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Business Recorder
24-05-2025
- Business
- Business Recorder
Power in decline
EDITORIAL: Just as the government prepares to repackage power sector subsidies in a new structure discussed with the World Bank, its own projections for future electricity costs have triggered alarm across the industrial landscape. The textile sector, already battered by erratic supply and steep bills, is warning of a retreat back to captive generation – an outcome that exposes the widening gap between policy claims and operational reality. At the heart of the dispute lies the Power Division's submission to Nepra of power purchase price (PPP) projections for FY2025-26. Despite years of renegotiations with Independent Power Producers (IPPs) and claims of trillions saved, the projected tariffs for next year remain strikingly similar to the old ones. In scenario after scenario presented by the Central Power Purchasing Agency (CPPA-G), the cost of power hovers between Rs24.75 and Rs26.70 per unit. Not only do these projections fail to reflect any tangible benefit from reforms, they also disregard the lived experience of industrial users grappling with frequent supply disruptions and declining competitiveness. From Karachi to Lahore, the industrial sector is demanding clarity: where are the savings, and why are they not translating into reduced tariffs? The fact that power rates may actually rise by Rs5-6 per unit in July, as time-bound fuel and quarterly adjustments expire, only deepens the frustration. Already, grid power has become synonymous with unreliability, causing production losses of up to 10 percent compared to captive generation. If prices rise further, many manufacturers see little choice but to revert to their own plants – despite the inefficiencies – just to keep operations stable. Nepra's hearing last week laid bare the disconnect between official optimism and industrial reality. Industry representatives criticised the flawed assumptions underpinning the CPPA's scenarios: overestimated GDP growth, inflation pegged at 8.65 percent despite a clear downward trend, and Kibor set at 11.9 percent even as interest rates are expected to fall into single digits. They also pointed to the absence of any discernible impact from IPP renegotiations, especially with the expensive Jamshoro coal plant and other legacy capacity charges still weighing heavily on the system. Meanwhile, the new subsidy restructuring proposal is being sold as progressive and targeted—but details reveal more of the same. Instead of genuine cost rationalisation or structural reform, the plan reshuffles consumer categories and discounts under a new label, seeking to placate lenders rather than fix the sector's fundamentals. For large-scale industry, the implications are dire. A distorted pricing structure, unreformed distribution companies (Discos), and unreliable supply chains are combining to undermine export potential at a time when Pakistan can least afford it. The sharpest warning came from the textile sector, which signalled that if quality and pricing are not addressed, it will abandon the grid altogether. Such a shift would not just undo years of policy work but also widen the inefficiency loop: as more high-volume users exit the system, the cost burden will shift further onto a shrinking base, deepening the circular debt crisis and exposing the sector to yet more political patchwork. Nepra's call for more realistic planning and transparency is timely, but insufficient. The Power Division's defence that projections are based on assumptions from IFIs and government agencies only underscores how deeply these exercises have lost touch with economic reality. What industry is demanding is not perfect foresight, but coherence and accountability. That these remain elusive after decades of reform is telling. With consumption already falling and energy affordability now front and centre in export decisions, the warning signs are flashing red. Policymakers may have convinced external lenders of their good intentions, but they are rapidly losing the confidence of the very users who keep the system afloat. Unless corrected, these flawed assumptions and misplaced priorities will not just cripple industry – they will power Pakistan straight into stagnation. Copyright Business Recorder, 2025
Business Recorder
13-05-2025
- Business
- Business Recorder
Sindh govt to provide ‘easy loans' to small, medium businesses
The Sindh government would provide 'easy loans' to small and medium businesses in the province and women to be given priority in providing loans, an official statement said on Tuesday. In this regard, the provincial government has signed memoranda of understanding (MoU) with Bank Islami and Soneri Bank. Speaking on the occasion, Special Assistant to the Chief Minister of Sindh on Investment and Public Private Partnership Syed Qasim Naveed Qamar said the agreements would provide loan facilities to small and medium businesses in Sindh on 'easy terms'. Sindh govt empowers low-income households with solar energy: Murad He added that priority would be given to women in providing loans, while technical assistance would also be provided to the businessmen. 'The agreement will also provide definite help in starting and expanding businesses.' Those engaged in agriculture, livestock, fisheries, poultry, cold storage, mining and other similar businesses in Sindh would be able to take advantage of the facility of the loans with Kibor based finance cost subsidies. He said the Sindh government was providing all possible support to encourage small and medium businesses in the province and in that regard, Kibor subsidy on loans was being provided by the Sindh Enterprise Development Fund (SEDF).
Express Tribune
11-05-2025
- Business
- Express Tribune
PSX sinks 6,939 points amid tensions
Listen to article The Pakistan Stock Exchange (PSX) endured a turbulent week, with the KSE-100 index plunging 6,939 points, or -6.1% week-on-week (WoW), to close near 107,000 amid rising geopolitical tensions between Pakistan and India. Despite a partial rebound on Friday, the broader trend remained bearish. Meanwhile, the State Bank of Pakistan (SBP) slashed the policy rate by 100 basis points (bps) to 11%, prompting a downward shift in Kibor and secondary market yields. On the macroeconomic front, remittances rose 13% year-on-year (YoY) in April to $3.2 billion, while State Bank's reserves climbed $118 million WoW. Additionally, Pakistan launched its Green Sukuk, targeting Rs20-30 billion for eco-friendly initiatives, even as the fiscal deficit widened and trade imbalances persisted. On a day-on-day basis, the PSX witnessed a turbulent start to the week, with the benchmark KSE-100 index closing nearly flat amid rising tensions with India and State Bank's policy uncertainty. The index dipped steeply in early trading, falling 1,036 points. At close, the KSE-100 recorded a decline of just 11.70 points and settled at 114,102. On Tuesday, the bourse closed lower as investor optimism over the State Bank's 100bps rate cut quickly gave way to concerns over escalating Pakistan-India tensions and Moody's warning about economic stability. The index recorded a decline of 534 points. The market continued its downtrend and experienced a turbulent start to Wednesday's session, with the index nosediving over 6,500 points shortly after the open over heightened border tensions. The KSE-100 briefly touched the low of 107,008 before staging a partial rebound, ultimately climbing to the intra-day high of 112,457 and closing the day down by over 3,500 points. On Thursday, stocks underwent yet another day of stampede as the PSX witnessed its largest single-day plunge of 6,482 points on intensifying fears of a war between Pakistan and India. The index settled at 103,527. The market staged a robust recovery on Friday, where the benchmark index surged around 3,650 points, trimming some of Thursday's steep losses. Investor sentiment improved sharply amid optimism over the upcoming IMF's executive board meeting, which was expected to approve the Extended Fund Facility (EFF) tranche and a $1.3 billion Resilience and Sustainability Facility (RSF). The index settled at 107,175. In its review, Arif Habib Limited (AHL) wrote that the KSE-100 index remained mostly in the red during the outgoing week amid mounting geopolitical tensions and concerns over further escalation. On the economic front, the State Bank on Monday reduced its policy rate by 100bps to 11%. Subsequently, Kibor across all tenors decreased 64bps to 91bps. Similarly, the secondary market yields across three, six and 12-month tenors fell 55bps, 51bps and 48bps, respectively. In addition to this, Pakistan launched Green Sukuk, aiming to raise Rs20-30 billion for environmentally sustainable projects, AHL said. Meanwhile, urea and di-ammonium phosphate sales dwindled 25% and 4% YoY, respectively, in April 2025. However, cement dispatches climbed up 13% YoY. AHL pointed out that the finance ministry reported a budget deficit of Rs2,970 billion (2.4% of GDP) for 9MFY25. Furthermore, the State Bank's reserves increased $118 million to $10.3 billion. The market closed the week at 107,175, plunging 6,939 points, or -6.08% WoW. Sector-wise, negative contributions came from banks (1,637 points), exploration and production (905 points), cement (738 points), technology (508 points) and pharmaceuticals (436 points). Meanwhile, the sector that contributed positively was sugar (7 points). Stock-wise, negative contributors were UBL (617 points), Lucky Cement (435 points), Hubco (339 points), OGDC (338 points) and Mari Petroleum (321 points). Among individual stocks, the positive contribution came from Nestle (16 points), JDW Sugar (7 points) and IBFL (3 points). Foreign buying was witnessed during the week, which came in at $1.52 million compared to net selling of $6.79 million last week. Average volumes arrived at 508 million shares (up 20% WoW) while average traded value settled at $98 million (up 0.3%), AHL added. JS Global analyst Muhammad Waqas Ghani said in his report that the week began on a volatile note as markets in Pakistan reacted to heightened geopolitical concerns. By Thursday, the sentiment had weakened sharply following reports of Indian drone strikes on multiple cities, including Karachi and Lahore, after Pakistani forces downed their planes.
Business Recorder
30-04-2025
- Business
- Business Recorder
Pakistan's current account to remain positive for full fiscal year 2024-25, says Aurangzeb
Finance Minister Muhammad Aurangzeb has projected that Pakistan's balance of current account will remain in surplus for the full fiscal year 2024-25, partially contradicting with the central bank estimation that the balance may either be in a deficit of 0.5% in the year. The State Bank of Pakistan (SBP) in its half-yearly report 2024-25 anticipated that the full-year current account would be either in a deficit of 0.5% or in a surplus of 0.5% for FY25. However, speaking at a pre-budget seminar at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in Karachi on Wednesday, the finance czar said the current account would remain positive for full FY25. He said the country's tax-to-GDP ratio would surge to 10.6% in FY25 and the government was aiming to raise the ratio to 13.5% in the next three years through various tax reforms. 'This will be the last International Monetary Fund (IMF) programme for Pakistan,' the finance minister maintained. Aurangzeb said the government was focused at giving relief in taxes to businesses and salaried class people, where possible, as 'the government is all for supporting economic activities in the next fiscal year 2025-26'. Govt won't support 'plots and files' business, says Aurangzeb He said the government had appointed independent analysts to take their assistance in making a better budget and make that in line with global best practices for FY26. 'Every sector of the economy has to pay due taxes to lower burden of the high taxation on salaried class people and manufacturing industries.' The finance minister, however, highlighted that Pakistan was under IMF programme which might limit relief measures for FY26. 'Despite of this, the government may look what it can do in this regard in the years to come.' Aurangzeb was of the view that there were three major challenges to the businesses and the economy; high taxation, high energy cost and financial cost. He added the finance cost (Kibor) came down to around 12% in line with the State Bank of Pakistan (SBP) cutting its policy rate by 10 percentage points since June 2024 to 12% at present, enabling businesses and the private sector to take credit for new projects and expansion of the ongoing production lines. 'We are in the right direction, but more to do,' the finance minister said, adding the government was working to see where it could give tax relieves to business and individuals.
Business Recorder
23-04-2025
- Business
- Business Recorder
MPC meeting on May 5: Further cut in policy rate likely
KARACHI: With the State Bank of Pakistan (SBP) set to convene its Monetary Policy Committee (MPC) meeting on May 5, 2025, analysts anticipate a further reduction in the key policy rate, driven by easing inflationary pressures. In the previous meeting held on March 10, 2025 the Monetary Policy Committee of the SBP unanimously decided to maintain the policy rate at 12 percent in response to risks arising from price volatility, persistent core inflation, and growing external account pressures due to rising imports and weak financial inflows, In a poll conducted by Topline Securities, some 69 percent of the market participants expect a rate cut of at least 50bps, while 31 percent believes that state bank will observe status quo. The ratio of participants observing status quo has come down from 38 percent in previous poll to current 31 percent. Out of this 69 percent, 37 percent expect a rate cut of 50bps, 30 percent expect a rate cut of 100bps, and 2 percent expect a rate cut of 150bps. According to Topline, the SBP has further room of around 200bps cut till Dec 2025 as we expect FY26 inflation to average between 6-7 percent, translating into real rate of 500-600bps (Policy rate: 12 percent), higher than historical real rate of 200-300bps. Furthermore, falling oil prices, falling dollar index, and higher remittances also makes strong case of rate cut. However, the sustainability in prices/index of former two (oil and dollar) is yet to be seen. Topline believed that the SBP is most likely to observe status quo in upcoming meeting as the expected foreign inflows for 2HFY25 are not materialized yet and are expected to be received once first review of IMF is approved by Board (before Jun 2025). Furthermore, the IMF has also mentioned in its press release of staff level agreement that, Pakistan remains committed to maintaining sufficiently tight monetary policy to keep inflation low. The US tariff risks are still looming, and we expect central bank to maintain status quo till any clarity on this global development. The Budget FY26 and adjustment in gas prices are around the corner. The revenue measures and their inflationary impact is not known yet. 6M Kibor and 6M T-Bills are up 31-35 bps from last MPC meeting: The secondary market indicators also shows pause in interest rate cut cycle as 6 months Kibor and T-bill have increased by 31-35bps since last MPC meeting with rate/yield of 12.09 percent/11.92 percent. Topline Research conducted a poll of key market participants on expectations over policy rate, and average inflation for question related to interest rate target for Jun 2025, 95 percent participant believe interest rate will remain in range of 10-12 percent, same as it was in previous poll, suggesting further cut of 0-200bps in next 2 months (or in next 2 meetings). While interest rate by Dec 2025, 37 percent believe will remain in range of 8-10 percent, and 49 percent in range of 10-11 percent and 12 percent in range of 11-12 percent. On Inflation side, 53 percent of the respondents believe, the FY25 average would be below 6 percent vs. 22 percent participants in previous poll. We also expect inflation to average 4.5-5.5 percent in FY25. Copyright Business Recorder, 2025
