Oil sector faces liquidity crunch, fuel supply at risk
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The oil sector is facing a severe liquidity crunch as the rupee's sharp depreciation has shrunk its credit lines and made it harder to import crude oil and petroleum products, industry sources said. The sector also fears a possible shortage of fuel in the country if banks do not increase their lending limits for oil imports, which are vital to meet domestic demand. Oil sector companies are approaching the central bank to take action in this regard. Representatives from different companies are meeting with central bank and commercial bank officials separately to resolve the issue. "We met with the top executive of a commercial bank on Monday and will be meeting with central bank officials on Tuesday to seek help in increasing our credit lines for crude oil imports," said a senior official of a local refinery, who declined to be named. The rupee has lost more than 25 percent of its value against the dollar since January 1, 2023, making imports more expensive and hurting the profitability of the oil sector. "A cargo of crude oil that used to cost Rs5 billion a few months ago now costs Rs15 billion, after the currency slide and a surge in global oil prices to $90 per barrel from $50-60," the official said. Industry officials fear a shortage of petroleum products if the situation does not normalise sooner rather than later, as the sector would not be able to import the required quantity of oil for domestic needs.
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Thin demand for vehicles and soaring interest rates continued to cast gloom on the auto sector as the amount of outstanding auto loans shrank for the 13th consecutive month by Rs8.5 billion to Rs285.2 billion at the end of July from Rs293.7bn in June. According to the State Bank of Pakistan (SBP) data, the highest financing of Rs368bn stood at the end of June 2022 and since then it has been sliding as a result of rising interest rates which is now at 22pc. The rest of the damage to auto leasing was given by the central bank through various measures to curb demand followed by skyrocketing prices of vehicles. An upper limit of Rs3m on auto loans and a reduction in repayment duration by the SBP further hit sales of local assemblers. The SBP’s data shows that new vehicle buying through banks is not coming up while the net retirement is going on.
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Auto financing shrinks for 13th month
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SBP phases out export finance scheme to meet IMF terms
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The State Bank of Pakistan (SBP) has begun to phase out its export finance scheme, a concessionary loan program for exporters, to comply with one of the key conditions of the International Monetary Fund (IMF) loan program. The central bank said in the letter to banks that as part of the gradual phasing out of the Export Finance Scheme (EFS) to a new arrangement over a period of time, the banks' revolving refinance limit under conventional and Islamic EFS will be reduced. Under the new arrangement, commercial banks may be able to take up the phased-out portion through their own liquidity against the government subsidy. However, this mechanism will only become effective and the subsidy to be provided by the government will be available through the Export Import (EXIM) Bank once operational payment modalities are agreed upon by the stakeholders. According to analysts, the SBP will gradually stop offering concessional loan schemes and route them through the EXIM Bank with government assistance.
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Cotton and phutti prices are witnessing extraordinary increases across Pakistan, increasing by a record Rs. 700 per maund in just the last two days. It has brought a sign of relief for farmers as a further increase in prices is expected. The primary driver behind the rise is the devaluation of the rupee against the dollar. As the rupee fell to a record low against the dollar, cotton prices jumped to Rs. 19,500 per 40 kg while the phutti prices are also averaging above Rs. 8,000 across Punjab. Traders have realized that imports would get more expensive or nearly impossible as the rupee continues to fall. Cotton picking has also slowed down in the big cotton-producing regions of Bahawalnagar, Rahim Yar Khan, and Bahawalpur which has also contributed towards the price increase. With the prevailing situation it is expected cotton to cross the magic number of Rs. 20,000 in the coming days, especially with the downward trend of the rupee. A foreign firm is also purchasing large quantities of cotton from Pakistan this year, due to which a record trend is being seen in the prices of cotton. Analysts are expecting a bumper crop production of cotton this year, which means less reliance on imports.
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Cotton Prices Report Massive Rise Amid Devaluation
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UAE’s Mashreq launches digital banking operations in Pakistan
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Mashreq, a leading financial institution in the MENA region, on 21st August announced its “successful incorporation” in Pakistan, marking what it called a “significant milestone” in its strategic expansion and underlining its commitment to drive digitization and financial inclusion in high growth markets. The announcement came after a high-level Mashreq delegation, including senior members of the executive committee visited Pakistan. “We eagerly anticipate the opportunities to collaborate with local stakeholders and contribute toward a robust digital ecosystem that will transform the country’s financial landscape,” Fernando Morillo, Group Head of Retail Banking at Mashreq, said. “We are committed to playing a vital role in the country’s digitization efforts and financial development, particularly in the sectors of SME, payments, and inclusion. The bank’s tech-ready infrastructure, coupled with its digital DNA, will be leveraged to empower customers in the market, meet their evolving needs, deliver seamless banking experiences and support the country’s vision of a financially inclusive, digitally led economy.” Founded as the Bank of Oman in 1967, it now offers online banking and ecommerce.
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In a development for Pakistan’s transportation sector, a joint venture between Chinese and Pakistani companies is set to commence production of electric two-wheelers and three-wheelers, commonly known as rickshaws in the country. The collaboration is expected to bring about positive changes in the local market, reducing carbon emissions and promoting eco-friendly transportation options. The joint venture was formed in April by Chinese electric vehicle manufacturer Benling Group, Chinese battery manufacturer Dongjin Group and Pakistani auto company Crown Group to leverage their expertise to introduce cutting-edge electric mobility solutions to the Pakistani market. Two-wheelers and three-wheelers are widely used in Pakistan for public transportation and are a vital part of the mobility ecosystem. By electrifying this segment, the vehicles to be produced are expected to address the growing demand for efficient and environmentally friendly transportation options in densely populated urban areas, where traffic congestion and air pollution have become major concerns.
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Sino-Pak JV set to start e-rickshaw production
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PRL says Russian crude ‘technically, commercially feasible’
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The Pakistan Refinery Limited (PRL) has said that it would again process Russian crude “when available at favourable commercial terms”, denying the impression that it has suspended the use of Russian crude oil because of processing issues. In a release on Sunday, the refinery insisted that Russian crude was successfully processed and the “spot deal was technically and commercially feasible”.
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In a development for Sino-Pak trade and agricultural cooperation, Pakistan’s Dynamic Engineering and Automation and China’s Qingdao Lulu Agri. Equip. Co., Ltd signed a memorandum of understanding (MoU) to carry out a project to processing chillies in Pakistan for export to China. With China currently being the world’s largest pepper producing and trading country, the MoU opens up new avenues for Pakistani enterprises to tap into the vast Chinese market. It also provides a platform for research collaboration and exchange programs between the two companies, fostering mutual learning and growth. Under the terms of the MoU, the two companies will jointly develop and coordinate work plans for the establishment of chilli production workshops, personnel management and technology transfer.
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MoU signed to facilitate chilli export to China
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US firm to invest $200m for establishing pink rock salt crushing, packaging facility
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Pakistan Mineral Development Corporation and Miracle Saltworks Collective Inc. USA have signed a memorandum of understanding (MoU) for establishing export quality pink rock salt crushing & packaging facility, promising a foreign direct investment of $200 million. Pakistan Mineral Development Corporation (PMDC) under the control of Ministry of Energy (Petroleum Division) and Miracle Saltworks Collective Inc. (MSCI), based in Wisconsin, USA, have embarked partnership with the signing of a memorandum of understanding (MoU). This non-binding MoU envisages establishing a state-of-the-art pink rock salt crushing and packaging facility for export purposes under theme of “Pink Prosperity”. The envisioned plant will be setup at Special Economic Zone located in the district Mianwali, Punjab. Talking to media, on the occasion, Managing Director PMDC said that this facility will be used only for the export of salt, through which Pakistan will be able to make a prominent place in the world market of pink salt.
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The Special Investment Facilitation Council (SIFC) has approved hiring of consultants to reduce shareholdings of Pakistan and Canada’s Barrick Gold equally in favour of Saudi Arabia in the Reko Diq gold and copper mine project. The formal decision to bring in another country in the Reko Diq project was taken this week by the apex committee of the SIFC. Last month, the SIFC in principle approved 28 projects worth billions of dollars that would be offered to Gulf countries for investment, including the construction of the Diamer-Bhasha dam and mining operations at Reko Diq in Balochistan’s Chagai district. The government officials said that in his last meeting as the SIFC chairman, the prime minister mandated the Ministry of Energy to hire financial advisers to offer shares in the Reko Diq mining project to prospective investors. According to the decision, the reduction of shareholdings should be done in a manner that the shares of Pakistan and Barrick Gold are reduced equally. Barrick Gold owns a 50 per cent stake in Reko Diq mine, with the remaining 50 per cent owned by the governments of Pakistan and Balochistan.
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KSA to join Reqo Diq as shareholder
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