Agri Taxes, Sugar Export & Data Manipulation, SCO & Chinese PM Visit, Fuel Prices, IMF & Pak Govt, Global Oil Prices Gain.

TOPLINE

• The government could collect up to Rs 300 billion in agricultural income tax if provinces align with the federal tax schedule. The FBR has urged provinces to amend their AIT regimes to match federal standards and begin taxing agricultural income by January 1, 2025.
• The ECC approved the export of an additional 500,000 tonnes of sugar, contingent on starting sugarcane crushing by November 21. However, the two official summaries showed that the government manipulated figures. It suggested that the monthly consumption was understated by 114,000 tons, or 20.2%, to show a surplus of 1.024 million tons.
• Chinese Premier Li Qiang may inaugurate the $200-million Chinese-funded Gwadar International Airport during his visit to Pakistan from October 14-17. Islamabad will host a two-day SCO meeting this week. Authorities are preparing to shut down the capital due to political unrest from the PTI and their call for a protest.
• Fuel prices may rise significantly, with high-speed diesel increasing by up to Rs 10.25/liter effective October 16, 2024. If approved, petrol could rise from Rs 247.03 to Rs 250.98, HSD from Rs 246.29 to Rs 256.54, kerosene oil from Rs 154.90 to Rs 162.75, and light diesel oil from Rs 140.90 to Rs 149.23/liter.
• The IMF has labeled Pakistan's external debt repayment capacity as fragile, estimating needs at $62.6 billion over 3 years and $110.5 billion over 5 years. The government has pledged to the IMF to raise the policy rate if financial stability is threatened and plans to cut the PSDP, adjust gas and electricity tariffs, and expand the tax base.
• Oil prices closed lower on Friday but recorded gains for the second consecutive week amid concerns over supply disruptions in the Middle East as Hamas struck Haifa and Israel continued its bombing of Lebanon and encirclement of Northern Gaza. Hurricane Milton's impact on fuel demand in Florida is under view as Biden surveyed damage.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Daily Rates: Find the following rates on the hyperlinked titles: [Shipping Intelligence], [Pakistan Stock Exchange], [Kibor International Kibor Rates], [BRIndex100 & BR Sectoral Indices], [Activities of Karachi Port Trust, Port Qasim]
• Push to Revive Cotton Crop: Federal Minister of Trade Jam Kamal Khan emphasized the need to restore the cotton crop, as officials from the Pakistan Cotton Ginners Association discuss revival strategies and seek tax reductions on ginning factories. Cotton prices have improved, but production has dropped by 50% compared to last year due to various challenges, according to Sajid Mahmood from the Central Cotton Research Institute. [BR]
• ECC Approves Sugar Export: The ECC approved the export of an additional 500,000 tonnes of sugar, contingent on starting sugarcane crushing by November 21. The decision was based on the Ministry of Industries' assurance of sufficient surplus stocks to meet domestic needs and maintain strategic reserves. The finance ministry stated that after taking into account previous exports, the remaining stocks would be 1.014 million tons as on November 30, 2024. After earmarking one-month off-take of 450,000 tons as strategic reserves, a surplus of 564,000 tons would be available. However, the comparison of the two official summaries showed that the government manipulated the figures. It suggested that the monthly consumption was understated by 114,000 tons, or 20.2%, aimed at showing a surplus of 1.024 million tons. After excluding the impact of manipulation, the country will be left with only 336,000 tons of stocks after exports that are hardly sufficient for three weeks of consumption. This may create shortages in the market and could lead to price spikes.? [Dawn] [ET] [ET]
• Sugar Exports Surge 53.82%: Rs 7.96 billion was the export value of sugar in August 2024, up 53.82% compared to Rs 5.17 billion in August 2023, according to the Pakistan Bureau of Statistics. [ET]
• Spice Imports Rise 46.7%: Rs 5.39 billion was the import value of spices in August 2024, up 46.7% compared to Rs 3.67 billion in August 2023. [ET]
• Footballs Exports Decline 1.55%: Rs 5.83 billion was the export value of footballs in August 2024, down 1.55% compared to Rs 5.92 billion in August 2023. [ET]
• Agricultural Income Tax Reform: The government could collect up to Rs 300 billion in agricultural income tax if provinces align with the federal tax schedule. The FBR has urged provinces to amend their AIT regimes to match federal standards and begin taxing agricultural income by January 1, 2025. [BR]
• Exporters Tax Regime Shift: Exporters will now fall under the regular income tax regime as the Exporters Facilitation Scheme ends, with VAT credits claimed through a credit tax system. The IMF report also stated that provinces will align agricultural income tax laws with federal standards to begin taxation by January 2025. [BR] [Dawn]

ENERGY - WEATHER, WATER & POWER

• Sindh Alarms Over Irrigation Project: The Sindh government has raised concerns over the approval of a new Rs200 billion irrigation project in Punjab, fearing further strain on water sharing. The issue is set to escalate as Punjab plans to construct the 176 km-long Cholistan canal and 120 km-long Marot canal, intensifying Sindh's accusations of inadequate downstream water flow. [Dawn]
• Thar Lignite Conversion Plan Unfeasible: A new study has deemed Sindh's plan to convert Thar lignite into gas and liquid fuels unfeasible due to unreliable technology, high costs, and environmental concerns. Researchers from NUST concluded that the long-term costs of burning Thar coal would outweigh its benefits, warning that it would harm the ecosystem and impose significant burdens on future generations. [Dawn]
• Chinese Premier to Inaugurate Gwadar Airport: Chinese Premier Li Qiang may inaugurate the $200-million Chinese-funded Gwadar International Airport in Balochistan during his visit to Pakistan from October 14-17. The airport's opening was delayed for a security review following militant attacks in August. [BR]
• Ogra Lowers RLNG Prices: Ogra announced up to a 7.11% reduction in RLNG prices for October 2024, mainly due to a decrease in DES prices. For SNGPL, the new prices are $12.0714 per mmbtu (transmission) and $12.9393 (distribution), while for SSGCL, they are $10.9238 (transmission) and $12.4659 (distribution). [BR]
• Fuel Prices Set to Rise: Fuel prices may rise significantly, with high-speed diesel increasing by up to Rs 10.25/liter effective October 16, 2024. If approved, petrol could rise from Rs 247.03-Rs 250.98, HSD from Rs 246.29-Rs 256.54, kerosene oil from Rs 154.90-Rs 162.75, and light diesel oil from Rs 140.90-Rs 149.23/liter. [BR] [ET]
• IMF Demands Gas Tariff Adjustments: The federal government assured the IMF that gas tariff adjustments will be announced by February 15, 2025, and then within 40 days to limit fiscal liabilities. The IMF noted that underpricing and depletion of indigenous gas have increased reliance on costly RLNG, leading to circular debt of Rs 2,083 billion (2.0% of GDP) by January 2024. [BR]
• Government Updates IMF on Privatization: The federal government told the IMF that transactions for two DISCOs will be finalized by January 2025 and admitted to missing the privatization of PIA and FESCO. The government reported that the Cabinet approved moving forward with privatization plans for PIA, the Roosevelt Hotel, First Women’s Bank, HBFC, and several DISCOs and GENCOs. [BR]
• Payments Halted to IPPs: The government has stopped payments to 18 IPPs with a total capacity of 4,267 MW and will negotiate converting their contracts from take-or-pay to take-and-pay mode for two years. This change will remain until the Competitive Trading Bilateral Contract Market (CTBCM) is fully operational. [BR]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Pakistan's Economy Shows Improvement: Finance Minister Muhammad Aurangzeb stated that Pakistan's economy is improving, with foreign exchange reserves expected to reach $11 billion in the next two weeks. He emphasized that this would provide approximately two and a half months of import cover, moving towards macroeconomic stability and preventing delays in dividend remittances to Chinese companies. [BR]
• Pashtun Jirga Condemns Displacement: The Pashtun jirga organized by the PTM in Jamrud, with government support, concluded with delegates condemning the displacement caused by militancy and anti-terrorism efforts. A final declaration is expected after further discussions among stakeholders. [Dawn]
• SCO Meeting Amid Security Concerns: Islamabad will host a two-day SCO meeting next week with seven prime ministers, including those from China and Russia, and officials from several countries. Authorities are preparing to shut down the capital due to recent militant violence and political unrest, with key attendees like Indian Foreign Minister Subrahmanyam Jaishankar and Chinese Premier Li Qiang. [BR] [BR] [Dawn] [ET]
• Nawaz, Bilawal Discuss Constitutional Amendment: Nawaz Sharif and Bilawal Bhutto Zardari spoke on Sunday to discuss the political situation and the 26th Constitutional Amendment. They emphasized the importance of collaboration among parties to reach a consensus on the amendment package. [ET]
• IMF Warns on Pakistan's Debt Capacity: The IMF has labeled Pakistan's external debt repayment capacity as fragile, estimating financing needs at $62.6 billion over three years and $110.5 billion over five years. Projected needs include $18.813 billion for the current fiscal year and up to $23.714 billion by 2026-27, remaining high even after the EFF program concludes. [The News]
• Digital Payments Surge in Pakistan: Digital payments in Pakistan increased to 84% of total volume last fiscal year, up from 76% the previous year. The State Bank of Pakistan reported a 35% rise in the volume and value of retail payments in FY24, fueled by more users of digital channels like mobile banking and internet banking. [The News]
• Government's Commitments to IMF: The government has pledged to the IMF to raise the policy rate if financial stability is threatened and plans to cut the Public Sector Development Programme, adjust gas and electricity tariffs, and expand the tax base through increased taxes. Under the $7 billion Extended Fund Facility, Pakistan has met 22 structural benchmarks and needs about $110.5 billion in foreign financing over the next five years, averaging $22 billion annually. [BR] [Dawn] [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israeli Genocide: Over 67 people were injured south of Haifa due to a Hezbollah drone strike on a military base, with United Hatzalah teams assisting the wounded. In response to the situation, the U.S. will send an advanced anti-missile system and troops to Israel to enhance its defense capabilities amid missile attacks from Iran. [BR] [BR] [Dawn] [Al Jazeera]
• Global Financial Scope: The world’s 26 poorest countries are deeper in debt than at any time since 2006 and increasingly vulnerable to natural disasters and other shocks, the World Bank has said. The poorest economies are worse off today than they were before the COVID-19 pandemic, even though the rest of the world has largely recovered, the Washington, DC-based lender said in a report released on Sunday. ?[Al Jazeera]
• Biden Surveys Hurricane Damage: President Joe Biden surveyed the damage from Hurricane Milton in Florida, which has resulted in at least 17 deaths and worsened conditions after Hurricane Helene. His aerial tour revealed significant destruction, including the shredded roof of Tropicana Field and debris-filled neighborhoods in St. Pete Beach, amid ongoing floodwaters and power outages. [BR]
• Russia Boosts Wheat Export Duty by 41%: Russia will increase its wheat export duty by 41%, raising it to 1,872 roubles ($19.51) per metric ton starting October 16, up from 1,328.3 roubles. This decision follows a closed-door meeting with top exporters and reflects higher prices for Russian wheat observed at Saudi Arabia's wheat tender on October 7, which ranged from $230 to $243 free on board. [BR]
• Vietnam & China Sign Agreements: Vietnam and China signed 10 agreements, including agricultural cooperation and cross-border QR code payments, during Chinese Premier Li Qiang’s visit to Hanoi. The agreements aim to strengthen ties amid a 21% rise in bilateral trade to $148 billion in the first three quarters of the year, following discussions with Vietnamese leaders. [BR]
• EU Imposes Taxes on Chinese EVs: The EU has imposed heavy taxes on Chinese electric vehicles to protect its industry, reflecting rising protectionist sentiments that may harm cooperation with China. These duties, effective October 31 and lasting at least five years, aim to counter the growing popularity of cheaper Chinese EVs in the EU and the US. [ET]
• Oil Prices Drop but Weekly Gains Continue: Oil prices closed lower on Friday but recorded gains for the second consecutive week amid concerns over potential supply disruptions in the Middle East and Hurricane Milton's impact on fuel demand in Florida. Brent crude futures fell 36 cents to $79.04 per barrel, while US West Texas Intermediate crude dropped 29 cents to $75.56 per barrel. [BR]
• Opinion: How We Investigated Political Ties to Abuse in India - “Western companies such as Coca-Cola buy sugar from fields where workers suffer abuses. But the country has labor laws. Where was the government?. When my colleagues and I began investigating labor abuses among sugarcane cutters in the western Indian state of Maharashtra, we were startled by how open it all was. But for decades, little had been done. Big Western brands such as Coca-Cola knew that workers were being exploited, yet continued to buy sugar from the region. A sugar industry group even gave a mill its seal of approval despite easily identified links to abuses.” - By Megha Rajagopalan [NYT]

OPINION(S) & REMAINDERS

• Met Office Accuracy: Being skeptical about the Met Office`s predictions has become almost second nature to Pakistanis. Most have rationalized their all-weather cynicism in two ways; either the country's weather cycles are so unpredictable that they defy all attempts at forecasting, or, the Pakistan Meteorological Department (PMD) cannot accurately predict the weather. Guided by gut instinct, there are several citizens whose bread and butter is intrinsically linked with an ability to tell what the weather will be like. [Dawn]
• Punjab Smog Season Set to Lengthen: Environmental experts warn that the smog season in Punjab will be longer this year, with Lahore being ranked as the world's most polluted city two weeks earlier than last year. The worsening air quality is impacting residents in major cities, including Faisalabad, Gujranwala, Multan, Bahawalpur, Rawalpindi, and Sialkot. [ET]
• Swat's Deforestation Affects Tourism: Swat, once known as the "Switzerland of Pakistan" and a popular vacation destination, has become inhospitable due to deforestation, making it less appealing for both locals and tourists in the summer. Temperatures in Mingora and Fizagat have risen to between 40 and 45 degrees Celsius, a drastic change. [ET]
• NERA Chosen for Spectrum Auction: The U.S.-based consultancy NERA was selected to provide services for the spectrum auction of IMT Spectrum in Pakistan, with a bid of $0.750 million. The Pakistan Telecommunication Authority (PTA) issued a letter of intent to NERA, which must respond within seven working days to assist in planning the 5G spectrum auction by April 2025. [BR]
• IMF Highlights Pakistan's Living Standards Gap: The IMF has reported that Pakistan is lagging behind regional peers in living standards, emphasizing the need for urgent policy changes. From 2000 to 2022, Pakistan's GDP per capita grew at an average annual rate of only 1.9%, significantly lower than Bangladesh (4.5%), India (4.9%), Vietnam (5%), and China (7.5%). [The News]
• Pakistan's Economic Freedom Ranking Declines: Economic freedom refers to the ability of private citizens to start and grow businesses, as well as engage in domestic and international trade. Despite the ease of business registration in Pakistan, the country ranks 147th out of 184 nations on the Heritage Index of Economic Freedom, classified as a "repressed" economy with a score of 49.5 in 2023. [ET]
• Opinion: Coping with the Inflation Cycle - “The structural theory of inflation says inflation is caused by a ‘structural’ weakness in a country’s capacity to produce goods or maintain an adequate flow of supply. General under-productivity creates imbalances between supply and demand. Inflation that stems from structural issues may not be easily changed by monetary policy.” - By Jawaid Bokhari [Dawn]
• Opinion: Re-Evaluating Our Import Strategy - “Rising imports risk a BoP crisis, IMF bailouts, making it crucial to rethink import strategy. It is important to note that Pakistan imposes some of the highest tariff rates in the region and has one of the lowest rates of manufacturing value-added and exports as a percentage of GDP. Pakistan lacks economic complexity, primarily producing goods with low levels of sophistication. Import restrictions and the inability to acquire goods that promote technological progress exacerbate the challenges businesses face.” - By Aadil Nakhoda [ET]