Investors Celebrate Pakistan's Continuing Economic Recovery

[Riaz Haq]

Pakistan's benchmark KSE-100 index hit an all-time high after the announcement of the $7 billion IMF bailout deal today. Economic indicators such as inflation, exports and remittances are also showing significant improvement as well. Speaking to reporters after the IMF deal,  the Fund Managing Director  Kristalina Georgieva acknowledged progress made by Pakistan. She said  "The economy is on the sound path. Growth is up and inflation is down". The KSE-100 index rose in early trade to a record high of 82,905.73 points, before giving up those gains later in the day to close 0.7% down at 81,657. It still represents an annual gain of nearly 100%. 

Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg

Pakistan rupee has remained essentially stable at around Rs. 277 to a US dollar over the last year. Inflation has come down from 37% last year to less than 10% this year.  Exports have climbed 10.54% ($2.921 billion) to $30.645 billion during the fiscal year 2023-24 compared to $27.724 billion in the corresponding period of 2022-23. Overseas workers' remittances have surged 44% to $5.94 billion in the first two months (July-August) of the current fiscal year 2024-25, compared to the same period last year.  Current account deficit has declined to $681 million in FY24 from $3.275 billion in FY23. The budget deficit for the 2023–2024 fiscal year has been reduced to 6.8% of GDP from 7.7% in the previous year. 

The stock market gains are driven primarily by the increasing profitability of the firms making up the index, in addition to improvement in macroeconomic indicators. The companies listed on Pakistan’s KSE-100 Index have reported their highest-ever earnings of Rs1.7 trillion in FY24, marking a 25% year-on-year increase from Rs1.3 trillion in FY23. In US dollar terms, profits after tax (PAT) rose 10% to $5.8 billion during the same period, according to data compiled by brokerage firm Topline Securities.  Dividend payouts soared 30% as banking, fertilizer, and cement sectors led growth, according to media reports. 

Pakistan has a long tough road ahead to carry out the reforms promised to the IMF in the latest bailout deal. Renegotiating unsustainable IPP (Independent Power Producers) contracts and carrying out long-delayed  privatization of state-owned enterprises to reduce major drain on the taxpayers will not be easy, Boosting tax collection is not easy either. Offering incentives for savings, investments and exports while reducing budget deficits is a difficult feat. It will take a lot of fortitude, finesse and political will to get the results to improve the economy. Pakistani leaders' biggest challenge is to find a way to grow the economy to create enough jobs for the country's growing working age population. Failure to do so could cause major social unrest in the nuclear-armed country of 240 million people. 

Related Links:

Haq's Musings

South Asia Investor Review

Why Hasn't Pakistan Economy Grown Faster the 5% Average Since 1960s?

Pakistan to Swallow IMF's Bitter Medicine

Agriculture: A Bright Spot in Pakistan's Economy

Following the Money: Insights into Pakistan Budget 2024-25

Pakistanis Consuming More Calories, Fruits and Vegetables

Pakistan Stock Market is World's Best Performing in 2024

Pakistan's Rural Economy

Pakistan Among World's Largest Food Producing Countries

Pakistan Sets New Record For Rice Exports

Riaz Haq's Youtube Channel

PakAlumni Social Network

[Riaz Haq]

Pakistan Economy Grows 3.07% Buoyed by IMF Loan, Lower Rates
Gross domestic product rose 3.07% in the three months to June from a year ago, the Pakistan Bureau of Statistics said Monday. That compares with a forecast of 2.7% in a Bloomberg survey of economists and a revised print of 2.36% in the January-March period.

https://www.bnnbloomberg.ca/business/international/2024/09/30/pakis...
-----

Pakistan’s economy grew faster than expected last quarter as funds from the International Monetary Fund and lower interest rates buoyed activity.

Gross domestic product rose 3.07% in the three months to June from a year ago, the Pakistan Bureau of Statistics said Monday. That compares with a forecast of 2.7% in a Bloomberg survey of economists and a revised print of 2.36% in the January-March period. For the financial year that ended in June, growth was revised to 2.52% from a reading of 2.38% earlier.

Pakistan was locked in a cycle of overlapping political and economic crisis that drove the nation close to default last year, but funds from multilateral lenders and loans from friendly countries have helped in stabilizing the country.

Foreign exchange reserves have strengthened from previously critically low levels, import and currency restrictions that hurt industrial activity have eased. Inflation has also cooled, helping monetary authority to lower borrowing cost by 450 basis points since June this year.

Last week, the government secured a final approval from the IMF for a fresh $7 billion loan program, that will bring certainty over financing over the next few years. The nation faces about $26 billion in loan repayments in the fiscal year started July.


The agriculture sector expanded 6.76% during the quarter on the back of a bumper wheat crop, while services sector expanded 3.69%, the data showed.

Prime Minister Shehbaz Sharif’s government has pledged to achieve a sustained growth by undertaking structural reforms in the economy. His administration forecasts an expansion of 3.6% in the year through June 2025.

[Riaz Haq]

Pakistan's Annual Consumer Price Inflation Slows to 6.9% in September

https://money.usnews.com/investing/news/articles/2024-10-01/pakista...

ISLAMABAD (Reuters) - Pakistan's annual consumer price inflation slowed to 6.9% in September, data showed on Tuesday, the lowest in more than three years, as the government seeks to implement IMF conditions that many households fear will hit them hard financially.

Annual inflation had slowed the previous month to 9.6%, the first single digit reading in more than three years.

Tuesday's data from the Pakistan Bureau of Statistics also showed that the monthly consumer price index in September stood at -0.5%.

"Due to aggressive monetary tightening, SBP (State Bank of Pakistan) has achieved in bringing inflation below 7% one year ahead of target," said Mohammad Sohail, chief executive officer at brokerage Topline Securities.

Pakistan's central bank has cut interest rates three times this year, saying it is confident that inflation is in check after it previously lifted rates to an all-time high of 22%.

In an economic outlook published last week the finance ministry said it expected annual inflation to decrease to 8-9% in September and October.

The International Monetary Fund approved a $7 billion loan programme for Pakistan last month that includes tough measures such as higher taxes on farm incomes and electricity prices.

The prospect of such moves has spurred concerns among poor and middle-class Pakistanis about higher prices after years of soaring inflation despite the recent downward trends.

[Riaz Haq]

Pakistan Is Only the Beginning of the Cheap Solar Revolution

By Ryan Cooper, managing editor at The American Prospect, and author of the book "How Are You Going to Pay for That?: Smart Answers to the Dumbest Question in Politics."

No need for expensive imported fuel when your energy is coming from the sun.

https://heatmap.news/economy/pakistan-solar

Pakistan imported a whopping 13 gigawatts of solar panels, mostly from China, in just the first half of 2024, mostly for rooftop installations for homes and businesses. That’s a mind-boggling amount of new solar for a country that only had about 50 gigawatts of installed generation capacity in total in 2023.
----------

Fuel imports are one of the largest expenses for even prosperous countries. For places like Pakistan, they are a punishing economic drain. Paying for vast amounts of imported coal, gas, and oil in scarce foreign currency is hard enough in good times, but it’s disastrous when one’s currency has depreciated by about 40% over two years.

Dirt cheap solar power could ameliorate or solve many of these problems at a stroke. Panels are now so cheap, even Pakistan can afford to import them by the millions — an expense, yes, but a one-time one. And while solar is inherently intermittent, and therefore not a solution to Pakistan’s reliability problems, batteries are also plummeting in price — down about 90% between 2010 and 2023 — and can help balance out supply. Cheaper batteries also mean cheaper EVs, with (as usual) Chinese models coming out at bewilderingly low prices. And because Pakistanis mostly drive motorcycles (often manufactured domestically) over relatively short distances, electrifying the personal vehicle fleet there will be far cheaper than in America or Europe; vastly smaller batteries require vastly simpler charging infrastructure.

If all goes well, this will free up vast amounts of economic capacity for Pakistan to invest in domestic development. Businesses will have stable, reliable power supplies that will justify more investment. Households will be able to upgrade their insulation, install heat pumps, and generally spend more on things other than energy. The government will be able to upgrade legacy transmission lines to accommodate solar production from the remaining hydro and nuclear plants.

Finally, of course, there is the climate benefit. Pakistan is one of the countries most threatened by climate change. Summer heat waves are bad and getting worse, to the point where murderous wet bulb events are increasingly likely. Catastrophic warming-fueled storms in 2022 caused the worst flooding in the country’s history, inundating about a third of Pakistan’s land area, killing nearly 2,000 people and causing billions of dollars in damages.

In short, a path to economic development will be opened. It is by no means guaranteed, but it will be a heck of a lot easier than trying to dig out from under the debt mountain of the collapsing coal-powered system. Look around the developing world and you’ll find there are a great many nations in similar situations.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Tax collection increased by 32% YoY to PKR 1,100bn during Sep’24

Tax collection for the month of Sep’24 increased by 32% YoY to PKR 1,100bn against a target of PKR 1,098bn. On MoM basis, tax collection increased by 38% in Sep’24

During 1QFY25, FBR collected revenue of PKR 2,556bn, up by 25% YoY. The collected amount is PKR 96bn short than the target of PKR 2,652bn.

https://x.com/ArifHabibLtd/status/1840975573146890642

[Riaz Haq]

See new posts
Conversation
Arif Habib Limited
@ArifHabibLtd
KSE100 Index recorded its highest-ever closing at 82,722

KSE-100 index went up by 755 points (+0.92% DoD) to close at 82,722 pts.

https://x.com/ArifHabibLtd/status/1841801335013859417

---------------------

Arif Habib Limited
@ArifHabibLtd
AHL reported that this surge in sales is attributed to rising demand alongside a notable decline in the prices of Motor Spirit (MS) and High-Speed Diesel (HSD), which fell by 20.19% and 20.06% year-on-year, respectively.

https://x.com/ArifHabibLtd/status/1841701062866051564

Petroleum product sales surge 20% in September fueled by increased demand

https://profit.pakistantoday.com.pk/2024/10/02/petroleum-product-sa...

Pakistan's petroleum consumption hits 1.27 million tons, driven by falling prices and robust petrol and diesel offtake

Petrol sales saw a remarkable 22% year-on-year rise, totaling 0.63 million tons in September 2024, up from 0.52 million tons the previous year. Meanwhile, HSD dispatches surged by 25% year-on-year, reaching 0.49 million tons in the same month.

Conversely, Furnace Oil (FO) sales experienced an 18% decline, dropping to 0.07 million tons due to diminished demand for FO in power generation, compared to 0.08 million tons in September last year.

On a month-on-month basis, petroleum product offtake increased by 5% from August’s 1.22 million tons, attributed to lower demand in August due to heavier rainfall.

For the first quarter of FY25, total petroleum product sales fell by 3% year-on-year to 3.68 million tons, compared to 3.81 million tons in the same period last year. While sales of HSD and FO declined, petrol sales remained stable, with volumes recorded at 1.85 million tons for petrol, 1.42 million tons for HSD, and 0.21 million tons for FO.

Company-wise, Pakistan State Oil (PSO) reported an 8% increase in offtake for September 2024, totaling 0.55 million tons. Additionally, HASCOL and Shell Petroleum saw substantial growths of 76% and 17% year-on-year, respectively, while Attock Petroleum Limited (APL) experienced an 8% decline in dispatches.

[Riaz Haq]

Danish shipping giant Maersk has announced a significant $2 billion investment in Pakistan’s port and transport infrastructure over the next two years. This investment aims to contribute to the country’s infrastructure development and drive economic growth, according to a state-owned news agency.

https://www.globaltrademag.com/maersk-commits-2-billion-to-boost-pa...

As part of this initiative, Pakistan’s Minister for Maritime Affairs, Qaiser Ahmed Sheikh, is scheduled to visit Denmark this month to sign a Memorandum of Understanding (MoU) between Maersk Shipping Company and Karachi Port Trust.

This announcement follows the recent commitment by Abu Dhabi Ports Pakistan CEO, Khurram Aziz Khan, who unveiled a $250 million investment in Karachi Port over the next decade during a meeting with Prime Minister Shehbaz Sharif. Khan also outlined plans for a $130 million investment in a state-of-the-art multipurpose terminal, expected to be completed within two years. Enhancements to the container terminal facility at Karachi Port will include automated gates, an expanded berth, a crane rail track, and additional infrastructure upgrades.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Remittances increased by 29% YoY to $ 2.8bn during Sep’24

Remittances by overseas Pakistanis increased by 29% YoY to USD 2.8bn during Sep'24 compared to USD 2.2bn during Sep’23. On MoM basis, remittances decreased by 3%.

In 3MFY25, remittances increased by 39%YoY to USD 8.8bn.

https://x.com/ArifHabibLtd/status/1843884748168478837

-----------------

https://tribune.com.pk/story/2501681/pakistan-sees-388-increase-in-...
In the first quarter of fiscal year 2025, overseas Pakistanis sent a total of $8.8 billion back to Pakistan, marking a significant increase of 38.8% compared to the same period in fiscal year 2024.

Overseas Pakistanis sent an impressive $2.849 billion back to Pakistan in September 2024, reflecting a notable 29% increase from $2.208 billion in the Septermber 2023, Express News reported. Despite this positive trend, remittances saw a slight decline of 3% compared to August 2024, when the total was $2.943 billion

The average monthly remittances from workers over the three months amounted to approximately $2.92 billion.

Pakistani workers in Saudi Arabia were the largest contributors in September 2024, sending $681.3 million. Although this figure is a 4% decrease from August, it still represents a 27% increase from the $538.3 million sent in September of the previous year.

In contrast, remittances from the UAE showed an upward trend, rising by 4% from August, from $538.4 million to $560.3 million. Year-on-year, this figure jumped significantly by 40%, compared to $399.8 million in September 2023.

Pakistani workers in the United Kingdom sent $423.6 million in September 2024, which was an 11% decrease from August. However, this amount still signifies a 36% increase compared to last year.

[Riaz Haq]

The case for agriculture exports - Business - DAWN.COM


https://www.dawn.com/news/1845946


In 1990, Pakistan’s exports-to-GDP ratio was around 14.8pc, which was significantly higher than that of China, India, and Bangladesh. Over the last three decades, these countries have predominantly experienced export-led growth, resulting in increased exports-to-GDP ratios of 19.7pc, 21.9pc, and 13.2pc, respectively, in 2023, as per World Bank data.

Unfortunately, due to flawed economic policies and the misplaced priorities of successive governments, Pakistan has bitterly failed to achieve export-led growth. Particularly during the Nawaz Sharif regime (2013-2017), the dollar exchange rate was artificially capped at Rs100 for four years. This policy made imports cheaper, leading to a surge in imports while exports declined.



In fact, the policy shook the very foundation of Pakistan’s export sector and disrupted the value chains of exportable products. While the intention was to keep inflation in check and to win the country’s next election — a short-term political gain — it came at the expense of long-term export growth. Consequently, Pakistan transitioned to a consumption-based economy, and the business community shifted its investment focus from manufacturing to trading and real estate sector.

The government, however, continued to collect taxes and duties on imports — a hassle-free method of tax collection and boosting revenue — without acknowledging that it came at the cost of a massive current account deficit. As a result, Pakistan’s export-to-GDP ratio decreased from 12.2pc in 2013 to 8.2pc in 2017, according to World Bank data.

Now, with the exception of some niche markets, Pakistan is struggling to increase its exports. The manufacturing sector feels incapacitated in maintaining its competitiveness in global markets due to a high policy rate of 20.5pc, electricity costs three times higher than those in neighbouring countries, and, to top it all off, frequently changing trade policies and tax regimes.

Historically, our manufacturing sector, particularly the textile sector, has relied on the government’s subsidies and incentives, which have hindered productivity, product diversification, and product quality improvements to the level needed to compete in global markets.

As the government withdraws these tax-related concessions and other incentives due to the financial crisis, manufacturers and exporters openly state that they will relocate their businesses to other countries, offering better incentives and a business-enabling environment.

However, amidst these economic challenges, the business environment, and current government policies, agriculture and information and communication technology (ICT) are the two sectors that can be relied upon for export growth, even during the current economic stabilisation phase.

Agriculture and IT are relatively less capital-intensive and do not require significant energy inputs. Their electricity needs can be efficiently met through solar power for offices and tube wells. Moreover, contrary to manufacturing, their turnaround period is in months, not years.

These sectors also offer another significant advantage: unlike the manufacturing sector, they are not heavily reliant on imports. Consequently, when they export, there is no corresponding considerable increase in imports.

[Riaz Haq]

See new posts
Conversation
Arif Habib Limited
@ArifHabibLtd
*Macroeconomic indicators in Pakistan show signs of significant improvement during FY25-todate*

* With Sep’24 recording a 44-month low inflation of 6.9%, average inflation in 1QFY25 dropped to 9.2% (compared to 29.0% in 1QFY24), driven by lower food prices, high base effect, and reduced global commodity prices.

* As inflation eased, the policy rate was lowered to 17.5% by the end of Sep'24, leading to a substantial drop in money market yields across all tenors, which now range between 12-15%, down from last year's peak of 23-25%. This marks the lowest level since 3QFY22.

* External account improved as the current account deficit declined, supported by exports reaching USD 7.9bn, the sixth highest quarterly figure in 1QFY25.

* SBP foreign reserves increased to USD 10.8bn —the highest since Apr'22. This rise in reserves has played a crucial role in stabilizing the PKR against the USD, which slightly appreciated by 0.23%.

https://x.com/ArifHabibLtd/status/1845002219650781359

[Riaz Haq]

Chinese premier opens trip with joint opening of Beijing-funded New Gwadar International Airport ahead of two days of SCO meetings



https://www.scmp.com/news/china/diplomacy/article/3282458/chinas-li...



Premier Li Qiang reiterated China’s pledge to upgrade a multibillion-dollar economic corridor with Pakistan and deepen joint counterterrorism efforts with its military as he arrived in Islamabad on Monday.
Li, who is on his first visit to the South Asian country as premier, will be attending a Shanghai Cooperation Organisation heads of government meeting in the Pakistani capital during his four-day trip.

“China is willing to work with Pakistan, focusing on establishing an upgraded version of the CPEC,” Li told Pakistani Prime Minister Shehbaz Sharif on Monday, according to the Chinese foreign ministry.

The China-Pakistan Economic Corridor (CPEC) is a flagship project under Beijing’s Belt and Road Initiative, with more than US$65 billion pledged for projects in Pakistan as of 2022.
Formally announced in 2013, the 3,000km (1,864-mile) route of infrastructure projects aims to connect landlocked western China to the Arabian Sea via Pakistan’s deep sea Gwadar Port.

Earlier, Li and Sharif inaugurated the Beijing-funded New Gwadar International Airport in a televised virtual ceremony.

The Chinese premier described the airport as a key facility for the Gwadar Port to become a regional connectivity hub and an important symbol of the further deepening of the construction of the CPEC.

Gwadar lies on the southwestern coast of the Pakistani province of Balochistan, near the Iranian border, where there has been a long-running insurgency.

“We aim to accelerate the construction of major projects in areas such as railways, roads and ports, and strengthen industrial integration,” Li said.

He also pledged to “deepen practical cooperation in agriculture, mining, information technology and energy, ensuring that the results of China-Pakistan cooperation benefit the people more broadly”.

Sharif said that the Gwadar International Airport marked “another symbolic representation” of the friendship between Pakistan and China, and the new facility would “fully unleash the hub functions” of Gwadar Port, bringing “unprecedented” development opportunities to Pakistan.

Later in the day, Li met Pakistani military leaders, telling them that China hoped to deepen counterterrorism cooperation towards jointly safeguarding peace and stability.

Military leaders present at the meeting were Chairman of the Joint Chiefs of Staff Committee of the Pakistan Army Sahir Shamshad Mirza, Chief of Army Staff Asim Munir, Chief of Naval Staff Naveed Ashraf and Chief of Air Staff Zaheer Ahmad Babar.

Pakistan has sought to bolster security for thousands of Chinese workers in Pakistan following a surge in militant violence targeting Chinese nationals and Chinese-funded belt and road megaprojects.

Security fears spiked ahead of Li’s visit, after a deadly attack on Chinese nationals near Jinnah International Airport in the southern city of Karachi.
Two Chinese workers were killed and several others were injured in the attack claimed by the separatist militant group Baloch Liberation Army, a group that has targeted Chinese interests in Pakistan before.

Li told Sharif: “We hope that Pakistan will continue to provide a favourable business environment for Chinese enterprises and fully ensure the safety of Chinese personnel, institutions, and projects in Pakistan.

“China firmly supports Pakistan’s counterterrorism efforts and is willing to actively promote counterterrorism cooperation, helping Pakistan to strengthen its counterterrorism capacity building.”

Sharif once again expressed “deep condolences” for the Chinese victims in the latest attack and pledged to “make every effort to apprehend the perpetrators” and enhance counterterrorism measures.