AGP Executive Report

Indus Waters Row: Pakistan’s Foreign Office called India’s “no water” remarks “deeply irresponsible,” warning any deliberate water blockage could amount to an act of war and pledging serious safeguards for livelihoods and national interests. Budget 2026-27 Watch: Islamabad is weighing selective income tax relief for salaried earners and possible export support, including scrapping a 1% export tax, while analysts say IMF-linked targets and FBR revenue pressure still shape the final fiscal choices. Economic Survey in Focus: Finance Minister Aurangzeb presented Economic Survey 2025-26 to PM Shehbaz, with reports flagging missed targets on growth and other sectors, even as remittances and some services held up. Markets: PSX sentiment stayed fragile as Iran-US tensions hit risk appetite, with the KSE-100 swinging down then rebounding in intraday trading. Power Sector Governance: Pakistan set up its first public sector Data Governance Council for the power industry to unify data and improve planning and forecasting. Health Reform: The health minister announced mandatory premarital thalassemia testing and a national genetic policy push toward prevention. Regional Trade: The 10th China-South Asia Expo opened in Kunming to boost regional trade and deal-making. Afghanistan Border: Pakistan reported renewed strikes along the Afghan border, while Kabul disputed civilian casualties—raising cross-border tensions again.

Afghanistan-Pakistan Cross-Border Strikes: Pakistan renewed airstrikes on Afghanistan’s border provinces (Khost, Kunar, Paktika), with Afghan officials citing at least 12 deaths including 11 children, while Pakistan says it targeted militant hideouts and killed 26 TTP-linked fighters. PoJK Crackdown: Pakistan-administered Kashmir saw deadly clashes after authorities banned JAAC, triggering shutdowns and internet blackouts; reports say at least 11 were killed and a bounty was announced for JAAC leaders. NEC Budget Push: The NEC approved a Rs3.669trn national development budget for FY27 and set a 4% growth target, while cutting provincial development allocations by Rs920bn; Khyber Pakhtunkhwa CM said the NFC Award update is promised within 180 days. Economic Survey Ahead of Budget: The Economic Survey 2025-26 is set to be released, showing growth shortfalls, agriculture/industry underperformance, weak exports, and inflation jumping to 11.66% in May, even as remittances stayed strong. Remittances & External Pressure: Pakistan recorded record monthly remittances around $4.25–4.3bn, but SBP warns of near-term foreign currency outflows of about $24.77bn as loans mature. Digital Payments Reform: SBP launched a nationwide feedback survey on digital payment services, seeking input on usage, reliability, fraud concerns and complaint handling. Passport Convenience: Government approved doorstep passport delivery nationwide with reduced delivery timelines and a move to cashless processing. Energy-Saving Business Hours: Islamabad extended business operating hours under austerity rules, allowing shops/malls until 9pm and restaurants until 11pm. Solar Billing Dispute: LESCO faces backlash from solar users alleging “double billing” and inconsistent compensation rates across billing cycles. Trade Logistics: Reports say Afghanistan has agreed to let about 1,500 stranded Pakistani trucks return after the Torkham closure, pending final approvals. Guinness Medical Record: Guinness sought records after Pakistani surgeons claimed 10 liver transplants in under 24 hours at PKLI&RC.

Fuel & Austerity: Ishaq Dar-led committee extended Pakistan’s fuel conservation and austerity measures until June 30, keeping consular attestation open on Fridays and pushing standalone grocery/kiryana store closing to 10pm nationwide. NEC Budget Push: The National Economic Council meeting finally began to review economic targets and the annual development plan, after repeated postponements tied to the 2026-27 federal budget schedule. Markets & PSX: The KSE-100 saw early volatility amid Middle East jitters, with investors tracking oil moves and regional risk. External Accounts: Remittances rose to $4.251bn in May 2026, up 20.2% month-on-month, supporting Pakistan’s external position. Banking & Tech: Allied Bank highlighted digital-led growth, while Ignite and Mobilink Bank signed up to set up the National Incubation Center in Sialkot. Energy & Industry: Cherat Packaging commissioned a 2.7MW solar plant; SPEC Refinery flagged a $4.5bn deep-conversion refinery plan in Balochistan. Regional Tensions: Pakistan’s airstrikes in Afghanistan again drew condemnation after reports of child deaths, while UN diplomacy saw fresh India-Pakistan blame exchanges.

Market Rebound: Pakistan Stock Exchange snapped back strongly, with the KSE-100 index gaining 1,376 points to close at 170,330 as investors returned to buying. FX Watch: The rupee edged up slightly in interbank trade, closing at 278.37 per dollar. Rates Outlook: The SBP’s next Monetary Policy Committee is set for June 15, with expectations split between a hold and another hike amid oil-price volatility. Fiscal Pressure: Pakistan’s federal debt rose to Rs81.93trn in April, up 1.7% MoM and 9.3% YoY, translating to debt growth of about Rs80 crore per hour. Privatisation Push: The government approved rightsizing and privatization of state entities, including Pakistan Mineral Development Corporation (PMDC) in the first phase, alongside Saindak Metals and ENAR Petrotech. Digital Welfare: BISP is moving to wallet-based digital payments, linking beneficiaries automatically to banks and mobile wallets after biometric verification. Startup Ecosystem: Ignite and Mobilink Bank will set up the National Incubation Center in Sialkot to support tech startups. Consumer & Compliance: Reckitt Benckiser was fined Rs3 crore over misleading Strepsils ads, while FIA expanded FATF desks to strengthen anti-money laundering and terrorism-financing probes. Trade & Connectivity: Pakistan plans to join the INSTC and link Gwadar with the Russia-backed corridor, aiming to boost regional transit trade. Regional Tensions: Protests and crackdowns in Pakistan-administered Kashmir continued, with reports of deaths and shutdowns affecting local business and transport.

DISCO Privatisation Push: PM Shehbaz Sharif ordered acceleration of electricity distribution companies’ privatisation, stressing transparency and a post-sale regulatory framework; the first phase targets IESCO, GEPCO and FESCO, with EOI already out and investor roadshows planned this month (Saudi Arabia, Türkiye, China). Electricity Relief: NEPRA cut power tariffs by about Rs1.98–Rs1.99 per unit under the quarterly adjustment, offering roughly Rs67bn relief for June–August 2026 (with limited exclusions). Budget Countdown: The federal Budget 2026-27 is now set for June 12 after further schedule changes and coalition talks, with NEC and macro framework discussions still underway. IMF Pressure on Provinces: IMF-backed reforms push provinces to sharply raise revenue targets for FY26-27, with provincial tax collection set to jump to Rs1.947trn. Market Mood: PSX rallied over 1,700 points on oil-price easing and budget optimism. Trade & Security at UNSC: Pakistan urged the Afghan Taliban to take “verifiable, non-reversible” action against terrorist groups, while India hit back at Pakistan’s “Fitna al-Hindustan” narrative at the UN. SME Export Boost: SMEDA expanded its SME certification and international accreditation grant drive to help firms access global markets. Climate Finance: UK-funded CFA Pakistan selected 11 climate businesses for investment readiness support. Kashmir Unrest: PoK saw deadly clashes after JAAC protests were banned, with at least 11 killed and 70+ injured.

Kashmir Flashpoint: Clashes in Pakistan-administered Kashmir ahead of a protest by the banned Joint Awami Action Committee killed 11 people and injured 70+ as police and paramilitary forces tried to disperse demonstrators, with both sides trading blame. Budget & Politics: PPP has given a green signal for Pakistan’s Federal Budget 2026-27 after Shehbaz Sharif and Asif Ali Zardari met and resolved most differences; technical talks continue, while security, Gilgit-Baltistan and Azad Kashmir also featured. Fertilizer Relief: Government is expected to allocate Rs20bn in subsidies for fertilizer firms to clear gas price arrears and keep urea supplies stable. Auto Costs: Budget 2026-27 discussions point to a possible rise in the Climate Support Levy on petrol cars (up to 3% for small engines), with Suzuki price revisions likely. Trade & Tariffs: US USTR proposed new Section 301 forced-labour tariffs (10%–12.5%) covering 60 economies including Pakistan, with comments due July 6. Markets: Pakistan’s stock market slid sharply as KSE-100 fell over 1,500 points amid regional tensions. SME Exports: SMEDA is pushing internationally recognised certifications via a matching-grant programme ahead of World Accreditation Day.

Middle East Risk to Markets: Israel and Iran exchanged strikes again for the first time since a ceasefire, despite Trump urging restraint, with oil jumping and PSX sliding as investors priced higher inflation and supply disruption risk. IMF-linked Budget Moves: Pakistan is awaiting IMF approval for Budget 2026-27 tax relief for salaried people, a cut in super tax, and export-related changes, while GST hikes on items like solar panels and hybrid vehicles remain on the table. Tax Enforcement Push: FBR plans an October 1 crackdown on non-filers showing luxury lifestyles on social media, using NADRA and financial data to issue notices and demand filings. Easier Foreign Investment: SECP streamlined licensing for companies with foreign sponsors by removing prior security clearance at the application stage (directors still need clearance later). Karachi Port Deal: Karachi Port Trust and Saudi partners signed an MoU for a 140-acre waterfront development including a crypto/blockchain zone and digital finance hub. Punjab Mobility Upgrade: Punjab will launch Lahore’s e-bike rental service with 10,000 bikes and 300 charging/docking stations. Energy & Daily Life: Hyderabad residents report worsening gas shortages despite scheduled supply hours, while LPG prices in India rose again amid West Asia disruptions. Security in AJK: Clashes tied to the banned JAAC in Pakistan-administered Kashmir left multiple personnel dead and dozens injured ahead of planned protests.

Middle East Diplomacy: Pakistan’s Interior Minister Mohsin Naqvi is in Tehran to deliver messages from PM and Army Chief Asim Munir to Iran’s Supreme Leader Mojtaba Khamenei as the US-Iran war hits day 100 and the US says it shot down more Iranian drones near the Strait of Hormuz. Budget Talks: PPP raised tax and Sindh development concerns in pre-budget meetings with Ishaq Dar, with Dar assuring issues would be addressed ahead of the June 10 federal budget; NEC is set to meet tomorrow to finalise 2026-27 development priorities. Inflation & Savings: Pakistan’s savings rate has fallen to a 30-year low (PIDE flags households saving just Rs6 per Rs100), while inflation is also reported to have hit a 16-month high, raising pressure on demand and investment. Water Crisis: Indus water overdrawal by Punjab is blamed for acute shortages in Sindh, sparking political friction and farmer distress, especially around Dadu Canal. Power Sector: IESCO says it arrested 3,288 electricity theft offenders and recovered 94% of Rs593.6m in fines since 2019. AJK Unrest: AJK authorities have proscribed JAAC and detained members; federal minister Tariq Fazal says most commitments are implemented and warns against creating uncertainty ahead of June 9 protests.

US-Iran Tensions: The US shot down two Iranian drones near the Strait of Hormuz as fresh strikes hit Bahrain and Kuwait, while Pakistan’s Interior Minister Mohsin Naqvi pushed de-escalation in Tehran with messages from PM Shehbaz and Field Marshal Asim Munir. Diplomacy & Regional Spillover: Lebanon’s army chief made a surprise trip to Pakistan as funerals were held for officers killed in Israeli strikes, underscoring how the wider US-Israel-Iran conflict keeps widening. Energy & Fiscal Pressure: Pakistan collected over Rs1,430bn under the petroleum development levy in July–May, while India defended its LPG hike and said households still pay far below market-linked costs. Money Laundering Crackdown: FIA arrested four in Lahore over illegal currency exchange/hawala-hundi and copyright violations, and NAB froze Bahria Town-linked foreign accounts worth $4.5m in Mauritius. Food Safety Push: President Zardari and PM Shehbaz urged stakeholders to strengthen safe food practices on World Food Safety Day. Karachi Water Crisis: JI staged protests over worsening shortages; KWSC replaced a 60-year-old Rising Main Line to cut losses and improve supply. Business & Regulation: SECP concluded enforcement against 36 SOEs with Rs3.175m penalties, while ICCI welcomed Pakistan’s Fixed Tax Facilitation Scheme for small businesses. Trade Talks Watch: India and the US said they’re on track to execute the first tranche of a trade pact by mid-July, though key tariff issues remain unresolved.

Karachi Waterfront Deal: Pakistan signed an MoU with Saudi and local partners to develop a 140-acre maritime business district on Karachi Port Trust waterfront land, aiming to turn the area into a commercial and maritime hub. Digital Finance Watch: Telenor’s possible exit from its 55% stake in Easypaisa is drawing early interest from private equity and strategic fintech players, with Ant Group positioned as a key minority stakeholder. Budget Focus: Business leaders are pushing for a stable, predictable tax regime and growth-friendly reforms ahead of Budget 2026–27, including support for IT exports and a simpler fixed tax scheme for small shopkeepers. Energy Policy Debate: A proposed two-part industrial tariff policy linked to IMF talks is sparking concern that it may punish firms for shifting to solar/off-grid options rather than fixing underlying power pricing problems. Trade & Logistics Disruption: WFP says fortified biscuits for Afghanistan reached after a 15,000 km detour through nine countries due to border closures and Strait of Hormuz disruptions. Regional Diplomacy: Pakistan’s Interior Minister Mohsin Naqvi is set for a third visit to Tehran to support US-Iran peace efforts amid wider West Asia tensions. Local Business Pressure: Balochistan traders and transporters formed a joint committee over security attacks on cargo vehicles and trade disruptions, warning of protests if compensation and protection aren’t provided.

Capital Markets: PSX saw a fresh wave of IPO activity with 13 new listings delivering an average 47% return, lifting investor confidence as several counters surged sharply post-listing. Fintech & Deals: Telenor is reportedly exploring the sale of its 55% controlling stake in Easypaisa, a move that could reshape Pakistan’s digital payments and lending landscape. Budget 2026-27 Watch: Proposed duty cuts could bring relief to Pakistan’s cosmetics, grooming and fitness industries, with import duties on key raw materials and equipment under review. Tax Reform for Retailers: The government rolled out a fixed tax scheme for small shopkeepers (up to Rs200m annual turnover), aiming to pull informal retailers into the tax net with simplified compliance. Governance & Compliance: SECP completed proceedings on 58 cases against 36 state-owned entities for filing lapses, imposing fines and warnings. Trade & Investment: Pakistan signed an MoU with Saudi and local partners for a 140-acre Karachi waterfront maritime business district at KPT, targeting investment and jobs. Security & FATF: FIA plans FATF desks nationwide to strengthen monitoring ahead of Pakistan’s mutual evaluation. Energy/Local Admin: PESCO approved a one-month salary bonus for eligible employees, linked to service duration and performance conditions.

Fuel Relief & Inflation Watch: Pakistan cut petrol by Rs4 to Rs377.78 per litre while keeping HSD unchanged at Rs380.78 for the next fortnight, extending a run of weekly reductions as global oil eases. Tax Push for Small Traders: The government launched a Fixed Tax Asaan Scheme for shopkeepers and small traders (up to Rs200m annual sales), charging 1% fixed tax with simplified compliance and fewer POS/audit burdens. SBP Reserves: State Bank-held foreign exchange reserves rose $43m to $17.19bn, but the wider trade deficit continues to pressure the external outlook. Security Coordination (SCO): Interior Minister Mohsin Naqvi urged SCO members to adopt a joint strategy against terrorism, cybercrime and terror financing, warning militants are using AI and crypto. Exports Under Threat: The Pakistan Textile Council warned exporters could miss supply-chain shifts unless Budget 2026-27 offers immediate relief on costs and policy distortions. Governance Reform in Islamabad: A proposed plan would create a 27-member elected local assembly with greater financial and administrative autonomy, using digital systems for service delivery. Regional Politics (GB Polls): India lodged strong protests over Pakistan’s June 7 Gilgit-Baltistan assembly elections, while PPP leader Bilawal Bhutto pledged jobs, land rights and stronger digital connectivity for the region. Business & Finance Tech: BankIslami’s aik won Best Shariah Compliant Digital Financial Solution at the Pakistan Digital Awards 2026.

Aviation & Trade Links: PIA will resume direct Islamabad–Beijing flights from July 3, reviving a key route for students, business travellers and tourists. US Trade Pressure: The Trump administration proposes forced-labour tariffs up to 12.5% on imports from 60 countries, including Pakistan, drawing pushback from trading partners. Tax Modernisation: PM Shehbaz directs a pilot launch of an AI-driven automated tax collection system in Islamabad to cut human discretion and boost compliance. Markets: PSX stays in the green as KSE-100 gains over 500 points early trade, supported by selective buying amid cautious hopes around US-Iran diplomacy. Energy Costs: NEPRA approved a net Re0.80 per unit relief for June electricity bills after quarterly tariff adjustments. Local Governance & Education: Lahore’s BISE board approves digitisation of affiliation and student registration processes, moving services online. Punjab Agriculture: Punjab expands farm mechanisation with subsidised tractors, combined harvesters and interest-free financing. Climate Risk: Maritime minister flags an Arabian Sea marine heatwave and warns of higher cyclone risks, urging urgent preparedness. Water Security: Pakistan reiterates it has “all options” against India’s Chenab–Beas water diversion plans, calling them a threat to regional stability. Foreign Exchange: Liquid foreign reserves stand at $22.64bn, with SBP reserves up slightly week-on-week.

Budget Watch: Pakistan will present the federal budget 2026-27 on June 10, with the Economic Survey due June 9, as business groups push for export-led growth and warn against a tax-heavy approach that could hurt earnings. Power Costs: NEPRA approved electricity tariff changes—Rs1.98 per unit reduction for three months (June-Aug) and a separate Rs1.19 per unit fuel adjustment collected in June bills—offering near-term relief for households and businesses. Trade & External Sector: Pakistan’s trade deficit hit a record $34.75bn in the first 11 months, with exports down and imports up, while SBP foreign exchange reserves rose $43m to $17.19bn. Tax Reform Push: PM Shehbaz ordered an AI-driven automated tax collection pilot in Islamabad and urged FBR reforms to make the system faceless, transparent and less discretionary. Regulation for Fintech Costs: PTA proposed treating corporate SMS as a separate market and may designate operators with significant market power, aiming to address high corporate messaging tariffs that hit banks and fintechs. Regional Deals: Pakistan and Tajikistan agreed a three-year roadmap to lift bilateral trade to $200m, with cooperation across energy, transport and trade facilitation. Diplomacy with Economic Angle: PM Shehbaz highlighted “true and special” Pak-US ties at the US 250th anniversary event, while Saudi delegations explored investment in ports, highways, airports, energy and IT.

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.