Pakistan approves import of 500,000 tons wheat
Pakistan on Tuesday approved import of 500,000 tons of wheat at a price of Rs103 per kg, which is cheaper than the previous tender, as it faces a challenge to allocate another Rs54 billion for food subsidies just five days after implementation of the new budget. The wheat import decision was taken by the Economic Coordination Committee (ECC) of the cabinet, which also allowed rupee-based trade with Afghanistan for one year to take off the pressure on foreign exchange reserves. However, it relaxed the import ban on goods that had already arrived in Pakistan as of June 30. The ECC approved the lowest bid of Cargill International/ Cargill Agro Foods Pakistan at a rate of $439.4 per ton for 110,000 tons to the extent of a total of 500,000 tons of wheat import, according to the Ministry of Finance. The total contract price is $220 million.
Business community slam Nepra for massive tariff hike
Islamabad Chamber of Commerce and Industry (ICCI) President Muhammad Shakeel Munir has slammed Nepra for approving an unprecedented tariff hike of Rs7.90 per unit under fuel cost adjustment for May 2022.
He termed it a very harsh decision as it would put an extra burden of Rs136 billion on the electricity consumers in their bills for July 2022.
Speaking at a meeting of the business community, Munir said the decision would further enhance the cost of doing business and badly affect production activities.
He stressed that the government should review the hike to save the businesses and people from high inflation.
Munir pointed out that it had become a practice to pass on the cost of transmission and distribution losses and power theft to the end-users, which might have no precedent in other countries.
Instead of putting the burden on consumers, the government should bring reforms to reduce the losses of power companies and make them efficient, he stressed.
Furthermore, the energy cost in Pakistan is already the highest in the region and such hikes in the name of fuel cost adjustment would further increase the cost of production, making exports uncompetitive.
Citing a report of the Asian Development Bank, the ICCI chief said Pakistan’s energy sector had been a major hurdle in the way of economic growth as the energy crisis had caused a huge loss of $82 billion to the gross domestic product (GDP) between 2007 and 2020.
SECP advice foolproof mechanism
The Petroleum Division has sought the Securities and Exchange Commission of Pakistan’s (SECP) advice about a foolproof mechanism for the provision of funds by Hubco for the transfer of Eni Pakistan assets to Prime International Oil and Gas Company Limited (PIOGCL).
It came after Hubco submitted an undertaking to the Petroleum Division that lacked the required unconditional financial support to PIOGCL for acquiring the assets of Eni Pakistan.
In a letter sent to the SECP chairman, the Petroleum Division said Eni Pakistan was disposing of its entire share capital to PIOGCL. PIOGCL is a consortium of Hub Power Holding Limited (Hubco) and Eni Employees Buyout Group (EBO Group).
“SECP may also like to advise us as to what could be a foolproof mechanism to make Hubco obligated to provide requisite funding, if required due to any financial inability of EBO Group,” DG petroleum said in the letter.
In order to establish the financial strength of the sponsors of PIOGCL regarding the future operations of petroleum exploration licences and development and production leases, the Petroleum Division had asked Eni Pakistan to provide an undertaking of Hubco, that in case PIOGCL fell short of meeting the financial obligations in respect of running the operations in future, Hubco would provide such financial support.
SPI increases 3.63pc
The Sensitive Price Indicator (SPI) for the week ended June 30, 2022 registered an increase of 3.63 percent for the combined income group, going up from 190.98 points during the week ended June 23, 2022 to 197.92 points in the week under review. The SPI for the combined income group rose 32.01 percent compared to the corresponding week of previous year. The SPI for the lowest income group increased 3.79 percent compared to the previous week. The index for the group stood at 204.53 points against 197.06 points in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics (PBS). During the week under review, average prices of 28 items rose in a selected basket of goods, prices of six items fell and rates of remaining 17 goods recorded no change.
SBP injects PKR 1.18tr into banks at higher return
Pakistan’s central bank cleared the smoke on Tuesday as it injected liquidity at a higher interest rate into commercial banks ahead of its monetary policy review on July 7, signalling it would increase its key policy rate this week.
The State Bank of Pakistan (SBP) supplied Rs1.18 trillion to commercial banks at an increased interest rate of 13.97 percent for a longer period of 73 days through the open market operation (OMO).
It had left the financial markets surprised a day ago (Monday) when it sought commercial banks demand for liquidity, but rejected all bids worth Rs2 trillion.
The Monday’s exercise had confused the market, as it gave mixed signals about the uptick in key policy rate on July 7. But Tuesday’s 73-day injection “at a higher interest rate” suggested a hike in the policy rate when the central bank meets on Thursday to review its monetary policy for the next six weeks, AHL Research economist Sana Tawfik said.
Financial institutions including Shariah-compliant banks had given huge demand for liquidity (Rs2 trillion) at rates in the range of 13.84 percent to 13.99 percent on Monday.
They came up with a reduced demand for liquidity (Rs1.37 trillion) at increased interest rates in the range of 13.87 percent to 14.07 percent on Tuesday. The central bank accepted bids worth Rs1.18 trillion at a rate of 13.97 percent.