Exports, Wheat, RLNG Supply & Petrol Imports, PTI & Military Courts, Inflation & PKR Decline, US Default, Italy Floods

TOPLINE

●     $4 billion exports worth during 10 months of the current financial year while Rs 1.81 billion was the export value of spices in April 2023, up 51.93% compared to April 2022.

●     Sargodha District has successfully achieved 100% of its wheat procurement target of 107,867 metric tonnes during the campaign. 14 tons of smuggled wheat were intercepted and seized on the Lahore-Islamabad motorway. The Attock food department soiled numerous attempts to smuggle wheat in the past two months.

●     Several shortcomings in the supply of subsidized RLNG to EOUs have been identified due to a lack of monitoring mechanisms, while petroleum imports declined by 17.96% during the July-April period of FY23, compared to the previous year. Moreover, emerging OMCs have expressed concerns about OGRA and its handling of smuggled Iranian products.

●     PTI has filed a petition with the SC, challenging the trial of civilians in military courts and the deployment of armed forces under Article 245 of the Constitution. Imran Khan was granted bail in 8 cases related to May 9 violence.

●     Pakistan's inflation is projected to rise by 1.07% on a monthly basis, reaching a peak of 37.27% in May while the Pakistani rupee declined by 1.31% against the dollar, reaching Rs 305.

●     Joe Biden expressed optimism about reaching a deal to avert a default as he began a meeting with House Speaker Kevin McCarthy on the debt limit. Increasing interest rates may also be on the cards.

●     Over 23,000 people in northeast Italy are displaced a week after heavy rains triggered severe flooding and resulted in 14 deaths as rescue operations continue.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

●     FY’23 Exports: $4 billion is the worth of exports during 10 months of the current financial year. [ET]

●     Spices Export: Rs 1.81 billion was the export value of spices in April 2023, up 51.93% compared to Rs 1.19 billion in April 2022, according to the Pakistan Bureau of Statistics. [ET]

●     Sargodha Reaches 100% Procurement Target: The District of Sargodha in Pakistan has successfully achieved its 100% wheat procurement target of 107,867 metric tonnes during the campaign. The district outperformed others in the division, with Khushab securing the second position with 90% completion, Bhakkar in third place with 52%, and Mianwali ranking fourth with 41% completion of their respective wheat procurement targets. [PO]

●     Motorway Police Seizes Smuggled Wheat: The National Highways and Motorway Police intercepted a dumper on the Lahore-Islamabad Motorway and seized 14 tons of smuggled wheat. The wheat, along with the driver of the dumper, was handed over to the District Food Inspector in Rawalpindi after the necessary legal procedures. [The Nation]

●     Wheat Smuggling Curbed: The food department in Attock, Pakistan, has successfully prevented numerous attempts to smuggle wheat and wheat products from Punjab to Khyber Pakhtunkhwa (KP) in the past two months. They confiscated a total of 3,546.50 metric tons of wheat and 296.86 metric tons of wheat products, including flour, during the operations. [PO]

●     Meeting on Cotton Sowing: Punjab Chief Minister Syed Mohsin Naqvi chaired a meeting to assess the progress of cotton crop sowing in the province. He directed the concerned departments to ensure that sowing and production targets were met, offering cash prizes to growers achieving maximum production and commending officials for their efforts. The meeting emphasized the need to protect the crop, take action against water theft, supply necessary resources to cotton growers, and combat the sale of counterfeit pesticides and seeds. [PO]

●     Challenges for Pakistan's Textile Sector: Pakistan's textile and clothing industry faced a significant setback with a 14.22% year-on-year decline, reaching $13.7 billion in the first 10 months of the current fiscal year. The decrease in production, driven by rising production costs, contributed to this downturn, as reflected in the alarming 29.11% decline in export figures for April, dropping from $1.73 billion to $1.23 billion compared to the same period last year. [Dawn]

●     Agricultural Collaboration: The Shanghai Academy of Agricultural Sciences (SAAS) and the University of Agriculture, Faisalabad (UAF) have signed a Letter of Intent (LoI) to collaborate on agricultural science and technology between China and Pakistan. The agreement aims to strengthen cooperation in areas such as post-harvest treatment, pest management, molecular mechanisms, germplasm evaluation, and specialty maize hybrids. [ET]

●     Shehbaz Sharif's Anti-Smuggling Drive: Prime Minister Shehbaz Sharif has issued urgent orders to combat the smuggling of wheat, sugar, and urea fertilizer to Afghanistan, aiming to address the country's economic crisis. He formed a steering committee, with himself as the head, to implement measures and expressed determination to tackle smuggling issues, ensuring an uninterrupted supply of fertilizer to farmers and increasing wheat production to make Pakistan a wheat-exporting nation again. [The Nation]

●     IFA Crackdown: The Islamabad Food Authority (IFA) conducted inspections in various areas and confiscated over 388 kgs of expired and substandard food items, including expired food, stored leftovers, MSG/sugar salt, and gutka. Prompt action was taken to dispose of the seized products, reaffirming the IFA's commitment to providing safe and healthy food to the residents of Islamabad. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

●     Flood Victims' Struggles: Despite government assurances of timely monetary assistance to flood victims, many families affected by last year's floods are still struggling to rebuild their homes and live in makeshift tents without basic amenities. The scorching heat wave adds to their difficulties, leaving them uncertain about their survival in the coming months. [ET]

●     Cracking Down on Water Theft: The Punjab government has decided to take strict measures to prevent the theft of canal water across the province. Commissioner Multan division, Engineer Aamir Khattak, directed the administration and police to crack down on water pilferers, with the formation of committees and the registration of criminal cases against offenders. Additionally, special teams from the Agriculture department have been established to combat fake pesticides and raise awareness among growers about the risks associated with substandard and non-registered seeds. [ET] [The Nation]

●     Small Dams in Sindh's Kohistan Belt: Small dams in the Kohistan belt of Sindh, Pakistan, have had positive effects such as reducing salinity levels in groundwater, mitigating flash floods, recharging aquifers, and providing ample drinking water for communities and agriculture. A World Bank climate change expert highlighted the significant impact of these dams on the lives, livelihoods, and ecology of the area during a visit to small dam sites in Kohistan. [Dawn]

●     Shortcomings in Subsidized RLNG Supply: The Directorate General of Audit Petroleum and Natural Resources has identified several shortcomings in the supply of subsidized RLNG to Export Oriented Units (EOUs) due to a lack of monitoring mechanisms by the Ministry of Commerce and the Federal Board of Revenue. The report highlighted the absence of set targets for exports and remittances, failure to analyze the current export levels, and insufficient measures to prevent misuse or unauthorized use of subsidized gas. [BR] [The News]

●     Pakistan's Petroleum Imports Plummet: During the July-April period of FY23, imports of the petroleum group in Pakistan experienced a significant decline of 17.96% compared to the previous year. This decrease can be attributed to a slowing economy, high inflationary pressures, and record-high fuel prices, resulting in reduced consumption. Local production and export of petroleum products also suffered negative growth, worsening the overall situation. [Dawn]

●     OMCs Urge OGRA to Tackle Smuggling: Emerging oil marketing companies (OMCs) in Pakistan have expressed concerns about the Oil & Gas Regulatory Authority (OGRA) and its handling of the smuggling of Iranian petroleum products in the country. In a letter, the Oil Marketing Association of Pakistan (OMAP) accused OGRA of showing "criminal restraint" and failing to take proactive action against the smuggling, which they believe is causing severe damage to the national economy and putting legal businesses at a disadvantage. OMAP emphasized the responsibility of OGRA to curb these illegal activities and create a viable business environment for legally operating OMCs. [The News]

●     Reimbursement for Damaged Road Network: The Pakistani government has approved the reimbursement of Rs 1.666 billion to the National Highways Authority (NHA) for repairing the provincial road network damaged during the 2022 flood. The ECC granted this approval, allowing the NHA to be reimbursed through their road maintenance accounts, and the decision was contingent upon the federal cabinet's approval of the supplementary maintenance grant. The unprecedented rainfall during the flood caused extensive damage to communication infrastructure, prompting the NHA to cooperate and mobilize resources to restore roads and infrastructure in various provinces. [BR]

●     Seminar Advocates Bio-Pesticides: During a seminar held to commemorate Farmers' Day, speakers emphasized the importance of using bio-pesticides as an affordable, environmentally friendly, and crop-safe alternative for farmers. The event, organized by the University of Agriculture Faisalabad, addressed the concerns of guava growers in Larkana district who have been facing significant damage from mealybugs, leading to a decline in plantations. The project to eradicate the mealybug outbreak was approved with gratitude to the University's Vice-Chancellor. [Dawn]

●     Simplified Pesticide Import: Pakistan Single Window (PSW) has introduced a new service that streamlines the import and clearance process for pesticides in Pakistan. This service includes the unified registration system, which enables electronic registration of pesticide products and premises, facilitating real-time validation and customs clearance. Additionally, the system allows for the electronic communication of inspection certificates between PSI companies and PSW, ensuring regulatory compliance and verification by relevant departments. [BR] [ET]

AGRI UPDATES & PAKISTAN POLICY

●     PTI Challenges Military Court Trials: PTI Chairman Imran Khan has arrived at the National Accountability Bureau’s (NAB) office in Islamabad and has been granted bail in 8 cases regarding the May 9 Federal Judicial Complex violence. The Pakistan Tehreek-e-Insaf (PTI) party has filed a petition with the Supreme Court, challenging the trial of civilians in military courts and the deployment of armed forces under Article 245 of the Constitution. The petition argues that the deployment of armed forces is being used to politically target the PTI and that trying civilians in military courts violates due process and international laws. It also claims that the requisition of armed forces to suppress political opponents is a violation of constitutional rights and that civilian forces were capable of handling the situation without military involvement. [Dawn] [Dawn] [The News]

●     Inflation Surges: Pakistan's inflation is projected to rise by 1.07% on a monthly basis, reaching a peak of 37.27% in May, primarily driven by increased food prices. The inflation rate is expected to ease from June onwards, potentially leading to a reduction in the central bank's interest rate in the second half of fiscal year 2024, as the year-on-year trend softens due to the base effect. [ET]

●     Govt of Pakistan Maintains 18% GST Rate: The government of Pakistan plans to maintain the standard rate of General Sales Tax (GST) at 18% in the upcoming budget for 2023-24. Instead of reducing the GST rate, the government intends to increase withholding taxes to generate more tax revenue. Additionally, the government is considering measures to bring retailers into the tax net and exploring options for implementing Minimum Asset Tax (MAT) on movable and immovable assets. The Finance Ministry discussed these budgetary proposals with the Federal Board of Revenue (FBR) to achieve a target tax collection of Rs 9 to Rs 9.2 trillion. [The News]

●     Pakistani Rupee Plummets to Record Low: The Pakistani currency, the rupee, reached a new all-time low against the US dollar, declining by 1.31% in a single day to reach Rs305. This downward trend has persisted over the past four working days, resulting in a total drop of approximately 4%. The interbank market also experienced a continued decline, reaching an 11-day low of Rs 286.55/$, widening the gap between the interbank and open market exchange rates to Rs18, which used to be much smaller in recent days. [ET] [The News]

●     Sharp Decline in Private Sector Lending: Net lending by banks to the private sector in Pakistan has plummeted by 90% during the first 10 months of the current fiscal year, reflecting a significant economic slowdown. The high inflation and record-high interest rates, coupled with political and economic uncertainties, have made banks reluctant to extend loans to struggling businesses, opting instead to lend to the government at abnormally high-profit rates. Conventional banks' lending to the private sector saw an 84.4% decline, further indicating the impact of political and economic challenges on the lending environment. [Dawn]

●     SBP Urges Tax Cuts for IT Sector Growth: The State Bank of Pakistan (SBP) has called for a reduction in duties and taxes on internet and IT devices to promote the rapid growth of the IT sector. The SBP emphasizes the need for consistent efforts led by the Prime Minister's office or a dedicated ministry to coordinate between public and private institutions to support the evolving IT industry. Despite significant growth in IT exports and tech start-ups in recent years, Pakistan's share in the global export of computer services remains low at only 0.3%. [BR]

●     Higher Tax Collection for FY 2023-24: The Federal Board of Revenue (FBR) is planning to set a tax collection target ranging from Rs 9 trillion to Rs 9.2 trillion for the fiscal year 2023-24, taking into account the significant revenue shortfall experienced in the previous year. In order to meet the target, the FBR is considering increasing certain withholding taxes, sales tax, and excise duty rates, as well as implementing measures for the documentation of the economy and taxation of assets. [BR]

●     Expansive Budget Projected: The government is expected to present a fiscally expansionary budget for the fiscal year 2023-24, with a significant increase of around 50% compared to the previous year's approved budget. The budget deficit is estimated to be approximately 7.4% of the GDP, with a major portion of the budget allocated to record-high interest payments. [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

●     US Default Countdown: US President Joe Biden expressed optimism about reaching a deal to avert a default as he began a Monday evening meeting with House Speaker Kevin McCarthy on the debt limit. The two sat down at the White House after Treasury Secretary Janet Yellen warned it’s now “highly likely” her department will run out of sufficient cash — and that a default could come as soon as June 1. Elsewhere in the US, two Federal Reserve hawks said they saw the need to raise interest rates further this year, days after Chair Jerome Powell signaled a pause in June. [Bloomberg] [Bloomberg]

●     G20 Meeting in Kashmir Faces Boycotts: The G20 meeting taking place in India-held Kashmir has faced boycotts from China, Turkey and Saudi Arabia. The meeting has been criticized for violating international laws and United Nations Security Council resolutions in the disputed region. [BR] [Dawn] [CNN]

●     Sri Lanka Signs Fuel Deal with China's Sinopec: Cash-strapped Sri Lanka has signed a deal with China's Sinopec, allowing the company to enter the domestic fuel market and compete with an Indian oil firm and a local state-owned retailer. The agreement aims to ensure a steady and uninterrupted fuel supply for the nation, following months of fuel rationing and shortages triggered by a foreign exchange crisis. [BR] [Reuters] [Zawya] [Economic Times]

●     Armenian PM's Proposal: Armenian Prime Minister Nikol Pashinyan stated that Armenia is willing to recognize Nagorno-Karabakh as part of Azerbaijan if Baku ensures the security of its ethnic Armenian population. Pashinyan expressed the possibility of accepting Azerbaijan's internationally recognized borders in exchange for guarantees for the rights of Armenians in Nagorno-Karabakh, emphasizing the need for a peace treaty. [Dawn] [TRT] [Reuters]

●     Meta Faces Record Fine: Meta, formerly known as Facebook, has been hit with a record 1.2 billion euro ($1.3 billion) fine by Ireland's Data Protection Commissioner (DPC) over its handling of user data and its failure to comply with EU-US data transfer regulations. The DPC has given Meta five months to cease transferring user data to the United States. Meta plans to appeal the ruling and the accompanying fine, emphasizing the potential dangers and precedents set by the decision. [Dawn] [Reuters] [Al Jazeera]

●     Erdogan Gains Endorsement: Turkish President Recep Tayyip Erdogan has received the endorsement of Sinan Ogan, an ultra-nationalist candidate who secured 5.2% of the vote in the recent general election, leading to the first-ever runoff in Turkey's history. Ogan has pledged support for Erdogan in the runoff and urged his supporters to back the president, emphasizing his alignment with Turkish nationalism and tough stance on issues such as immigration and terrorism. [Dawn] [France 24] [DW] [Barron’s]

●     Severe Flooding in Northeast Italy: Over 23,000 people in northeast Italy are still displaced a week after heavy rains triggered severe flooding and resulted in 14 deaths. While many affected individuals are staying with friends or family, around 2,700 individuals are being accommodated in hotels, schools, gyms, and other centers provided by local authorities. [BR] [ET] [The National]

●     Fuel Shortage Challenges Bangladesh: Bangladesh is facing difficulties in paying for imported fuel due to a shortage of dollars, resulting in the state petroleum company owing over $300 million and a significant decrease in fuel reserves. The country's reliance on energy imports has led to power cuts and impacted its garments industry, with fuel suppliers reducing shipments or threatening to halt supplies. Bangladesh Petroleum Corp has requested permission for commercial banks to settle dues with India in rupees, as dollar reserves have declined. [ET] [Reuters]

PAKISTAN - REMAINDERS

●     Pakistan's population has reached 249.566 million in the latest count. [BR]

●     The Pakistan Bureau of Statistics to continue to carry out census in areas hit by law & order. [Dawn]

●     Sindh Assembly asks the Election Commission to hold mayoral elections before the budget. [Dawn]