Exports Decline, Seafood Exports, Power Prices, 4th Surplus Month, IMF Forex deal, Russia-Ukraine Grain Deal

TOPLINE

• Pakistan's textile group exports saw a decline of 14.63%, totaling $16.501 billion compared to $19.329 billion the year before. Overall exports also decreased by 12.73% to $27.735 billion 22-23 from $31.782 billion in 21-22.
• Pakistan achieved a historic seafood export record of $496 million in 2022-23, attributed to the depreciation of the PKR against the USD.
• Pakistan has reduced the regasified liquefied natural gas (RLNG) prices for both Sui companies in July 2023 by up to 1.5%. Electricity costs areA on the rise as DISCOs and K-Electric seek to collect an additional Rs 29.5 billion next month. DISCOs want Rs 25.1 billion more through the FCA, while K-Electric seeks Rs 4.4 billion for June consumption.
• Pakistan's current account saw a $334 million surplus in June, marking the fourth consecutive month of surplus compared to last year's deficit of $2.32 billion. The overall deficit for the previous fiscal year reduced by 85% to $2.56 billion, with a focus on balancing payments and saw a 43% narrowing of the trade deficit to $27.59 billion.
• Pakistan signed an agreement with the IMF to limit the average premium between interbank and open market exchange rates to 1.25% during any consecutive five-day period. The difference should not be more than PKR 4.
• The EU is looking to transport Ukrainian grains via land to compensate for Russia's withdrawal from a UN-backed Black Sea exports agreement. On Tuesday, Russia targeted Ukrainian grain ports following the deal's collapse.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Export Challenges Amidst Decline: During the fiscal year 2022-23, Pakistan's textile group exports saw a decline of 14.63%, totaling $16.501 billion compared to $19.329 billion in the previous year. Overall exports for the country also decreased by 12.73% to $27.735 billion (provisional) in 2022-23 from $31.782 billion in 2021-22. The decline in exports was also observed in cotton yarn and rice exports, which decreased by 30.04% and 14.47%, respectively, during the same period. Food group exports also dropped by 12.73%, standing at $5.022 billion in 2022-23. [BR] [Dawn]
• Tea Import: Rs 15.1 billion was the import value of tea in June 2023, up 63% compared to Rs 9.3 billion in June 2022. [ET]
• Football Exports: Rs 5.6 billion was the export value of footballs in June 2023, up 29.6% compared to Rs 4.3 billion in June 2022, according to the Pakistan Bureau of Statistics. [ET]
• Seafood Export Triumph: Despite challenges such as over-fishing and a global slowdown, Pakistan achieved a historic seafood export record of $496 million in 2022-23, primarily attributed to the depreciation of the Pakistani rupee against the US Dollar, which made seafood items more affordable for international buyers. With the possibility of hitting the $1 billion mark if major markets lift their restrictions, exporters see this accomplishment as a significant achievement in the face of over-exploitation and falling commodity prices. [BR]
• Sugar Prices Soar in Pakistan: The price of sugar has surged, rising from Rs 110 to Rs 150 per kg within three weeks after Eid. The court's suspension of the official prize notification and the Supply Chain Management Order has allowed market manipulators to take control, leading to price exploitation. Despite the country having 1.9 million tonnes of sugar stock, soaring prices have raised concerns. [Dawn]
• Cotton Crop Optimism: Farmers in Pakistan are hopeful for a better cotton crop this year despite challenges like variable weather and potential pest attacks. Early cotton stockpiling and significant arrivals at ginning factories mark a positive start to the season, with Sindh leading in production. The current target is set at 2.764 million hectares, aiming for a production of 12.7 million bales, triple the output of the previous year. [Dawn] [ET] [The News]

AGRI-INPUTS, WEATHER, WATER & POWER

• Dust Storms & Rain Forecast: The Meteorological Department has issued a forecast for dust storms, thunderstorms, and rain in several districts of the province starting from Wednesday. The weather system, intensified by monsoon currents from the Arabian Sea, is expected to bring drizzle at night or in the morning in Karachi. The weather conditions may cause damage to weak structures and bring isolated heavy rainfall until July 22-23. [Dawn]
• Monsoon Rains Trigger Evacuations: More than 14,000 people and their cattle were evacuated from villages in eastern Pakistan, authorities said Tuesday, following the arrival of monsoon rains across South Asia. The summer monsoon brings South Asia 70-80 percent of its annual rainfall between June and September and is vital for the livelihoods of millions of farmers in a region of around two billion people. [BR]
• Pakistan Cuts RLNG Prices in July 2023: Pakistan has reduced the regasified liquefied natural gas (RLNG) prices for both Sui companies in July 2023 by up to 1.5%, or $0.1938 per MMBtu, compared to June 2023. Sui Northern Gas Pipelines Limited (SNGPL) consumers will now pay $12.6493 per MMBtu, while Sui Southern Gas Company (SSGC) clients will pay $13.1367 per MMBtu. This is in line with decreases in RLNG prices over the past 5 months, despite a slight increase in May 2023. RLNG prices are influenced by crude oil prices since they are closely linked to them. [The News]
• Rising Electricity Bills & Connection Costs: Power consumers are opposing the decision to increase peak hours from four to six, viewing it as an anti-people move that will significantly raise their electricity bills and have criticized the hike in the cost of obtaining new connections. The government's power division reportedly made the decision to change peak hour timings from 7pm to 11pm to 4pm to 11pm, resulting in higher power unit costs during these hours. [Dawn]
• Electricity Costs Surge in Pakistan: Electricity costs in Pakistan are on the rise as ex-Wapda Distribution Companies (Discos) and K-Electric seek to collect an additional Rs 29.5 billion from consumers next month. Discos want Rs 25.1 billion more through fuel cost adjustment (FCA), while K-Electric seeks about Rs 4.4 billion for electricity consumed in June. Once approved through the public hearings, Discos would charge consumers an extra Rs 1.885 per unit, despite over 58% power generation in June being from cheaper domestic fuels. [Dawn]
• KE Files Petition for Electricity Rate Increase: K-Electric (KE) has filed a petition for a potential increase in electricity rates by Rs 2.33 per unit, subject to a public hearing scheduled for July 26, 2023. The proposed increase is attributed to the utilization of fuel sources based on economic merit order, with a rise in Furnace Oil (FO) prices partially offset by a decrease in regasified liquefied natural gas (RLNG) prices. FO witnessed a 6% price hike, while RLNG from Pakistan LNG Limited (PLL) decreased by 6%, RLNG from Sui Southern Gas Company Limited (SSGC) decreased by 2%, and power purchased from Central Power Purchasing Agency (CPPA-G) decreased by 1% during June 2023. [ET]

AGRI UPDATES & PAKISTAN POLICY

• June Surplus, FDI Woes: Pakistan's current account recorded a surplus of approximately $334 million in June, marking the fourth consecutive month of surplus compared to last year's deficit of $2.32 billion. The overall deficit for the previous fiscal year reduced by 85% to $2.56 billion, as the country focused on balancing payments and saw a 43% narrowing of the trade deficit to $27.59 billion. However, Pakistan faced challenges in attracting foreign investors, experiencing a 25% decrease in net foreign direct investment (FDI) to $1.46 billion in the previous fiscal year. In June, FDI dropped further to $114 million, signaling a challenging investment environment due to ongoing political and economic uncertainties. [BR] [Dawn] [Dawn]
• China Extends Financial Support to Pakistan: China has provided further financial support to Pakistan by rolling over a $600 million loan, bolstering Islamabad's foreign exchange reserves. In the past three months, China has already rolled over more than $5 billion in loans to Pakistan, as Pakistan faced challenges with the IMF. [Dawn] [The News]
• Civilian Cases & Military Courts: Chief Justice Umar Ata Bandial expressed that civilian cases should not be subjected to the strictness and severity of military courts since civilians have constitutional protections that military personnel do not. He stated that military law is meant for the military and is different from ordinary law. One concern about these trials is that the verdicts of military courts are not made public and cannot undergo judicial review. This observation came up during a hearing where the Attorney General for Pakistan cited a note by Justice Yahya Afridi, urging the Chief Justice to consider forming a full court to hear the matter. [Dawn]
• Confusion Over Election Timing: The government's position on the dissolution of assemblies remained unclear and mixed on Tuesday, as Information Minister Marriyum Aurangzeb stated that there was no final decision yet on the date. She asserted that the decision would be made in consultation with the PDM and allied parties and would be officially announced. This statement contradicted earlier statements and added to the confusion surrounding the timing of the general elections. [BR] [Dawn] [ET] [DT] [RP] [ARY] [The Nation]
• IMF Bailout Deal-Pakistan's Exchange Rate Agreement: Pakistan signed an agreement with the IMF to limit the average premium between interbank and open market exchange rates to 1.25% during any consecutive five-day period, as part of a $3 billion bailout package under the Standby Arrangement (SBA) program. The IMF warned about Pakistan's complex economic challenges and emphasized the need for strict policy implementation and continued financial support from external partners for macroeconomic stability. [BR] [BR] [ET] [The News]
• IMF's Projections & Commitments: The government of Pakistan has committed to the IMF to increase revenue sustainably by focusing on undertaxed sectors like agriculture and construction, broadening the tax base, and implementing progressive taxation. They have also pledged not to introduce any new tax amnesties or grant further tax exemptions in 2023-24 without prior approval from the National Assembly. The IMF has projected a tax collection target of Rs 9,415 billion for the Federal Board of Revenue (FBR) in 2023-24. [BR]
• Pakistani Rupee Hits Three-Week Low: On Tuesday, the Pakistani currency experienced a 1.34% drop against the US dollar in the interbank market, reaching its lowest point in three weeks at Rs 283.04 per dollar. The rupee's decline was attributed to increased demand for the greenback, and there were speculations of a strengthening black market where Hawala and Hundi operators were offering higher rates for the US dollar compared to the official markets. In the open market, the rupee fell by 1.37%, reaching Rs 290/$, and the difference between exchange rates in the two markets widened to Rs 7, surpassing the acceptable level of Rs 4. [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• EU to Aid Ukraine's Grain Transport Amidst Russia-Ukraine Conflict: The European Union is looking to transport additional Ukrainian grains via road and rail to compensate for Russia's withdrawal from a UN-backed Black Sea exports agreement. On Tuesday, Russia targeted Ukrainian grain ports following its withdrawal from the deal, which allowed safe export of Ukrainian grain blocked due to the Russia-Ukraine conflict. Russian forces claimed gains in an area where Ukrainian officials reported a renewed offensive. The strikes on Odesa included hitting a fuel storage facility and a plant producing seaborne drones in retaliation for Ukraine's attacks on a road bridge to the occupied Crimean Peninsula.? [BR] [Reuters] [Reuters] [BR] [Dawn]
• G20 Talks End with Discord on Ukraine: G20 finance chiefs concluded their talks in India with disagreements over Russia's war in Ukraine, limited progress on debt restructuring, and concerns about deepening poverty. The G20 failed to agree on a joint statement due to differences over the Russia-Ukraine war, but some progress was made on other key issues during the two-day summit in Gandhinagar. [Dawn] [VOA] [HT] [GN]
• Chinese Emissions: President Xi Jinping said China will decide on its own path to reduce carbon emissions instead of following other nations. China’s resolve to achieve the dual-carbon goal, a twin initiative in reaching a carbon peak by 2030 and carbon neutrality by 2060, is unwavering, CCTV reported on Tuesday citing Xi as saying at a national conference on environmental protection. “But the path, method, pace and intensity to achieve this goal should and must be determined by ourselves, and will never be influenced by others,” he said. The remarks came after China’s Premier Li Qiang met with US climate envoy John Kerry for the most high-profile talks scheduled during Kerry’s visit to Beijing this week. [Bloomberg] [Bloomberg]
• Uzbekistan, Afghanistan, & Pakistan Sign Railway Agreement: Pakistan, Uzbekistan, and Afghanistan signed an agreement on Tuesday to establish a rail link that will connect Central Asia with Pakistan through Afghanistan. The project, known as the 'Uzbekistan-Afghanistan-Pakistan (UAP) Railway,' will pass through Termiz in Uzbekistan, Mazar-i-Sharif and Logar in Afghanistan, and enter Pakistan via the Kharlachi border crossing. The three countries reached a breakthrough during a trilateral working group meeting in Islamabad, where they agreed on a roadmap to conduct a bankable feasibility study and explore financing resources for the early implementation of the project. [Dawn] [ET] [RP] [APP] [MG] [The News] [ARY]
• India Opposition Alliance Emerges: Ahead of India's general elections next year, a new opposition front has emerged in Bengaluru, with 26 major parties forming a joint alliance named 'INDIA,' standing for 'Indian National Development Inclusive Alliance.' The Congress chief, Mallikarjun Kharge, viewed the NDA meeting as a sign of Mr. Modi's nervousness, stating that the opposition's determination to unite against the BJP in 2024 had forced the BJP to reconcile with its former allies. An 11-member coordination committee will be established in Mumbai, with a central secretariat in Delhi for campaign management and joint rallies. [Dawn] [DP]
• Opinion: A Look Back at Our Coming War With - “The 360-degree rivalry between the United States and China has yielded a barrage of recent books about the possibility of armed conflict breaking out, with plenty of advice on how to forestall it. If “Who lost China?” was an American preoccupation of the early Cold War, “Who lost to China?” threatens to become its contemporary variant. After five decades of engagement between Washington and Beijing, a period that featured both America’s unipolar triumphalism and China’s ascent to economic superpower status, the two countries are now on a “collision course” for war, many of these books assert, even if the rationales are varied and at times contradictory.” - By Carlos Lozada [NYT]

PAKISTAN - REMAINDERS

• IT exports will surge to $15 billion according to a projection by the IT Minister. [ET]
• 37 Sindh hospitals have been switched to solar energy. [ET]
• Summit Bank Ltd changes name to Bank Makramah Ltd. [BR]
• Opinion: Dhabeji Special Economic Zone — a likely game-changer - “Now, as Keti Bandar is part of the China-Pakistan Economic Corridor (CPEC), a special economic zone has been established for the successful implementation of this project. The economic zone, known as Dhabeji Special Economic Zone, covers 1500 acres of land and aims to connect Karachi to the entire country through the Malir Expressway.” - By Sarang Latif Chandio [BR]