Author: Ibraheem Sohail

Pakistani exporters are targeting to ship off 125,000 tons of mangoes this season. Shipments will reportedly begin from May 25 and are expected to generate large foreign exchange inflows for cash-strapped Pakistan.

According to the Pakistan Fruit and Vegetable Exporters Association (PFVA), if exporters are able to meet the target, the mangoes will bring in approximately $100 million in export revenues. Reports reveal that last season’s export target sat at just 100,000 tons, indicating that exporters have increased their target by 25,000 tons for the current season.

Analysts believe, however, that the domestic supply of mangoes may be detrimentally impacted by climate challenges, creating difficulties for exporters to meet their target. As per a key member of the PFVA, the supply of mangoes has been falling persistently owing to water scarcity and climate change.

The aforementioned PFVA member, Waheed Ahmed, outlined how mango production could decline by a staggering 20 percent this year. He highlighted how mango production may fall from a respectable 1.8 million tons to a measly 1.4 million tons.

Reports reveal that 70 percent of mangoes are grown in Punjab, with 29 percent being grown in Sindh. Khyber Pakhtunkhwa is responsible for producing just one percent of Pakistan’s mangoes.

According to Waheed Ahmed, authorities need to enact “provincial-level initiatives” to relieve climate-based pressures impacting mango production. These include, but are not limited to, developing mango varieties that are climate resilient, improving water management on a provincial scale, modernising the agricultural sector and investing in research and development.

As per experts, climate change poses a significant threat to agricultural activities, a threat which mangoes are not immune to. Pakistan may soon be able to invest in initiatives once it receives funds from the International Monetary Fund (IMF) under the Resilience and Sustainability Facility (RSF) to combat climate-related shocks.

Falling mango yields could result in an uptick in fruit prices in the domestic market. Increasing mango exports could exacerbate the problem, causing a further increase in prices.

Waheed Ahmed has revealed that exporters are targeting new markets in addition to long-standing importers of Pakistani mangoes. These new markets include the United States, Australia, Japan and South Korea.

Moreover, he outlined that exporters will place special emphasis on moving into the Turkish and Chinese markets. Reports suggest that South Africa will open its market for Pakistan’s mangoes too, which could result in a significant jump in mango exports.

In a bid to ensure that Pakistan’s Virtual Asset Economy complies with safeguards set by the Fina­ncial Action Task Force (FATF), the federal government has decided to set up the Pakistan Digital Assets Authority (PDAA). According to details from reports, PDAA will be responsible for regulating digital assets and ensure that processes do not violate FATF’s regulations.

As per a statement issued by the Ministry of Finance (MoF), officials from the ministry will initiate a strategy to accelerate the growth of Pakistan’s virtual asset economy while simultaneously regulating the digital asset space. The Pak­istan Cryptocurrency Cou­ncil (PCC) has recommended a general outline of tasks for the PDAA.

Reports indicate that the tasks include ensuring economic inclusion, responsible adoption of virtual assets and to regulate financial infrastructure that is based on the blockchain. The purpose of regulation lies in ensuring that innovations are in accordance with FATF’s rules.  

Finance Minister Muhammad Aurangzeb, also PCC’s chairman, outlined how Pakistan’s goal is “not just to catch up but to lead”. He highlighted that this was possible via regulation and with the PDAA, Pakistan will get catapulted to a leading role in global financial innovation.

The PCC’s chairman further elaborated on the PDAA’s importance as its regulations could protect consumers and attract international investments – as regulation reduces risk.

As per reports, he emphasized how the newly created PDAA is responsible for matters pertaining to digital asset compliance, licensing and innovation. The body is expected to regulate tokenized platforms, digital stablecoins, DeFi applications, wallets and exchanges. 

Analysts have pointed out how Pakistan’s decision to lean into crypto and the digital asset space places it in the rank and file of leading economies such as those of Singapore, Japan, Hong Kong and the UAE. Reports confirm that the aforementioned countries have set up regulatory bodies of their own to oversee activities occurring in the digital asset space.

The establishment of such bodies reportedly allows for the host country to remain compliant with international financial laws while also promoting innovation. Details from reports suggest that the PDAA will be able to yield positive returns from the domestic electricity surplus via regulated crypto mining.

Aside from attracting investments, reports suggest that PDAA may regulate over $25 billion of the informal crypto market and tokenize government debt and national assets.

Reports indicate that the PDAA may also assist startups to design and launch block-chain based solutions. If managed effectively, the PDAA could allow Pakistan to become a major competitor to existing players in the international virtual asset economy.

Pakistan has missed its targeted investment ratio despite the federal government’s best efforts. However, details from reports reveal that the investment ratio has improved, rising to 13.8 per cent of the economy’s size in the current fiscal year (FY).

Islamabad has been working to raise investment inflows, particularly those that do not contribute to the national debt stock. Figures approved by the National Accounts Committee, however, indicate that the government was unable to meet the official investment ratio target.

A possible contributing factor is the inelastic nature of private investments. Moreover, the Pakistan Sovereign Wealth Fund (PSWF) remains largely idle despite being set up about two years ago.

The PSWF’s dormancy is linked to disagreements with the International Monetary Fund (IMF), with reports suggesting that the IMF is concerned about its legal framework.

Lawmakers and authorities intended to boost the investment-to-GDP ratio up to a respectable 14.2 percent. While this conclusion has been based on provisional figures, reports have revealed that the result will become official next Sunday when authorities launch the Economic Survey of Pakistan. 

Analysts note that despite missing the investment-to-GDP ratio target, the figure has logged a remarkable improvement from the previous fiscal year, as it sat at an abysmal 13.1 percent – the lowest investment ratio in 50 years.

Pakistan is now relying on the Special Investment Facilitation Council (SIFC) to boost domestic investment levels while simultaneously assisting the federal government with the implementation of policies. Private sector investment levels increased marginally to settle at 9.1 percent of the Gross Domestic Product (GDP) – well below the target of 9.7 percent. 

According to reports, the fixed investment-to-GDP ratio climbed up to 12 percent, a stark improvement from the 11.4 percent recorded during the previous FY. However, the targeted level was 12.5 percent, implying that the economy missed yet another investment goal. 

Reports reveal that if the federal government exhausts its development budget of Rs1.1 trillion, the public sector investment-to-GDP ratio will be able to climb up to 2.9 percent. 

The lack of investments suggests that the government will have to finance projects by taking out loans. However, the cash-strapped country is already beset by external financing issues; taking up additional loans will only serve to exacerbate financing problems.

As per a recent staff report released by the IMF, Pakistan needs to ease its trade policies, which the IMF considers to be restrictive. The IMF believes that the removal of trade-hindering policies, with a focus on abolishing the existing inefficient tariff system, could result in increasing private investment levels.

Pakistan’s economy continues to post modest growth as macroeconomic indicators such as Gross Domestic Product (GDP) and per capita income have increased in Fiscal Year (FY) 2024-25 compared to FY 2023-24. The government announced that it anticipated the economy to grow at a rate of 2.68 percent.

The figure displays a steep drop from initial projections which suggested that the rate of economic growth would sit at 3.6 percent in FY 2024-25. The government’s statement from Tuesday indicates that the country will not be able to meet the targeted GDP figure. 

The latest growth figures released by the government align closely with revised projections released by international financial institutions such as the World Bank and International Monetary Fund (IMF). Data from the World Bank indicates that Pakistan’s economy is expected to grow by 2.7 percent during the current FY, falling marginally from earlier estimations of a 2.8 percent growth rate.

However, the International Monetary Fund’s (IMF) growth revisions have been more pronounced as the lender expects real GDP growth to sit at just 2.6 percent. This is a large deviation from the growth rate the IMF originally anticipated, which stood at a respectable three percent.

The Asian Development Bank (ADB) estimates growth rate to sit at 2.8 percent, depicting the institutions’ optimism surrounding Pakistan’s economy. 

The revised GDP growth rates were approved during a meeting of the National Accounts Committee (NAC). As per reports, Planning Commission Secretary Awais Manzur Sumra chaired the 113th NAC meeting during which the aforementioned revisions were approved.

Reports reveal that Paksitan’s economic recovery is stagnating because of falling industrial output and pressures on the economy stemming from external financing issues. The large scale manufacturing sector witnessed a contraction of 1.53 percent in the first three quarters of FY 2024-25 accompanied by a 3.38 percent decline in the mining and quarrying sector.

The agricultural sector is projected to log a marginal 0.56 percent growth during FY 2024-25, a figure lower than what most economists would prefer.  Despite challenges faced by the agricultural and industrial sectors, the service sector has witnessed sizable growth, resulting in the size of the economy reportedly rising to $410.96 billion in FY 2024-25.

Compared to the previous FY, the figure stood at a much higher than the 371.66 billion nominal GDP figure indicating a revival of the economy. Per capita income has grown as well, reportedly rising from $1,680 in FY 2024-25 to $1824 for the current FY.

Lawmakers in Islamabad have reportedly engaged in discussions with commercial banks from the United Arab Emirates to request loans totalling $350 million. According to reports, the federal government requires these loans to meet external financing needs.

Finance Minister Muhammad Aurangzeb has been holding talks with the UAE’s commercial banks in efforts to resume their lending to Pakistan. Analysts believe that the loan package may be finalised soon, providing the economy with some fiscal breathing room.

In the first nine months of fiscal year (FY) 2024-25, foreign creditors provided Islamabad with approximately $504 million, with a number of the lenders based in the UAE. This has reportedly subsided fears foreign commercial banks had and kept them away from providing Pakistan with loans.

Lately, Pakistan has greatly improved its banking outlook along with most of its macroeconomic indicators. The Finance Minister outlined Pakistan’s accomplishment of meeting quantitative targets set by the International Monetary Fund (IMF) while highlighting how the renowned credit rating agency, Fitch, improved Pakistan’s credit rating.

Aside from Fitch, another credit rating agency, Moody’s, also upgraded Pakistan’s rating, reflecting rising market confidence in the country’s ability to pay back its liabilities. Commercial banks prefer lending to countries with a low risk of default as it is a safer option with steady returns on issued debt.

The Ministry of Finance has revealed that it engaged with three UAE-based banks, namely Abu Dhabi Islamic Bank, Ajman Bank and Sharjah Islamic Bank. As per reports, these meetings were held virtually and revolved around the aforementioned banks’ support for Islamabad’s fiscal and developmental goals.

The finance minister was at the helm of the discussions and even engaged with members of a team from Standard Chartered Bank. Reports suggest that he expressed gratitude to both Dubai Islamic Bank and Standard Charte­red Bank for identifying Ajman and Sharjah Islamic Banks as potential lenders.

Reports indicate that the Asian Develop­ment Bank (ADB) is willing to back the loans totalling $350 million with its guarantees, greatly reducing the risk of the UAE’s banks lending to Pakistan. In the event that Pakistan defaults on these specific loans, ADB may have to repay the banks with its own resources. 

As per reports, the Finance Minister outlined the government’s commitment to long-term reforms, including active privatisation efforts and rightsizing of the government.

The federal government, following discussions with the International Monetary Fund (IMF), has reached an agreement with the creditor to increase the domestic Petroleum Development Levy (PDL) to over Rs100 per litre. According to reports, the international lender expects Pakistan to make this change in fiscal year (FY) 2025-26.

Reports indicate that proceeds from the PDL will be directed towards power sector subsidies and payments to reduce the country’s ballooning circular debt. This will result in a massive hike in the PDL, which is Rs78 per litre and Rs77 per litre for petrol and diesel, respectively.

Reports reveal that the hiking of the PDL is in line with the federal government’s initiatives as lawmakers intend to fund electric vehicle and power subsidies via proceeds from non-tax revenues. Moreover, it is part of the IMF’s Extended Fund Facility Program, and if followed correctly, it will allow Islamabad to greatly consolidate its fiscal position.

This move may pave the way for Pakistan to curb fuel imports, reducing the current trade deficit. However, many analysts believe that the demand for fuel is inelastic, resulting in only a minor drop in domestic consumption of the commodity – this could allow for a significant boost in government revenues.   

The PDL has recently witnessed a series of increments, rising from Rs60 per litre in July 2024 to its current high of Rs80 per litre. According to reports, this Rs20 rupee hike, spread out over 10 months, resulted in the government obtaining an additional Rs1 trillion in revenue.

Islamabad had initially planned to bring in a whopping Rs1.281 trillion via the levy by the end of the FY. Moreover, the levies on fuel are not limited to the PDL as the government intends to impose a carbon levy on petrol and diesel, standing at Rs5 per litre.  

Reports suggest that the government intends to abolish the ceiling on the Debt Service Surchage (DSS) on power bills by the end of FY 2024-25. The ceiling stands at 10 percent, and if removed, may greatly alleviate the cash-strapped nation’s rising circular debt stock.

To counter the circular debt problem, the government intends to pass fuel cost pass-throughs and regular tariff adjustments onto users of the national grid. This could result in the general public facing higher power bills, thereby reducing household purchasing power.

In a bid to support industrialisation efforts and export revenues, Prime Minister (PM) Shehbaz Sharif has decided to implement the National Tariff Policy by forming a senior advisory committee. According to reports, the tariff policy is to be implemented over a period of five years and is expected to significantly improve the domestic economy.

Reports indicate that the committee will include 10 senior officials, with Finance Minister Muhammad Aurangzeb at the helm. Notable figures on the committee include the ministers for Railways, National Food Security & Research, Commerce, and Petroleum.

Furthermore, renowned economist Dr Ijaz Nabi, along with former bureaucrats Dr Robina Athar and Manzoor Ahmed, are also part of the committee. The inclusion of economic experts along with bureaucrats may result in the committee gaining a wider array of perspectives as opposed to one entirely composed of lawmakers alone.

As per the notification, the committee is primarily responsible for leveraging tariffs to grow exports, come up with support schemes and outline different sectors that will be affected because of a revision in tariffs, among other duties.

Other responsibilities include providing oversight to the policy’s implementation, along with studying the economic figures associated with tariffs. Moreover, reports indicate that the committee will also attempt to bring in foreign direct investment inflows while simultaneously focusing on creating a surplus in the supply of industrial products.

While the surplus may not clear in the domestic market, experts believe that it could allow for a boost in exports, thereby generating export revenues for cash-strapped Pakistan.  This spells great news for the country as it has historically relied on remittances to stop the current account deficit from growing too large, a phenomenon caused by the country’s persistent trade deficits.

Reports reveal that the Ministry of Commerce (MoCOM) will have the authority to induct members onto the committee. The MoCOM has also been tasked with extending secretarial support to the committee upon request. 

PM Shehbaz has authorised a sizable drop in tariffs on imports, which could attract investments while boosting exports, as per details from an official announcement. He announced his intentions to create employment avenues by improving the economy.

Reports suggest that PM Shebaz has also implemented a 15 percent upper limit on customs duty, a move that could provide importers relief. Moreover, he waived off additional customs duty entirely, which can be as high as seven percent, along with regulatory duties, which can be as high as 90 percent. 

However, these reductions in tariffs and duties are to be implemented in phases. As per reports, it will take four to five years for importers to experience the full extent of tariff reductions.