SBP Profits, Textile Exports, Rain Spell, 5 IPPs Capped, Tax Collection Down, Israeli Genocide.

TOPLINE

• The State Bank of Pakistan reported a record profit of Rs 3.4 trillion in FY24, up from Rs 1.1 trillion. The SBP will transfer 80% (Rs 2.72 trillion) to the government, which faces Rs 9 trillion in debt servicing costs for FY’25. Banks in Pakistan invested a record Rs 5.429 trillion in risk-free government securities, a 21% year-on-year increase.
• Cotton prices are rising despite a 64% drop in production YoY, leading to higher imports. Textile exports increased by 5.37% in August. Cotton cloth exports reached Rs 50.8 billion in August 2024, up 8.2% from Rs 47.002 billion.
• Weather forecasts predict rain in Upper and Central Pakistan from September 26 to October 1, benefiting kharif crops despite some drainage mismanagement. The Met Office predicts moist currents from the Bay of Bengal and a westerly wave will bring rain, wind, and thundershowers, with isolated heavy falls in areas in Central and Upper Punjab.
• The government has asked four IPPs from the 1994 and 2002 policies to end their power purchase agreements or face consequences. It will no longer pay annual capacity payments of Rs 139-150 billion to these IPPs for the next 3-5 years.
• In 2023-24, tax collection from imports was 35%, down from 39% in 2022-23, while domestic taxes rose to 65% from 61%. Customs duty increased slightly from 12% to 13%. To achieve the FY 2024-25 tax target of Rs 12.97 trillion, the government plans to collect Rs 450 billion through enforcement measures and digital tracking of Rs 48 trillion in services.
• Israel and Hezbollah engaged in heavy fire over the weekend, with intensified airstrikes from Israel and rocket launches from Hezbollah as the specter of a wider war rises. Iran displayed a record 23 ballistic missiles during its Sacred Defense Week, along with a new kamikaze drone capable of over 4,000 km range.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• ECC Approves 140,000 Tonnes Sugar Export: The Economic Coordination Committee approved exporting an additional 140,000 metric tonnes of sugar due to stable prices and surplus stocks. This includes 100,000 tonnes for immediate export and 40,000 tonnes for Tajikistan. The Pakistan Sugar Mills Association has requested the State Bank to extend credit line deadlines to December 31, 2024, citing financial pressures. [BR] [ET] [ET]
• Cotton Prices Rise - Exports at Rs 50.8 Billion: Cotton prices are rising despite a 64% drop in production, leading to higher imports. Textile exports increased by 5.37% in August, with APTMA Chairman Kamran Arshad noting that affordable electricity could lessen dependence on an IMF package. Punjab plans to form a committee to enhance cotton production. Cotton cloth exports reached Rs 50.8 billion in August 2024, up 8.2% from Rs 47.002 billion in August 2023, according to the PBS. [BR] [ET]
• FFBL & FFC Approve Merger: Fauji Fertilizer Bin Qasim Limited (FFBL) and Fauji Fertilizer Company Limited (FFC) have approved their merger, integrating FFBL into FFC. Shareholders will receive 4.29 FFBL shares for each FFC share, leading to the cancellation of all FFBL shares and the issuance of 150.897 million new FFC shares. FFC, holding a 49.9% stake in FFBL, is expected to have a combined book value of Rs 132.84/share. [The News]
• Rice Millers Boycott Bills - Basmati Exports Rise: The Sindh Balochistan Rice Millers and Traders Association decided to continue non-payment of electricity bills for mills in their urgent meeting on Sunday, marking the second consecutive month of refusal. In August 2024, basmati rice exports reached Rs 27.8 billion, a 71.75% increase from Rs 16.23 billion in August 2023, according to PBS. India's removal of the floor price for basmati rice exports and eased restrictions on non-basmati rice exports has raised concerns among Pakistani exporters, who previously benefited from these measures. Pakistan's rice exports grew to $3.9 billion in FY24, but India's new policy, starting September 2024, may threaten Pakistan's position in the global basmati market. [Dawn] [ET] [ET]
• Tea Imports Rise: Rs 16.2 billion was the import value of tea in August 2024, up 1.56% compared to Rs 15.9 billion in August 2023. [ET]
• Rain Forecasts Benefit Kharif Crops in Pakistan: Weather forecasts predict rain in upper and central Pakistan from September 26 to October 1, benefiting kharif crops despite some drainage mismanagement. Floodwater will improve soil fertility for winter wheat, while paddy, sugarcane, and cotton across 11.4 million acres in Punjab is expected to thrive. [ET]
• Punjab Announces Subsidies for Vegetable Farmers: Punjab Chief Minister Maryam Nawaz Sharif announced subsidies for groups of five to 10 vegetable farmers for seeds, fertilizers, and irrigation. A project will cultivate onions and tomatoes on 2,000 acres to ensure local availability for six months, preventing inflation, with cultivation planned in Kahror Pacca, Rahim Yar Khan, Vehari, and Rajanpur. [BR] [ET]
• Gold Prices Rise to Record Local Rates: Gold prices rose by $35 to $2,612/ounce, hitting record local rates of Rs 233,196 for 10 grams and Rs 272,000 for one tola. This marks increases of Rs 3,001 and Rs 3,500, respectively. On January 1, the rates were Rs 188,357 and Rs 219,700. Consumers now pay Rs 44,939/10 grams and Rs 52,300/tola, with global prices up $530 despite stable rupee-dollar parity. [Dawn]

ENERGY - WEATHER, WATER & POWER

• Rain & Winds Expected in Northern Pakistan: Rain and strong winds are forecasted for northern Pakistan from September 26 to October 1. The Met Office predicts moist currents from the Bay of Bengal and a westerly wave will bring rain, wind, and thundershowers, with isolated heavy falls in areas including Islamabad, Rawalpindi, Lahore, and surrounding regions. [Dawn]
• Export Fund Board Approves Projects: The Export Development Fund's Board, led by Commerce Minister Jam Kamal Khan, has approved multiple projects across various sectors. The Board includes diverse representation from regional Chambers and leaders in textiles, agriculture, livestock, chemical, engineering, and women-led export enterprises. [BR]
• Panel Formed for EV Financing Expansion: An inter-ministerial meeting decided to form a panel from various government divisions to discuss financing mechanisms for Electric Vehicles (EVs) in Pakistan. Prime Minister Shehbaz Sharif was briefed on the plan to expand EVs to 30% of four-wheelers by 2030, up from the current 2%, with most imports coming from China. [BR]
• Pakistan, China Sign Shale Gas MoU: At the 8th Silk Road International Expo in China, Pakistan's OGDCL and China's CCDC signed an MoU to jointly develop Pakistan's shale and tight gas resources. The partnership aims to address Pakistan's energy needs through indigenous resources, with the agreement signed by OGDCL's Executive Director Mumtaz Ali Soomro and CCDC Vice President Zhang Zhidong. [BR] [Dawn] [Dawn]
• K-Electric Seeks 51-Paisa Fuel Adjustment: K-Electric has requested a 51-paisa/unit fuel adjustment for August, aiming to collect an additional Rs 853 million from consumers in October, contrasting with the 57-paisa/unit refund proposed by public sector Discos. This follows a Rs 3.1/unit fuel cost adjustment for July, for which KE sought Rs 6.2 billion, though NEPRA has yet to finalize its decision. [Dawn]
• Power Minister Hints at Tariff Reductions: Federal Minister for Power Awais Ahmad Khan Leghari announced that the Power Sector Task Force has reviewed Independent Power Producers (IPPs) and state-run plants, expecting tariff reductions to benefit consumers soon. He briefed the Senate Standing Committee on Power about the assessment of return on equity, operation and maintenance costs, and outstanding dues of the IPPs. [The News]
• Government Pressures IPPs to End Agreements: The government has asked owners of four IPPs from the 1994 and 2002 policies to voluntarily end their power purchase agreements or face consequences. It will no longer pay annual capacity payments of Rs 139-150 billion to these IPPs for the next 3-5 years, citing prior excess payments. [The News]
• ADB Rejects Thar Lignite Plan for Jamshoro Power Plant: The government's plan to use 100% Thar lignite in coal power plants has hit a snag as the Asian Development Bank (ADB) refused to support the conversion at Jamshoro Power Plant Unit I. ADB's approval is essential for structural changes in the $1.5 billion project, which is financed by ADB, the Islamic Development Bank, and the government. [Dawn]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• PTI Holds Peaceful Rally in Lahore: The Pakistan Tehreek-e-Insaf (PTI) held a peaceful rally in Lahore, emphasizing its commitment to constitutional supremacy and democracy despite police raids and arrests. The rally was permitted after negotiations with the Punjab government, complying with 43 conditions, and was relocated from Minar-i-Pakistan to Cattle Market Kahna. [BR] [Dawn]
• JUI-F Declares Ruling Coalition a Failure: The JUI-F has declared the Shehbaz Sharif-led ruling coalition a "failure" and is demanding immediate free and fair elections, thwarting hopes for a smooth passage of the proposed "Constitutional Package." In response, the government plans to convene the National Assembly in early October to seek approval for the amendment, despite the JUI-F showing no signs of compromise. [Dawn]
• Supreme Court Adjusts Committee After Ordinance: After the federal government issued an ordinance to amend the Supreme Court (Practice and Procedure) Act 2023, Chief Justice Qazi Faez Isa adjusted the three-judge committee, replacing Justice Munib Akhtar with Justice Amin-ud-Din Khan. Information Minister Attaullah Tarar confirmed that President Asif Ali Zardari approved the ordinance to "serve the public interest." [Dawn] [ET]
• Tax Collection - Imports Down to 35%, Domestic Up to 65%: In 2023-24, tax collection from imports was 35%, down from 39% in 2022-23, while domestic taxes rose to 65% from 61%. Customs duty increased slightly from 12% to 13%. To achieve the FY 2024-25 tax target of Rs 12.97 trillion, the government plans to collect Rs 450 billion through enforcement measures and digital tracking of Rs 48 trillion in services. Prime Minister Shehbaz Sharif has approved expanding the Point of Sale (POS) initiative to support this effort. [BR] [ET]
• PRAL Board Reconstitution Approved: Finance Minister Muhammad Aurangzeb approved the reconstitution of the Pakistan Revenue Automation Ltd (PRAL) board to accelerate tax digitalization. This decision was made during a virtual Cabinet Committee meeting, with the FBR setting timelines for PRAL's full reform. [Dawn]
• SBP Reports Record Rs 3.4 Trillion Profit: The State Bank of Pakistan (SBP) reported a record profit of Rs 3.4 trillion in FY24, up from Rs 1.1 trillion the previous year, providing crucial support to the cash-strapped government. Despite concerns over the high 22% interest rate, the SBP will transfer 80% (Rs 2.72 trillion) of its profit to the federal government, which faces Rs 9 trillion in debt servicing costs for FY25. [Dawn]
• Pakistan, China Enhance Security Cooperation: Pakistan and China agreed to strengthen cooperation in counter-terrorism and border management during a meeting between Interior Minister Mohsin Naqvi and Chinese Minister Chen Mingguo. They discussed enhancing relations, particularly regarding Xinjiang, and agreed to joint police exercises in Gilgit-Baltistan and training for GB police officers at the Xinjiang Police Academy. [Dawn]
• Banks Invest Rs 5.429 Trillion in Securities: In the first eight months of 2024, banks in Pakistan invested a record Rs 5.429 trillion in risk-free government securities, a 21% year-on-year increase. This shift reflects banks' preference for easy profits through government loans at high interest rates, bringing total investments in government papers to Rs 31.032 trillion by the end of August. [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israeli Genocide: Israel and Hezbollah engaged in heavy fire, with intensified airstrikes from Israel and rocket launches from Hezbollah. Defence Minister Gallant indicated the conflict may continue until it's safe for evacuated residents to return. Al Jazeera's West Bank office was raided, resulting in a 45-day closure order. Israeli attacks in Gaza continued over the weekend, targeting a school, murdering over 20 people. [BR] [Dawn] [Dawn] [Dawn] [Dawn]
• Floods & Landslides Hit Central Japan: Floods and landslides in central Japan resulted in one death and at least 11 missing, with recovery teams deployed in a remote peninsula already affected by a major earthquake this year. Heavy rains have begun to subside, revealing destruction, while the national weather agency warns of dangers from loose ground and debris, particularly in Wajima, where floodwaters nearly reached ground level. [BR]
• Deadly Gas Explosion at Iran Coal Mine: A gas leak explosion at the Tabas coal mine in eastern Iran has killed at least 51 people, making it one of the country's deadliest work accidents in years. The explosion occurred when around 70 workers were present, injuring 20 others, with the blast caused by a methane gas leak affecting two blocks of the privately-owned mine. [Dawn] [ET]
• Sri Lanka Elects New President Dissanayaka: Sri Lanka's new president, Anura Kumara Dissanayaka, a Marxist leader from a party with a history of insurrections, won 42.31% of the votes, reflecting public discontent with establishment parties after the country's severe economic crisis. After the election, he expressed a commitment to unite the nation and "rewrite Sri Lankan history." [Dawn] [Dawn]
• Biden Caught Criticizing China: US President Joe Biden was caught on a hot mic during a summit with leaders from Australia, India, and Japan, stating that an aggressive China is "testing us." His comments, made in Delaware, risk undermining a summit declaration that intentionally avoided mentioning Beijing. [Dawn]
• Iran Displays 23 Missiles, New Drone: Iran displayed a record 23 ballistic missiles during its Sacred Defense Week, along with a new kamikaze drone capable of over 4,000 km range. The showcased missiles included various types, with the newly introduced Jihad missile featuring a range of 1,000 km and a high-explosive detachable warhead. [ET] [PressTV]
• Greece, Cyprus Sign MoU for Subsea Electric Cable: Greece and Cyprus signed an MoU to advance the Great Sea Interconnector, a €1.9 billion subsea electric cable linking Europe to Cyprus and eventually Israel. The cable will be 1,240 km long and 3,000 meters deep, set to begin work soon. Cyprus aims to reduce reliance on costly heavy fuel oil for electricity. [BR]
• Gold Prices Exceed $2,600 Amid Tensions: Gold prices topped $2,600 on Friday, fueled by expectations of US interest rate cuts and rising Middle East tensions. Spot gold increased 1.3% to $2,620.63, while US futures rose 1.2% to $2,646.20. The Federal Reserve's recent rate cut has made gold more appealing, contributing to a 27% increase in 2024, the largest annual rise since 2010. [BR]

OPINION(S) & REMAINDERS

• WhatsApp, Instagram Outages Hit Pakistan: WhatsApp and Instagram users in Pakistan experienced outages on Saturday, with Downdetector noting up to 86 reported issues on Instagram within an hour. WhatsApp users faced problems sending voice notes after 10:45 AM, while network providers Zong and PTCL also reported disruptions. [Dawn]
• Mobile Phone Imports Drop 19.82%: Pakistan imported mobile phones worth $143.889 million in the first two months of FY 2024-25, a decline of 19.82% compared to the same period last year. Mobile phone imports for FY 2023-24 reached $1.898 billion, a significant increase from $570.071 million in FY 2022-23, while imports in August 2024 rose 23.14% month-on-month to $79.406 million. [BR]
• Opinion: Rising Seas - “Sea-level rise is among the most ominous of multifaceted risks attributed to climate change, and has serious implications for billions of people. Rising sea levels are one of the primary indicators of global warming, originating in the early 20th century, when fossil fuels consumed by the expanding industrial complex released huge amounts of greenhouse gas (GHG) emissions. While extreme weather events induced by climate change cause huge damage during short spells, the long-term risks associated with sea-level rise are equally lethal and pose serious threats to life.” - By Jamil Ahmad [Dawn]
• Opinion: Why IMF has Intervened in the Agri Sector - “Just recently, under the $7 billion Extended Fund Facility, the International Monetary Fund (IMF) introduced a new condition that requires Pakistan`s federal and provincial governments to phase out the crop minimum support price (MSP) system by June 2026. Currently, MSP is limited to just three crops: wheat, sugarcane, and cotton unlike in India, where 23 crops benefit from it.” - By Khalid Saeed Wattoo & Dr Waqar Ahmad [Dawn]
• Opinion: The Myth & Magic of Palla Fish - “For the fishermen of southern Sindh, it is a time to rejoice and catch the prized pallafish. On the left bank of the gushing Indus, several boats line up downstream of the Kotri Barrage. On one of them, the elderly Suleman Mallah is busy cleaning his fishing net. He is preparing for the next day, when it will be his turn to take his boat out and hopefully net a few`palla`. Suleman and other fishermen travel around 200-250 ft into the river to have a decent catch, which includes a variety of fish.” - By Mohammad Hussain Khan [Dawn]
• Opinion: Climate Under Siege - “Following extreme heatwaves in almost every corner of the world, heavy rains and floods shocked the global community. This is becoming a pattern. The recent past witnessed an unprecedented series of extreme weather events across South Asia and neighbouring regions, with devastating impacts on lives, infrastructure, and economies. A powerful monsoon system wreaked havoc, triggering catastrophic floods, landslides, and storms across India, Bangladesh, China, and Pakistan.” - By Masood Lohar [Dawn]
• Opinion: A Solution to Our Water, Energy Woes - “Pakistan’s water resources can boost energy and agriculture, but poor planning stalls key infrastructure projects. The Diamer-Bhasha Dam emerges as a beacon of hope. First conceptualized as a key component of Pakistan's water management and energy strategy, the dam's construction began in 2020 under the previous government. Initially, the cost of the dam was estimated at Rs 479 billion, with Rs 120 billion allocated for land acquisition alone.” - By Gulab Umid [ET]