Pak Debt Record, FED on Cigs & Juices, POL Prices Slashed, IMF on Taxation & Treasury Bills, PSX New High, Putin Visits China.

TOPLINE

• Pakistan's total debt and liabilities hit a record of nearly Rs 81 trillion, growing at a double-digit rate over the past year, as the country faces challenges in finding new financing sources due to junk credit ratings. The State Bank of Pakistan reported a Rs 8.4 trillion surge in total debt and liabilities by March-end compared to the previous year.
• SPARC proposed a 26% increase in Federal Excise Duty on cigarettes for the 2024-25 budget. The 20 percent FED imposed on fruit juices in June 2023, which, alongside an 18% sales tax, resulted in a 40% decline in the formal packaged juice industry's volume.
• Petrol prices were cut by Rs 15.39 per liter to Rs. 273.10, high-speed diesel by Rs 7.88 per liter to Rs. 274.08, light diesel oil by Rs 7.54 per liter to Rs 161.17, and kerosene oil by Rs 9.86 per liter to Rs 173.48.
• The IMF suggests Pakistan consider adopting either the Australian or Indian taxation model to revamp its GST system, as the FBR aims for an annual tax collection target between Rs 11.2-11.5 trillion for the next budget. The government raised Rs 640 billion in Wednesday's treasury bills auction, surpassing the Rs 450 billion target.
• Bulls drove the KSE 100 index to a new intraday record high above 75,000 for the fourth consecutive session on Wednesday, fueled by foreign investors' interest amid a positive economic outlook. Topline Securities noted an unprecedented rally at PSX, with foreign portfolio investments totaling $150 million within a year.
• Russian President Vladimir Putin visits China on Thursday to meet with President Xi Jinping, seeking support for his efforts in Ukraine and Russia's economy. This trip is Putin's first abroad since his March re-election and his second to China in just over 6 months, highlighting China's importance as an economic lifeline for Russia.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Protest Planned Over Delayed Wheat Procurement: Workers of Jamaat-e-Islami (JI) and the Kissan Board Pakistan (KBP) will protest in front of the Punjab Chief Minister's House today against the delayed wheat procurement, causing distress for growers. Led by JI Chief Hafiz Naeem ur Rehman, the demonstration will begin at Mall Road and conclude at the Chief Minister's House. [BR]
• Cotton Picking Begins Amid Price Concerns: Cotton picking has begun in coastal Sindh and parts of Punjab, with ginners planning to start factories in early June. Despite lower arrivals compared to last year, concerns arise over declining cotton prices in local and foreign markets, hinting at a potentially challenging future for the cotton sector akin to wheat. [Dawn]
• FED Adjustments on Juices, Cigarettes: The government plans to adjust the Federal Excise Duty (FED) in the upcoming budget, particularly targeting juices and cigarettes. This decision follows an assessment of the adverse effects of the 20 percent FED imposed on fruit juices in June 2023, which, alongside an 18% sales tax, resulted in a 40% decline in the formal packaged juice industry's volume. [BR]
• SPARC Advocates 26% Cigarette Tax Hike: SPARC proposed a 26% increase in Federal Excise Duty on cigarettes for the 2024-25 budget. They presented this proposal during a briefing session with journalists and submitted it to the Finance Ministry/FBR, advocating for higher taxation on cigarettes to protect children's rights. [BR]
• Dairy Imports: Rs 2.5 billion was the import value of milk, cream and milk food for infants in March 2024, down 28.35% compared to March 2023. [ET]
• Synthetic Materials Export: Rs 10.1 billion was the export value of plastic materials in March 2024, up 69.2% compared to Rs 5.98 billion in March 2023, according to the Pakistan Bureau of Statistics. [ET]

ENERGY - WEATHER, WATER & POWER

• Petroleum Prices Reduced Nationwide: The federal government announced significant reductions in the ex-depot prices of petroleum products starting May 16, following approval from Prime Minister Shehbaz Sharif. Petrol prices were cut by Rs 15.39 per liter to Rs 273.10, high-speed diesel by Rs 7.88 per liter to Rs 274.08, light diesel oil by Rs 7.54 per liter to Rs 161.17, and kerosene oil by Rs 9.86 per liter to Rs 173.48. [BR] [Dawn] [ET]
• Heatwave Warning: Temperatures Soar to 40°C - The temperature in the city reached 40 degrees Celsius on Wednesday, with the Meteorological Department forecasting "hot to very hot" weather across the province in the coming days, especially in the upper and central regions, where daytime temperatures could rise to 45-47°C starting from Thursday. [Dawn]
• LSMI Output Rises in March: The Large Scale Manufacturing Industries (LSMI) output increased by 2.04% in March 2024 compared to March 2023 but decreased by 9.35% compared to February 2024, according to the Pakistan Bureau of Statistics (PBS). For the overall period from July to March 2023-24, the sector showed a slight decline of 0.10% compared to the same period the previous year. [BR] [Dawn] [ET]
• Electricity Tariff Adjustment Approved: The Power Division has the Prime Minister's approval to adjust electricity tariffs, possibly increasing them by up to 10% while reducing variable charges to maintain neutrality for consumers. Taxes will be collected from relevant segments instead of through electricity bills, and the poorly performing NTDC will be dissolved by June 30, 2024, according to CPPA-G sources speaking to Business Recorder. [BR] [Dawn]
• Shehbaz Orders Net Metering Review: Prime Minister Shehbaz Sharif has directed NEPRA and the Power Division to amend net metering regulations for rationalizing buy back rates. This decision, made during a recent meeting, responds to the increasing shift to solar power by wealthy households and commercial entities due to load shedding and high electricity costs. [BR]
• Motor Gasoline Demand Growth: Industry projections suggest a 5-6 percent growth in the country's motor gasoline demand over the next five years, driven by improved economic indicators and increased automobile sales. Gasoline consumption is expected to rise to 9.4 million tonnes by fiscal year 2027-28, up from 7.7 million tonnes in the current fiscal year, according to the Pakistan Oil Report by the Oil Companies Advisory Council (OCAC). [The News]
• Government-Fertilizer Deal: Gas Stability, Urea Prices - The government and fertilizer manufacturers have struck a deal to provide affordable gas from the Mari Gas Field at a fixed price over the long term, allowing for state control of urea prices. This agreement ensures stable gas supply to fertilizer plants while regulating market prices to protect farmers, as reported by a Ministry of Industries and Production official to The News. [Dawn] [The News]
• CM Bugti: Rs 50B Solar Tube-wells Project - Balochistan Chief Minister Mir Sarfaraz Bugti announced a Rs 50 billion project to solarize around 27,000 agricultural tube-wells, aiming to boost the agricultural sector and support farmers. He hailed it as a historic achievement, achieved through the provincial government's advocacy with the Federal Government. [ET] [UP]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Imran Khan Granted Bail in ￡190m Case: The Islamabad High Court granted bail to Imran Khan in the 190 million UK pound case. The division bench, comprising Chief Justice Aamer Farooq and Justice Tariq Mehmood Jahangiri, announced the verdict after arguments from both sides. Special Prosecutor Amjad Pervez represented NAB, while Sardar Latif Khosa appeared as Imran's counsel. The Supreme Court has resumed hearing a case about changes in the accountability laws as former prime minister Imran Khan appeared before it via video link as a petitioner in the matter. [BR] [Dawn] [ET]
• China, Pakistan Forge Enhanced CPEC: China is prepared to collaborate with Pakistan to advance an "upgraded version" of the China-Pakistan Economic Corridor (CPEC), announced Foreign Minister Wang Yi, as reported by his ministry. This statement follows Wang's meeting with his Pakistani counterpart Mohammad Ishaq Dar in Beijing, where Dar arrived on Monday for an official four-day visit to co-chair the 5th Pakistan-China Foreign Ministers' Strategic Dialogue. [BR] [ET] [The News]
• IMF Proposes GST Reform Models: The IMF suggests Pakistan consider adopting either the Australian or Indian taxation model to revamp its GST system, as the FBR aims for an annual tax collection target between Rs 11.2 to Rs 11.5 trillion for the next budget. These options include centralized administration, rate-setting, and a strict revenue-sharing formula. [The News]
• ECC Grants Rs 23 Billion to AJK for Utilities: The ECC approved a Rs 23 billion grant to the AJK government for electricity and flour, following the Prime Minister's announcement amidst protests against price increases. The decision was made in an emergency ECC meeting convened to consider the proposal from the Ministry of AJK and Gilgit-Baltistan. [BR]
• Government Exceeds Target in Treasury Bills Auction: The government raised Rs 640 billion in Wednesday's treasury bills auction, surpassing the Rs 450 billion target, while cutting off yields for various tenors by up to 49 basis points. Despite this, bids totaled over Rs 1.8 trillion, indicating investor preference for risk-free government papers amid an uncertain investment climate. [Dawn]
• Pakistan's Debt, Liabilities Hit Record Rs 81 Trillion: Pakistan's total debt and liabilities hit a record nearly Rs 81 trillion, growing at a double-digit rate over the past year, as the country faces challenges in finding new financing sources due to junk credit ratings. The State Bank of Pakistan reported a Rs 8.4 trillion surge in total debt and liabilities by March-end compared to the previous year, with liabilities amounting to Rs 4.4 trillion. [ET]
• Pakistan Investment Bond Auction Success: The State Bank of Pakistan sold over Rs 458 billion of Pakistan Investment Bond – Floating Rate (PIB-PFL) in an auction, exceeding the Rs 280 billion target. Cut-off prices were Rs 96.1823 for the 5-year and Rs 94.2124 for the 10-year bonds. Despite substantial bids, only the semiannual floaters were accepted, with none for the quarterly PIB. [MG]
• Punjab Plans Tax Inclusion for Economic Documentation: The Punjab Finance Minister announced plans to bring all services under the tax net to facilitate economic documentation. Mujtaba Shujaur Rehman emphasized the need for a uniform tax rate on all services and proposed including exempted services with a nominal rate to promote a documented economy during the fourth meeting of the Resource Mobilization Committee for 2024-25. [BR] [ET]
• KSE 100 Hits Record High on Foreign Investor Surge: Bulls drove the KSE 100 index to a new intraday record high above 75,000 for the fourth consecutive session on Wednesday, fueled by foreign investors' interest amid a positive economic outlook. Topline Securities CEO Mohammad Sohail noted an unprecedented rally at PSX, with foreign portfolio investments totaling $150 million within a year, the largest influx in over six years. [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israel Genocide: In Gaza's north, battles continue as Palestinian groups target invading Israeli troops with small-arms ambushes, rocket fire, and IEDs. The International Rescue Committee describes the crisis in southern Gaza as unimaginable, with Israeli ground forces invading Rafah and mass displacement leading to urgent needs for food and water. [Al Jazeera] [BBC]
• Putin Visits China for Support Amid Ukraine Crisis: Russian President Vladimir Putin visits China on Thursday to meet with President Xi Jinping, seeking support for his efforts in Ukraine and Russia's economy. This trip is Putin's first abroad since his March re-election and his second to China in just over six months, highlighting China's importance as an economic lifeline for Russia amidst Western sanctions over Ukraine. [Dawn]
• US Inflation Cooling: The latest inflation report may offer Federal Reserve officials some hope that inflation is resuming its downward trend, which would be key for them to cut rates. Separate retail sales data indicated some softening of the resilient consumer demand that’s been bolstering the economy. “The market likes it,” said Gary Pzegeo at CIBC Private Wealth US. The S&P 500 notched its 23rd record in 2024 as data showed the core consumer price index cooled for the first time in six months. Wall Street’s “fear gauge” sank toward the lowest since December. Treasuries climbed across the US curve. Fed swaps priced in a faster pace of policy easing this year. [BBG] [BBG]
• Jaishankar: Chabahar Deal Despite US Sanctions Warning - India's Foreign Minister S. Jaishankar downplayed US sanctions threat after signing a contract with Tehran to operate the Chabahar Port, stressing its regional benefits. The US warned entities considering deals with Iran of potential sanctions shortly after India and Iran inked a 10-year agreement for the port's development. [ET] [IFP] [VOA]
• How China Rose to Lead the World in Cars & Solar Panels: Heavy subsidies for industry, together with weak sales in China, have set the stage for an export boom, raising fears of factory job losses elsewhere. On Tuesday, President Biden raised U.S. tariffs sharply on imports from China of electric cars, solar panels and other high-tech manufactured goods. China launched an ambitious program called Made in China 2025. The plan was for China to replace key imports in 10 advanced manufacturing industries by making its own products. The state-controlled banking system directed loans to those key sectors. [NYT]

OPINION(S) & REMAINDERS

• Minister Ghani Urges Faster Karimabad Underpass Work: Local Government Minister Saeed Ghani addressed the slow pace of work on the Karimabad underpass, urging authorities to expedite the project during his visit to the site in district Central. He also reviewed progress on other infrastructure projects like Shahrah-i-Noor Jehan, Bakhtiari Youth Centre, and Allama Rashid Turabi Road. [Dawn]
• Opinion: Will the Upcoming Disco Boards be a Fiasco Again? - “It all boils down to one fact that the present selection of the DISCO BoDs is going to be below-par, especially when it is based on the wisdom of the generalist civil servants posted in the energy ministry and who are not qualified to make such nominations without assistance from sectoral experts. In fact, the nomination committee as notified in the SOEs Act on 2023 will always remain deficient if they do not have any assistance from sectoral professionals and otherwise too any possible nomination will be faulty to say the least.” - By Engr Tahir Basharat Cheema [BR]
• Editorial: Startups in Pakistan - “VC interest burgeoning in Pakistan’s tech startups. Such were the headlines back in 2021 when the startup landscape in the country was attracting record VC funding. During 2021 and 2022 the startup landscape, largely led by tech startups in terms of both funding and growth, witnessed Increased venture capital interest, which brought noticeable funding to early-stage startups.” - [BR]