Punjab Flour Price Down, Schools off ℅ Heatwaves, Foreign Investments, FBR on Sales Tax, Pak Export Data, Israeli Genocide.

TOPLINE

• The Punjab government reduced the price of 20 kg flour by Rs 1,300 and set the roti price at Rs 14 in various districts, including Lahore. Reductions of Rs 600-700/10 kg flour and an average of Rs 1,300/20 kg flour were witnessed.
• Due to heatwaves, half of Pakistan's students will be out of school for a week as Punjab, the most populous province, closes schools early for summer break. Approximately 26 million students are affected by the decision, with Pakistan's meteorological office predicting three heatwaves, one already underway and two more expected in June.
• Pakistan is turning to China for the Diamer Bhasha dam project, facing a $3.5 billion financing gap, adding it to CPEC. Pakistan and Saudi Arabia are discussing a deal where Pakistan would sell 15% of its shares in the Reko Diq project to a Saudi investor. UAE President Al Nahyan assured Pakistan and pledged a $10 billion investment.
• The FBR has proposed an 18% sales tax on many currently zero-rated items in the 2024-25 budget, including tractors, fertilizers, dairy, and stationery items.
• Pakistan's exports increased by 9.10% compared to the previous year, reaching $25.280 billion during the first 10 months of the fiscal year. Pakistan's top export market was the USA, followed by China and the UK. Other major export destinations included the UAE, the Netherlands, Germany, and Spain.
• Israel conducted airstrikes on Gaza early Thursday and hoped to resume talks with Hamas for a ceasefire and prisoner release deal. US Treasury Secretary Yellen cautioned of a "humanitarian crisis" if Israel disrupts a vital financing channel to the occupied Palestinian territories to sever ties between Palestinian and Israeli banks.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Saudi Food Show 2024: Pakistani food exporters are optimistic about increasing their market share in Saudi Arabia after a strong response at the "Saudi Food Show 2024" in Riyadh, where 30 Pakistani companies participated. Currently, Pakistan holds a 7% share of Saudi Arabia's 1.2 million tonne annual rice demand. [The News]
• Fruit Juice Council Urges FED Abolishment: The Fruit Juice Council (FJC) is urging Pakistan's government to abolish the 20% Federal Excise Duty (FED) on packaged juice, citing its negative impact on the industry. Previously, a 5% FED led to declining sales, but its removal spurred industry growth, reaching an annual turnover of approximately Rs 60 billion in 2022 and employing about 10,000 people. [ET]
• Punjab Reduces Flour Price: The Punjab government reduced the price of 20 kg flour by Rs 1,300 and set the roti price at Rs 14 in various districts, including Lahore. Punjab Food Minister Bilal Yasin noted significant decreases in wheat product prices, with strict monitoring ensuring reductions of Rs 600-700/10 kg flour and an average of Rs 1,300/20 kg flour. [Dawn]
• Cotton Season 2024-25: Price Update - The new cotton season (2024-25) has started, with 200 bales sold from a Hyderabad factory at Rs 20,400 per maund. Phutti prices in Interior Sindh range from Rs 9,000 to Rs 10,500 per 40kg. Cotton prices in Sindh and Punjab are between Rs 19,500 to Rs 21,500 per maund, with Phutti prices in Punjab ranging from Rs 9,500 to Rs 10,000 per 40kg. Additionally, 400 bales from Khan Pur were sold at Rs 22,000 per maund. [BR]

ENERGY - WEATHER, WATER & POWER

• Punjab Schools Close Amid Heatwaves: Due to heatwaves, half of Pakistan's students will be out of school for a week as Punjab, the most populous province, closes schools early for summer break. Approximately 26 million students are affected by the decision, with Pakistan's meteorological office predicting three heatwaves, one already underway and two more expected in June. [BR] [Dawn] [Dawn] [ET]
• Pakistan Looks to China for Diamer Bhasha Dam: Pakistan is turning to China once more for the Diamer Bhasha dam project, facing a $3.5 billion financing gap, suggesting Saudi Arabia might not invest. Prime Minister Shehbaz Sharif has directed the project's inclusion in the China Pakistan Economic Corridor (CPEC), leveraging China's $28 billion investment in Pakistan's infrastructure and energy projects under CPEC. [ET]
• Govt Approves Compensation & Hydro Projects Funding: On Thursday, the government approved compensation for Chinese nationals killed in a terrorist attack and redirected Rs 70.5 billion from discretionary budgets to hydroelectric projects. The Economic Coordination Committee (ECC) also approved an Rs 89 billion supplementary budget, with a significant portion allocated to hydroelectric schemes. [ET]
• Pakistan-Saudi Reko Diq Deal: Pakistan and Saudi Arabia are discussing a deal where Pakistan would sell 15% of its shares in the Reko Diq project to a Saudi investor, reducing Pakistan's overall stake from 50% to 35%. This would make Pakistan a minority shareholder in the project, with the Balochistan government retaining its 25% share and the federal government's stake dropping from 25% to 10%. [The News]
• NEPRA Questions Power Price: NEPRA questioned a proposed 25% increase in Power Purchase Price (PPP) for 2024-25, citing unsubstantiated figures. The CPPA-G proposed discussing the matter with stakeholders and sought approval for a PPP of over Rs 27 per unit, estimating a Rs 5 per unit increase in electricity prices. [BR]
• Electricity Shortfall Grips Pakistan: On Thursday, Pakistan grappled with a severe electricity shortfall of 6,623 megawatts due to a heatwave, causing widespread outages, especially in rural areas. Demand peaked at 25,800 MW, surpassing production at 19,177 MW. Notably, hydropower generated 5,100 MW, government thermal plants 1,000 MW, and private plants 8,650 MW. Nuclear plants contributed 3,222 MW, and wind power up to 870 MW. [ET]
• Local Automakers Struggle, Used Car Imports Surge: Local automakers struggle to entice buyers despite price cuts and discounts, while the imported used car market flourishes. APMDA Chairman H.M. Shahzad reports that 28,000 used cars were imported during July-May FY24, compared to 14,000-15,000 in all of FY23, with imports expected to reach 35,000 units by year-end. [Dawn]
• Customs Duty Hike: Electric Buses - The Federal Board of Revenue (FBR) has imposed a 30% customs duty on 14-seater electric sightseeing buses, classifying them under PCT heading 8703.1000, instead of the 20% duty under PCT heading 8702.4090. Indus Motor Company CEO Ali Asghar Jamali expressed hope that the upcoming budget will include measures to support the local auto industry and restore investor confidence. [BR] [BR]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• UAE Pledges $10 Billion: UAE President Sheikh Mohamed bin Zayed Al Nahyan assured Pakistan of his country's support and pledged a $10 billion investment across multiple sectors during a bilateral meeting with Prime Minister Shehbaz Sharif in Abu Dhabi. The Pakistani delegation, including high-ranking officials, accompanied Sharif during his daylong visit to the UAE. [BR] [Dawn] [The News]
• PTI Criticizes Exclusion from SIFC Meeting: The PTI criticized the government for reportedly excluding Khyber Pakhtunkhwa Chief Minister Ali Amin Gandapur from an upcoming meeting of the Special Investment Facilitation Council (SIFC). The SIFC, established in June 2023, aims to unite provincial and federal government representatives and military officials to address economic revival and enhance foreign direct investment (FDI) inflows. [Dawn]
• Punjab Governor Delays Defamation Bill: Punjab Governor Sardar Saleem Haider Khan indicated he might not approve the Defamation Bill 2024, opting to send it back to the provincial assembly for reconsideration, as reported by ARY News. He expressed concerns about the bill's hasty passage and emphasized the need for consultation with all stakeholders, including the journalist community, before legislation. [ARY] [ET]
• FBR Proposes Sales Tax Changes: The FBR has proposed an 18% sales tax on many currently zero-rated items in the 2024-25 budget, including tractors, fertilizers, dairy, and stationery items, while also considering withdrawing sales tax exemptions on local supplies of various items. However, the government has not yet made a final decision on these proposals. [BR]
• Pakistan's Foreign Exchange Reserves Update: During the week ending May 17, Pakistan's State Bank saw a slight rise in foreign exchange reserves to $9.157 billion due to strategic dollar purchases. Commercial banks, however, experienced a significant drop in reserves. The SBP aims to reach $9 billion in reserves before releasing the final $1.1 billion tranche under the IMF's Stand-By Arrangement. [Dawn] [ET]
• Pakistan's Economic Growth: Mixed Signals - Pakistan's GDP and per capita income increased in dollar terms in 2023-24, indicating economic revival, but the economy's size remained below the FY22 level at $374.903 billion compared to $375.449 billion. The National Accounts Committee approved these figures, attributing growth to inflation. [Dawn]
• Pakistan's Top Export Markets: In the current fiscal year, Pakistan's top export market remained the United States, followed by China and the United Kingdom. Other major export destinations included the United Arab Emirates, the Netherlands, Germany, and Spain. Overall, Pakistan's exports increased by 9.10% compared to the previous year, reaching $25.280 billion during the first ten months of the fiscal year. [The News]
• Strong Rebound: IT Exports - IT exports in FY24 have rebounded strongly, reaching nearly $2.6 billion in the first nine months, matching the full-year total of FY23. SBP data indicates a 21% year-on-year increase in IT exports during the first ten months of FY24, with net IT exports (exports minus imports) also experiencing a robust 20% growth. [BR]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israel Genocide: Israel conducted airstrikes on Gaza early Thursday and expressed willingness to resume talks with Hamas for a ceasefire and prisoner release deal amid the ongoing conflict since October 7. The attacks resulted in at least 50 Palestinian casualties, including 15 children, with Gaza's civil defense agency reporting 26 casualties in Gaza City alone. [Dawn]
• Yellen Warns of Palestinian Financing Crisis: US Treasury Secretary Janet Yellen cautioned of a potential "humanitarian crisis" if Israel disrupts a vital financing channel to the occupied Palestinian territories, expressing concern over threats to sever ties between Palestinian and Israeli banks. She made these remarks ahead of a G7 finance ministers meeting in Stresa, Italy. [BR]
• Saudi Arabia Bans Makkah Access for Visit Visa Holders: Travelers holding visit visas to Saudi Arabia will be prohibited from entering the holy city of Makkah during the Hajj season, as announced by the Kingdom's Ministry of Interior. The ban will be enforced from May 23 to June 21, with foreigners on visit visas already in Saudi Arabia urged not to travel to Makkah during this period, according to the Saudi Press Agency. [Dawn]
• China Conducts Taiwan "Punishment" Drills: China conducted "punishment" drills around Taiwan in response to perceived separatist acts, deploying warplanes and staging mock attacks. These actions followed President Lai Ching-te's inauguration, which Beijing denounced. UN Secretary-General Antonio Guterres's spokesman called for restraint amid escalating tensions. [Dawn]
• Euclid Telescope Unveils Stunning Images: Europe's Euclid space telescope released breathtaking new images on Thursday, showcasing shining galaxies, a vibrant star nursery, and a spiral galaxy resembling our Milky Way. Launched last year, Euclid's mission is to investigate dark matter and dark energy. It aims to chart two billion galaxies across a third of the sky with its wide view. [Dawn]
• WHO Condemns Tobacco Companies: The World Health Organization (WHO) accused tobacco companies on Thursday of actively targeting young people through social media, sports, music festivals, and flavored products, aiming to hook a new generation on nicotine. Despite stricter regulations on cigarettes, tobacco companies and new entrants are introducing smoking alternatives like vapes, claiming they target adult smokers. [BR]

OPINION(S) & REMAINDERS

• FBR Blocks Non-Filers' SIMs: The FBR blocked 11,252 SIMs of non-filers and plans to continue. There were initial disagreements with CMOs and opposition from the PTA, though later the PTA stayed silent. The FBR Chairman inaugurated a new Regional Tax Office in Islamabad, emphasizing its modern technology for better taxpayer facilitation and tax collection processes. [The News] [MG]
• ECC Sanctions Compensation & Grants: The ECC approved $2.58 million compensation for families of Chinese workers slain in the Shangla attack and Rs 88 billion in supplementary grants for various ministries. Led by Finance Minister Muhammad Aurangzeb, the meeting also sanctioned Rs 2.5 million for a local national killed in the same incident. [Dawn]
• Islamic Finance Industry Demands: Pakistan's Islamic finance industry faces a rising demand for qualified professionals ahead of a 2027 deadline for complete transition set by the Federal Shariat Court. Islamic banking's profit before tax exceeded Rs 393.4 billion in the August-December 2023 quarter, reflecting its rapid growth and global appeal due to alignment with responsible investing. [The News]
• Opinion: Why Development Aid must be Localized - “The idea of localizing aid for humanitarian assistance as well as for development purposes gained some traction during the Covid-19 pandemic, when aid agencies were compelled to rely on local partners due to lockdowns and travel restrictions. The US Agency for International Development is now trying to allocate a quarter of its funding to local development actors by 2025, and half of it by 2050.” - By Syed Mohammad Ali [ET]
• Opinion: Making Hay of Wheat - “According to the Household Integrated Economic Survey 2018-19, the combined share of wheat and milk in consumption expenditure on food by all five quintiles, from the poorest to the richest households, is a little more than 41 pc. Farming families fight against many odds to secure these two top food items; among these odds is the most taxing, unforgiving and unpredictable one — the market. Over the last century, our agriculture has transformed from family need-driven subsistence farming to market-oriented commodity production.” - By Tahir Mehdi [Dawn]