Import Payments, Rains, Petrol Price Hike, FBR Jan Shortfall, Debt & Ijara Sukuk, Red Sea Shipping.

TOPLINE

• The SBP has eased rules for import advance payments, allowing authorized dealers to make full payments in advance without prior approval, as long as due diligence and anti-money laundering measures are in place.
• The current spell of ongoing rains, expected to last until February 4, is anticipated to have a notable positive impact on Rabi crops, the environment, and human health.
• The interim government has approved a substantial increase in ex-depot prices for petrol by 13.55/liter To Rs 272.89 and high-speed diesel by Rs 2.75/liter to Rs 278.96 for the fortnight starting February 1, 2024, ahead of the February 8 general elections.
• In January 2024, the FBR faced a Rs 9 billion shortfall with tax collection at Rs 681 billion against a monthly target of Rs 690 billion.
• The government plans to save Rs 32 billion annually by using cost-effective Ijara Sukuk for budgetary needs. The government is carrying a debt burden of Rs 14.5 trillion above the statutory limit, as per the skewed Debt Policy Statement 2024.
• Container shipping through the Red Sea has decreased by nearly one-third this year due to ongoing attacks by Yemen's Houthi rebels, according to the International Monetary Fund (IMF).

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• ECC Meeting on Wheat Rates: Gilgit-Baltistan Unrest Continues - The Economic Coordination Committee (ECC) will meet today to discuss the revision of subsidized wheat rates for Gilgit-Baltistan and other issues. The G-B government recently withdrew a decision to increase wheat prices due to protests, but the Awami Action Committee (AAC) continues its campaign until all 15 demands are addressed. [ET]
• Sugar Industry Crackdown: Government Targets Tax Evasion - The caretaker government, led by Minister Gohar Ijaz, has announced a crackdown on sugar mills engaged in tax evasion during a meeting of the Sugar Advisory Board. The sugar industry expressed support for the government's efforts to combat sugar smuggling to neighboring countries, and it was revealed that this year's sugar production estimates have increased to 6.5 million tons due to higher crop yields. [BR]
• Pakistan's State Bank: Streamlining Import Advance Payments - The State Bank of Pakistan has eased rules for import advance payments, allowing authorized dealers to make full payments in advance without prior approval, as long as due diligence and anti-money laundering measures are in place, according to a recent circular. This change enables payments up to 100 percent of the letter of credit or invoice value without pre-approval. [The News] [ET]
• Karachi's New Gold Trading Firm Aims for Rs 2.5 Trillion Contribution: The first formal company for offline and online gold trading was inaugurated in Karachi, aiming to generate Rs 2.5 trillion for the national exchequer in the next five years. Muhammad Shahid Zakariya, Chairman of Zakariya Group, emphasized the need for regulation in gold trading to address issues like speculation, invoicing irregularities, tax evasion, and black marketing. [BR]
• Sri Lanka-bound Livestock: Commerce Ministry Seeks ECC Nod - The Ministry of Commerce has sought permission from the Economic Coordination Committee (ECC) to export live animals to Sri Lanka for artificial insemination. The request, prompted by Sri Lanka's need for Sahiwal bulls, will be presented to the federal cabinet for final approval after ECC consideration. [Dawn]
• Inflation Outlook Raised: Government Adjusts Projection to 28.5% - The federal government has revised its inflation projection to 28.5% in January, citing food supply shocks, marking a 3.5% increase from the previous forecast. The adjustment, following the central bank's elevated forecast, indicates ongoing challenges in essential goods and utility prices, with a suggested inflation rate of around 27.5% in February. [ET]
• Tea Imports: 5.53% surge was seen in tea imports during the first half of the current fiscal year. [ET]

AGRI-INPUTS, WEATHER, WATER & POWER

• Current Rains Boost Prospects for Rabi Crops & Environment: The current spell of ongoing rains, expected to last until February 4, is anticipated to have a notable positive impact on Rabi crops, the environment, and human health, according to agriculturalists and government officials. When contacted by Business Recorder, both groups expressed unanimity on the positive effects of the rainfall on overall agricultural output, especially concerning Rabi crops. [BR]
• Interim Government Greenlights Fuel Price Surge Pre-Elections: The interim government has approved a substantial increase in ex-depot prices for petrol by 13.55 per liter and high-speed diesel by Rs 2.75 per liter for the fortnight starting February 1, 2024, ahead of the February 8 general elections. The adjustments, attributed to exchange rates, higher premiums, and global oil prices, result in new prices of Rs 272.89 for petrol and Rs 278.96 for high-speed diesel. [BR] [Dawn] [ET] [PO] [AN] [ProPakistani] [Samaa] [Dunya]
• Tight Gas Bonanza: Pakistan Unveils $165 Billion Exploration Policy - The government has revealed a new tight gas policy, aiming to attract $165 billion in oil and gas exploration, with a specific focus on securing $20 billion for exploring untapped tight gas reserves ranging from 35 to 70 trillion cubic feet. Pakistan is estimated to have untapped natural gas deposits of 66 trillion cubic feet, presenting a potential investment opportunity of $38 billion in this sector. [ET]
• HBL Empowers Farmers with Rs 2 Billion Solar Tubewell Financing: HBL, honored as the Best Bank in Agriculture Financing, has provided over Rs 2 billion in financing for solar-powered tube wells, benefiting over 850 farmers in Pakistan. This initiative aims to empower farmers, promote sustainability, and enhance crop yields and productivity through environmentally friendly energy. [BR]
• PPIB Advocates Fixed Interest for Solar Projects in South Punjab: The Private Power & Infrastructure Board (PPIB) has asked for a fixed interest rate on Cash Development Loans (CDLs) for three solar panel PV projects in South Punjab. This request, outlined in a letter to the Power Division, is part of the initiative to develop large utility-scale solar PV projects, aiming to replace expensive imported fossil fuels with solar energy. [BR]
• NEPRA Concerned Over High Tariffs, Signals Consumer Impact: NEPRA raised concerns over reduced industrial electricity consumption due to high rates during a hearing on a proposed Rs 5.62/kWh adjustment in power distribution tariffs for December 2023. The authority did not contest the figures, suggesting the adjustment will be passed on to consumers, recovering an additional Rs 41.69 billion. [BR] [ET]
• IoT Fuels Efficiency: Pakistan Railways Upgrade - Pakistan Railways has implemented an Internet of Things (IoT)-based fuel monitoring system at the Margalla station in Islamabad. The digital initiative, inaugurated by the Caretaker Minister for Railways, aims to enhance safety and operational efficiency by digitally monitoring fuel usage in locomotives. [Dawn]

AGRI UPDATES & PAKISTAN POLICY

• ECC Eyes Rs4 Billion for Census, Rs 7.15 Billion for Education Program: The ECC is likely to approve a Rs 4 billion fund for the 7th Population and Housing Census and consider a Rs 7.15 billion grant for the "Action to Strengthen Performance for Inclusive and Responsive Education" program during its meeting, chaired by caretaker Finance Minister Dr. Shamshad Akhtar. [BR]
• Finance Ministry Addresses Inflation Challenges Amid Economic Activity: The Finance Ministry notes ongoing inflation challenges from supply chain disruptions, higher utility prices, and increased expenditure due to significant markup payments. Despite improved economic activity in the first half of the fiscal year, there is fiscal pressure, and inflation is anticipated to be around 27.5-28.5 percent in January 2024, easing to 26.5-27.5 percent in February 2024. [BR]
• Government Seeks Loan Extension for Dasu Transmission Line: The government has requested a 13-month extension, until June 30, 2025, for the closing date of the World Bank loan to facilitate the ongoing construction of a 765 kV transmission line from the Dasu Hydropower Plant to Islamabad, as per official documents from the Economic Affairs Division. [BR]
• Market Rebounds Despite Imran Khan's Legal Woes: The stock market broke a four-session losing streak on Wednesday with selective buying in early trade. However, investor sentiments were dampened by news of a 14-year jail term for former Prime Minister Imran Khan and his spouse in the Toshakhana reference, leading to profit-taking and trimming of early gains in the benchmark KSE 100-share index, which made an intraday high of 758 points according to Topline Securities Ltd. [Dawn]
• Government Plans Rs 32 Billion Savings with Ijara Sukuk Financing: The federal government plans to save Rs 32 billion annually by using cost-effective Ijara Sukuk for budgetary needs, citing lower rates compared to traditional Treasury Bills and Investment Bonds. In CY23, Rs 1.7 trillion was borrowed, with the majority through direct auctions, indicating a shift towards Sukuk for more efficient financing. [BR]
• Debt Policy Violations: Government's Rs 14.5 Trillion Breach - The federal government is carrying a debt burden of Rs 14.5 trillion above the statutory limit, as per the skewed Debt Policy Statement 2024 from the Ministry of Finance. The document reveals violations of the Fiscal Responsibility and Debt Limitation Act during the fiscal year 2022-23, indicating a failure to implement the Medium-Term Debt Management Strategy. [ET]
• FBR Falls Short by Rs 9 Billion in January, Meets 7-Month Target: In January 2024, the FBR faced a Rs 9 billion shortfall with tax collection at Rs 681 billion against a monthly target of Rs 690 billion. However, the overall tax collection target for the first 7 months was met at Rs 5,150 billion, reflecting a Rs 1,177 billion increase from the previous fiscal year. The government has outlined eight contingency measures to generate an extra Rs 18 billion monthly if needed. [BR] [Dawn] [ET]
• ECP Cracks Down on PTI: 72 Arrested, Elections in KPK and Balochistan at Risk - The Election Commission of Pakistan (ECP) has intensified a crackdown on PTI leaders and activists, arresting over three dozen more individuals for their alleged involvement in violence during a rally at Teen Talwar. The total arrests now stand at 72, and there are concerns that elections in Khyber Pakhtunkhwa and Balochistan might be postponed due to the deteriorating law and order situation. The military leadership has declared a zero-tolerance policy against political violence, vowing not to allow anyone to sabotage the elections. [Dawn] [Dawn] [Dawn]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• Red Sea Shipping Slump: Houthi Attacks Cause 30% Drop, IMF Reports - Container shipping through the Red Sea has decreased by nearly one-third this year due to ongoing attacks by Yemen's Houthi rebels, according to the International Monetary Fund (IMF). Jihad Azour, Director of the IMF's Middle East and Central Asia department, revealed that the decline, amounting to almost 30%, accelerated at the beginning of the year. [Dawn]
• Euronext Wheat Futures Drop on Russian Prices, Sluggish Demand: Euronext wheat futures hit new contract lows on Wednesday, influenced by falling Russian prices and heightened competition for slow international demand. March wheat on Euronext in Paris dropped 1.1% to 211.50 euros ($229.41) per metric ton, reaching a life-of-contract low of 210.50 euros, the weakest front-month price in nearly two months. [BR]
• Gold Rises Despite Monthly Decline, Eyes on US Rate Cut Outlook: Gold prices increased, with spot gold rising 0.7% to $2,050.09 per ounce, and US gold futures gaining 0.9% to $2,049.40. However, gold is on track to break its three-month winning streak, facing a 0.6% decline this month amid adjusted expectations for a potential March interest rate cut by the US central bank. The market is closely watching the central bank's policy rate outlook discussion later in the day. [BR]
• Dollar Falls Ahead of Fed Rates Decision, Focus on Policy Language: The dollar declined against the euro and yen as traders anticipated a US rates decision from the Federal Reserve. The central bank is expected to maintain interest rates but might signal future cuts by removing language indicating potential hikes. The market is cautious, and any adjustment in the language could be interpreted as dovish, though it may not necessarily indicate a rate cut in March. [BR]
• Malaysian Palm Oil Futures Dip, Still Show Monthly Gain: Malaysian palm oil futures declined for the third consecutive session, closing at 3,795 ringgit ($802.83) per metric ton, down 1.22%. Despite the recent fall, the contract posted a monthly gain of 1.99% after a 4.47% drop in December, influenced by weaker rival oils and subdued Chinese economic data. [BR]

PAKISTAN - REMAINDERS

• Over 3 Dozen PTI Activists Arrested in Pakistan for Rally Violence, PTI Candidate in Bajaur shot dead. [Dawn]
• Record $37M Foreign Withdrawal from Pakistan's Equity Market in January 2024. [BR] [BR]
• Opinion: Climate Finance Geopolitics - “The lines of distinction between climate finance and traditional development financing have been blurred. Concurrently, national and provincial roles and responsibilities in Pakistan to access international climate finance have become muddled, if not messy. All international finance, including FDI and international trade, is fast becoming an instrument of global climate policies and geopolitics.” - By Ali Tauqeer Sheikh [Dawn]