Author: Ibraheem Sohail

Oil prices recorded a major decline in the global market on Tuesday after Israel agreed to US President Donald Trump’s proposal to a ceasefire with Iran. According to reports, this has eased concerns about disruptions in oil supply to the international market.

Data from the New York Mercantile Exchange reveals that Brent crude futures fell below the $70 support level, recorded a sharp 9.99% decline between June 23 at 12:30 PM (UTC-4) and June 24 at 3:00 AM (UTC-4). This caused prices to fall to $65.68 per barrel. 

A statement released by the Israeli Prime Minister Benjamin Netanyahu’s office confirmed that Israel agreed to a ceasefire with Iran as it had accomplished its objectives for destroying the country’s ballistic missile and nuclear threat. The US President made an announcement on Monday, outlining that if both Iran and Israel cease hostilities, the conflict would end after 24 hours.

The 12-day Iran-Israel conflict drove oil prices to a five-month high. The hike in global oil prices detrimentally impacted the global economy, causing capital markets across the region to take a hit, including the Pakistan Stock Exchange (PSX).

Analysts believe that the ceasefire could result in oil prices declining to previous levels. However, analysts also outline that oil prices will only become less volatile if both sides adhere to the ceasefire.

Currently, Iran is the Organization of the Petroleum Exporting Countries’ (OPEC) third-largest crude oil producer, and many feared further hikes in the price of oil as large-scale attacks on the country’s oil installations could have resulted in a major drop in supply.

Moreover, the war could have spread to the Strait of Hormuz, which witnesses the transport of 20 percent of the world’s oil supply, including exports from non-belligerent countries such as Kuwait, Iraq, and the United Arab Emirates (UAE).

Reports suggest that disruptions faced by naval cargo vessels in the region could have slingshot prices past the $100 per barrel resistance level. It merits a mention that Brent crude futures have remained under $100 per barrel since August 2022, highlighting the severity of the situation.

However, analysts predict that the risk premium built into oil prices because of Iran-Israel tensions is likely to diminish significantly, resulting in a drop in prices.

Prime Minister (PM) Shehbaz Sharif has reportedly approved proposals to phase out the use of meter readers in power distribution companies in a bid to reduce issues of overbilling. According to reports, a mobile application, Apna Meter Apni Reading, will be launched to fully replace manual meter reading.

This facility, however, will not be available in Karachi as the city is not served by a state-owned power distribution company. If K-Electric intends to offer its customers the same service, it will have to develop its own infrastructure.

Reports reveal that the current meter reading system has several issues. Customers have logged numerous complaints, claiming that their bills are much higher compared to the number of units they have consumed.

Currently, meter readers go from one utility pole to the next, taking pictures of every electricity meter. As per reports, these pictures are then forwarded to the Power Information Technology Company (PITC), which utilises information from the pictures to issue bills to customers.

The PM Shehbaz reportedly issued directives to the Power Division this month to resolve the complaints of overbilling via an electronic system. Reports suggest that the creation of a smart power mobile application was approved, which will be available to consumers in Urdu, Punjabi, Sindhi, Pashto, and Balochi.

PM Shehbaz has given a deadline of one month to Power Division officials to plan a strategy to start phasing out the use of meter readers in the power sector. This could greatly improve the efficiency of the power sector as a large number of meter readers can be put to use towards other operations. Alternatively, the federal government can also enact right-sizing initiatives, as some meter readers may not be required even after being reassigned to other designations.

Moreover, reports have outlined how this will result in a fall in administration costs. PM Shehbaz has reportedly agreed to pass savings from lower costs to customers, thereby reducing the financial strain on the general public.

PITC has asked power distributors to work on media campaigns to educate the general public about the benefits of self-reading, as meter readers are often a cause of overbilling. According to reports, the federal government has earmarked Rs316 for the aforementioned media campaign.

The Pakistan Stock Exchange (PSX) witnessed a massive 1,600-point slide on Monday, a day after the US launched strikes on Iran’s nuclear sites. The benchmark KSE-100 index fell below the 119,000-point support level.

As per the details, the decline in the KSE-100 index has been exacerbated by the US’ involvement after already being locked in a freefall last week because of escalating tensions between Iran and Israel.

It merits mention that the PSX’s losing streak comes two weeks after the release of the latest federal budget that caused the index to reach an all-time high. However, the budget-related spike in the exchange was short-lived as reports indicate that Iran-Israel tensions have resulted in oil prices climbing to a five-month high. The hike in global oil prices has caused capital markets across the region to take a hit, including the PSX.

These developments caused the KSE-100 index to open in the red in the early hours of the day. As of 12 PM, the KSE-100 index has shed 1,656.07 points because of a rise in market-wide selling pressure. According to reports, companies in key sectors such as commercial banking, automobile assembling and oil and gas exploration witnessed larger sell-offs.

Data from the PSX reveals that the KSE-100 index reached an intraday low of 117,977.81 points at 9:37 AM. A minor recovery was recorded after the index hit its intraday low, allowing the index to reach an intraday high of 118,798.51 points at approximately 9:58 AM.

However, the rally was short-lived, and the index witnessed a decline again, with 118,000 points resulting as a key support level. For reference, the KSE-100 closed at 120,023.23 points on Friday, after which the index shrank by 1.38 percent during trading hours on Monday, leading to a 1,656.07 point drop.

Of the 17 indexes listed on the exchange, 16 remained in the red with the All-Share Index (ALLSHR) shrinking by 1.40 percent, which translates into a 1,047.13 point drop in the index. Unlike the KSE-100, which tracks the performance of the 100 largest and most liquid companies, the ALLSHR index records the performance of all publicly listed companies on the PSX.

The aforementioned figures are not final and are likely to fluctuate as stocks continue to be traded on the floor of the PSX.

Pakistan has managed to secure approximately $20 billion in external financial assistance during the first 11 months of fiscal year (FY) 2024-25, exceeding its annual target of $19.2 billion. According to reports, this figure includes approximately $6.89 billion in fresh loans and grants, while the majority of the assistance was in the form of legacy rollovers.

China and Saudi Arabia granted rollovers of $3 billion each, while the United Arab Emirates granted Pakistan a rollover of $2 billion.

Despite Pakistan exceeding the annual target, the Economic Affairs Division’s (EAD) latest report outlined that inflows of foreign economic assistance dropped by 8.7 percent during the first 11 months of FY 2024-25 compared to the same period last year, when inflows stood at a respectable $7.55 billion.

It merits a mention that the $6.89 billion figure does not count the $2 billion received from the International Monetary Fund (IMF) under the ongoing $7 billion Extended Fund Facility program. The reason behind this is that these IMF disbursements are recorded separately by the State Bank of Pakistan (SBP). 

Reports have highlighted how including IMF disbursements and the rollovers results in total foreign assistance reaching $20 billion in the 11-month period. As per the data, Pakistan’s overall rollover portfolio from Saudi Arabia, China, and the UAE is estimated to sit at $12.7 billion, comprising loans and safe deposits.

Reports suggest that delays in the IMF program deterred many commercial lenders, contributing to the 8.7 percent drop in foreign economic assistance. Last year, inflows were higher due to timely IMF tranches.

Commercial financing from UAE-based lenders showed some recovery, reportedly reaching $903 million, but it remained far below the $3.8 billion annual target. Aside from delays from the IMF’s side, credit rating concerns and tough economic conditions have played their role in the fall in foreign economic assistance. 

As per reports, multilateral creditors disbursed $3.37 billion during the first 11 months of FY 2024-25, recording an uptick from $3.14 billion the previous year. Reports suggest that bilateral disbursements witnessed a significant drop on a year-on-year (YoY) basis as well, falling by 45 percent, causing aid to fall to a measly $487 million from its previous value of $889 million.

Islamabad also intended to generate $1 billion through international bonds and expected $9 billion in inflows from China and Saudi Arabia. Reports reveal that the breakdown would be $5 billion in time deposits, while the $4 billion would be SAFE deposits.

Meanwhile, inflows through the Naya Pakistan Certificates rose to $1.77 billion from $1.05 billion last year. The ADB and World Bank contributed $1.39 billion and $1.23 billion, respectively, showing YoY growth.

The federal government has revised the import policy to permit the commercial import of old and used vehicles up to five years of age from September 2025. According to reports, importers are currently not allowed to bring in cars older than three years.

Commerce Secretary Jawad Paul reportedly clarified during a meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, that the revised policy does not apply to vehicles brought in under the Baggage Scheme, which will continue to permit the import of vehicles only up to three years old.

For reference, the Baggage Scheme allows Pakistanis living abroad to import vehicles into Pakistan under specific conditions. These conditions include a limit on how many cars a person can import each year, and require them to have lived abroad for at least 180 days within the past seven months.

Reports indicate that in order to protect the local automobile industry, Islamabad intends to impose an additional 40 percent tariff on these older vehicles during the fiscal year (FY) 2025-26. However, over the next four years, this extra duty is expected to be reduced for old and new cars alike.

Reports suggest that the import of cars up to seven years old could be allowed in the coming years.  However, the authorities will likely ensure that strict quantity and environmental standards are maintained to avoid environmental harm.

Senator Mandviwalla stressed that overseas Pakistanis should be given the same five-year import window under the Baggage Scheme as commercial importers. 

Reports reveal that the commerce secretary outlined the strategic abuse of the existing gift scheme as an argument against the import of used vehicles.

In other automobile-related developments, the Senate Standing Committee on Finance was also informed of a planned three-tier levy on new vehicle purchases, though reports suggest that members were caught off guard when they realised these charges had not been officially included in the Finance Bill for FY 2025-26. 

The proposed levy structure includes a 1 percent charge for vehicles up to 1300cc, 2 percent for vehicles between 1301cc and 1800cc, and 3 percent for automobiles above 1800cc.

As per reports, Pakistan aims to boost electric vehicle production to 2.2 million units, mainly electric bikes, over the next five years.

The Senate Standing Committee on Finance has approved a proposal to increase the withholding tax on cash withdrawals to one percent for the fiscal year 2025–26. According to reports, the hike will apply only to non-filers.

The move was reportedly recommended by Chairman Federal Board of Revenue (FBR) Rashid Mahmood Langrial, who suggested that the withholding tax should be raised from its current rate of 0.6 percent. Reports have outlined how the one percent tax on cash withdrawals by non-filers is higher than the 0.8 percent rate that was initially proposed.

In the outgoing fiscal year, cash withdrawals made by non-filers via credit cards exceeding Rs50,000 were also subject to a 0.6 percent withholding tax. The increase in the tax rate is now intended to boost the federal government’s revenues for FY 2025-26.

In the weeks leading up to this development, it emerged that the FBR aimed to use the tax hike to “penalise” non-filers. The government also appears to target non-filers on other fronts, with reports suggesting that Islamabad may scrap the non-filer category altogether, curtailing their financial freedoms.

Reports suggested that non-filers may not be allowed to make financial transactions of any kind. While the government expects its move to broaden the tax net by penalising non-filers, analysts have outlined how this could lead to the rise of unrecorded transactions.

This may cause a significant setback to the federal government, which is implementing reforms to transition the economy towards a cashless system. According to reports, in meetings held prior to the release of the budget, the finance minister pushed for stronger digitisation efforts and a move to limit cash transactions.

Reports indicate that withdrawals larger than Rs50,000 will result in tax deduction from the entire amount. Under a one percent withdrawal rate, withdrawals amounting to Rs75,000 in a single day will result in non-filers paying Rs750 to the federal government. Similarly, non-filers withdrawing Rs100,000 in a single day will have to face a tax of Rs1000.

While the tax seems nominal at first glance, it could prove to be a respectable source of revenue for the government if non-filers continue to use the formal banking system. However, the government will have to ensure that non-filers do not resort to informal channels for transferring cash.

Lawmakers in Islamabad have rejected the government’s proposal to impose an 18% sales tax on imported solar panels. Reports say the National Assembly (NA) and Senate finance committees have officially rejected the plan, which was part of the federal budget for fiscal year 2025–26.

Finance Minister Muhammad Aurangzeb announced the tax on June 10 while presenting the budget on the floor of the NA. Along with imposing a tax on the import of solar panels, the proposal also aimed to bring digital marketplaces and online sellers into the tax net.

During the NA’s standing committee meeting on Wednesday, the FBR’s chairman reportedly informed the finance committee that no tax is currently being charged on completely built solar panels. Instead, the tax is only applicable to panels when their components are imported and the panels are assembled locally. 

As per reports, the FBR’s chairman argued that panel prices have dropped significantly over the years, and the proposed GST could bring in Rs20 billion in revenue without significantly reducing their affordability. However, committee members believe that the tax would make solar panels harder to afford, especially for the poor and that panels are not affordable as “solar prices have increased within two weeks.”

Lawmakers also argued that business costs are already too high, and taxing solar could serve to exacerbate things. Reports cite MNA Shahida Akhtar Ali, who pushed for taxing goods from other sectors, like sugary drinks, instead of targeting solar panels. Analysts believe that discouraging solar could kill momentum, just as more households are shifting to renewable sources.

Data from reports indicate that the FBR also revealed that 32,000 megawatts worth of solar panels have been imported over the last five years. A significant chunk, however, was never installed. 

Around 6,000 MW was used for net metering, while the rest was either off-grid or unaccounted for. Officials also flagged cases of over-invoicing and stockpiling ahead of the budget announcement, suggesting that some importers braced for a tax hike by hoarding solar panels. This could allow them to benefit from any increases in prices.

In a separate session, the Senate’s finance committee echoed the same concerns and called for an immediate withdrawal of the tax proposal. Members said the move felt abrupt and unfair, especially as many stakeholders had already rushed to dump solar equipment into the market.

The Karandaaz Financial Inclusion Survey reveals that the proportion of citizens with a bank account or mobile wallet has risen by 28 percent in recent years. However, women remain significantly underrepresented in Pakistan’s formal financial network compared to men.

The data suggests that the increase is primarily a result of an uptick in men signing up for financial services. Women’s inclusion, however, has remained subdued. 

The data from the survey reveals that female financial inclusion has increased by just 11 percentage points from 2014 to 2024. Meanwhile, financial inclusion of men has seen a more pronounced jump, skyrocketing by 45 percentage points during the same period.

The survey indicates that 35 percent of respondents had access to some form of a digital financial service (DFS) in 2024. This marks a stark improvement from 2014, when access to DFS sat at a measly seven percent. However, details suggest that men’s financial inclusion towers that of women, standing at 56 percent compared to women’s 14 percent.

Findings from the survey were derived from the dataset, which included 6,624 households across various regions of Pakistan. The survey is reportedly intended to outline the disparity in access to DFS by considering underserved groups such as women and those from rural regions of Pakistan.

A region-wise breakdown suggests that Punjab has the highest aggregate level of financial inclusion, sitting at a respectable 40 percent. Islamabad trails close behind at 38 percent, while financial inclusion in Gilgit-Baltistan sits at 33 percent.

However, an intraprovince gender wise comparison shows that the aforementioned average figures are bloated because of higher male financial inclusion. 

The gap in the financial inclusion ratio by province is worst in Azad Jammu and Kashmir, where a mere one percent of women have access to financial services, compared to 48 percent of men. Balochistan seems to follow AJK’s trend, with the financial inclusion ratio resting at 4 percent and 41 percent for women and men, respectively.

While the inclusion of women in Punjab, Sindh, Khyber Pakhtunkhwa (KP) and GB is much higher than in AJK and Balochistan, it still rests much lower than men. KP and GB emerge as the most gender-equitable provinces, where the financial inclusion gap between men and women stands at a comparatively lower 20 percentage points.

Reports cite multiple factors behind lower access to financial services for women. These include lower literacy and access to technology. For instance, women lag far behind in SIM card ownership, a necessity to open a bank account. Data suggests that only 47 percent of women have a SIM card registered in their name, highlighting their lower access to technology.