Rice Exports, IPPs Contracts, Flood Warning: Chenab & Ravi, NEPRA on FCA, Pak Reserves, Yunus as BD Interim Leader.

TOPLINE

• After reaching a record $4 billion in rice exports, Pakistani exporters aim for $6 billion in the current fiscal year (FY25) due to a bumper crop. REAP reported that exports in the last fiscal year (FY24) earned $3.93 billion from 6 million tons of rice.
• The government plans to address issues with Independent Power Producers (IPPs) and reduce electricity costs by A task force, directed by the PM and led by Energy Minister Awais Leghari, will immediately end contracts with 6 IPPs from the 1990s and gradually phase out 9 others.
• The NDMA has issued a flash and urban flooding warning due to monsoon rains causing 156 deaths and 282 injuries. Expected flooding from the Chenab and Ravi rivers and adjoining nullahs is likely between August 10-13, with landslides in hilly areas. In Rawalpindi and Islamabad, heavy rains led to severe flooding, with water rising to 22 feet in Nullah Leh.
• NEPRA has approved a positive adjustment of Rs 2.56/unit in the Fuel Charges Adjustment (FCA) for June 2024, allowing Discos to collect an additional Rs 33.5 billion from consumers.
• Pakistan's central bank foreign exchange reserves increased by $51 million to $9.153 billion in the week ending August 2. Overall, the country's reserves rose by $80 million to $14.472 billion, with commercial banks' reserves up $29 million to $5.32 billion, due to improvements in the current account deficit and increased exports, remittances, and financial inflows.
• Nobel Peace laureate Muhammad Yunus has assumed leadership of Bangladesh's caretaker government amid recent violence that led to Prime Minister Sheikh Hasina's resignation and flight to India. Yunus, known for his microcredit work with Grameen Bank.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Inflation Drops: Food inflation dropped from 48% to 2% and overall inflation fell from 38% to 12%. The PML-N government claimed that these improvements show progress toward economic stability, with the government focusing on poverty alleviation, reducing inflation, and creating job opportunities for youth. [BR]
• Cotton Spot Rate Drops: On Thursday, the cotton spot rate fell by Rs 400-Rs 17,400/maund due to quality issues from rainy weather. Prices vary: Sindh has rates between Rs 16,500-Rs 17,000/maund, Punjab between Rs 17,500-Rs 18,000, and Balochistan between Rs 16,800-Rs 17,000. Phutti prices range from Rs 6,000-Rs 7,800/40 kg depending on the region. [BR]
• Pakistani Rice Exports Surge: After reaching a record $4 billion in rice exports, Pakistani exporters aim for $6 billion in the current fiscal year (FY25) due to a bumper crop. The Rice Exporters Association of Pakistan (REAP) reported that exports in the last fiscal year (FY24) earned $3.93 billion from 6 million tons of rice, partly benefiting from India's export ban due to a short crop. [BR]
• EU Issues Warning on Contaminated Rice: The European Commission reported that a consignment of organic basmati rice from Pakistan, imported via the Netherlands, was contaminated with genetically modified rice. The EU Rapid Alert System for Food and Feed (RASFF) issued a warning on August 2, 2024, after testing on July 31, 2024, deemed the product hazardous. The contamination has been traced to government laboratories in Germany and Luxembourg. [PT]
• Spice Exports Drop in June 2024: Rs 2.01 billion was the export value of spices in June 2024, down 18.36% compared to Rs 2.46 billion in June 2023, according to the Pakistan Bureau of Statistics. [ET]
• Urbanization Threatens Food Security: At a conference, Provincial Environment Minister Dost Muhammad Rahimoon warned that converting farmlands near urban areas into housing societies threatens Pakistan's food security. He highlighted this issue as part of the broader climate change challenges facing the country. [Dawn]
• SAI Raises Concerns on Corporate Farming: The Sindh Abadgar Ittehad (SAI) is concerned that corporate farming could exacerbate Sindh's water shortages. At a meeting led by Nawab Zubair Talpur, SAI sought clarity on water supplies for new lands and criticized the federal government's plan to build six canals in the Indus river system. [Dawn]

ENERGY - WEATHER, WATER & POWER

• NDMA Issues Flooding Alert: The NDMA has issued a flash and urban flooding warning due to monsoon rains causing 156 deaths and 282 injuries. Expected flooding from the Chenab and Ravi rivers and adjoining nullahs is likely between August 10-13, with landslides in hilly areas. In Rawalpindi and Islamabad, heavy rains led to severe flooding, including three fatalities and water levels rising to 22 feet in Nullah Leh, prompting evacuation orders and disrupting daily life. [BR] [ET] [ET]
• Reducing Electricity Costs for the Poor: Prime Minister Shehbaz Sharif acknowledged that eliminating poverty and high electricity costs entirely isn't feasible but said the government is working with provinces to reduce electricity costs for the poor. He also noted efforts to end reliance on IMF programs and mentioned a Rs 50 billion development budget cut to help low electricity users. [BR]
• Fuel Charges Adjustment Increase Approved: NEPRA has approved a positive adjustment of Rs 2.56/unit in the Fuel Charges Adjustment (FCA) for June 2024, allowing Discos to collect an additional Rs 33.5 billion from consumers. This adjustment followed a revised claim by CPPA-G, reflecting higher fuel cost variations for power plants, leading to an actual FCA of Rs 9.7710 per unit against a reference of Rs 7.1403 per unit. [BR] [Dawn] [ET]
• Workshop on Floating Solar Project: On Thursday, the Sindh energy department, in collaboration with UNDP and UN DESA, held a workshop in Karachi to discuss the 500 MW Floating Solar Power Project at Keenjhar Lake. The event aimed to promote private sector investments through feasibility studies, investor matchmaking, and presentations at the SDGs Investment Fair. [Dawn]
• Elections Law Changes Spark Disputes: Changes to the elections law, restricting independent lawmakers from joining parties after a set period, are likely to lead to legal disputes among the government, opposition, and judiciary. President Asif Ali Zardari has signed the bill, which could affect political affiliations and the separation of powers. [Dawn]
• Balochistan’s Renewable Energy Potential: A World Bank study suggests that Balochistan should leverage its variable renewable energy (VRE) potential to generate surplus electricity for export, reducing its dependence on power imports. The study highlights using existing import connection lines to stabilize the grid, trade electricity at competitive prices, and optimize the annual supply mix. [Dawn]
• Mari Petroleum Expands into IT Sector: Mari Petroleum Company Limited (MARI) is expanding into IT by forming a subsidiary specializing in cloud computing and AI. This expansion aligns with Pakistan's growing IT sector, which saw IT and IT-enabled services export remittances reach a record $3.223 billion for FY 2023-24, a 24% increase from the previous year. Mari Petroleum reported a profit of Rs 77 billion for the year ended June 30, 2024, up 37% from Rs 56.1 billion the previous year. [BR] [Dawn] [ET]
• Tractor Industry Faces Shutdown: PAAPAM warns the tractor industry is close to shutting down due to delayed GST refunds and a new GST regime, causing a cash flow crisis across the supply chain. They are now seeking intervention from the prime minister after unsuccessful attempts with other ministries. [Dawn] [ET]
• Government to Review IPP Agreements: The government plans to address issues with Independent Power Producers (IPPs) and reduce electricity costs by reviewing and terminating agreements with 15 IPPs. A task force, directed by Prime Minister Shehbaz Sharif and led by Energy Minister Awais Leghari, will immediately end contracts with six IPPs from the 1990s and gradually phase out nine others. [BR] [ET]
• Pak Suzuki Halts Production: Pak Suzuki Motor Company has halted its Karachi manufacturing plant due to delays in clearing CKD kits at the port, resulting in significant demurrage charges. The Pakistan Association of Auto Parts & Accessories Manufacturers (PAAPAM) has requested a one-year deferral for implementing WP29 UNR regulations in a letter to the Ministry of Industries. [BR]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Turkey-Pakistan Trade Boost: Turkey and Pakistan have committed to increasing business activities and investment through enhanced mutual trade and economic cooperation. This decision was made during a Round Table Business Conference co-chaired by Turkish Trade Minister Prof Dr Omer Bolat and Pakistani Federal Minister Abdul Aleem Khan, with participation from key Turkish officials and Pakistan's business community. [BR] [Dawn]
• Pakistan's Reserves Increase: Pakistan's central bank foreign exchange reserves increased by $51 million to $9.153 billion in the week ending August 2. Overall, the country's reserves rose by $80 million to $14.472 billion, with commercial banks' reserves up $29 million to $5.32 billion, due to improvements in the current account deficit and increased exports, remittances, and financial inflows. [Dawn] [The News]
• Kibor Falls Amid Rate Cut Hopes: Kibor dropped to an 18-month low as falling treasury bill yields raised hopes for future interest rate cuts. SBP Governor Jameel Ahmad warned that inflation could rise due to budget measures, increased energy and wheat prices, and the Middle East situation. [ET] [The News]
• Arshad Nadeem Sets Record: Arshad Nadeem won gold in the javelin throw final at the Paris Olympics with an Olympic record throw of 92.97 meters, surpassing the previous record of 90.57 meters set in 2008. This achievement stands out as a significant moment for Pakistan's under-powered Olympic team, especially with the absence of the once-legendary men's hockey team. [Dawn] [ET]
• New Elections Law Expected to Spark Disputes: Changes to the elections law, signed by President Asif Ali Zardari, restrict independent lawmakers from joining parties after a set period. This move is expected to lead to legal disputes involving the government, opposition, and judiciary, potentially impacting the separation of powers between these branches. [Dawn]
• Jamaat-i-Islami Ends Sit-In Temporarily: Jamaat-i-Islami ended its two-week sit-in after agreeing with the government to form a task force to address issues with independent power producers, reduce electricity bills, and lower taxes for salaried individuals. JI emir Hafiz Naeemur Rehman started the sit-in deferred, not ended, and warned the party would resume protests if the government fails to meet its commitments. [Dawn]
• Stock Market Surges Amid Uncertainty: Despite political and economic uncertainty, the stock market surged on Thursday, fueled by improved corporate results and a 54 basis point cut in treasury bill yields. Ahsan Mehanti of Arif Habib Corporation highlighted strong corporate earnings, especially in the oil sector, as key factors boosting investor confidence and expectations for looser monetary policy. [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israel Genocide: On Thursday, Israel revoked the diplomatic status of Norway’s envoys to the Palestinian Authority, accusing Oslo of "anti-Israel behavior" during the Gaza crisis. In response, Norway summoned the Israeli ambassador to lodge a formal protest. Meanwhile, the U.S. deployed advanced F-22 stealth warplanes to the Middle East to bolster forces amid concerns of an Iranian counterattack on Israel, following Defense Secretary Lloyd Austin’s orders for additional military assets in the region. [Dawn] [Dawn]
• Yunus Leads Bangladesh Caretaker Government: Nobel Peace laureate Muhammad Yunus has assumed leadership of Bangladesh's caretaker government amid recent violence that led to Prime Minister Sheikh Hasina's resignation and flight to India. Yunus, known for his microcredit work with Grameen Bank, aims to stabilize the country and address the ongoing crisis. [BR] [Dawn] [ET]
• Russia-China Barter Trading Plans: Russia and China may start using barter trading schemes to avoid the U.S.-monitored banking systems, with potential agriculture deals as soon as this autumn. This move aims to bypass payment delays and regulatory scrutiny, reducing currency risk and visibility for Western regulators. [BR]
• Iran Accuses Israel of Spreading War: Iran has accused Israel of trying to spread war in the Middle East following the killings of Tehran-allied militant leaders. Iran's acting foreign minister claimed that Israel made a "strategic mistake" by allegedly killing Hamas leader Ismail Haniyeh in Tehran, with regional tensions rising as Iran and its allies vowed retaliation amid ongoing Gaza conflict. [BR]
• Earth Hits Record Temperatures: Earth experienced its hottest days on record with global temperatures at 17.6°C on July 22 and 23. The EU’s Copernicus Climate Change Service reported that while July 2024 was the second warmest July on record, it ended a 13-month streak of monthly temperature records. 2024 is still likely to be the hottest year on record. [ET] [SCMP]
• Global Equities Rise, Oil Prices Up: On Thursday, global equities rose over 1% as lower-than-expected US unemployment claims eased recession fears. Oil prices gained for the third day, driven by Middle East supply risks. The US Labor Department reported a significant drop in initial unemployment claims to 233,000, better than the expected 240,000. [ET]

OPINION(S) & REMAINDERS

• Largest Reform Program Approved: Prime Minister Shehbaz Sharif approved the largest reform program in Pakistan's history to ease business operations and attract investment. The initiative includes the launch of the first digital registry of Pakistani laws and rules, with the prime minister directing the finalization of agreements with interested international funding institutions. [BR]
• Mitchells Fruit Farms Overview: Mitchells Fruit Farms Limited (PSX: MFFL), established in 1933 and renamed after Independence, went public in 1993 and listed on the stock exchange in 1996. The company specializes in manufacturing and selling a range of products, including beverages, ketchups, sauces, preserves, and ready-to-cook and ready-to-eat foods. [BR]
• Opinion: Deep-Sea Mining - “MINING in the deep sea has turned into a hot topic in the discourse on controlling planet-warming gases in the atmosphere.? To steadily transition away from fossil fuels, low-carbon technologies will require uninterrupted supplies of large quantities of critical minerals, or ‘battery minerals’ — cobalt, nickel, copper, and manganese. Scientific evidence suggests that small rocks, or ‘nodules’, on the seabed, usually at a depth of four to six kilometers, contain large amounts of critical minerals.” - By Jamil Ahmad [Dawn]
• Opinion: Story of a Hari - “The hardship begins from day one, when a deal is struck between the landowner and hari (farmer). It is a brazenly unequal deal. The landowners in Pakistan are probably one of the most privileged classes, who have special benefits and advantages. The deal struck between the landowner and farmer is brazenly unequal.? Treating the hari with contempt, the landlords have safeguarded their wealth. For instance, in northern Sindh, most deals are done on a crop-sharing basis.” - By Zubeida Mustafa [Dawn]
• Opinion: The Challenge of IPPs—V - “If it is decided there is a genuine excess capacity and a relief has to be provided to consumers then there is no reason to classify and treat the government-owned IPPs in a manner similar to what has been accorded to other IPPs. In this case unless there is a loan liability in foreign currency, there is no case for a Capacity Charge. Furthermore accounting for the cost of energy is to be based on cost to cost so that the ‘Return on Equity’ component is transferred to consumers.” - By Syed Shabbar Zaidi [BR]
• Opinion: The Gendered Impact of Increasing Heat - “Human-induced climate changes have begun putting increasing pressure on already stressed natural systems on which life on our planet depends. Increased carbon dioxide in the atmosphere has changed precipitation levels, causing more erratic and intense floods, and droughts. Global warming is triggering severe glacial melts which are threatening vital river systems fed by mountain-based glaciers, such as the mighty Indus. Melting ice at the polar caps is causing sea levels to rise in turn threatening coastal areas and low-lying countries, such as the Maldives.” - By Syed Mohammad Ali [ET]