the scrutiny of applications will take place on June 19, with the final decision on objections to be made by July 17. [Dawn]

●     Political Stability to Drive Economic Turnaround: The Ministry of Finance responded to criticism from economist Atif Mian, rejecting his observations on Pakistan's economic policy and ruling out the chances of default. The ministry predicted a major turnaround in the economy with the emergence of political stability, citing recent political developments and dismissing Mian's remarks as misplaced criticism. [Dawn]

●     Curbing Illegal Remittances: Foreign remittance service providers are optimistic that Pakistan's remittances could exceed $50 billion annually if illegal channels, which constitute around 80% of the total market, are curbed. These providers highlight that the prevalence of black market remittances, known as Hundi and Hawala, is a global issue, and efforts to close the gap between open market and inter-bank rates can help reduce reliance on illegal networks. Currently, remittances to Pakistan are estimated to be around $26 billion to $27 billion in the current fiscal year. [ET]

●     Electronic-Assessment Scheme: The government plans to introduce an electronic-assessment scheme in the upcoming budget to conduct income tax assessments using automated desk-audits based on risk-based parameters. The scheme, recommended by the Reforms & Revenue Mobilization Commission (RRMC), aims to create a faceless, jurisdiction-less, nameless, and paperless assessment process, following the example of countries like Singapore, the United Kingdom, India, and others that have already implemented similar systems. This move builds upon the existing requirement of online filing for income tax returns and aims to further streamline the assessment process. [BR]

●     Direct Foreign Investment in Pakistan: Maritime Affairs Minister Faisal Sabzwari announced that a $500 million investment agreement with Gulf countries is in the final stages. The intergovernmental agreement policy will be submitted to the law ministry for approval, potentially enabling direct foreign investment aligned with the conditions set by the IMF. The collaboration between Pakistan and the UAE, under a government-to-government agreement, is focusing on three projects, including bulk terminals, while plans are underway to establish industrial parks in Port Qasim to attract foreign investors. [Dawn]

●     Boosting Healthcare: The Khyber-Pakhtunkhwa (K-P) government has provided an additional Rs 2 billion for the Sehat Plus Card program, ensuring continuous healthcare coverage. Financial difficulties have made it challenging for the government to pay the remaining Rs 10 billion owed to the insurance company by the fiscal year's end. Furthermore, an inquiry by the K-P health department has recommended a final warning to a private firm operating Tehsil Headquarters Hospital Mir Ali, with the potential termination of the agreement if it is not adhered to properly. [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

●     US Debt Ceiling: President Joe Biden and his Republican opponents have announced they have agreed in principle to raise the US debt ceiling and avert a default. President Joe Biden finalized a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025, and said the deal was ready to move to Congress for a vote. [BBC]

●     Erdogan Secures Narrow Victory in Runoff Election: Turkish President Recep Tayyip Erdogan secured a narrow victory in a runoff election, extending his rule until 2028 despite facing economic challenges and strong opposition. Celebrations erupted on the streets and Erdogan expressed gratitude to his supporters, vowing to continue leading the country for the next five years and earning their trust. [Dawn] [ET] [Al Jazeera] [CNN]

●     Iraq Launches Development Road Project: Iraq has initiated a $17 billion project to connect its major commodities port, Grand Faw Port, to the Turkish border through rail and road infrastructure. The Development Road aims to boost Iraq's economy by transforming the country into a transit hub, shortening travel time between Asia and Europe and potentially including high-speed trains, industry links, and energy pipelines. [BR]

●     Iran-Afghanistan Border Clash: Two people were killed and several others were injured in a shootout between Taliban fighters and Iranian border guards near a border post between Iran and Afghanistan. The incident occurred amidst tensions between the two countries over water rights, with Iran accusing the Taliban of violating a water treaty and the Taliban denying the accusation, blaming the Iranian forces for initiating the shooting. [Dawn] [ET] [Reuters] [NYT] [Geo]

●     Vietnam's Rice Export Reduction: Vietnam plans to reduce its rice exports to 4 million tonnes per year by 2030, down from 7.1 million tonnes in 2022, as stated in a government document. The aim is to focus on exporting high-quality rice, ensure food security, protect the environment, and adapt to climate change. However, some industry insiders express concerns that the strategy may be overly ambitious considering the challenges posed by climate change and farmers transitioning to other crops. [BR] [CNBC] [BP]

●     Neuralink Receives FDA Nod for Human Trials: Elon Musk's company Neuralink has received approval from the US Food and Drug Administration (FDA) to conduct human trials for its brain implants. This milestone allows Neuralink to proceed with its goal of developing technology that enables direct communication between brains and computers, although recruitment for the clinical trial has not yet begun. [Dawn] [CBS] [EN] [CNBC]

●     Controversy Surrounds Parliament Inauguration: Opposition parties in India are boycotting the inauguration of the new parliament building in New Delhi, arguing that President Draupadi Murmu should have presided over the event instead of Prime Minister Narendra Modi. The boycott is supported by 19 opposition parties, who view the prime minister's involvement as a threat to democracy and a disrespect to the nation, while two ruling parties from Odisha and Andhra Pradesh have decided to attend the ceremony. [Dawn]

●     Currency Guarantees for Climate Finance: A meeting in Paris next month will propose a $100 billion plan to boost climate and development finance in poorer countries through currency guarantees to investors. The plan, spearheaded by Barbados leader Mia Mottley, aims to leverage the International Monetary Fund (IMF) and other multilateral development banks (MDBs) to provide foreign exchange guarantees for investments in domestic currencies, particularly for green transition projects such as environmentally friendly and ocean-focused initiatives. [ET]

●     Oil Prices: Oil prices ticked up on Friday as US officials appeared close to striking a debt ceiling deal, and as the market weighed conflicting messages on supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting. Brent crude was up 39 cents, or 0.5%, at $76.66 a barrel at 01:36 p.m. ET (1736 GMT). US West Texas Intermediate rose 56 cents, or 0.8%, to $72.38 a barrel. [BR]

●     Opinion: White House and G.O.P. Strike Debt Limit Deal to Avert Default - “President Biden and Speaker Kevin McCarthy have reached an agreement in principle to raise the debt limit for two years, while also implementing spending cuts and caps. The compromise aims to prevent a catastrophic default and break the fiscal stalemate, but its passage in Congress is not guaranteed due to opposition from both conservative Republicans and Democrats who oppose the proposed cuts.” - By Jim Tankersley, Catie Edmondson & Luke Broadwater [NYT]

PAKISTAN - REMAINDERS

●     US Ambassador Blome meets partners in the ‘Green Alliance’ framework in Jamshoro. [Dawn]

●     Opinion: Rethink the Ravi Riverfront Project - “The former government, of Imran Khan, had claimed to champion causes of the common man and the environment. Yet, like many of their predecessors, the PTI also fell prey to vested interests of influential developers and cash-starved provincial authorities by giving the go-ahead to the problematic but lucrative Ravi Riverfront Urban Development Project.” - By Syed Mohammed Ali [ET]

●     Opinion: Maintaining Wheat Supply - “Pakistan, the fifth most populous country in the world, is facing challenges in wheat production as its productivity has remained stagnant in recent years. This year, wheat production is expected to fall short of the target, with reduced cultivation area and the impact of floods affecting sowing. As a result, Pakistan has shifted from being a wheat exporter to a net importer, with imports projected to reach 2.6 million tonnes to meet domestic demand.” - By Irfan Afzal [Dawn]

●     Opinion: Is Textile a Rent-Seeking Industry? - “During a panel discussion on whether the textile industry is a rent-seeking industry, speakers, including textile mill owners, emphasized the challenges faced by the sector and rejected the notion that it solely relies on rent-seeking practices. They discussed how the industry has been unfairly targeted and criticized for seeking incentives such as subsidized energy and financing, arguing that the benefits it generates in terms of foreign earnings and job creation outweigh the accusations.” - By Kazim Alam [Dawn]

●     Opinion: Profit Over Planet - “Climate change, with its devastating consequences, is a global issue that demands attention. While capitalism and the profit-driven nature of multinational corporations contribute significantly to greenhouse gas emissions and environmental degradation, the impacts of climate change extend beyond the environment to include economic and social hardships, especially for marginalized communities in developing countries. Addressing the systemic issues of capitalism and prioritizing sustainable practices are crucial steps in mitigating the effects of climate change and promoting a more equitable and resilient future.” - By Abdul Rehman Nawaz & Ali Asad Sabir [ET]