Inflation Drops, APTMA on Rates, Regional IMPEX Grows, Petrol Sales Decline, Govt Agencies, Intl Oil & Gold Prices.

TOPLINE

• Pakistan's annual consumer price inflation rate dropped to 9.6% in August 2024, marking the first single-digit inflation in nearly three years, down from 27.4% a year ago and 11.1% in July. The month-on-month inflation rate increased by 0.4% in August, compared to 2.1% in the previous month.
• The All Pakistan Textile Mills Association (APTMA) has urged the Monetary Policy Committee to cut interest rates by 400 basis points in its upcoming September 12 meeting. APTMA argues that the current 9.5% interest rate, translating to a real rate of around 10%, is excessive given the declining inflation and the financial strain on the industrial sector.
• Pakistan's exports to 7 regional countries increased by 25.59% in July 2024, totaling $339.88 million, with China being the largest export destination and growth observed in exports to Afghanistan and Sri Lanka. Meanwhile, Pakistan's imports from the region surged by 51.54% to $1.51 billion, primarily driven by increased imports from China and Afghanistan.
• Petroleum product sales fell by 14% in August year-on-year, mainly due to reduced sales of high-speed diesel and furnace oil. While there was a 2% month-to-month increase from July to August, sales for the first two months of the fiscal year dropped by 12%, with experts citing diesel smuggling and decreased use of furnace oil for power generation.
• The government will keep the Trading Corporation of Pakistan (TCP), Pakistan National Shipping Corporation (PNSC), and Small and Medium Enterprises Development Authority (Smeda) under state control, despite TCP's Rs 287 billion in receivables.
• Oil prices stabilized on Monday with Brent crude at $76.87/barrel, down 0.08%, and US West Texas Intermediate at $73.63, up 0.11%. Last week’s losses were due to higher OPEC+ production and weak demand from China and the US. Gold prices dropped to their lowest in over a week, with spot gold falling about 0.1% to $2,501.20/ounce.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Pakistan Inflation Drops to 9.6%: Pakistan's annual consumer price inflation rate dropped to 9.6% in August 2024, marking the first single-digit inflation in nearly three years, down from 27.4% a year ago and 11.1% in July. The month-on-month inflation rate increased by 0.4% in August, compared to 2.1% in the previous month. [BR] [Dawn] [ET]
• FBR to Review Tax Valuation: The Federal Board of Revenue (FBR) has agreed to review the valuation table for the monthly advance tax collected from shops and retail outlets, addressing a key demand of the All Pakistan Anjuman-e-Tajran. During a meeting, FBR officials informed traders that the "Tajir Dost Scheme" would be implemented, requiring traders to register and pay their due taxes. [BR]
• Cotton Spot Rate Falls to Rs 18,300: On Monday, the spot rate for cotton decreased by Rs 700 to Rs 18,300/maund. Cotton prices in Sindh range from Rs 18,000-Rs 18,200/maund and Phutti from Rs 6,500-Rs 7,500/40 kg. In Punjab, cotton is priced between Rs 18,000 and Rs 18,400/maund, with Phutti ranging from Rs 6,800 to Rs 8,500/40 kg. In Balochistan, cotton is between Rs 18,000 and Rs 18,200/maund, and Phutti between Rs 6,600 and Rs 8,600/40 kg. [BR]
• APTMA Urges 400 Bps Rate Cut: The All Pakistan Textile Mills Association (APTMA) has urged the Monetary Policy Committee to cut interest rates by 400 basis points in its upcoming September 12 meeting. APTMA argues that the current 9.5% interest rate, translating to a real rate of around 10%, is excessive given the declining inflation and the financial strain on the industrial sector. [BR] [ET]
• Salt Export Surge to Bangladesh Speculated: Speculation about a potential surge in salt exports to Bangladesh has increased due to political changes in Bangladesh and environmental issues affecting salt production in India. Industry insiders have noticed more quotation requests from Bangladeshi traders following Bangladesh's relaxation of trade policies, which is expected to improve trade terms for salt imports. [ET]
• Steel Industry Seeks Tax Exemption: The steel industry has asked the FBR to enforce a sales tax exemption on local scrap sales to boost revenue by Rs 40-50 billion in 2024-25 and prevent the use of fake invoices. Delays in implementing this policy are causing revenue loss and forcing steel producers to operate at minimal capacity, leading to job cuts. [BR]
• Pakistan Regional Trade Surge: Pakistan's exports to seven regional countries increased by 25.59% in July 2024, totaling $339.88 million, with China being the largest export destination and significant growth observed in exports to Afghanistan and Sri Lanka. Meanwhile, Pakistan's imports from the region surged by 51.54% to $1.51 billion, primarily driven by increased imports from China and Afghanistan. [ET]
• IFAD Launches Sindh Coastal Resilience Project: The International Fund for Agricultural Development (IFAD) will launch the "Sindh Coastal Resilience Project" in 2025 to support farming and fishing in vulnerable areas of Sindh. The initiative will target 7 poor talukas across Badin, Sujawal, and Thatta districts to provide sustainable livelihoods and address climate change impacts. [Dawn]
• Sindh Floods Cause Rs 86.86 Billion in Crop Losses: Recent heavy rains and flooding in Sindh have caused an estimated Rs 86.86 billion in losses to farmers, with 541,351 acres of crops destroyed. The cotton crop was particularly hard-hit, with 293,580 acres significantly affected, according to a preliminary report from Sindh's Agriculture Minister. [Dawn] [ET]

ENERGY - WEATHER, WATER & POWER

• NDMA Warns of More Floods: The NDMA has warned of further floods as recent monsoon rains have already resulted in 293 deaths, 564 injuries, and the destruction of nearly 20,000 houses. The National Emergencies Operations Centre anticipates additional rain and thunderstorms in Khyber-Pakhtunkhwa and Punjab from the night of September 2 to September 4, 2024. [BR] [Dawn]
• Denmark Supports Pakistan Mining: Denmark has pledged to support the modernization and investment in Pakistan's mining industry. Federal Ministers met with a delegation from FLSmidth, including CEO Mikko Keto, and welcomed the investment, with Ambassador Jakob Linulf also in attendance. [BR]
• Petroleum Sales Drop 14%: Petroleum product sales fell by 14% in August year-on-year, mainly due to reduced sales of high-speed diesel and furnace oil. While there was a 2% month-to-month increase from July to August, sales for the first two months of the fiscal year dropped by 12%, with experts citing diesel smuggling and decreased use of furnace oil for power generation as key factors. [The News]
• Dar Rejects Gas Reallocation Proposals: Ishaq Dar rejected the Petroleum Division's proposals for reallocating 35% of discovered gas to third parties, stating the policy approved by the Council of Common Interests would not be revised. The proposals included applying the policy to depleting and new fields, excluding existing ones, and a phased allocation increase until 2031. [ET]
• IMF Sets Conditions on Punjab Subsidies: The IMF has imposed new conditions on Pakistan following Punjab's decision to grant Rs 45-90 billion in electricity subsidies for two months. The IMF requires Punjab to end the subsidy by September 30 and has banned any new provincial subsidies during the 37-month Extended Fund Facility (EFF) program. [ET]
• IMC Boosts Localization Investment: Indus Motor Company (IMC) has approved an additional Rs 1.1 billion investment to further localize parts for its vehicles, raising the total investment in this project to Rs 4.1 billion. The initiative aims to complete by Q1 2026 and focuses on reducing foreign exchange outflows, boosting the local parts industry, and generating employment. [Dawn]
• Sindh to Build Expressway & Undertake Afforestation: The Sindh government will build an expressway from Karachi Port to the M9 Motorway and undertake large-scale afforestation along the Indus River. The plans were approved at a PPP Board meeting led by Chief Minister Murad Ali Shah. [ET]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Govt. Proposed Public Order and SC Judge Bills: On Monday, the government proposed two Senate bills: the "Peaceful Assembly and Public Order Bill 2024" to regulate public gatherings in Islamabad and a bill to increase Supreme Court judges to address case backlogs. The PTI opposed both bills, particularly the public order bill, which mandates organizers to obtain district magistrate approval seven days before an event. [Dawn] [ET]
• National Assembly Passes Four Bills: The National Assembly passed four bills on Monday, including those for establishing tribunals for privatization and electronic crimes, despite opposition protests. The other bills include the "Apostille Bill, 2024" and the "Cannabis Control and Regulatory Authority Bill, 2024." [BR]
• Pakistan's Economic Challenges Highlighted: Pakistan faces five major economic challenges, including high fuel prices, poverty, and inflation, as per the Finance Ministry's report to the ADB. The report notes that the Russian-Ukraine war has exacerbated the impact of high fuel prices on sectors like electricity, industry, transportation, and construction. [BR]
• FBR Proposes 1% Tax Increase: The Federal Board of Revenue (FBR) has proposed a 1% increase in all withholding tax rates from October 1, 2024, if there is a revenue shortfall in September 2024. This increase would be implemented via a supplementary Finance Bill if the FBR does not meet its September tax collection targets. [BR]
• GPF Markup Rate Set at 13.97%: The Finance Ministry has set the General Provident Fund markup rate for fiscal year 2023-24 at 13.97%. This rate is lower than the 14.22% for 2022-23 but higher than the 12.40% for 2021-22. [BR]
• Govt. Maintains Control of Key State Enterprises: The government will keep the Trading Corporation of Pakistan (TCP), Pakistan National Shipping Corporation (PNSC), and Small and Medium Enterprises Development Authority (Smeda) under state control, despite TCP's Rs 287 billion in receivables. The Cabinet Committee on State-owned Enterprises may allow the private sector to carry out some of their functions. [ET]
• SIFC Targets Key SOEs for PSWF: The Special Investment Facilitation Council (SIFC) has prioritized four major oil and gas companies and the Roosevelt Hotel for management under the Pakistan Sovereign Wealth Fund (PSWF) and a strategic initiative for state-owned enterprises. The selected companies are OGDCL, PPL, PSO, and PRL, with a consensus to identify 12 SOEs for the initiative. [The News]
• PTA Receives Proposals for 5G Auction: The Pakistan Telecommunication Authority (PTA) has received five proposals from international consultants for overseeing the 5G spectrum auction, which is expected to be completed within the current fiscal year. Industry players, however, have raised concerns about whether this is the right time to proceed with the 5G rollout. [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israeli Genocide: An independent UN expert warned on Monday that Israel’s “genocidal violence” in Gaza risked spreading to other parts of the occupied Palestinian territory amid a large-scale military operation in the West Bank. Francesca Albanese, the United Nations special rapporteur on the rights situation in the Palestinian territories, warned in a statement that Israel’s recent intensification of its operations in the occupied West Bank, which is separated from Gaza by Israeli territory, marked “a dangerous escalation”. [Dawn] [ET]
• Putin Claims Rapid Advances in Eastern Ukraine: Russian President Vladimir Putin claimed that his forces are advancing rapidly in eastern Ukraine, suggesting Ukraine's cross-border incursion into Kursk is failing. Speaking before visiting Mongolia, Putin acknowledged the challenges in Russian border regions but asserted that Ukraine has not stopped Russia's Donbas offensive. [ET]
• Southern India Floods Kill 25: Intense monsoon rains and floods in southern India have killed at least 25 people, with 16 deaths in Telangana and 9 in Andhra Pradesh. Thousands have been rescued and placed in relief camps. The heavy rainfall, totaling 400 millimeters in 24 hours, has caused significant damage to homes. Experts link the increasing frequency of such extreme weather events to climate change. [ET] [The News]
• China Hosts Major China-Africa Forum: China is hosting its largest diplomatic event since the COVID-19 pandemic this week, the China-Africa forum. The event aims to bolster ties with Africa, a resource-rich continent where China has heavily invested in infrastructure and development projects, and accessed valuable resources like copper, gold, lithium, and rare earth minerals. [ET] [VOA]
• Red Sea Tanker Attack Update: On Monday, a Saudi-owned crude tanker and a Panama-flagged oil ship were attacked in the Red Sea off Yemen. The vessels, the Saudi-flagged Amjad and Panama-flagged Blue Lagoon I, sustained minimal damage and continued their voyages without reported casualties. It remains unclear if the attacks were carried out by Iran-aligned Houthi militants. [BR]
• Urals Crude Freight Rates Fall: Freight rates for shipping Russia’s Urals crude to India have dropped to their lowest since the price cap was imposed in late 2022, improving the economics of Moscow's oil exports. Prices for Urals in India have strengthened, remaining about $10 above the price cap limit set by the G7 and the EU. [BR]
• Argentina Grain Exports Surge 40%: Argentina’s grain exporters earned $2.451 billion in August, a 40% increase from the previous year, according to CIARA-CEC. Despite this, revenues fell 6% from July, though there was a 9.4% increase for January-August. The sector's sales pace remains moderate, CIARA-CEC noted. [BR]
• Gold Prices Hit Weekly Low: Gold prices dropped to their lowest in over a week on Monday, with spot gold falling about 0.1% to $2,501.20 per ounce. The decline came as the US dollar strengthened and market attention turned to upcoming economic data for insights on potential Federal Reserve rate cuts. Trading was light due to the US holiday. [BR]
• Oil Prices Stabilize; Palm Oil Falls: Oil prices stabilized on Monday with Brent crude at $76.87 per barrel, down 0.08%, and US West Texas Intermediate at $73.63, up 0.11%. This came after last week’s losses due to expected higher OPEC+ production and weak demand from China and the US. Additionally, the November palm oil contract on the Bursa Malaysia Derivatives Exchange fell by 1.11% to 3,933 ringgit ($903.10) per metric ton. [BR] [BR] [Dawn]

OPINION(S) & REMAINDERS

• Dr. Bengali Opposes Job Cuts & Privatization: Economist Dr. Kaiser Bengali opposes the planned elimination of 150,000 government jobs and the privatization of Utility Stores Corporation, arguing that these measures unfairly impact lower-income groups. He resigned from the High-Powered Committee for Rightsizing, citing disappointment with the government's lack of commitment to reducing expenditures. [Dawn] [ET]
• Nishat Mills Plans UK Expansion: Nishat Mills Limited (NML) has received Board approval to establish a private limited company in the UK through its UAE subsidiary, Nishat International FZE. This move is subject to regulatory approvals. NML also reported a 51.98% drop in profit after tax to Rs 5.35 billion for the first nine months of FY24, mainly due to increased finance costs and a higher super tax rate. [The News]
• Opposition Criticizes Sindh Assembly on Dacoit Violence: On Monday, the opposition criticized the Sindh Assembly over the rise of dacoits with military-grade weapons, while the government defended its measures to restore order. Muhammad Farooq of Jamaat-e-Islami highlighted the ongoing issue of violence and kidnappings in Sindh, questioning the government's strategy to address these problems. [BR]
• Opinion: Leveraging Private Sector to Empower Pakistan’s Youth - “In the long run, this ‘youth bulge’ could be the country’s greatest hope or missed opportunity, depending on how effectively we channel our resources to empower them. Empowering our youth will require significant investments and a strategic overhaul of existing policies and initiatives.” - By Khawaja Aftab Ahmed [BR]