Taxes & PSX Fall, Ginners National Strike, Rice Exports Record, Fertilizers FBR Audit, Power Sector Financing, Gas Prices Rise & PSO Debt Financing, D

TOPLINE

• The government may impose a 2-3% tax on export proceeds instead of bringing exporters into a normal tax regime for the 2024-25 budget. Amid criticism of tough tax measures, including from the business community and opposition, the stock market saw a decline on Monday. Investors opted for profit-taking after a four-day post-budget rally.
• Cotton ginners nationwide have initiated an indefinite strike due to new taxes and significantly increased power tariffs for ginning units. The Pakistan Cotton Ginners Association (PCGA), in a meeting in Sukkur, decided to halt the procurement of raw cotton and delivery of ginned lint to spinning units.
• Pakistan's rice exports for the fiscal year are expected to reach $3.5 billion, slightly below the targeted $4 billion but significantly higher than the previous record of $2.5 billion. This $1 billion increase marks the highest-ever increment in export earnings and an 81% year-on-year rise.
• The FBR has launched a nationwide audit of urea and fertilizer dealers to verify proper income tax payments. Notices for audit have been issued to 437 cases, with proceedings expected to conclude soon.
• The government aims to secure $2 billion in external financing for the power sector over the next 3 years. Despite the OGRA decision to lower gas prices by 10% for the next year, it will increase gas prices for CPPs by Rs 250/mmBtu to Rs 3000/mmBtu. PSO plans to raise foreign debt for a $1.5-2 billion investment in the PRL.
• Dubai's red-hot property market continues to draw investors from India, Pakistan, the Middle East, Australia, the UK, Europe, Turkey, and beyond. Despite initial fears of a downturn, the market saw transactions worth $74.6 billion in 2023, and nearly $24 billion in the first quarter of 2024.

AGRI-UPDATES - COMMODITIES, POLICY & DEVELOPMENTS

• Surplus Wheat Export Revenue: The Cereal Association of Pakistan (CAP) indicated that exporting 1 million tons of surplus wheat and wheat products could generate over $300 million in foreign exchange. Commodity traders have requested government approval for these exports to help bolster the country's foreign exchange reserves. [BR] [Dawn]
• Nationwide Cotton Ginners Strike: Cotton ginners nationwide have initiated an indefinite strike due to new taxes and significantly increased power tariffs for ginning units. The Pakistan Cotton Ginners Association (PCGA), in a meeting in Sukkur, decided to halt the procurement of raw cotton and delivery of ginned lint to spinning units across the country as a form of protest. [BR]
• Pakistan's Rice Exports Surge: Pakistan's rice exports for the fiscal year are expected to reach $3.5 billion, slightly below the targeted $4 billion but significantly higher than the previous record of $2.5 billion. This $1 billion increase marks the highest-ever increment in export earnings and an 81% year-on-year rise, making rice exports the second-largest category in Pakistan's export lineup, after knitwear. [BR]
• Commerce Ministry Forms Export Review Committee: The commerce ministry has set up a special committee to review exporter proposals amid opposition to the government's tax plans. Commerce Minister Jam Kamal Khan met with the All Export Association of Pakistan to address concerns before the Finance Bill 2024 likely passes in the National Assembly soon. [Dawn]
• Interloop Limited: Global Hosiery & Apparel Manufacturer - Interloop Limited (PSX: ILP), established in 1992 and listed on PSX in 2019, manufactures hosiery, denim, knitted apparel, and activewear for global brands. The company operates industrial facilities in Pakistan, an associate manufacturing unit in Sri Lanka, and a sourcing office and affiliate facility in China. ILP also has marketing offices in the USA, Europe, and Japan. [BR]
• SCA Rejects Sukkur Barrage Probe: The Sindh Chamber of Agriculture (SCA) rejected the technical committee formed by the irrigation secretary to investigate the Sukkur Barrage incident on June 20 involving gate No. 47 collapse and damage to gate No. 44. SCA President Miran Mohammad Shah called for a high-level inquiry into maintenance lapses, financial irregularities, and demanded accountability for irrigation officials responsible. [Dawn]
• Pakistan Cement Dispatches Drop 18% in June 2024: In June 2024, local cement dispatches in Pakistan are expected to drop by 18% month-on-month to 2.76 million tonnes, with a 21% year-on-year decline, according to Topline Research. The decrease is mainly due to fewer working days caused by Eid holidays. In May 2024, sales were higher at 3.36 million tonnes due to post-Ramadan demand, exceeding the 11-month average for fiscal year 2024. [ET]
• Spice Imports Surge: Rs 7.03 billion was the import value of spices in May 2024, up 98.3% compared to Rs 3.55 billion in May 2023, according to the Pakistan Bureau of Statistics. [ET]

ENERGY - WEATHER, WATER & POWER

• Heatwave Claims 20 Lives in Karachi: In Karachi, temperatures exceeding 40°C for two consecutive days led to the deaths of 20 individuals from suspected heatstroke. Bodies of 10 people, mostly chronic drug addicts, were brought to hospitals without signs of injury. Edhi morgues receive 562 bodies in a week. The city recorded a maximum temperature of 42°C on Monday and 41°C on Sunday. [Dawn] [ET]
• FBR Audits Urea Dealers Nationwide: The Federal Board of Revenue (FBR) has launched a nationwide audit of urea and fertilizer dealers to verify proper income tax payments. Notices for audit have been issued to 437 cases, with proceedings expected to conclude soon. Additionally, notices have been sent to non-filers by relevant Inland Revenue Field Formations. [BR]
• Government Upholds Gas Price Increase: Despite the Oil and Gas Regulatory Authority's (OGRA) decision to lower gas prices by 10% for the next budgetary year, the government will not reduce gas prices from July 1, 2024. Instead, it will increase gas prices for captive power plants (CPPs) by Rs 250 per mmBtu to Rs 3000 per mmBtu, in accordance with International Monetary Fund (IMF) directives. [The News]
• Government Seeks $2 Billion Power Sector Financing: The government aims to secure $2 billion in external financing for the power sector from international financial institutions over the next three years (2024-2027). The Asian Development Bank will contribute $400 million under OCR funding for the Power Distribution Strengthening Project-1 during 2024-2025. [BR]
• Government Cuts PSDP by Rs 250 Billion: Just before its approval in the National Assembly, the government slashed the proposed Public Sector Development Programme (PSDP) by Rs 250 billion from Rs 1.4 trillion. This reduction aims to free up fiscal space for tax withdrawals while safeguarding the expected International Monetary Fund (IMF) deal. [Dawn]
• Neelum-Jhelum Hydropower Project Faces Shutdown: An independent panel of experts flagged concerns about the Neelum-Jhelum Hydropower Project's headrace tunnel last year, suggesting preventive measures that weren't implemented before the project, valued at over Rs 500 billion and generating 969 megawatts, shut down on May 2, 2024. Officials estimate the shutdown will cause annual losses exceeding Rs 55 billion. [Dawn]
• PSO Plans $1.5-2 Billion Investment in PRL: Pakistan State Oil (PSO) plans to raise foreign debt for $1.5-2 billion investment in Pakistan Refinery Limited (PRL). Receivables surged to Rs 810 billion, mainly from circular debt with late payment charges. PSO, in its FY24 financial briefing, disclosed diversification plans: electric charging stations, financial, and renewable energy sectors for economic growth and earnings boost. [ET]
• Hub Power & BYD to Introduce Electric Vehicles in Pakistan: Pakistan is set to embrace automotive technology with Hub Power Company Limited partnering with Chinese auto giant BYD (Build Your Dreams) to introduce electric vehicles (EVs) in the local market. Hub Power Holdings Limited, a subsidiary, has finalized plans for local EV production in collaboration with BYD. [ET]

PAKISTAN - ECONOMICS, POLITICS & SECURITY

• Criticism Over Tax Hikes in Budget: Opposition and government allies in the National Assembly criticized the regime for raising taxes in the federal budget. Abdul Qadir Gilani of PPP suggested PML-N announce initiatives like a new Saraiki Province to boost its popularity. He stressed PPP's opposition to reducing South Punjab's development budget from 35% to 20%. [The News]
• Senate Adopts Finance Bill 2024: The upper house of parliament adopted the finance panel's report on the Finance Bill 2024, despite strong opposition protests against the proposed "Azm-e-Istehkam" military operation in Khyber Pakhtunkhwa and the Pak-Afghan border area. [BR]
• Government Considers Export Tax Adjustment: The government may impose a 2-3% tax on export proceeds instead of bringing exporters into a normal tax regime for the 2024-25 budget, responding to their strong opposition. Finance Minister Mohammad Aurangzeb is expected to address this in his upcoming speech, potentially amending the Finance Bill 2024-25 to provide relief to exporters. [The News]
• Private Sector Credit Growth Slows: In 2024, Private Sector Credit (PSC) grew by Rs 188 billion, a 1.0% increase year-on-year, down from Rs 300 billion (5.0% growth) the previous year. This slowdown is attributed to economic sluggishness, high borrowing costs, and policy rate adjustments affecting schemes like the Export Finance Scheme (EFS) and Long Term Finance Facility (LTFF), according to the Economic Survey of Pakistan. [BR]
• Government Borrowing Hits Record High: In the first 11 months of the fiscal year, the government borrowed Rs 7.39 trillion, surpassing the combined borrowing of the previous two years. With an unprecedentedly high interest rate of 22%, debt servicing costs are expected to exceed budget estimates for the upcoming fiscal year. [Dawn]
• Gilgit-Baltistan Budget 2024-25: Gilgit-Baltistan's 2024-25 budget is set at Rs 140.17 billion, with Rs 86.6 billion for non-development expenses and Rs 34.60 billion for development projects. Finance Minister Engineer Muhammad Ismail presented the budget amid opposition protests, noting a Rs 68 billion federal grant and expected revenues of Rs 6.40 billion from non-tax sources and Rs 1.33 billion from the GB revenue authority. [Dawn]
• Supreme Court Questions SIC's Parliamentary Status: The Supreme Court questioned if the Sunni Ittehad Council (SIC) can be considered a parliamentary party under the law, as its chairman contested the election independently before forming the party afterward. Justice Naeem Akhtar Afghan asked the Election Commission of Pakistan (ECP) to explain this during Monday's hearing on SIC's petition regarding reserved assembly seats. [Dawn]
• Stock Market Declines Amid Tax Criticism: Amid criticism of tough tax measures, including from the business community and opposition, the stock market saw a decline on Monday. Investors opted for profit-taking after a four-day post-budget rally. Ahsan Mehanti of Arif Habib Corporation attributed the market's fall to disappointing May current account data, which showed a $270 million deficit after several months of surplus. [Dawn]

INTERNATIONAL - MARKET, POLITICS, SECURITY & DEVELOPMENT

• Israel Genocide: Netanyahu's statement that the "intense phase" of the Gaza conflict is easing, the Israeli army conducted airstrikes in Gaza. Hamas reiterated calls for a permanent end to hostilities. Meanwhile, Palestinian reconciliation talks planned in China this month have been postponed indefinitely, highlighting ongoing challenges to Palestinian unity amid Israel's Gaza offensive. [Dawn] [Dawn]
• Tragedy at South Korean Lithium Battery Plant: Twenty-two people, including 20 foreign nationals (18 Chinese, one from Laos, and one of unknown nationality), were killed in a massive fire at a South Korean lithium battery plant. The fire erupted during operations on the second floor where lithium-ion batteries were being inspected and packaged, leading to explosions and tragic consequences. [Dawn]
• Kremlin Downplays North Caucasus Violence: The Kremlin dismissed concerns of escalating violence in Russia's North Caucasus region after coordinated attacks in southern Dagestan killed at least 20 people over the weekend. This comes just three months after a deadly attack by Islamic State militants in Moscow, the deadliest in Russia in nearly 20 years. [Dawn]
• Modi Urges Opposition Consensus: Indian PM Modi, facing coalition government after election setback, urged opposition for consensus as parliament opens. Session till July 3 to outline Modi's third term plans; Rahul Gandhi expected as opposition leader, vacant since 2014. Previous terms saw BJP's landslide wins, enabling swift legislation passage. [ET]
• Biden vs. Trump Debate: Joe Biden and Donald Trump are set to face off in a historic US presidential debate this week, marking a pivotal moment in the 2024 race as millions of viewers watch. The event kicks off what is expected to be a contentious summer on the campaign trail in a highly polarized and tense United States still grappling with the aftermath of the 2020 election chaos and violence. [Dawn]
• Dubai Property Market Thrives: Dubai's red-hot property market continues to draw investors from India, Pakistan, the Middle East, Australia, the UK, Europe, Turkey, and beyond. Despite initial fears of a downturn, the market saw transactions worth $74.6 billion in 2023, and nearly $24 billion in the first quarter of 2024, indicating sustained investor confidence and activity. [BR]
• Chicago Wheat Futures Stabilize: Chicago wheat futures stabilized on Monday after reaching their lowest since April, supported by a stronger dollar and increased global harvests. Corn and soybean futures saw minor gains alongside wheat. The main wheat contract on CBOT held at $5.76 per bushel after dropping to $5.73 earlier, while recent concerns over Russia's harvest had previously pushed prices to a 10-month high of $7.20. [BR]

OPINION(S) & REMAINDERS

• Telecom Operators Request Relief: The Telecom Operators Association has asked the Special Investment Facilitation Council (SIFC) to abolish Finance Bill 2024 amendments imposing hefty fines and a 75 percent advance tax on mobile services for non-compliant tax filers, arguing their system cannot distinguish between filers, making it impractical for over 180 million subscribers. [BR]
• Punjab CM Calls for Regularization & School Restoration - Punjab Chief Minister Maryam Nawaz Sharif has called for regularizing 14,000 assistant education officers (AEOs) and secondary school educators (SSEs). She also directed the restoration of 603 non-functional schools and noted the completion of outsourcing for 5,863 government schools by August 5 during a recent meeting on the Public Schools Reorganisation Programme. [ET]
• Senate Rejects Tax Hike, Proposes Exclusion of Spouse's Assets - The Senate of Pakistan rejects tax hike proposal on individuals, suggests excluding spouse's assets from filers' wealth statement in Finance Bill 2024-25. Recommendations sent to National Assembly; Finance Minister to respond today. [ET]
• Opinion: ‘Global Boiling’ - “This year’s Hajj turned tragic as over 1,300 pilgrims succumbed to soaring temperatures, which reached a blistering 51.8 degrees Celsius. This calamity marks a new chapter in the saga of extreme weather events gripping the planet, a phenomenon UN Secretary General António Guterres dubbed “global boiling”.” - By Masood Lohar [Dawn]
• Opinion: BRICS: Emergence of Polycentric, Multimodal Harmonic World - “Two global events in less than seven days representing two different global outlooks concluded in the first half of June 2024. The G7 Summit in Italy had heads of state of the United States, Canada, Germany, France, Italy, Canada and Britain, while the chiefs of the European Council and the European Commission attended the meeting between 13 June– 15 June 2024. The Summit ended by re-emphasising the protectionist approach of protecting economic interests against the alleged Chinese meddling with global markets and the continued support for the sinking ship of Ukraine.” - By Shazia Anwer Cheema [ET]