Aug Inflation, Cotton Arrivals, Power Relief & SOE Consumption, CN-PK-AFG Trade, LC Challenges, Russia-Ukraine War.

TOPLINE

• In Aug 2023, Pakistan's year-on-year inflation was 27.4%. Over the first two months of FY’24, the average inflation rate was 27.84%. Pakistan's trade deficit expanded to $2.126 billion in Aug 2023 from $1.637 billion in July 2023.
• As of August 31, 2023, Pakistan received over 3 million bales of seed cotton (Phutti), with Punjab accounting for 1,068,796 bales, Sindh for 1,972,308 bales, and Balochistan for 70,600 bales.
• The caretaker govt is considering providing relief to power consumers using up to 300 units per month by reducing their electricity bills by Rs 3,000. Consumers with bills ranging from Rs 60,000 to Rs 70,000 may receive relief of Rs 13,000. State-owned entities consume free electricity units, costing the government between Rs 22-25 billion annually.
• The first-ever China cargo shipment bound for Afghanistan, which entered Pakistan through the Sost border on August 28, 2023, has now crossed the Torkham border for its final destination in Kabul.
• Foreign banks are demanding a 10% commission to endorse import letters of credit (LC) due to Pakistan's economic challenges.
• Russian drones attacked Ukraine's Odesa region, hitting a Danube port on the border with NATO member Romania. Moscow has been targeting Ukrainian ports in the Black Sea and Danube since exiting a grain transportation agreement. Turkish President Tayyip Erdogan and Russian President Vladimir Putin will prioritize discussions on the Black Sea grain deal, with Turkey aiming to persuade Moscow to rejoin the agreement.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Cotton Bales Stock Report 2023: As of August 31, 2023, Pakistan has received over 3 million bales of seed cotton (Phutti), with Punjab accounting for 1,068,796 bales, Sindh for 1,972,308 bales (including 1,184,243 in Sanghar district), and Balochistan for 70,600 bales. Out of this total, approximately 2.8 million bales have been converted into cotton bales. Exporters purchased 168,726 bales, textile mills acquired more than 2.6 million bales, and the Trading Corporation of Pakistan (TCP) has yet to begin procuring cotton, leaving 257,107 unsold cotton bales in stock. The country has 528 operational ginning factories. [BR] [Dawn]
• SAWiE Conference: Pakistan's Organic Cotton Potential - A conference convened leading agricultural scientists and experts in Multan to recognize the country's potential in organic cotton production. The "2nd Annual SAWiE Conference on Organic Cotton Pakistan," held in collaboration with the Pakistan Central Cotton Committee, aimed to explore opportunities for growth and increased foreign exchange earnings in this sector. [ET]
• Pakistan's August 2023 Inflation & Trade Data: In August 2023, Pakistan's year-on-year inflation was 27.4%, slightly down from the previous month but slightly up from the same period last year. Over the first two months of fiscal year 2024, the average inflation rate was 27.84%. Meanwhile, Pakistan's trade deficit expanded to $2.126 billion in August 2023 from $1.637 billion in July 2023, but over the first two months of the fiscal year, it decreased by 40.29 percent to $3.763 billion. Exports also dropped by 6.38% in July-August 2023-24 compared to the previous year. [BR] [BR] [ET]
• SBP Faces Inflation Challenge for Fiscal Target: The SBP has seen inflation slow down for the third consecutive month after reaching a peak in May 2023. However, the decline has become less significant in recent months, raising doubts about the SBP's ability to meet the fiscal target set by the previous government of achieving a 20% average inflation rate for the full year FY24. This challenges the SBP's claim of maintaining positive real interest rates in the future. [BR]
• PM’s Anti-Smuggling Initiative: Caretaker Prime Minister Anwaar-ul-Haq Kakar has instructed Customs and law enforcement to crack down on smuggling of various items, especially in border areas. This includes setting up additional check-posts in Balochistan and preparing a report on officers involved in smuggling. [The News]
• Track & Trace System in Pakistan's Tobacco Industry: The Federal Board of Revenue (FBR) in Pakistan has entered into agreements with 22 tobacco manufacturers to implement the Track and Trace System (T&TS) in their factories. This digital system, involving unique identification codes and stamps on cigarette packs, aims to combat tax evasion and illegal tobacco trade, potentially boosting tax revenue from the tobacco sector, which accounts for approximately 1.5% of Pakistan's total tax collection. [The News]
• Dairy Products Import: Rs 2.8 billion was the import value of milk, cream and milk food for infants in July 2023, up 36% from last year. [ET]
• Palm Oil Import: Rs 78.4 billion was the import value of palm oil in July 2023, up 19.3% from Rs 65.7 billion in July 2022, according to PBS. [ET]
• Seafood Export: Rs 5.3 billion was the export value of fish and fish preparations in July 2023, up 30.9% compared to Rs 4.1 billion in July 2022, according to the PBS. [ET]
• Vegetables Export: Rs 4.09 billion was the export value of vegetables in July 2023, down 57.99% compared to Rs 9.74 billion in July 2022, according to the PBS. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

• IMF Seeks Data on Electricity Bill Relief Proposal: The International Monetary Fund (IMF) has requested additional data from the Power Division regarding proposed measures to provide relief in inflated electricity bills for August and September. The decision from the IMF is pending as it evaluates the data provided by the Finance and Power Divisions, with expectations of a response in the near future. [The News]
• Caretaker Government Mulls Electricity Bill Relief: The caretaker government in Pakistan is considering providing relief to power consumers using up to 300 units per month by reducing their electricity bills by Rs 3,000. Consumers with bills ranging from Rs 60,000 to Rs 70,000 may receive relief of Rs 13,000. This initiative aims to alleviate the financial burden on people facing inflation and high electricity bills. [ET] [DP] [MM] [ARY] [Geo]
• Advanced Income Tax on High Electricity Bills: Non-taxpayer residential customers with monthly electricity bills over Rs 25,000 will face a 7.5% Advanced Income Tax, per the Government of Pakistan Finance Act 2021. Tax-filers can get exemptions but must link their CNIC information to their account. Check K-Electric's website for details. [MG] [Dawn]
• State-Owned Entities Enjoy Free Electricity Amid Rising Costs: State-owned entities in Pakistan's power sector consume free electricity units, costing the government between Rs 22 billion and Rs 25 billion annually. Government allowances for employees in various departments add to these costs. Despite this financial burden on consumers, it is seen as relatively minor compared to the substantial capacity payments expected to reach Rs 2 trillion to be paid to independent power producers (IPPs) by year-end. [Dawn]
• Floodwaters Approach Bahawalpur-Lahore Highway: Floodwaters have approached very near to the Bahawalpur-Lahore National Highway, specifically in the Goth Shah Muhammad area. This development comes after the Sutlej River experienced a high flood level of approximately 144,000 cusec at Empress Bridge Bahawalpur. Over a distance of about 10 kilometers, the floodwaters reached the vicinity of the Bahawalpur-Lahore National Highway, passing through the Goth Shah Muhammad area in Khairpur Tamewali Tehsil of Bahawalpur district. [BR] [ET]
• Kurram Tangi Dam Consultancy: Wapda signed a contract worth Rs 776.3 million with a joint venture led by DOLSAR for consultancy services for Stage-II of the Kurram Tangi Dam Project. This includes detailed engineering design, project cost estimates, and resettlement planning, with the Asian Development Bank providing financial assistance. The dam will be constructed on the Kurram River in North Waziristan District, Khyber Pakhtunkhwa. [BR]
• China-Afghanistan Cargo: Torkham Crossing - The first-ever China cargo shipment bound for Afghanistan, which entered Pakistan through the Sost border on August 28, 2023, has now crossed the Torkham border for its final destination in Kabul. This shipment used the old Silk Route under the UN's TIR Convention to facilitate international trade. A ceremony was held at Torkham Zero point to mark the occasion. [BR]
• Pakistan Petroleum Sales August 2023: In August 2023, Pakistan's total petroleum product sales were 1.41 million tons, down 8.0% YoY. This drop was driven by a 64 percent YoY decrease in Furnace Oil (FO) sales due to reduced reliance on FO-based power generation, while Motor Spirit (MS) and High-Speed Diesel (HSD) sales increased by 5.0% and 11% YoY, respectively, mainly due to drier weather compared to the previous year. [BR]
• Approval Granted for Thar-Bin Qasim Railway Project: Amid nationwide protests over high power bills and escalating tensions with a Chinese coal extraction partner in Thar, the federal government has granted approval for a crucial infrastructure project. The project involves the construction of a 105-kilometer railway line connecting Thar to Bin Qasim, aiming to facilitate the seamless transportation of coal from Sindh's mines to both national and global energy markets. [ET]
• Insecticides Imports in 1st Fiscal Month: 17.78 million dollars worth of insecticides were imported in the first month of the current fiscal. [ET]

AGRI UPDATES & PAKISTAN POLICY

• ECP Hastens Constituency Delimitation: The Election Commission of Pakistan (ECP) has decided to expedite the constituency delimitation process to enable the general election to be held in the last week of January 2024. The process will now be completed by November 30, instead of the earlier deadline of December 14,. [The News]
• PTI Leader Chaudhry Parvez Elahi Challenges Detention: PTI leader Chaudhry Parvez Elahi, formerly the Punjab chief minister, has filed a petition with the Islamabad High Court challenging his detention, claiming it to be illegal and without lawful authority. He was arrested by Islamabad police under the Maintenance of Public Order (MPO) Ordinance shortly after being released by the Lahore High Court (LHC) with a restraining order against his potential arrest or preventive detention by any agency. [Dawn]
• Countrywide Strike Against Soaring Bills & Inflation: Traders in various parts of the country are observing a shutter-down strike today in protest of soaring electricity bills and unprecedented inflation. This strike follows ongoing protest demonstrations by traders and the public in several cities. [Dawn] [ET] [ET]
• Middle Class in K-P Hit Hard by Inflation: The middle class in Khyber-Pakhtunkhwa (K-P) is grappling with surging inflation, high fuel prices, and soaring electricity costs, leading to deserted marketplaces as people limit purchases to essentials due to record inflation. [ET]
• COAS General Munir Focuses on Economic Reforms: COAS General Asim Munir has pledged to enhance transparency in dollar exchange and interbank rates by bringing money exchanges under taxation. He emphasized the Special Investment Facilitation Council's potential to attract substantial investments, potentially up to $100 billion from countries like Saudi Arabia, the UAE, and Kuwait. Task forces focused on economic matters and different sectors are being formed to bolster economic decision-making. [Dawn]
• Finance Minister Critiques Fiscal Policies: Caretaker Finance Minister Dr. Shamshad Akhtar criticized previous governments for their lack of fiscal discipline, growing foreign debt, significant non-development spending, and inflation, which she argued have negatively affected the lives of the poor. However, she did not address the impact of the International Monetary Fund (IMF) program. [BR]
• Foreign Banks Seek 10% Commission for LCs in Pakistan: Foreign banks are demanding a 10 percent commission to endorse import letters of credit (LC) due to Pakistan's economic challenges, including a depreciating rupee, foreign exchange reserve issues, and debt servicing concerns. This reflects diminishing confidence in Pakistan's banking system among global financial institutions. [Dawn]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Russian Drones Attack Danube Port Near NATO Border: Russian drones attacked Ukraine's Odesa region, hitting a Danube port on the border with NATO member Romania. Moscow has been targeting Ukrainian ports in the Black Sea and Danube since exiting a grain transportation agreement. This incident occurred just before a summit between Vladimir Putin and Recep Tayyip Erdogan, where they aim to revive the grain deal. President Volodymyr Zelensky discussed maritime corridor protection with France's Emmanuel Macron. [BR]
• Biden Sends Depleted Uranium Munitions to Ukraine: The Biden administration is set to send armor-piercing munitions containing depleted uranium to Ukraine for the first time as part of a new military aid package. These munitions are intended to assist Ukraine in countering Russian tanks and are expected to be delivered alongside U.S. Abrams tanks in the coming weeks. [ET] [Reuters] [BI]
• Leaders Prioritize Black Sea Grain Deal Talks: During their meeting, Turkish President Tayyip Erdogan and Russian President Vladimir Putin will prioritize discussions on the Black Sea grain deal, with Turkey aiming to persuade Moscow to rejoin the agreement. [ET] [Reuters] [Al Jazeera] [MT]
• Record 872 Migrants Arrive in UK via Small Boats: A record number of migrants, around 872, arrived in the UK via small boats on a single day, with an average of about 58 people per boat crossing the English Channel, as reported on Saturday. In 2023, the total number of Channel crossings reached 20,973, still lower than the same period last year when approximately 25,000 had made the journey. The highest daily total since 2018 was 1,295 on August 22, 2022, and in August 2023, a new monthly record was set with an average of approximately 53 migrants per vessel making the crossing. [ET] [PO] [AN] [NA] [Telegraph] [The Independent]
• Opinion: India sliding into an abyss under RSS - “With Chandrayaan 3 landing on the moon, PM Narendra Modi appears to have got a third life where the opposition will find it very difficult to turn the tide and stop him from getting a third term in the office. Meanwhile there are saner voices in India who are warning that Modi’s third term would allow RSS to establish Hindutva Republic in 2024.” - By Adeela Naureen & Waqar K Kauravi [ET]
• Oil Prices Rise on Saudi Production Cut Expectations: Oil prices reached a six-month high, ending a two-week slide, driven by expectations of tighter supply due to Saudi Arabia's anticipated extension of its 1 million barrel per day production cut into October. Brent crude settled at $88.49 per barrel, up 1.9%. Meanwhile, Malaysian palm oil futures inched up due to positive export data, with the benchmark November contract closing at 4,040 ringgit per metric ton, marking a 2.12% weekly gain. [BR] [BR]

PAKISTAN - REMAINDERS

• Suzuki Motorcycle Production Suspension: Pak Suzuki Motor Co (PSMC) has extended the suspension of its motorcycle production for an additional 12 days due to an ongoing shortage of vital raw materials. [The News]
• PIA Expands China Connectivity to 16 Cities. [ET] [PO]
• Militant attacks in August ‘highest in a month’ since 2014: PICSS report shows 99 terror strikes across the country claimed 112 lives; no attacks reported in Punjab. [Dawn] [AN] [The News] [The Nation] [TOI] [Siasat]
• Opinion: Karachi’s Water Complexities - “While the much-awaited lining of the Kalri Baghar (KB) Feeder Upper — a vital water supply source for Karachi — is expected to begin soon, the Sindh government still struggles to get an additional share of water to meet the needs of the provincial metropolis as the decision is long overdue.” - By Mohammad Hussain Khan [Dawn]
• Opinion: Plastic Metamorphosis: From Waste To Eco-Wonder - “Lahore, often the most polluted city during smog season, is now at the forefront of recycling the mounting solid waste within its historic walls. This effort is creating opportunities for aspiring innovators and startups to tap into this valuable resource for sustainable solutions. As Pakistan grapples with a severe environmental crisis, clogged waterways and urban flooding caused by solid waste continue to wreak havoc. Unless we adopt effective waste management strategies, these challenges are destined to persist. In a bid to combat this menace, recent initiatives have been taken to ban single-use plastics in the capital city. However, the effectiveness of such bans remains a topic of vigorous debate.” - By Shabina Faraz[ET]