Interest Rate Hike, Rains Havoc, Fertilizer Taxes, Army Sacking, Russian Oil Tanker, Veg Exports, ISL Airport Lease

TOPLINE

• Pakistan’s central bank unexpectedly raised its benchmark rate to a record high 22% in an emergency meeting as the nation makes a final attempt to revive its stalled loan program with the IMF.
• Heavy rains in Punjab, Pakistan have led to a death toll of 20 people, with 14 more fatalities reported. The deaths were caused by electrocution, drowning, and lightning strikes, while incidents of flooding and injuries from collapsed structures have also been reported. The Pakistan Meteorological Department has warned of urban flooding in cities including Rawalpindi, Lahore, Peshawar, Islamabad, and Gujranwala as urban flooding is becoming a recurring phenomena.
• The Government imposes federal excise duty (FED) on fertilizers, leading to price increases of Rs 150 and Rs 470 per 50kg bag for nitrogen and phosphorus neutrons respectively. Urea and DAP, the two key fertilizers, will be affected, with urea prices expected to rise by Rs 125-150 per bag and DAP prices increasing by Rs 470 per bag due to the new tax.
• In a significant development, the Pakistan Army has taken decisive action by dismissing 3 senior officers in connection with the rioting of May 9.
• A second tanker carrying discounted Russian crude oil is set to arrive at Karachi Port on Tuesday, after being delayed by a week due to limited storage space in Pakistan Refinery Limited.
• Rs 6.22 billion was the export value of vegetables in May 2023, up 38.7% compared to Rs 4.5 billion in May 2022.
• New Islamabad International Airport is set to be leased to international investors as the government faces challenges in outsourcing Karachi and Lahore airports.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

• Eid Ul Azha Trading Frenzy: As Eid Ul Azha approaches, the trade of sacrificial animals in Rawalpindi has reached its peak. The presence of 11 cattle markets has caused significant traffic congestion, causing inconvenience to residents. While the sale of goats and sheep has decreased due to high costs, the purchase of large animals, including camels, remains relatively higher. Transporting the animals from the market to homes has become a challenge, and the district administration has issued an order to close all cattle markets on July 1. [ET]
• Vegetable Export: Rs 6.22 billion was the export value of vegetables in May 2023, up 38.7% compared to Rs 4.5 billion in May 2022, according to the Pakistan Bureau of Statistics. [ET]
• Rice Production: 21.5% reduction was witnessed in rice production in one year. [ET]
• Federal Excise Duty Raises Fertiliser Prices: Government imposes federal excise duty (FED) on fertilizers, leading to price increases of Rs 150 and Rs 470 per 50kg bag for nitrogen and phosphorus neutrons respectively. Urea and DAP, the two key fertilizers, will be affected, with urea prices expected to rise by Rs 125-150 per bag and DAP prices increasing by Rs 470 per bag due to the new tax. [The News]

AGRI-INPUTS, WEATHER, WATER & POWER

• Pre-Monsoon Rains Threaten Flooding: Prime Minister Shehbaz Sharif has called for vigilance as heavy pre-monsoon rains are predicted to flood low-lying urban areas in Pakistan until June 30. The Pakistan Meteorological Department has warned of urban flooding in cities including Rawalpindi, Lahore, Peshawar, Islamabad, and Gujranwala. Landslides are also expected in hilly regions. The recent rainfall in Lahore has already caused flooding, prompting the prime minister to intervene and instruct authorities to address the situation. [Dawn] [Dawn]
• Punjab, KPK Ravaged by Heavy Rains: Heavy rains in Punjab, Pakistan have led to a death toll of 20 people, with 14 more fatalities reported. The deaths were caused by electrocution, drowning, and lightning strikes, while incidents of flooding and injuries from collapsed structures have also been reported. Three persons were killed and eight others were injured in rain-related incidents in different parts of Khyber Pakhtunkhwa. [ET] [ET] [Dawn] [PT]
• KPK PDMA Releases Rs 150 Million: The Provincial Disaster Management Authority (PDMA) in Khyber Pakhtunkhwa, Pakistan, has released Rs 150 million to combat emergency situations during the monsoon season and other emergencies in the province. The funds have been allocated to district administrations in eight districts, with varying amounts ranging from Rs 5 million to Rs 40 million. [ET] [The Nation]
• Delayed Russian Crude Oil Shipment to Arrive at Karachi Port: A second tanker carrying discounted Russian crude oil is set to arrive at Karachi Port on Tuesday, after being delayed by a week due to limited storage space in Pakistan Refinery Limited. The tanker, carrying 55,000 tonnes of Russia URAL oil, is en-route and expected to reach its destination on June 27, 2023. [The News]
• Government's Petrol Levy Decision: The Government is unlikely to impose an additional Rs 10 per liter Petroleum Levy (PL) on petrol and high-speed diesel from July 1. The decision depends on meeting revenue targets and the sale of POL products, with the increase to Rs 60 per liter applicable for the entire year. [The Nation]
• Leasing Islamabad International Airport: New Islamabad International Airport is to be leased to international investors as the government faces challenges in outsourcing Karachi and Lahore airports. The airport is considered a clean transaction and there are interested parties, including the International Finance Corporation (IFC), for operating these airports. [The News]
• Power Cement's Debt Restructuring Deal: Power Cement Limited agrees with local banks to restructure its long-term obligations of Rs 11.9 billion. The arrangement includes reducing principal repayments and extending the timeline for payment, reflecting the company's response to economic challenges such as inflation and low local demand. [BR]
• Managing Water Resources: The Indus Basin in Pakistan is under pressure due to population growth, rapidly melting glaciers, changing pattern in river flows, and over abstraction of groundwater.? The per capita water availability is declining, and water demand of urban, industrial, and commercial sectors is exceeding safe withdrawal limits. Implementing an IWRM approach can help to sustainably manage our water resources and contribute towards sustainable development. [BR]

AGRI UPDATES & PAKISTAN POLICY

• Pakistan's Benchmark Rate Hiked to 22%: Pakistan’s central bank unexpectedly raised its benchmark rate to a record high 22% in an emergency meeting as the nation makes a final attempt to revive its stalled loan program with the IMF. The South Asian nation is going through its worst economic crisis amid record inflation and interest rates but it has seen prospects for its IMF loan take a positive turn before it expires at the end of the week. In a dramatic final attempt to appease the lender, the nation agreed to raise taxes by $750 million and cut spending in its annual budget over the weekend. [BR] [BR] [Dawn] [The News] [Bloomberg] [Bloomberg]
• Pakistan's Bond Surge: Pakistan's dollar-denominated bonds experienced a surge in value following the approval of a revised budget by the country's parliament, signaling a last-minute effort to secure a deal with the International Monetary Fund (IMF). Shorter-dated securities saw the most significant gains, although they remain at distressed levels. With just four days remaining before the expiry of a $6.5 billion Extended Fund Facility, the IMF will review whether to release a pending $1.1 billion tranche that has been on hold since November. The budget review occurred after a meeting between Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva. [BR] [The News]
• Including Census and Debt Payments: ECC approves Rs 21 billion in technical supplementary grants, including Rs 6 billion for conducting the 7th Population and Housing Census and Rs 4 billion for mark-up payments on debt of the PIAC. The Ministry of Planning had requested Rs 34 billion for the census, with Rs 22 billion already released, and now an additional Rs 6 billion has been approved by the ECC. [BR]
• Amendments to Members of Parliament Act: The President of Pakistan has approved amendments to the Members of Parliament Act, granting increased perks to lawmakers. The amendments allow chairpersons of standing committees to use larger cars and exempts them from liability for any damage caused to public vehicles. This has raised concerns about tax burdens on the masses. [ET]
• High-Level Talks in Dubai: Top leaders from the PML-N and PPP met in Dubai to discuss the timing of the next general elections in Pakistan and their respective roles in the future government. Nawaz Sharif and Asif Ali Zardari held talks to reach a consensus on important matters, including the selection of caretaker officials and key positions in case of victory in the upcoming elections. The leaders decided to directly engage in these discussions to avoid unnecessary delays at lower levels. [Dawn]
• Army Takes Strong Action: In a significant development, the Pakistan Army has taken decisive action by dismissing three senior officers, including a lieutenant general, for their failure to prevent the rioting that occurred on May 9. Additionally, disciplinary measures have been taken against 15 other military personnel, including three major generals and seven brigadiers. The army's investigation into the events of May 9 has been completed, leading to charges against a total of 18 officers, with appropriate action being taken against those found responsible. The move underscores the army's commitment to maintaining discipline and accountability within its ranks. [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

• New Sustainability Standards Unveiled: New common standards have been introduced by the International Sustainability Standards Board (ISSB) to tackle misleading climate claims in the corporate world. These standards aim to address the issue of "greenwashing" by setting uniform sustainability and climate standards for companies globally. Currently, companies often report unreliable data on their greenhouse gas emissions, allowing them to overstate their climate credentials. The new standards will be implemented from 2024 and are expected to enhance transparency and credibility in reporting emissions, promoting more accurate assessments of companies' environmental impact. [Dawn]
• US-China Yellen Visit: US Treasury Secretary Janet Yellen plans to visit Beijing in early July for the first high-level economic talks with her new Chinese counterpart, He Lifeng, sources say. News of the trip comes as the US nears completion of an executive order that would regulate and potentially cut off certain US investments in China. Officials are aiming to have it ready as soon as late July, people familiar with the internal deliberations said. The Biden team has been working on the order on US outbound investment in China for almost two years. It would cover certain investments in semiconductors, artificial intelligence and quantum computing. [Bloomberg]
• Opinion: How India Profits From Its Neutrality in the Ukraine War - “The Gulf of Kutch in India is home to the world’s largest oil refinery. But until recently Russia, one of the largest producers, rarely shipped crude petroleum here. After Russia invaded Ukraine, tankers laden with Russian oil are an increasingly common sight along this inlet of northwestern India. A New York Times analysis of data from SynMax, a satellite data analytics company, found that dozens of tankers now arrive every month from Russia. The ships are signs of a stark wartime phenomenon: Since fighting began, India has rapidly emerged as a primary buyer of Russia’s vast supply of crude oil.” - By Lazaro Gamio, Leanne Abraham, Ana Swanson & Alex Travelli [NYT]

PAKISTAN - REMAINDERS

• Editorial: Declining wheat yields - “A recent study released by the International Maize and Wheat Improvement Centre is a wake-up call for South Asian countries, especially Pakistan, regarding the future of wheat yield in the face of climate change. The study reveals that if effective measures are not taken, wheat yields in South Asian countries could decline by a significant 16% by 2050. This decline is primarily attributed to the rising temperatures brought about by climate change.” - [ET]

Opinion: As with Zia, the US now needs Modi - “Is the Indian slow march to collusion with the US not palpable in what is being described as the new Cold War? If the answer is ‘it is’, and that’s the role expected from India under Modi’s watch, the hullabaloo about the US betraying its widely touted commitment to democracy sounds untenable. What questions Modi was asked about the backsliding of democracy under his watch at a very visible press conference with Biden or how he parried them was of little consequence.The elephant in the room was US complicity in the subversion of democracy yet again, the nature of the beast. The question to Modi should have been posed to Biden. Tall claims came a cropper, didn’t they, in the US desertion of Afghanistan that left the devastated country to the mercy of the misogynistic Taliban who were waiting to take the catch for 20 years.” - By Jawed Naqvi [Dawn]