Extreme heat waves spark wildfires, prompting US-China Climate Talks to address global warming and boost climate change efforts

TOPLINE

• Pakistan is witnessing record-breaking prices of wheat flour (Rs 170/kg) and sugar Rs 150/kg).
• Pakistan's textile industry has witnessed a decline in production in the cotton yarn and cotton cloth segments, resulting in an decrease of 26% Y-o-Y. The apparel sector has seen growth, with garments production increasing by 13% in April 2023 and 26% in the 11-month period of FY '23.
• The government has increased the base tariff of electricity by Rs 4.96 per unit from July 1, in line with the IMF agreement. The new base tariff will be Rs 29.78 per unit, based on a revenue requirement of Rs 3.281 trillion. Gas prices are expected to increase with rates of Rs 1100 per MMBTU for up to 300 cubic meters and Rs 2000 per MMBTU for higher consumption. POL product prices declined with petrol price now at Rs 253/liter instead of Rs 262/liter. High Speed Diesel price will be Rs 253.50/liter instead of Rs 260.50/liter.
• Following the breach of River Sutlej's banks at Arifwala, areas were submerged, and crops were destroyed. Relief camps in Bahawalnagar, Chistian, and Sulemanki were established as a measure against potential floods.
• The FBR in Pakistan has made amendments to the Export Facilitation Scheme-2021. Exporters must provide details of their export performance for the past 2-3 years and a summary of foreign exchange realized.
• As the completion of the National Assembly's term approaches, political tensions rise over the caretaker set up and the transition through the elections. PM Shehbaz met with PPP’s Zardari and IPP’s Jahangir Khan Tareen, agreeing to hold timely elections and opt for a senior politician as the caretaker prime minister. The caretaker government will last for 3 months with elections scheduled for November.
• In June, India's merchandise trade deficit reached $20.13 billion, with merchandise exports totaling $32.97 billion and imports amounting to $53.10 billion. With 9 months before the general election, Indian PM Modi and the BJP have revived the proposal for a Uniform Civil Code (UCC) to be established across India.
• Extreme heat waves swept across three continents on Sunday, leading to wildfires and the potential for record-breaking temperatures. The US and China are set to have Climate Talks to address global warming and enhance their climate change efforts. US envoy Kerry will travel to China to prepare for the UN sponsored talks.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Wheat & Sugar Prices Soar in Pakistan: Pakistan is witnessing record-breaking prices of wheat flour and sugar, with wheat flour reaching Rs 170 per kilogram and sugar reaching Rs 150 per kilogram in Karachi and other parts of the country. The Chairman of the Wholesale Grocers Association, Abdul Rauf Ibrahim, has attributed this to an "artificial shortage" created by the hoarding mafia in interior Sindh and the open market of Karachi. The price of a 100/kg bag of wheat has risen to Rs 13,200, resulting in an increase in the price of wheat flour to Rs 132 per kilogram, while mill flour, ex-mill flour, and fine flour are being sold at Rs 170, Rs 160, and Rs 150 per kilogram, respectively. Speculators and hoarders have taken control of the market, causing the surge in prices, and if wholesale rates continue to rise next week, retailers predict that the retail price of sugar may exceed Rs 150 per kg.? [BR] [MM News] [Samaa] [ARY] [Dawn] [The Nation] [ARY] [Dunya] [DD]
• Economic Challenges in Fiscal Year End: The fiscal year ended with stagnant output growth and an inflation rate of approximately 30%. Although reliable unemployment statistics are lacking, some analysts estimate the current unemployment rate to be around 12%. However, the rising prices of food items are concerning for the general population, as food items constitute a significant portion of their consumption. Moreover, food prices have been consistently increasing since August 2019, indicating a lack of dynamism in the agriculture sector. [ET]
• Contrasting Trends in Textile Industry: Pakistan's textile industry has witnessed a notable decline in production, specifically in the cotton yarn and cotton cloth segments, resulting in an overall decrease of 26% year-on-year. On the other hand, the apparel sector has shown remarkable growth, with garments production increasing by 13% in April 2023 and 26% in the 11-month period of FY2023. Analysts attribute the decline in cotton yarn and cotton cloth production to economic challenges, technological limitations, and fluctuations in raw material prices, as these segments heavily rely on machinery and power. [ET]
• Cotton Revival Plan: The cotton market is experiencing a bullish trend, and the Trading Corporation of Pakistan (TCP) will buy cotton at government-fixed rates to maintain stability. The All Pakistan Textile Mills Association (APTMA) has requested separate electricity rates for export industries. Plans for an agricultural revolution supervised by the army are underway to benefit the national economy and the cotton crop. The Lahore High Court (LHC) rejected a textile sector's stay order on energy tariff. The local cotton market saw a significant price increase and increased business volume due to active trading by textile mills and ginners. This year, despite an early harvest in Sindh, low prices and various issues such as contaminated production, lower yields, uncertified seed, and lack of government support have left cotton farmers feeling alienated, leading them to shift their focus to other crops like sugarcane and paddy. [BR] [ET] [Dawn]

AGRI-INPUTS, WEATHER, WATER & POWER

• Iron & Steel Scrap Import: Rs 19.5 billion was the import value of iron and steel scrap in May 2023, down 14.9% compared to Rs 22.9 billion in May 2022. [ET]
• Petroleum Crude Import: Rs 110 billion was the import value of petroleum crude in May 2023, up 4.3% compared to Rs 105.3 billion in May 2022, according to the Pakistan Bureau of Statistics. [ET]
• Insecticides Import: Rs 6.01 billion was the import value of insecticides in May 2023, up 197% compared to Rs 2.02 billion in May 2022. [ET]
• Electricity Tariff Hike: The federal government of Pakistan has increased the base tariff of electricity by Rs 4.96 per unit from July 1, 2023, across the country in line with an agreement with the International Monetary Fund (IMF). The new base tariff will be Rs 29.78 per unit, based on a revenue requirement of Rs 3.281 trillion. This increase is part of the government's efforts to align tariffs with costs, reform the energy sector's cost base, and target power subsidies more effectively, as recommended by the IMF. In 2022, the base tariff was raised by Rs 7.91 per unit in three phases, resulting in an increase from Rs 16.91 per unit to Rs 24.82 per unit. The new base tariff will apply to all power Distribution Companies (DISCOS) and K-Electric. [BR] [BR]
• Gas Price Surge Expected: The Pakistani government is set to raise gas prices to meet IMF conditions, following an increase in power tariffs. The prices will be presented at the next ECC meeting, with rates of Rs 1100 per MMBTU for up to 300 cubic meters and Rs 2000 per MMBTU for higher consumption. [BR]
• LNG Prices Rising: imported liquefied natural gas (LNG) has become the most expensive fuel for power generation in the country, surpassing furnace oil. NEPRA has reaffirmed that hydropower remains the cheapest source of electricity supply to the national grid, priced at Rs 6.94 per unit. [Dawn]
• Awaited LNG Bids: Pakistan received two bids for two LNG cargoes, valued higher than international spot market prices, with one bid from Trafigura Pte Ltd priced at $23.47 per mmBtu for January delivery and another bid at $22.47 per mmBtu for February delivery, while no bid was received for the third cargo, and a decision is pending on accepting the bids by July 31. [The News]
• Nosediving Petrol Prices: The petroleum products price changes will remain effective from 16 to 31 July, 2023. Dar said Rs9 per liter reduction has been made in petrol prices, while High Speed Diesel will witness Rs7 slash. After the new rates, petrol price will be 253 rupees per liter instead of 262 rupees per liter. High Speed Diesel price will be 253.50 rupees per liter instead of 260.50 rupees per liter. [BR]
• River Sutlej Breach Triggers Flooding: Following the breach of River Sutlej's banks at Arifwala, numerous areas were submerged, and crops spanning several acres were destroyed. The water level in the river continues to rise, exacerbating the situation. To aid those affected by the floods, various welfare organizations are providing essential supplies such as ration, clean drinking water, and medical assistance. Additionally, the Pakistan Army, along with Rangers and the civil administration, has established relief camps in Bahawalnagar, Chistian, and Sulemanki as a precautionary measure against potential floods in these regions. [BR] [ET]
• FIA's ACC Identifies High-Ranking Customs Officials in Bribery Case: The Anti-Corruption Circle (ACC) of the Federal Investigation Agency (FIA) in Karachi has nominated 3 high-ranking customs officials after two customs officials were detained at Karachi airport with a large sum of money, leading to the discovery of a bribery and smuggling network. The seized cash, along with foreign currencies, was allegedly collected as "speed money" from customs check posts in Karachi's Keamari district. [BR]
• Establishing New Energy Sources: PM Shehbaz Sharif on Friday performed the groundbreaking of 1,200MW Chashma Nuclear Power Plant Unit 5 (C-5), which is expected to be completed in 7-8 years at a cost of $3.48 billion. PM Shehbaz had on June 30 witnessed the signing of an MoU about the project between China National Nuclear Corporation Overseas Ltd and Pakistan Atomic Energy Commission. [Dawn]
• Recovering from Super Floods: Pakistan continues to grapple with the aftermath of devastating super floods, which caused widespread damage and displacement, with many communities still lacking basic necessities. The country faces challenges in securing sufficient financial resources for reconstruction and recovery efforts, leaving the population vulnerable to the impacts of the anticipated record-breaking monsoon season. [Dawn]
• Renewable Energy Push: The long-term policy framework designed around sustainability drives greater good for social impact. Public and private sector organizations are bound to contribute to Pakistan’s share in making the world a better place for future generations. The energy crisis in Pakistan makes it impossible for business owners to run their day-to-day operations.A stronger infrastructure comprising renewable energy in the power sector will not only result in a greener Pakistan but also address the climate catastrophes looming over us. [ET]

AGRI UPDATES & PAKISTAN POLICY

• Pakistan's Stability & Rating Upgrade: Pakistan has secured $5.6 billion in additional financing, including a loan from the IMF, to avoid default and boost its foreign-exchange reserves. The funding includes commitments from Saudi Arabia and the UAE, with $3 billion already disbursed. This supports Pakistan's financial stability before elections and has led to an upgrade in its rating by Fitch. The IMF's Director of Communication Kozack, highlighted the need for ongoing reforms to address structural challenges and attract private capital. [The News] [BR]
• Roshan Digital Account: Between September 2020 and June 2023, Pakistan received $6.4 billion through the Roshan Digital Account (RDA) from its citizens living abroad. Out of this amount, $1.5 billion was repatriated and $3.7 billion was used locally. The net repatriable liability remained at $1.1 billion. Investments made through the RDA totaled $716 million, with $316 million in conventional Naya Pakistan Certificates (NPCs) and $377 million in Islamic certificates. Pakistanis living abroad also invested $18 million in the stock market. The account balance stood at $385 million with other liabilities at $20 million. [The News]
• FBR's Amendments & Requirements: The Federal Board of Revenue (FBR) in Pakistan has made amendments to the Export Facilitation Scheme-2021 for exporters. Under the revised scheme, exporters must provide details of their export performance for the past 2-3 years and a summary of foreign exchange realized. The FBR has also introduced the definition of "online marketplace" to include electronic platforms facilitating exports. [BR]
• Caretaker Government: As the completion of the National Assembly's term approaches, political tensions rise as discussions over seat adjustment, caretaker set-up, and the timing of the general elections take center stage, with Prime Minister Shehbaz Sharif meeting PPP Co-chairman Asif Ali Zardari and IPP patron-in-chief Jahangir Khan Tareen, agreeing to hold timely elections and opt for a senior politician as the caretaker prime minister. [ET]
• IMF Issues Warning: After approving the $3 billion bailout package, the IMF board has expressed concerns about Pakistan's past poor record and advised completing the new programme to rebuild trust. PM Sharif had a telephonic conversation with IMF’s MD Georgieva, assuring her that Pakistan will bridge the trust deficit. [ET]
• Pakistan's General Elections Set for November: Prime Minister Shehbaz Sharif has announced that the general elections in Pakistan are likely to take place in November, three months after the dissolution of the National Assembly. He stated that his government will hand over power to the caretaker set-up next month, before the completion of the assembly's tenure. The incumbent National Assembly's five-year term will end on August 12, and according to the law, general elections must be held within 60 days if the elected house completes its constitutional tenure. If the dissolution is early, elections are held within 90 days. [Dawn]
• Pak-Iran Forge Agreements on Border Security: Chief of the Army Staff (COAS) Gen Syed Asim Munir met with Iranian President Ebrahim Raisi and other leaders to discuss the importance of enhancing cooperation at the shared borders and combating terrorist groups. The two sides reached "good agreements" to increase border security, with Gen Munir expressing Pakistan's commitment to accelerating these measures for sustainable security. The meetings with Iranian officials took place following Gen Munir's discussions with Iran's top military leadership, emphasizing the significance of the cooperation between the two countries. [Dawn] [Dawn] [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Scorching Weather Across Asia, Europe, & the US: Extreme heat waves swept across three continents on Sunday, leading to wildfires and the potential for record-breaking temperatures. The effects of global warming were evident as Asia, Europe, and the United States experienced scorching weather. [BR]
• Cluster Bomb Controversy: Russia's President Vladimir Putin has declared that Russia possesses an ample supply of cluster bombs and retains the right to use them if such munitions are employed against Russian forces in Ukraine. In response, Ukraine has stated that it received cluster bombs from the United States, to compensate for shell shortages during their counteroffensive. Cluster munitions are banned in over 100 countries due to their indiscriminate nature and the long-lasting threat of unexploded bomblets. [BR] [CNN] [MINT]
• UK Becomes First European Nation to Join CPTPP: The UK government has signed a treaty to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which it claims is the biggest trade deal since Brexit. Business and Trade Secretary Kemi Badenoch signed the accession protocol in New Zealand, making the UK the first new member and the first European nation to join the bloc since its establishment in 2018. The CPTPP includes G7 members Canada and Japan, as well as Australia, New Zealand, Brunei, Chile, Malaysia, Mexico, Peru, Singapore, and Vietnam. [BR] [GOV.UK] [SCMP] [Sky News] [Nation.Cymru] [NTD]
• Elon Musk's Twitter Performance: Since Elon Musk's acquisition of Twitter for $44 billion last October, the platform has witnessed a significant decline in advertising revenue, losing roughly half of its revenue, according to Musk. He mentioned this in a tweet response to a user discussing financing suggestions. Insider Intelligence predicts that Twitter's revenue for 2023 will be less than $3 billion, a one-third decrease from 2022. [BR] [CNN]
• Iraq's Proposed Barter Deal with Iran: Iraqi Prime Minister Mohammed Shia al-Sudani announced a potential barter deal between Iraq and Iran, where Iraqi oil would be traded for Iranian gas. However, three former U.S. officials have noted that such a trade would likely violate U.S. sanctions on Iran, unless a waiver is issued. The barter is intended to resolve payment delays and secure gas exports to Iraq, as Iran had reduced exports due to the delayed payments. While details of the proposed barter are limited, it could help address power supply issues during Iraq's hot summer. [ET] [Reuters] [Press TV] [NHR]
• India's Merchandise Trade Deficit Widens: In June, India's merchandise trade deficit reached $20.13 billion, with merchandise exports totaling $32.97 billion and imports amounting to $53.10 billion. The weak exports can be attributed to various factors, including the slowdown in major global economies, according to Trade Secretary Sunil Barthwal. Services exports in June were $27.12 billion, while imports were $15.88 billion. From April to June, both services and merchandise exports declined by 7.3% year-on-year to $182.7 billion, while imports fell by 10.2% to $205.29 billion. [BR] [Times Now] [BW] [Reuters] [Mint] [Economic Times] [ABP]
• Final Stretch for BJP: With 9 months remaining before the general election, Indian Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) have revived the proposal for a Uniform Civil Code (UCC), aiming to establish a common set of personal laws. The Law Commission has sought public opinion on the matter, while Modi has made a strong public endorsement of the common code. [Dawn]
• US-China Bilateral Talks: The United States and China are holding bilateral talks to address global warming and enhance their climate change efforts. U.S. special envoy on climate change John Kerry will meet with his Chinese counterpart Xie Zhenhua in Beijing to discuss reducing methane emissions, limiting coal use, curbing deforestation, and supporting developing countries in tackling climate change. The talks are seen as an opportunity to improve the strained relationship between the two countries and set the stage for UN based climate talks. [Dawn] [ET] [PO] [CNBC] [DH] [Reuters] [ST] [Al Jazeera] [PT]
• Global Public Debt Reaches $92 Trillion: Global public debt reached a record high of $92 trillion in 2022, according to a United Nations report. Governments around the world have increased borrowing to address crises like the COVID-19 pandemic. Developing countries are particularly burdened by the debt, as the report highlights that both domestic and external debt have grown more than fivefold in the past two decades, outpacing economic growth. [BR] [VOA] [Reuters]
• Oil Prices Drop as Dollar Strengthens: Oil prices fell more than a dollar a barrel on Friday as the dollar strengthened and oil traders booked profits from a strong rally, with crude benchmarks recording their third-straight weekly gain. Brent crude futures settled at $79.87 a dollar, down $1.49, or 1.8%, while the US West Texas Intermediate crude futures fell $1.47, or 1.9%, to settle at $75.42 a barrel. [BR]
• Palm Oil Futures Recover: Malaysian palm oil futures ended with a modest recovery on Friday and logged a third consecutive weekly gain as the strength in rival edible oils countered a firmer yen. The benchmark palm oil contract for September delivery on the Bursa Malaysia Derivatives Exchange closed 12 ringgit, or 0.3%, higher at 3,877 ringgit ($857.17) a metric ton. [BR]

PAKISTAN - REMAINDERS

• ‘Climate March’ highlights the importance of a clean city in Karachi organized at Frere Hall. [BR] [Dawn]
• Opinion: Monsoon Scares - “Karachi, Pakistan's largest city, has been plagued by severe urban flooding during the monsoon season, with record-breaking rains causing infrastructure collapse and widespread damage. The complex issue stems from a combination of poorly maintained infrastructure, inadequate drainage systems, urbanization, climate change, and institutional challenges. Population growth further strains the city's infrastructure, exacerbating the risk of flooding.” - Muhammad Toheed [ET]
• Opinion: In Search of Halal food - “Thai Deputy Prime Minister and Commerce Minister Jurin Laksanawisit emphasized the importance of exploring business opportunities in halal and organic food, as he believes these will be key issues for the global population by 2050. Despite Thailand having a relatively small Muslim population, the country is a leading global halal food producer and exporter, with exports expected to reach around $8 billion by the end of the fiscal year.” - Kalbe Ali [Dawn]
• Opinion: Ranking Karachi - “THE Economist Intelligence Unit’s rating of Karachi as one of the world’s least livable cities is not surprising. Five categories were reviewed to arrive at this conclusion: stability, healthcare, education, culture and environment, and infrastructure. Karachi’s ranking was an abysmal 169th out of a total of 173 cities.” - By Dr Noman Ahmed [Dawn]
• Devaluation of rupee causes downward trend in psychological wellbeing: “Tragic cases of individuals resorting to self-immolation and suicide due to their inability to repay loans highlight the exploitative nature of mobile phone applications offering "easy loans" with exorbitant interest rates in Pakistan. Misleading advertisements and the desperate financial situations of vulnerable individuals lead them into a cycle of debt and despair, exacerbating their already dire circumstances.” - Mohiuddin Aazim [Dawn]