Wheat Imports & Price, Ramadan Subsidy Discontinued & Inflation, January Exports, Pak-Iran Pipeline, PDM 2.0 in Govt, Pak Financing Crisis.

TOPLINE

• Private sector wheat imports of 1.98 million tonnes from September 2023-January 2024, costing $573 million, stabilized flour prices below Rs 200/kg in Pakistan.
• The Punjab government won't subsidize flour during Ramadan. Food hampers will be given to 6.5 million families identified by BISP. As Ramadan nears, Rawalpindi sees a 30% surge in food prices for Iftar already.
• Exports of non-textile value-added products grew by 4.93% in January, reaching $553 million, excluding food products. Rs 3.23 billion was the export value of tobacco in Jan 2024, up 34.6% as Rs 656 million was the export value of raw cotton in Jan 2024, up 171%.
• The Cabinet Committee on Energy (CCoE) has initiated the first phase of the Iran-Pakistan gas pipeline within Pakistan, using $158 million from Gas Infrastructure Development Cess (GIDC) funds, with an additional Rs 2.5 billion allocated for FY 2023-24 to avoid a potential $18 billion contractual liability.
• As general elections conclude, efforts to form governments intensify, with the ECP scheduling the presidential election on March 9, before Ramadan President Alvi delays convening the 16th National Assembly until all women's reserved seats are allocated. Sindh & Punjab Provincial Assemblies took oaths over the weekend.
• The upcoming government must secure $11.3 billion in 5 months due to a failure to boost foreign reserves. Despite reducing imports, the current account deficit remains. Pakistan received $6.3 billion in foreign loans but lacked the Saudi Oil Facility.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Wheat Imports Stabilize Pakistan's Flour Prices: Private sector wheat imports of 1.98 million tonnes from September 2023-January 2024, costing $573 million, stabilized flour prices below Rs 200/kg in Pakistan. Lower average import prices and a strengthened rupee contributed to this relief, aiming to address wheat shortages and stabilize the market amidst national average prices ranging from Rs 2,600-3,200 for 20kg wheat flour bags. [Dawn]
• Punjab Ends Ramadan Flour Subsidies: The Punjab government won't subsidize flour during Ramadan. Food hampers will be given to 6.5 million families identified by BISP, including flour, ghee, sugar, rice, and baisen. Districts will verify families with incomes below Rs 27,000/month. [Dawn]
• Pakistan's Weekly Inflation Rises 0.04% on Food, Energy Costs: Weekly inflation in Pakistan increased by 0.04%, driven by higher food and energy prices. Despite a 13-week low compared to last year, inflation remains high at 30.68%. Significant price hikes were seen in tomatoes, bananas, high-speed diesel, and chicken. Rawalpindi experiences a 30% surge in food prices for Ramadan, with items like dates, gram flour, and meat seeing notable increases. [ET] [ET]
• Weekly Cotton Review: Cotton prices remained stable last week, but the textile sector faces challenges from rising energy costs and delayed payments for cotton yarn. Discussions are ongoing to increase cotton cultivation, but uncertainty over Phutti's intervention price may impact sowing. Cotton prices in Punjab and Sindh range from Rs 20,000-23,000/maund, with Phutti prices in Punjab at Rs 8,500-10,500/40 kg. [BR]
• Non-Textile Exports Surge: Exports of non-textile value-added products grew by 4.93% in January, reaching $553 million, excluding food products. However, overall non-textile exports saw only a 0.8% increase to $3.78 billion in the first seven months of the year compared to the same period last year. [Dawn]
• Businessmen Call for APTTA Amendments: Businessmen, led by PAJCCI Coordinator Zia-ul-Haq Sarhadi, are urging amendments to the Afghanistan-Pakistan Transit Trade Agreement (APTTA) 2010 through stakeholder consultation. They also seek the revival of Goods in Transit to Afghanistan (GITA) service via loose cargo trains between Peshawar and Karachi, and Karachi and Chaman, proposing the repeal of SRO 121 for this purpose. [BR]
• Spices Import: Rs 5.53 billion was the import value of spices in Jan 2024, up 62% from Rs 3.42 billion in Jan 2023. [ET]
• Textile Machinery Import: Rs 3.1 billion was the import value of textile machinery in Jan 2024, down 22% from Rs 3.9 billion in Jan 2023. [ET]
• Tobacco Export: Rs 3.23 billion was the export value of tobacco in Jan 2024, up 34.6% compared to Rs 2.4 billion in Jan 2023, according to the Pakistan Bureau of Statistics. [ET]
• Raw Cotton Export: Rs 656 million was the export value of raw cotton in Jan 2024, up 171% compared to Rs 242 million in Jan 2023, according to the Pakistan Bureau of Statistics. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

• Provincial PSDP Surges 19%: Provincial government development spending (PSDP) rose by over 19% in the first six months of the current fiscal year (July-December 2023-24) compared to the same period last year. Official data reveals that provincial PSDP spending reached Rs 542.808 billion during July-December 2023-24, marking a 19.44% increase from Rs 454.436 billion for the corresponding period the previous year. [BR]
• NEPRA Directs Meter Replacement & Billing Rectification: NEPRA orders DISCOs and K-Electric to replace defective meters, rectify billing errors, and charge based on actual data. This follows an inquiry into excessive billing. Nepra also investigated Discos' Rs 7.13/unit FCA request, questioning the need for such a hike due to grid inefficiencies causing power outages. [BR] [Dawn]
• Iran-Pakistan Gas Pipeline Phase 1 Begins: The Cabinet Committee on Energy (CCoE) has initiated the first phase of the Iran-Pakistan gas pipeline within Pakistan, using $158 million from Gas Infrastructure Development Cess (GIDC) funds, with an additional Rs 2.5 billion allocated for FY 2023-24 to avoid a potential $18 billion contractual liability. [BR]
• FBR Amends Regulations for PLL Tax Adjustment: The Federal Board of Revenue (FBR) has amended regulations to allow Pakistan LNG Limited (PLL) full input tax adjustment without the 10% minimum output payment requirement, granting them 100% input tax adjustment under SRO 242(I)/2024. [BR]
• Government Amends Refinery Policy to Boost Investment: The government has amended the Refinery Policy 2023, offering a 10% tariff protection for seven years to existing oil refineries for upgrading to Euro 5 fuel specifications. This aims to attract up to $6 billion in investment for refinery expansion. Tariff collections will be held in escrow, with refineries allowed to withdraw up to 27.5% for upgrades. This expansion will double diesel production, reducing import dependence. [ET] [BR]
• Cnergyico Plans $1B Refinery Upgrade Amid Dispute: Cnergyico Ltd. aims to invest $1 billion to upgrade its refinery amidst a dispute over unpaid Rs 47.5 billion in petroleum levy. Despite facing challenges, including pending receivable claims of approximately Rs 60 billion, the company ensures regular payment of current levies for 2023-2024. [The News]
• CPEC Power Project Dues Reach Record High: Outstanding dues of CPEC power projects hit a record Rs 493 billion ($1.8 billion) last month, surging three-fourths in seven months. This may strain Pakistan's economic relations with Beijing, especially during the caretaker government's tenure. [ET]
• Jamshoro Power Plant Conversion Delayed: The $545 million Jamshoro Power Plant in Sindh, funded by the Asian Development Bank (ADB), faces hurdles in switching from imported coal to local coal, delaying its commercial operations. K-Electric (KE) proposes converting it to Thar coal to reduce costs and foreign exchange dependence. [The News]
• Lahore Water Conservation Challenges: Rawalpindi WASA targets defaulters - Efforts to curb water wastage in Lahore face challenges as half of identified consumers remain untraceable despite directives. Rawalpindi WASA initiates action against 16,000 consumers for outstanding dues after court denies relief on tariff hikes. FIRs to be filed, water connections to be disconnected. New MD Saleem Ashraf aims to boost revenue with a zero-tolerance policy. [ET] [ET]
• Pakistan Railways Upgrades with Coach & Wagon Purchase: Pakistan Railways aims to purchase 230 passenger coaches and 820 High Capacity Wagons to boost train speed and punctuality. The initiative includes manufacturing 184 coaches locally for speeds up to 160 km/h. Efforts are underway to rehabilitate tracks and enhance locomotive speed for timely passenger transport. Infrastructure upgrades along the Karachi to Peshawar route, including track doubling, are also in progress. [ET] [The Nation] [HUM]

AGRI UPDATES & PAKISTAN POLICY

• Election Fallout: Government Formation in Focus - As general elections conclude, efforts to form governments intensify, with the ECP scheduling the presidential election on March 9, before Ramadan President Alvi delays convening the 16th National Assembly until all women's reserved seats are allocated, awaiting approval. The ECP allocated women's seats, but the Sunni Ittehad Council's allocation is pending. [The News] [The News] [ET]
• Sindh, Punjab Assembly Speaker Election: PPP Chairman Bilawal Bhutto Zardari nominated Syed Murad Ali Shah for Chief Minister of Sindh. Ovais Shah and Naveed Anthony were nominated for Speaker and Deputy Speaker of the Sindh Assembly, respectively. In a secret ballot, Owais Qadir Shah was elected as speaker and Anthony Naveed as deputy speaker, both securing 111 votes each. PML-N's Malik Muhammad Ahmed Khan secured victory in the Punjab Assembly Speaker election with 224 out of 327 votes. Malik Zaheer Ahmed Channer, also from PML-N, won the deputy speaker position with 220 votes. However, missing votes raised concerns about the results' validity. [BR] [Dawn] [ET] [ET] [ET] [PT]
• Pakistan's Urgent Need for $11.3 Billion in 5 Months: The upcoming government must secure $11.3 billion in 5 months due to a failure to boost foreign reserves. Despite reducing imports, the current account deficit remains. Pakistan received $6.3 billion in foreign loans but lacked the Saudi Oil Facility. Exhausting the last $595 million SOF tranche in 6 months prompted a new request for $1 billion over 10 months. [The News]
• SBP Allows Exporters' Currency Usage: The State Bank of Pakistan (SBP) has permitted exporters to use funds from their special foreign currency accounts for international payments without prior approval. Exporters can retain a portion of their export proceeds in Exporters’ Special Foreign Currency Accounts (ESFCAs) and utilize these funds freely for various business-related payments abroad. [ET] [PT] [The News]
• Pakistan Secures IMF Loan Tranche for Energy Reforms: Pakistan has met IMF benchmarks in the energy sector to secure a $1.2 billion loan tranche, addressing issues like containing circular debt below Rs 385 billion and reducing line losses. Despite increased electricity prices, concerns persist, with further review expected during the second review of the $3 billion bailout package. [ET]
• SECP Extends Deadline for NPO Asset Transfers: The SECP has granted non-profit organizations (NPOs) a 90-day period to notify the FBR about asset transfers to other NPOs post-dissolution, as per a recent SRO. This amendment requires companies to transfer assets to approved non-profit organizations under Section 42 of the Companies Act and inform the FBR within the stipulated time frame. [BR]
• Futures Spread Drops, Trading Volume Surges: The futures spread fell to 7.90 percent, down by 1974 bps, at the end of the week. Trading volume surged by 180.7 percent to 283.30 million shares per day, while the average daily traded value rose by 104.0 percent to Rs 9.93 billion compared to the previous week. [BR]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Israeli Genocide: Israeli Prime Minister indicated a potential ceasefire with Hamas would only delay a ground invasion of Gaza's southern city Rafah. US-mediated talks aim for a ceasefire and hostage release. Dire food shortages in northern Gaza prompt Palestinians to flee. Efforts for a truce before Ramadan continue in talks involving Egypt, Qatar, the US, Israel, and Hamas. [BR] [ET] [ET]
• Russia-Ukraine War: Ukrainian President Volodymyr Zelenskyy announced that 31,000 Ukrainian soldiers have been killed in action during the two years since Russia's full-scale invasion began, marking the first time Kyiv has confirmed its losses. Speaking in Ukraine. Year 2024" forum in Kyiv, Zelenskyy emphasized the significant sacrifice each loss represents for Ukraine. [ET] [ET] [Al Jazeera]
• C4 Nations Seek WTO Action on Cotton Subsidies: African cotton-producing nations, represented by the C4 countries, seek WTO intervention to address trade distortions caused by subsidies from industrial countries like the US, India, and China. They argue that these subsidies negatively impact domestic cotton prices, affecting millions of cotton producers in Africa. [BR]
• Indian Farmer Protests: In India's Punjab state, farmers demanding higher crop prices have enlisted young students like 18-year-old Simranjeet Singh Mathada to sustain their protest momentum. Mathada and thousands of college students wake up at 3 am to prepare meals, distribute water, and load supplies for the protest site, located about 200 km from New Delhi. [ET]
• Macron Faces Protests, Clashes at Agricultural Fair: French President Macron faced protests and clashes during his visit to an agricultural fair. Angry farmers heckled him and scuffled with police. Despite the chaos, Macron toured the fair, sampled local produce, and met exhibitors. Protestors breached gates, leading to clashes and intermittent closures of the fair. Six people were arrested, and eight officers were injured. [ET] [France24]
• Alliance Urges Action Against Chinese Auto Imports: A U.S. manufacturing advocacy group, the Alliance for American Manufacturing, has urged the U.S. government to prevent the import of low-cost Chinese autos and parts from Mexico. They argue that these imports, supported by Chinese government backing, could severely impact the viability of American car companies and potentially lead to a crisis in the U.S. auto sector. [ET] [Reuters]

PAKISTAN - REMAINDERS

• Mobile Handset Production Soars: In January 2024, local plants made 2.27 million mobile handsets, including 0.72 million 2G and 1.55 million smartphones, far exceeding the 0.24 million imports. PTA data shows 60% of mobile devices on the Pakistan network are smartphones, while 40% are 2G. [BR]
• Import Rule Revision Impacts Auto Sales: The government revised import rules to classify cars with up to 2,000 kilometers as new, aiming to avoid Customs issues. Despite an 81% rise in vehicle sales in January 2024, auto financing fell for the 19th straight month to Rs246 billion, with high-interest rates and utility bills hampering purchasing power, leading to a 48% drop in car sales to 49,990 units in the first 7 months of FY24. [BR] [Dawn]
• Sazgar Engineering, Great Wall Motors Launch ORA 3 EV: Sazgar Engineering collaborates with Great Wall Motors to introduce the electric vehicle ORA 3 in Pakistan, aiming to offer sustainable transportation solutions in response to rising gasoline prices. Priced at Rs 8.99 million, the ORA 3 targets consumers seeking eco-friendly options in the market. [ET]
• Real Estate Adopts Global Trends, Raises Ecological Concerns: Due to the real estate sector's growth, housing companies are adopting global construction trends to attract wealthy clients. Many are importing plants and seeds for landscaping, but this strategy risks harming local flora and fauna. [ET]
• Gulf, OTO Ink Lubricants Distribution Pact for Pakistan: OTO and Gulf signed a deal to distribute lubricants and fluids in Pakistan, meeting the growing demand in the market. The agreement reflects Gulf's confidence in Pakistan's long-term growth, highlighting the country's appeal to international petrochemical companies for trade and investment. [The News]