Category: Business

Businesses and consumers prepare to celebrate as they may soon see a reduction in their utility bills of up to PKR 8.55 billion. This is because the Central Power Purchasing Agency-Guaranteed (CPPA-G) has proposed for Discos (electricity distribution companies) to decrease the per unit price of electricity by PKR 0.7.

The lower cost of electricity will serve to greatly benefit households and industries, which consume 47 per cent and 28 per cent of the electricity used, respectively. Businesses in the cement, steel and textiles sectors stand to benefit in the form of higher profits, as they are large consumers of electricity.

Textile exporters stand to benefit the most as their products will become more attractive to customers in international markets due to their lower prices. Textile exports already stand at an impressive USD 16.655 billion in 2023, with more to gain if the proposal goes through.

While discos are to return this amount, this won’t be too tough on most of them as they are owned by the government directly. However, the owners of K-electric will not be too thrilled if the proposal is accepted, as it is privately owned, and it will reduce earnings due to the PKR 0.7 negative adjustment.

For average households and above, this adjustment will reduce the monthly electricity bill by about PKR 150 to PKR 450, resulting in them having more money available. When this money is available to consumers, it will likely create more sales for the goods and services of local businesses.

Aside from the negative adjustment charges, the coming of winter will also greatly reduce the average electricity bills, allowing local businesses to cash in on consumers having more money available.

The reduced electricity bills are likely to help grow local businesses while also improving the overall standard of living for Pakistanis. However, businesses are experiencing uncertainty in decision-making with the constantly changing electricity tariffs and adjustment charges.

While there is a negative adjust charge right now, many speculate that discos are likely to advocate for higher tariffs in the near future to recuperate any losses.

Businesses are aware of this potential scheme and are weary of the constant changes in electricity, which is a major input in the production of most goods.

Pakistan’s current account saw a surplus of $119 million in September 2024, a notable improvement from the $218 million deficit in the same month last year, according to data from the State Bank of Pakistan (SBP).

This marks second straight month of current account surplus, and it’s the biggest since March 2024.

The surplus for August 2024, which was initially reported around $75 million, was revised down to $29 million in the latest data.

In the first three months of the current fiscal year (3MFY25), the overall current account deficit stands at $98 million. This marks a significant 92 per cent reduction from the $1.241 billion deficit recorded in the same period in 2023.

Breakdown of September 2024

Trade (September 2024)	Value (Sept 2024)	Value (Sept 2023)	Improvement
Exports of goods and services	$3.302 billion	$2.999 billion	+10%
Imports of goods and services	$5.574 billion	$4.845 billion	+15%
Worker remittances	$2.849 billion	$2.209 billion	+29%

Exports: Pakistan’s total exports of goods and services reached $3.302 billion, a rise of over 10 per cent compared to $2.999 billion in September 2023.

Imports: Imports surged nearly 15 per cent year-on-year, reaching $5.574 billion in September 2024.

Worker remittances: Remittances amounted to $2.849 billion marking a 29 per cent increase compared to last year.

Reasons behind the improvement

The reduction in the current account deficit is partly due to not so impressive economic growth and high inflation, which have curbed demand for imports. The increase in exports, higher interest rates, and some import restrictions have supported the government’s efforts to narrow the deficit.

3MFY25 performance

From July to September 2024, exports totalled $9.4 billion, while imports reached $16.83 billion. Worker remittances during the same period were recorder at $8.79 billion, showing almost 39 per cent jump from the same period in 2023.

Why it matters?

The current account is a critical indicator for Pakistan’s economy. this is due to its reliance on imports. A widening deficit can weaken the Pakistani currency and deplete foreign exchange reserves, while a surplus helps stabilise both.

Cotton farmers breathed a sigh of relief as the final bale of their successful harvest was loaded onto trucks en route to the ginning factories. After a 48 per cent decline in cotton output from last year, the first fortnight of October recorded an 8.87 per cent increase compared to the same period last year, reigniting the hopes of many in the cotton industry.

The cotton harvest crossed the one million bale mark compared to the same time last year. This increase in the yields, amounting to an extra 90 thousand bales of cotton, resulted in 184 ginning factories reopening. That is an incredible 52.27 per cent increase in the number of operational factories. The owners of these factories are set to benefit as the factories have gone from collecting dust to receiving cotton trucks.

At these factories, cotton is cleaned and refined by separating it from impurities such as leaves, dirt and, most importantly, cotton seeds. These seeds are a major byproduct of the purification process and a source of profit for the factory. If farmers manage to increase yields, factory owners can count on getting more seeds with each additional deposit of raw cotton to the factory.

The availability of these extra seeds will likely translate into an increase in the production of cottonseed oil and animal feed. This is going to spell good news for businesses involved in poultry as the increased supply of animal feed in the market will potentially result in lower feed prices for their hens.

Due to lower cotton production levels earlier in the year, import deals to bring in approximately 3 million bales of raw cotton have been formalised. However, the cotton is still not on Pakistani shores.

The wait times associated with the import of cotton by Pakistan from the United States, which sources most of Pakistani cotton imports, is a staggering 44 days. If this cotton was sourced internally from local farmers, however, this time could be cut down to just 2-3 days. Unfortunately though, farmers cannot currently scale up production to meet the domestic demand of cotton.

If cotton farmers can continue to ramp up production, the business community will not be the sole beneficiary. Pakistan has been importing billions of dollars of cotton, recently being the 5th largest importer of the raw material in 2022. If local farmers can meet domestic demand, the economy will be spared a huge import bill, thereby reducing the balance of the trade deficit, which stood at a glaring $24.8 billion in FY 2023.

October may mark the end of the woes faced by farmers this year. However, only time will tell if they can reach the level of production they enjoyed just a year prior.

Bilateral sources line up to extend loans totalling USD 4.5 billion to Pakistan for the Reko Diq mining operation. Business owners surrounding the mining facility prepare to celebrate as the influx of funds will serve to promote business activity in the region.

The greatest potential lender is the EXIM (Export-Import) Bank of the United States, which is interested in lending USD 1.5 billion to the Reko Diq mining operation.

Other lenders like the World Bank, Asian Development Bank and bilateral sources like Canada, Japan, and Germany, among many others also expressed their interest in the project by offering to pitch in the combined value of three billion dollars in loans.

The inflow of foreign investments and loans is bound to improve the transportation infrastructure of the area around the extraction site – primarily roads. Saudi Arabia has already offered to invest USD 150 million in infrastructure as part of the Saudi investment package into Reko Diq, which has still not been accepted by Pakistan.

The new roads that will get paved for transporting gold and copper out of the mines will also be used by local businesses to move goods from warehouses to stores. Travel times and costs will witness a drop, helping businesses in the area improve their supply chain.

This will also make the area around Reko Diq more accessible to tourists and travellers, which will rake in more traffic. With the increase in visitors, local shops, restaurants, rest stops, and other businesses will have the chance to attract more customers.

Moreover, foreign investments will bring foreign workers to the mining zone who will need housing, food, and other services. New businesses could spring up to meet these needs, which will likely create jobs and reduce the current unemployment rate of 9.13 per cent, which is second only to Kashmir.

The Government of Balochistan owns a 25 per cent stake in the mining operation. If the loans flow in, Balochistan’s economy will likely see an improvement along with the businesses that call it home.

Businessmen across Pakistan watched the developments of the meeting between Iran’s Minister of Trade, Mohammad Atabak, and Pakistan’s Commerce Minister, Jam Kamal Khan.

The meeting ended with an agreement to remove the existing barriers to trade that could greatly increase trade and business activities on both sides of the border.

The meeting in Islamabad sparked hope for future trade with Iran as the delegation from Tehran invited Pakistan to attend further talks regarding the improvement of economic ties.

Pakistani sugar exporters would benefit enormously if talks between Islamabad and Tehran led to trade deals. This is because Iran currently spends over half a billion dollars annually to meet its sugar demand – a potential market for Pakistani exporters.

This is prime time for sugar producers to capture lucrative export deals as the ECC (Economic Coordination Committee) has already directed banks to facilitate the export of an additional half a million tons of sugar.

Currently, Iran imports sugar from as far away as Belgium and Brazil, a process that can take a staggering 40 days. The Pakistani market, however, could supply sugar to Iran within just 3-4 days due to the fact that the two countries are neighbours. 

Pakistani businessmen in the agricultural sector will also reap a lot from this potential partnership, just like sugar producers. That’s because in 2023 alone, Pakistan imported nearly half a billion dollars worth of fertilisers, and Iran is a net exporter, so a trade deal between the two neighbours is possible.

If realised, the import of Iranian fertilisers is likely to drive down fertiliser prices locally, which would benefit farmers. The lower production costs would help increase profitability for farmers and could also make Pakistani agricultural exports even more competitive than they already are in the global market.

Perhaps the most exciting possibility, however, is the potential for the export of Iranian petroleum to Pakistan. With petrol prices sitting at an uneasy PKR 247 per litre, importing oil from Iran at special rates due to “special clauses” in trade deals could provide relief to both businesses and consumers.

Atabak has extended an invitation to Jam Kamal Khan for further talks in Tehran, sparking speculation that a trade deal could soon become a reality, which would mark a major step forward in bilateral relations.

If the discussions result in trade agreements, businesses from both nations will benefit. Industries and citizens are expected to enjoy lower costs and shorter delivery times for imports. The future could very well see Iranian fertilisers being used to grow Pakistani sugarcane, only for that same sugar to make its way back to Iran – a sweet cycle of trade.