AGP Executive Report

Trade & External Accounts: Pakistan’s goods trade deficit hit a record $34.75bn in July-May FY26 as exports fell 5.6% to $27.9bn while imports rose 5.94% to $62.66bn; May showed a tentative improvement with exports up 9.59% MoM to $2.7bn and imports down 21.45% MoM to $5.29bn, narrowing the monthly deficit. Budget & Markets: Deputy PM Ishaq Dar says the federal budget will be tabled on June 10, while business groups watch delays and IMF-linked fiscal measures; PSX saw early buying with the KSE-100 up nearly 1,000 points in morning trade. Energy Costs & Industry: Government shared with the IMF a “two-part industrial tariff” plan to raise fixed electricity charges to deter off-grid shifts like solar; separately, Pakistan’s fuel market is under pressure as smuggled diesel floods supply. Aviation Fuel Support: India approved a Rs10,000cr ATF price stabilisation fund for airlines via interest-free advances to OMCs—an example of how West Asia volatility is reshaping aviation economics. Housing Finance: Punjab’s “Apni Chhat Apna Ghar” drew World Bank and foreign interest as a large interest-free affordable housing model. Diplomacy & Security: Pakistan stepped up Middle East peace diplomacy amid regional tensions; meanwhile, reports highlight fallout from Taliban-Russia military cooperation and renewed terrorism risks. Legal/Local: Karachi courts allowed virtual appearances for drug suspect Anmol “Pinky” on security grounds; Karachi declared June 8 holiday for Abdullah Shah Ghazi Urs. Corporate: Supernet Technologies won a ~Rs1bn contract to modernise critical communications infrastructure.

Budget Timeline: Pakistan’s coalition has locked in the federal budget presentation for June 10, after pre-budget talks between the government and PPP, with Finance Minister Aurangzeb and DPM Ishaq Dar confirming another round later this week. Provincial Finance: Punjab is expected to present its budget on June 12, with a summary sent to Chief Minister Maryam Nawaz, focusing on economic activity, agriculture reforms and tax improvements. Rail & Trade Logistics: PM Shehbaz ordered faster, well-funded execution of Pakistan Railways mega projects, stressing freight services to boost revenue and cut delays. US Tariff Shock: The US Trade Representative proposed Section 301 tariffs on 60 economies, including Pakistan (10%) and India (12.5%), over alleged failures to curb forced-labour imports—raising fresh uncertainty for regional supply chains. Pakistan External Sector: Pakistan’s trade deficit hit $34.76bn in 11 months of FY25-26, with imports rising and exports slipping, though May showed some import easing. Energy & Industry: OGDCL announced a major oil and gas discovery in Sindh’s Sanghar, while the NA power committee backed bills to strengthen the power sector regulatory framework.

US Trade Pressure: The Trump administration, via USTR, has proposed new Section 301 duties of 10% or 12.5% on imports from 60 economies, including Pakistan, over alleged failures to curb forced-labour goods—now headed for a public comment period before any final decision. Budget Consultations: PM Shehbaz met leading industrialists and businessmen to shape the FY27 budget, stressing export-led growth and steps to bring the informal economy into the tax net while offering public relief. Markets: Pakistan Stock Exchange opened mixed, with the KSE-100 down about 375 points amid cautious sentiment. Energy & Industry: OGDCL announced a new oil and gas discovery in Sindh’s Sanghar district (Bobi Deep-1), with initial production estimates of about 2,000 bpd oil and 1.1 mmscfd gas. Power Sector Accountability: Power Minister Leghari ordered disciplinary action against worst-performing DISCO officers over poor handling of consumer complaints via the 118 call centre system. Business Environment: Islamabad and other areas revised market closing times for summer, extending shop hours to 9pm and allowing later timings for some services. Local Development: Sindh cabinet approved major additional funding, including Rs8.825bn for water and drainage schemes and Rs11.198bn for Karachi infrastructure projects.

Energy & Markets: Robert A Pape warned of “new shocks in June” as world oil inventories drain toward an “operational stress level,” with analysts linking the risk to the Strait of Hormuz situation and Iran-US tensions. Business Sentiment: An OICCI survey says 70–80% of firms are postponing investment; overall business confidence fell 9 points to +13% amid inflation, fuel costs, supply disruptions and policy uncertainty. PSX Watch: The KSE-100 staged a thin recovery, gaining 421 points to close at 171,021. Retail Austerity: Islamabad extended shop hours to 9pm and restaurants to 11pm, with exemptions for essential services and delivery/takeaway. Power Costs: NEPRA hearing suggests an electricity tariff hike of Rs1.73 per unit via April fuel cost adjustment. CPEC 2.0: Pakistan-China cooperation is shifting toward industrialisation, tech, green energy and SEZs under CPEC 2.0. Healthcare Supply Chain: Cabinet approved a digital track-and-trace system for medicines using 2D barcodes/serialisation to curb fake drugs. SBP Overseas Push: Naya Pakistan Certificates now accept Saudi Riyal and UAE Dirham, with returns up to 7.50% for five-year tenors. Infrastructure: NHA approved a new Mansehra–Chilas motorway via Kaghan/Naran/Jhal Khand, cutting KKH distance by up to 120km, including a 13.5km Babusar Tunnel. Precious Metals: Gold rose in Pakistan, tracking global gains tied to Middle East uncertainty.

IMF Budget Tightrope: Pakistan’s FY27 budget is set to deliver limited broad relief as IMF-linked revenue and primary surplus targets push the government toward fiscal consolidation, taxation and enforcement, with inflation still a key risk. Inflation & Cost of Living: CPI inflation hit 11.7% in May, driven by food, transport and energy-related costs, squeezing households and denting sentiment. Business Sentiment Slips: An OICCI survey shows confidence deteriorated sharply in Q2 2026 as Middle East escalation lifted fuel costs, inflation and supply-chain disruptions. Power & Tariffs: NEPRA is set to consider a Rs1.72 per unit fuel-cost adjustment that could raise electricity bills, while capacity-charge recovery is challenged in court. Telecom Push: PTA says 5G is live in 22 cities and 4G speeds could reach ~40 Mbps, but lawmakers also demanded action over poor mobile and internet service quality. Corporate & Startup Moves: SECP recorded 3,161 new firms in May; Binance and Telenor Pakistan signed an MoU on blockchain education; Pakistan’s Metal secured strategic investment from Rebel Fund. Digital Health Milestone: Cabinet approved a track-and-trace system for medicines to curb fake drugs. Trade Disruption: Mango export targets were cut by 30,000 tons due to Middle East tensions and higher freight costs. Markets: PSX rebounded after a sharp drop, with buying returning amid geopolitical uncertainty. Governance & Oversight: Parliament raised concerns over delays in the Karachi IT Park and questioned PTCL privatization confidentiality. Security Signal Request: Pakistan asked Afghanistan’s Taliban for a concrete, public directive on any TTP attack halt.

Oil & Shipping: Oil prices jumped after Iran suspended indirect talks with the US, with Tehran warning it could act around the Strait of Hormuz as Israel-Hezbollah fighting escalates, while Trump said talks are still moving “at a rapid pace.” Pakistan–EU Trade: PM Shehbaz met EU HR/VP Kaja Kallas to push expanded trade, investment, climate and security cooperation, highlighting GSP Plus as a key driver for exports. Budget & Industry: Shehbaz told chambers of commerce the 2026-27 budget will back industrial growth and exports, directing FBR to clear pending tax refunds by June 15 and moving PRAL HQ to Karachi. Real Estate Taxes: Property sector groups are lobbying for major tax relief in the budget, including cuts to withholding, rental income and capital gains taxes, plus abolition of Section 7E. Power & Business Hours: Punjab is restoring market timing rules after Eid relaxation, with shops/malls closing by 8pm (restaurants until 10pm), as energy conservation pressures continue. ECP Delimitation: ECP set a fresh three-day deadline for Islamabad’s delimitation documents, a key step for long-delayed local polls. Aviation Expansion: South Air plans new domestic routes to DI Khan and Chitral as it expands its network. Sports Governance: PFF president says constitutional reforms must empower football stakeholders, not individuals. Tech & AI: Nvidia unveiled an AI chip for PCs/laptops aimed at running AI locally, intensifying competition in the AI hardware race.

Budget Watch: Pakistan’s federal budget for FY2026-27 is pegged at about Rs17.1tn, with growth at 4.1% and inflation at 8.4%, as Parliament is set to convene on June 5; the APCC will also review the PSDP and macro targets. Development Funding Crunch: Planning Minister Ahsan Iqbal warned nearly Rs3tn of development projects may be shelved because PSDP is only Rs1.126tn against demands of about Rs4.1tn. Property Tax Relief: Budget 2026-27 may cut transaction taxes for property buyers/sellers who are filers, including lowering withholding tax rates under Sections 236K and 236C; non-filers are unlikely to get relief. EU Engagement: EU top diplomat Kaja Kallas arrives in Islamabad to co-chair the 8th Pakistan-EU Strategic Dialogue with Ishaq Dar and meet senior leadership, focusing on bilateral and regional cooperation. Business Hours Tightening: Islamabad re-imposes revised market timings from June 1, with markets/malls closing by 8pm and food outlets by 10pm; Punjab restores early closures after Eidul Azha. PSX Sentiment: PSX opened lower as Middle East tensions lifted oil prices and hopes for a US-Iran ceasefire extension faded. Karachi Governance Probe: NAB launches an inquiry into alleged illegal NOCs for marriage halls and marquees by SBCA, amid concerns over commercialization on amenity plots. Migration Crackdown: FIA says it offloaded about 39,786 passengers in 2025 under risk-based screening to curb irregular migration and smuggling. Education Disruption: University of Karachi students face uncertainty as a teachers’ exam boycott enters its fourth week, affecting nearly 50,000 students.

US–Israel Abraham Accords Pressure: Trump’s push to expand the Abraham Accords is putting Pakistan under fresh international scrutiny, with Islamabad trying to balance Washington ties against domestic support for Palestine. Karachi Water Crisis: K-Electric’s power fault and shutdown at Dhabeji/NEK pumping stations triggered a 54MGD water shortfall, leaving parts of Karachi facing shortages while KWSC urges urgent restoration. Sindh Water Rights Row: Sindh’s Sharjeel Memon accuses IRSA of unjust “shortage equalisation,” saying Sindh’s water shortage is 22% (42% at Guddu, 29% at Kotri) and calls for federal intervention. Power Sector Accountability: In Lahore, LESCO staff were suspended after Khawaja Asif alleged Rs80,000 was taken to repair a transformer without receipts; power minister says “strict action” followed. Power Tariff Talks: Awais Leghari says there’s “no sufficient outcome” yet from negotiations for discounts with Chinese power producers, despite Rs3.5tr savings from other IPPs. Pakistan Lobbying in Washington: FARA disclosures cited by experts say Pakistan spends about $900,000 monthly on US lobbying, including a $1.2m deal, as scrutiny grows. GB Election Security: Punjab approved deployment of 6,000 police personnel in Gilgit-Baltistan for the June 7 election amid PTI claims of pre-poll rigging. Lyari Resettlement Probe: NAB Karachi launched an investigation into alleged corruption in the Lyari Expressway Resettlement Project, alleging illegal plot sales from affectees’ allocations.

Solar & Energy Security: Pakistan’s rooftop solar boom is helping cut exposure to oil-and-gas price shocks linked to Strait of Hormuz turmoil, with estimates of $12bn avoided imports since 2018 and potential further savings of $6.3bn this year. IT & Forex: SBP data shows Pakistan’s IT freelancers’ foreign exchange earnings jumped 49% to $959m in the first 10 months, keeping overall IT exports above $3bn. Budget Watch: A think tank flags defence spending could rise to about Rs2.75tn in FY26-27, with calls for higher armed forces pay/pensions and wartime contingency allocations. Pakistan-US Ties: US Defence Secretary Pete Hegseth praised Pakistan as a “true friend,” citing PM Shehbaz Sharif and Gen Asim Munir’s role in US-Iran mediation; India’s Congress hit back over the praise. EU Engagement: EU foreign policy chief Kaja Kallas is set to visit Islamabad to discuss security, energy and economic cooperation. Karachi Trade/Ports: Karachi port crash is under formal investigation; ships were barred from sailing pending probe. Security Spillover: Delhi Police claim to have busted an ISI-Dawood-linked terror module, arresting nine and recovering arms. Women’s Economic Rights: Pakistan lags on women’s economic rights enforcement, with weak implementation of legal protections highlighted in a new report.

Erasmus Mundus: Pakistan topped global Erasmus Mundus fully funded scholarship rankings for the fifth straight year, with 98 Pakistani students selected for the 2026 cycle. Markets & Finance: PSX extended gains, adding 2,237 points (+1.30%) to close at 173,962.82; forex reserves rose to about $22.65bn, with SBP reserves up $66m. Banking/Capital Markets: UBL arranged Pakistan’s largest short-term rated unsecured privately placed Sukuk of Rs25bn for Engro Fertilizers, oversubscribed by around 2x. Tax Policy: MAP proposed phased super tax cuts and relief for salaried taxpayers in Budget 2026-27. Trade/Regional Ties: China and Pakistan agreed to accelerate CPEC 2.0 and deepen cooperation in AI, digital economy and agriculture. Energy/FX Watch: Currency rates stayed broadly stable on May 30; IMF/World Bank warned Hormuz risks could hit global energy and food security. Diplomacy: Ishaq Dar met Marco Rubio in Washington; both left without answering a reporter’s “Will Pakistan recognise Israel?” question, while Dar reiterated Pakistan’s Palestine stance. Local Economy/Infra: Lahore saw rain and hailstorm; Karachi faced Eid hardship from dry taps plus gas and power outages, alongside sanitation issues from offal disposal.

US-Iran Mediation & Hormuz: Pakistan’s FM Ishaq Dar met US Secretary of State Marco Rubio in Washington, with Rubio praising Islamabad’s “constructive” peace and mediation role as a tentative US-Iran ceasefire extension and Strait of Hormuz reopening move toward Trump approval. Energy & Trade Shock: Trump’s draft terms reportedly hinge on reopening Hormuz for toll-free shipping, lifting the US blockade, and mine clearance—while Iran warns navigation services may no longer be free and 20,000 Iranian cargo containers remain stuck in Pakistani ports. Pakistan-US Economic Agenda: Dar and Rubio agreed to deepen cooperation on trade, investment, security and counterterrorism amid hopes for regional stability. Eid Relief at the Pump: Pakistan cut petrol and diesel by Rs22 per litre to Rs381.78 and Rs380.78 respectively, easing inflation pressure for households and transport. FX Update: SBP foreign exchange reserves rose by $66m to $17.15bn (SBP-held). Digital Services Export Boost: Pakistani freelancers earned about $959m in computer and information services in 10 months, nearly $1bn, up 49% year-on-year. Regional Security Lens: CSTO chief said Afghanistan-Pakistan tensions are weighing on regional stability, while Iran’s regional posture remains a key factor in US-Israeli strategy debates.

Budget Countdown: President Asif Ali Zardari has approved National Assembly and Senate budget sessions for June 5, with the FY2026-27 federal budget to be presented in the National Assembly at 5pm and the Senate session at 6pm. Labour Rights: Punjab notified the Punjab Labour Code 2026, consolidating labour laws and extending protections to contract, gig and app-based workers, including online and home-based workers. Petrol Relief Watch: Pakistan may see a cut in petrol and diesel prices after global oil moves, with ex-refinery rates down and the final decision to be taken by the PM in line with revenue targets. Markets: PSX stayed bullish post-Eid, with the KSE-100 crossing the 172,000 mark and gaining strongly on optimism around US-Iran talks and easing oil prices. Diplomacy & China Ties: Ishaq Dar met China’s Wang Yi in New York, with both sides stressing Pakistan’s mediation role in US-Iran talks and reaffirming strategic cooperation. Legal Ruling: Lahore High Court directed that FIA cannot stop citizens from foreign travel on mere suspicion or vague grounds, ordering written reasons for offloading. Security Sweep: NIA launched multi-state raids targeting a Pakistan-linked terror network allegedly using drone drops for arms and explosives.

Pakistan-China Diplomacy: Ishaq Dar met China’s Wang Yi in New York, with both sides reaffirming a rules-based order, peaceful coexistence and faster implementation of bilateral cooperation. Budget & Inflation: Finance Minister Aurangzeb said the 2026-27 federal budget will aim for “minimum possible burden” by focusing on tax enforcement and compliance, not new taxes, while keeping inflation in check. IMF Tax Move: Under IMF pressure, Pakistan plans to raise tax on farmers’ income from July, with small-farmer relief via the Pakistan Asaan Khidmat App. Eid Cost Pressure: Rawalpindi families reported steep inflation-driven spikes in graveyard Eid items and labour charges, turning visits into a costly burden. US-Iran Ceasefire Volatility: A reported 60-day extension lifted risk sentiment, but fresh strikes near the Strait of Hormuz and missile action involving Kuwait show the truce remains fragile. CPEC & Gwadar Focus: China and Pakistan agreed to accelerate CPEC 2.0, spotlighting Gwadar as a connectivity hub and deepening corridor-linked cooperation beyond infrastructure. EV Push: Pakistan’s shift toward EV scooters and bikes is gaining traction as petrol prices rise, aiming to cut fuel import dependence. Markets & Energy: Dollar softened on ceasefire-extension hopes while oil and gold swings reflected renewed uncertainty around Hormuz.

China-Pak Ties & CPEC 2.0: Planning minister Ahsan Iqbal said Pakistan-China relations are a stability and growth engine, with CPEC Phase II expected to shift from infrastructure to industrialization and digital/agri development after PM Shehbaz’s China visit. Fuel Prices & OMC Profits Debate: India’s recent fuel price hikes have reignited questions over whether oil marketing companies are earning windfall gains, as governments weigh excise cuts and revenue impacts. Pharma Supply Chain: Nepal exported raw materials for anticancer medicines (paclitaxel and docetaxel) and plans to expand exports to Pakistan and other Asian markets. Youm-e-Takbeer Messaging: Pakistan marked May 28 with renewed pledges from PM Shehbaz, President Zardari and military leadership on nuclear deterrence, sovereignty and unity. US-Iran Pressure & Mediation Role: Reports say US sanctions hit Iran’s Strait of Hormuz authority, while Pakistan’s mediator role in US-Iran talks remains in focus amid talk of a broader Abraham Accords push. ESG Banking Spotlight: VEON CEO praised Mobilink Bank’s green transition, noting over a third of branches run on renewable energy. Cyber Security Alert: FBI warned Microsoft 365 users about the Kali365 phishing scam that can hijack accounts via OAuth token theft. Border Tensions & Crackdowns: India ordered demolition of illegal structures within 15 km of the Pakistan border, citing infiltration and trans-border crimes. Public Health: WHO warned tobacco use kills about 164,000 Pakistanis annually and urges stronger taxation and youth-focused addiction curbs.

Iran-US Mediation: PM Shehbaz Sharif spoke with Iranian President Masoud Pezeshkian on Eidul Azha, with Iran thanking Pakistan’s role and both sides expressing hope a peace accord will soon be finalised, while talks aim to reopen the Strait of Hormuz. US Pressure on Israel Ties: Trump renewed calls for Pakistan to join the Abraham Accords, raising a potential passport/administrative headache since Pakistan’s passport currently bars travel to Israel; Islamabad has rejected the demand. Energy & Inflation Watch: Oil prices slid as optimism grew over a possible US-Iran framework, reviving hopes petrol/diesel could fall below Rs400/litre in Pakistan’s next review, though officials are cautious due to volatility and currency risk. Pakistan-China Push: Xi Jinping urged faster progress on a “closer China-Pakistan community” during Shehbaz’s Beijing visit, reinforcing CPEC 2.0 and broader all-weather cooperation. Local Stress Test: Karachi’s water crisis entered a second month, with dry taps and longer tanker waits hitting low-income areas hardest during Eid demand. Governance & Security: Sindh PPP says no draft of the 28th Amendment was shared; meanwhile India’s Amit Shah ordered demolition of illegal border constructions within 15km, escalating border security measures.

UN Condemnation: The UN Security Council has strongly condemned Pakistan’s deadly train bombing in Balochistan, calling it a “heinous and cowardly” suicide attack and urging accountability for perpetrators, organizers and financiers. US-Iran Mediation: China backs Pakistan’s “active mediation” between Washington and Tehran, while UN talks in New York also saw Pakistan’s FM Ishaq Dar assure the UN chief of continued engagement to restore peace. Geopolitical Pressure: India hit back at Pakistan’s mediator role at the UN, warning of “consequences” for terror sponsorship, as US Senator Lindsey Graham called Pakistan’s mediation “problematic” amid Abraham Accords pressure. Energy Shock Watch: BMI warns US-Iran war spillovers could keep inflation elevated in emerging markets, with Strait of Hormuz disruption feeding into higher fuel prices and tighter policy. Local Economy & Costs: Eid spending is getting squeezed—KMC’s “exit tax” at cattle markets sparked outcry, while gold prices fell Rs2,400 per tola and vegetable prices rose in Karachi and Lahore. Business & Tech: Pakistan is moving to local data storage via a cloud accreditation push, and Zen Technologies’ smart border suite highlights the region’s intensifying border-security race.