Pakistan an important neighbor of Iran, says Zarif

Iranian Vice President for Strategic Affairs Mohammad Javad Zarif held a cordial meeting with Pakistan’s ambassador in Tehran, Muhammad Mudassir Tipu.

The two officials discussed the expansion of ties in various fields, including economy, security, and military domains. Cultural exchanges and the need to further increase them was another focus of discussions. 

“Pakistan is an important neighbor of Iran. This means that we should do our best to further enhance our ties,” Zarif said to the envoy.

The Iranian official who served as the country’s foreign minister for 8 years in the 2010s, traveled to Pakistan multiple times during his long tenure as a diplomat. 

For his part, Tipu briefed Zarif on the current state of bilateral ties, and reciprocated sentiments about the importance of enhanced cooperation between the two historically friendly countries. 

Iran and Pakistan have taken multiple steps to increase cooperation in recent years. Notably, a massive border market was inaugurated in 2023 by the leaders of the two countries.

Security collaboration has also become extremely significant, with the two nations facing similar threats posed by terrorists and smugglers.

 

PSX records modestly positive activities

Pakistan Stock Exchange (PSX) witnessed a modestly positive week, with the benchmark KSE-100 index gaining 716 points or 0.64%WoW, to close at 112,801 points on Friday, February 21, 2025. Market activity was largely driven by ongoing announcements of corporate results, particularly better than expected earnings by the cement companies.

The authorities' stance against imposing new taxes ahead of the upcoming IMF review boosted investor confidence, with expectations of smooth review process, expected next month.

On the macro front, foreign direct investment (FDI) surged by 56%YoY to US$1.5 billion in 7MFY25, primarily due to higher inflows from China into the power sector, especially Hydel projects.

Current account posted a deficit of US$420 million in January 2025 after three months of surplus, driven by 17%YoY increase in imports. However, the 7MFY25 balance remained in surplus at US$682 million.

Yields in the latest auction rose by 3 to 17bps, with 3-month yield on T-bills climbing to 11.82%.

Large-Scale Manufacturing (LSM) index declined by 1.87%YoY in 1HFY25, primarily due to a slowdown in construction-related sectors.

Market participation also improved, with average daily traded volume increasing by 14%WoW to 590 million shares, from 519 million shares a week ago.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$35 million to US$11.20 billion as of February 14, 2025.

Other major news flow during the week included: 1) IMF and Pakistan to discuss US$1bn climate finance talks next week, 2) overseas investors repatriate US$1.3 billion during first seven months of the current financial years, 3) IFC announces to invest US$2 billion annually in Pakistan’s infrastructure, 4) textile exports increased by 11%YoY in seven months, and 5) GoP decides to deregulate fuel prices and auction offshore blocks.

Glass ceramics, Jute, and textile spinning were amongst the top performing sectors, while Transport, Pharmaceuticals, and Close-end mutual funds reported were the laggards.

Major selling was recorded by Mutual Funds and Foreigners with a net sell of US$8.6 million and US$5.1 million, respectively. Insurance companies, Individuals, and Companies absorbed most of the selling with an aggregate buy of US$14 million.

Top performing scrips of the week were: BOP, FCCL, KTML, TGL, and DGKC, while laggards included: SAZEW, MEHT, SEARL, TRG, and ABOT.

According to AKD Securities market outlook remains positive, with the KSE-100 expected to be influenced by corporate earnings announcements, which could set the tone for sector-specific movements.

Any developments regarding the upcoming IMF review or the US$1.0 billion climate financing by IMF could further trigger positive momentum. Over the medium term, the KSE-100 is anticipated to sustain its upward trajectory, primarily driven by strong earnings in fertilizers, sustained ROEs in banks, and improving cash flows of E&Ps and OMCs, benefiting from falling interest rates and economic stability.

 

Pakistan posts current account deficit in January

Pakistan has posted current account (CA) deficit of US$420 million in January 2025 as against a surplus of US$474 million in December 2024.

This was the first CA deficit since September 2024, shrinking the CA surplus during first seven months of the current financial year to US$682 million (which still compares well with a deficit of US$1.8 billion during 7MFY24).

A key reason for the deficit was the increase in goods imports (up by US$560 million MoM), about half of which was due to higher petroleum imports. This showed flat imports, which makes the negative CA balance less concerning. 

Goods trade deficit expanded to US$2.5 billion in January 2025 from US$1.8 billion a month ago, largely due to higher imports (up 11% MoM to US$5.4 billion) while exports fell 4% to US$2.9 billion.

Petroleum imports rose 25%MoM to US$1.6 billion, as compared to an average US$1.2 billion over the previous six months – despite January being an off-peak month for petroleum consumption (lower mobility during winter).

Overall goods imports were nearly flat MoM and petroleum imports fell 12% MoM to US$1.3 billion. The higher imports were due to a temporary difference (SBP data is cash based; and the payment for deliveries of previous months came due in January).

Goods exports were broadly flat around US$2.9 billion, but Textile exports were up a notable 14% MoM to US$1.7 billion. Food exports were down 19%MoM (rice exports fell 11%MoM).

Remittances were reported at US$3.0 billion but are likely to rise in the coming months' with the commencement Ramadan falls in March. Remittances increased 32%YoY during 7MFY25, to US$20.8 billion.

A narrow spread between the interbank and kerb exchange rates and a big outflow of skilled workers in recent years (driven by the economic crisis of 2022-23) were the key drivers for the increase in remittances.

Foreign exchange reserves held by State Bank of Pakistan fell to US$11.4 billion by end January from US$11.7 billion at the start of the month, manlily due to debt repayments of about US$500 million and CA deficit.

Next IMF review is due in early March 2025, a favorable review should unlock the next US$1 billion tranche.

Pakistan is scheduled to launch a US$200 million panda bond auction in China by June 2025.

 

India-US Relations: Implications for Pakistan

The evolving relationship between the United States and India under the leadership of President Donald Trump demands closer attention of Pakistan’s ruling junta. This developing alliance raises concerns in Islamabad, as the strengthening ties between the two countries may deepen the already strained relations between the US and Pakistan.

Recent developments prompted Pakistan’s foreign office to publicly express its concerns following a meeting between President Trump and Indian Prime Minister Narendra Modi. A major point of contention was Trump’s offer to sell advanced military technologies, including F-35 jets, to India. This could have serious implications for Pakistan’s defense capabilities.

The joint communiqué issued after the meeting highlighted concerns about Pakistan's role in terrorism, calling for Pakistan to “expeditiously bring to justice” those responsible for the 2008 Mumbai attacks and the 2016 Pathankot incident. It further emphasized the need to prevent Pakistani territory from being used for cross-border terrorism.

Additionally, the appointment of S. Paul Kapur, a scholar of Indian origin known for his hawkish stance on Pakistan, as the US representative for South and Central Asia is seen as another sign of Washington’s increasingly critical view of Islamabad. His nomination adds to a growing list of individuals in the new US administration who are vocal critics of Pakistan’s policies.

Some vocal Pakistani expatriates in the United States, who supported Trump during his campaign, have been pushing for a tougher stance on Islamabad. This situation places the Pakistani government in a difficult position, it will once again have to prove its strategic value to US policymakers.

Meanwhile, New Delhi appears to be using its growing economic influence to deflect international scrutiny over its involvement in global assassination and terrorism networks, while simultaneously shifting the blame onto Pakistan.

In light of these challenges, Pakistan must adopt a more proactive approach in diplomacy, actively establish its credibility and strengthen its global position. Despite Pakistan’s long-standing engagement in the global war on terrorism and its ongoing counterterrorism cooperation with the US, the heavy toll on its people in social and economic terms remains largely unrecognized and underappreciated.

Moving forward, Pakistan needs to reassess its foreign and security policies, aligning them more closely with the expectations of its international allies while safeguarding its national interests.

 

OIC extraordinary session on Gaza

The Iranian Foreign Ministry's proposal to convene an emergency meeting of the Organization of Islamic Cooperation (OIC) foreign ministers to address the forced displacement of Palestinians from Gaza has reportedly gained significant support.

According to a report by the Islamic Republic News Agency (IRNA), citing an informed source within Iran's Foreign Ministry, the session is expected in the first half of March, following extensive diplomatic efforts by Iranian Foreign Minister Abbas Araghchi.

The proposal, formally submitted to the OIC Secretary General, followed a series of recent consultations between Araghchi and his counterparts in Saudi Arabia, Egypt, Algeria, Turkey, Pakistan, Malaysia, and Gambia, as well as the current OIC chair.

The discussions focused on possible measures against controversial US-Israeli plans to relocate Gazans to countries such as Egypt, Jordan, and Saudi Arabia.

Araghchi has repeatedly condemned these proposals, warning that they would "complete the colonial erasure of Palestine."

He urged unified action to thwart this "conspiracy" against Palestinian rights.

“The US-Zionist plan to forcibly expel Gazans and scatter them across other nations is a blatant attempt to destroy Palestinian identity," Araghchi stated.

He further noted that Israeli Prime Minister Benjamin Netanyahu’s recent suggestion of establishing a Palestinian state on Saudi territory was an "unprecedented aggression" and a "threat to regional peace and security."

Indirectly referencing Netanyahu’s remarks, Araghchi emphasized the need for the OIC to adopt "urgent measures" to prevent the normalization of "genocidal policies" by the Israeli regime.

He stressed that the international community, particularly Muslim-majority nations, must oppose efforts to legitimize violations of international law.

“The Organization of Islamic Cooperation must take a decisive and effective decision as soon as possible by holding an extraordinary meeting with the presence of the foreign ministers of the member states to defend the legitimate rights of the Palestinian people,” Iran's top diplomat said in a phone call with OIC Secretary General Hussein Ibrahim Taha.

US President Donald Trump recently proposed that Washington take “ownership” of the Gaza Strip and transform it into a tourism hub, permanently displacing the Palestinian inhabitants.

“We’ll own it [Gaza] and be responsible for clearing it out and rebuilding it into the Riviera of the Middle East [West Asia],” Trump said during a news conference with Israel’s convicted war criminal Benjamin Netanyahu.

Later, while sitting next to Jordan’s King in the Oval Office, Trump refused to elaborate on how he would proceed with his plan, given the opposition from both the residents of Gaza and the countries to which he plans to relocate the population of over 2 million. He said the US would just “take” the territory.

The US president's statements have ignited international outrage, with rights and legal bodies accusing him of helping Israel complete the genocide it could not finish during 16 months of brutal war on Gaza.

 

Saudi Navy taking part in AMAN-25 Exercise in Pakistan

The Royal Saudi Navy is participating in the joint naval exercise titled “AMAN-25,” which started in Karachi, Pakistan on Friday, as part of its efforts to enhance international cooperation in maritime security.

Naval forces from as many as 60 countries are taking part in the five-day multinational maritime exercise, which aims to strengthen global collaboration in combating piracy and terrorism while improving security coordination among the participating naval forces.

The 9th edition of the naval drill, organized by the Pakistan Navy, focuses on safeguarding economic waters, sharing expertise, enhancing combat readiness, and preparing participants for complex maneuvers and counter-techniques.

The Royal Saudi Navy is participating in the exercise with two war ships –HMS Jazan and HMS Hail- along with specialized forces from the Marine Corps and the Royal Navy’s Special Security Units.

Pakistan on a path of implosion

It was what one may safely describe as a ‘memorable’ occasion. Exactly a year ago today, adult-aged Pakistanis from all faiths, cultures, ethnicities, and socioeconomic classes had headed to their assigned polling stations to cast their ballots in a much-delayed general election.

 was remarkable how many expectations they ended up defying that day. One recalls the unannounced blackout of all mobile communication services, enforced by the authorities shortly before polls opened, which had left people without access to vital election-related information and unable to contact their friends and families.

It was not enough to deter the over 59 million citizens’ intent on having their voices heard that day. One also recalls the smug predictions of television pundits and the surveys fed to the media in the run-up to Election Day. None of them prepared the nation for the coup ordinary Pakistanis pulled off merely with the help of a stamp and a ballot paper.

No observer can honestly deny that the last election’s results were highly unexpected.

Considerable effort was made to keep one party out of the race. The party’s leadership was jailed, its workers picked up, its electoral symbol withdrawn, and its candidates, even after being forced to declare themselves independents, not allowed to campaign.

If the previous elections were manipulated — perhaps by the same elements — to bring the PTI to power, they went out of their way to ensure that it did not have any chance this time around.

Despite all their machinations, however, the PTI ended up winning an unexpectedly large chunk of the popular vote.

The results announced two things: one, that Pakistan’s youth had finally arrived on the political scene, and two, that ordinary voters had overwhelmingly rejected the narratives set by the powers of the day. In this sense, the 2024 election was indeed a historic one.

Much went wrong after February 08, 2024, mainly because responsible individuals within the Pakistani state refused to come to terms with the country’s changed realities.

However, though the injustices that followed the last general election cannot be forgotten, it is equally important to start thinking about what must now be done to mitigate their effects.

The country has continued to march on a path of implosion, unable to contain the dissonance created by a conflict between what those controlling the state want and what the people want for themselves. Unless this fundamental conflict is resolved, the country will not be at peace with itself.

A war of egos has been fought between a handfuls of individuals at the cost of the well-being of millions of ordinary Pakistanis. This unnecessary war must be called to an end. The people of Pakistan have been wronged for too long. They need a change.

Dawn Editorial, February 08, 2025

Aman-25 focuses regional cooperation

The picturesque seafront of the Pakistan Navy Dockyard with windsurfers, sailboats and Navy boats painted a beautiful backdrop for the flagpoles from which fluttered the flags of 60 nations participating in the ninth Multinational Maritime Exercise ‘Aman-25’ on Friday morning.

The biennial exercise commenced with a formal flag-hoisting ceremony, followed by the cutting of a cake by senior representatives of the participating navies.

A message from the Chief of Naval Staff, Admiral Naveed Ashraf, was read by Commodore Omar Farooq during the ceremony.

The naval chief welcomed the participants and highlighted that the exercise, which began in 2007, has now become a regular biennial feature, bringing together regional and ex­tra-regional navies to foster a secure and conducive maritime environment.

He emphasized the Pakistan Navy’s role as a key stakeholder in the Arabian Sea and its initiatives to enhance regional maritime security, including Regional Maritime Security Patrols.

He further stated that in recognition of the international community’s trust in its efforts to promote peace and stability at sea, Pakistan Navy has introduced the Aman Dialogue this year as an adjunct to the exercise.

Speaking on the occasion, Pakistan Fleet Commander Rear Admiral Abdul Munib underscored the force’s contributions to collaborative maritime security and the exercise’s significance in enhancing interoperability among the participants.

Rear Admiral Munib praised the participating countries for supporting Pakistan’s commitment to peace and maritime security and expressed the hope that the friendships fostered during the exercise would continue and grow.

The ninth edition of the exercise will see the participation of 12 naval ships, some of which have already arrived at the Karachi port while others are on their way.

China, with its Plans Baotou-133 and Plans Gaoyouhu, and the Kingdom of Saudi Arabia, with its HMS Jazan and HMS Hail ships, are the nations participating with two vessels each.

The other vessels include UAE’s Abu Dhabi (CVT) P-191, Malaysia’s KD Terengganu-174, Japan’s JS Murasame, Sri Lanka’s SLNS Vijayabahu, Indonesia’s KRI Bung Tomo-357, Iran’s Jamaran, Bangladesh’s BNS Somdura Joy, USA’s Lewis B. Puller and Oman’s RNOV Sadh. Meanwhile, Turkiye is participating with one aircraft.

There are also a number of special operation forces and observers taking part in the inaugural Aman Dialogue scheduled for February 09 to 10.

Bangladesh’s Chief of Naval Staff Admiral Nazmul Hassan, who arrived with his naval fleet, held meetings with Pakistan’s top military leadership on Friday in another sign of the improved bilateral ties between the two nations.

Admiral Hassan, who will also attend the inaugural Aman Dialogue on maritime security, called on the chairman of the Joint Chiefs of Staff Committee, Gen Sahir Shamshad Mirza and Chief of Army Staff Gen Asim Munir.

He also held a bilateral meeting with Admiral Ashraf at the Naval Headquarters in Islamabad.

The meetings focused on the evolving regional security landscape and mutual strategic interests, particularly in maritime collaboration.

Both militaries explored avenues to strengthen defence ties, including joint naval exercises, training programs, and exchange visits.

Adm Hassan’s visit marks the second high-level engagement between the Bangladeshi Armed Forces and Pakistani military leadership in recent months.

On January 14, Lt Gen S.M. Kamrul Hassan, the principal staff officer of Bangladesh’s Armed Forces Division, led a military delegation to Pakistan, where both sides agreed to bolster defence cooperation and collaborate on regional peace efforts.

Observers see these developments as a shift in Bangladesh-Pakistan relations after years of estrangement.

Bangladesh’s participation in Pakistan’s multilateral naval exercise is considered a major step forward in military cooperation.

 

Kashmir Question

Almost eight decades since Pakistan and India became sovereign states, the Kashmir issue remains unresolved, bedevilling ties between the neighbours, with the people of the disputed region unable to exercise their right to self-determination.

Moreover, since the events of August 2019, India has tightened its grip over the occupied territory, removing the limited rights the held region had under the Indian constitution. Though, the hardline BJP government may think the Kashmir dispute is a thing of the past, the fact is that the territory remains internationally disputed, and no amount of constitutional tinkering and attempts to alter occupied Kashmir’s demography by New Delhi can change this reality.

The BJP government may like the world to think that it has transformed held Kashmir into a proverbial heaven on earth, but the dark reality of the Indian occupation cannot be hidden.

While Pakistan has long been raising the Kashmir issue at international forums, neutral observers, too, have pointed out the Indian state’s excesses in the disputed region.

For example, Human Rights Watch has said that journalists in IHK remain vulnerable to state violence, including physical assault and the threat of “fabricated criminal cases”. It adds that “hundreds of Kashmiris”, including journalists and human rights activists, remained in detention.

On the other hand, Amnesty International has also criticized India’s “arbitrary detentions” and “stringent anti-terror laws” in IHK. It also says that repression in the region has escalated since Article 370 was scrapped in 2019. These descriptions are a mere glimpse of the ugly reality of the occupied region.

The fact is that the only principled and peaceful solution to the Kashmir dispute remains the plebiscite the UN Security Council called for in 1949, after India had taken the Kashmir case to the world body.

Over the decades, no Indian government has taken any serious steps to implement the UN’s resolution, with the result that the Kashmir dispute has become a source of permanent discord in the subcontinent.

However, until there is a long-term solution in light of the aforementioned resolution, an alternative option for peace in Kashmir and the entire subcontinent would be the implementation of the four-point plan hammered out during the Musharraf era.

That scheme envisaged a ‘soft’ LoC, with free movement of people and goods across Kashmir, and eventual demilitarization.

If both sides, particularly India, are serious about peace, reviving this formula could be the starting point for fresh negotiations. The important thing is to continue the dialogue process, on bilateral disputes as well as the Kashmir issue, and move beyond rigid positions.

On Kashmir Solidarity Day today, Pakistan should reaffirm its support for the people of Kashmir. It should also keep the door open for India in case it decides to resolve the Kashmir question through dialogue.

Dawn Editorial of February 05 2025

 

 

Improving Iran-Pakistan bilateral relations

Reportedly, Iranian Foreign Minister Abbas Araghchi and Pakistan's Deputy Foreign Minister Amina Baloch discussed bilateral ties and regional developments. The meeting took place in Tehran, on the sidelines of the Economic Cooperation Organization (ECO) meeting.

"Under President Pezeshkian's leadership, we aim to elevate our relationship with Pakistan. We recognize its significant role in our foreign policy," Araghchi stated.

He further highlighted the importance of sustained dialogues and interactions at the highest levels to capitalize on shared opportunities while tackling common challenges.

Baloch, reflecting on mutual interests and concerns, emphasized issues such as border security, drug trafficking, and illegal migration.

"Pakistan is committed to advancing the relationship with Iran. We aim for more robust cooperation both bilaterally and regionally to manage these shared challenges," she explained.

The meeting also provided an opportunity for the diplomats to discuss regional developments, including the situation in Afghanistan, Gaza, Syria, and Lebanon.

Iran and Pakistan have historically maintained cordial ties. They share deep cultural and historical links and routinely support each other in international forums. Recent developments have further strengthened this close partnership.

In early 2024, the two countries demonstrated impressive diplomatic resolve by swiftly de-escalating border tensions through dialogue, leading to the inking of important security and military agreements in the ensuing months. Since then, significant efforts have been carried out to combat cross-border terrorism and ensure the security of the Iran-Pakistan border. 

The visit of Major General Mohammad Bagheri, the chief of staff of the Iranian Armed Forces, to Pakistan in early 2025 further solidified the two nations’ commitment to security and military cooperation.

Economic collaboration has also seen positive momentum in recent years, with several huge projects like the Iran-Pakistan (IP) Gas Pipeline underway. 

The visit of the late Iranian President Ebrahim Raisi to Pakistan in April 2024 marked a new chapter in economic engagements, with agreements signed to elevate bilateral trade to US$10 billion over the next five years.

 

Pakistan: Central bank cuts policy rate by 100bps

Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday January 27, 2025 in its meeting reduced the benchmark policy rate by 100bps to 12.00%.

The MPC stressed adopting a cautious approach noting that core inflation remains elevated, with high frequency indicators showing gradual improvement. The impact of 1,000bps reduction in the policy rate since June 2024 will continue to unfold, driving growth.

The committee also added that 1QFY25 GDP growth remained below expectations.

Tax collection during 1HFY25 also remained below the target.

Global oil prices remained volatile and that the global economic policy environment has become more uncertain.

Going forward, economic activity is expected to gain more traction with GDP growth for FY25 in the range of 2.5 to 3.5%.

Headline inflation for FY25 is now expected to average between 5.5 to 7.5%, subject to risks from volatile commodity prices, adjustment to energy prices, volatile food prices and impact of revenue measures.

On the fiscal front achieving the target for primary surplus would be challenging, while overall deficit is likely to come close to the target.

Outlook for the current account has improved considerably due to robust remittances. The current account balance for FY25 is anticipated to swing between a surplus and a deficit of 0.5% of GDP.

 

AMAN-25 multinational maritime exercise

The Commander of the Pakistan Navy has expressed his enthusiasm about the participation of the Islamic Republic of Iran in the forthcoming multinational maritime exercise, AMAN-25, set to take place in Karachi from February 07 to February 11.

Speaking in an exclusive interview with Iranian news agency IRNA in Islamabad, Admiral Naveed Ashraf emphasized the long-standing and constructive relationship between Pakistan and Iran’s naval forces. He also indicated his eagerness to further expand and enhance this partnership.

During the official visit of General Mohammad Bagheri, Chief of Staff of the Iranian Armed Forces, to Islamabad, Pakistan extended a formal invitation to Iran for the AMAN-25 exercise. 

Tehran welcomed the invitation, reinforcing the shared interest in strengthening military cooperation. 

Admiral Ashraf noted that Pakistan values the contributions made by the Iranian Navy in fostering stronger regional maritime cooperation. “We have much to learn from each other’s maritime experiences. As we look ahead to AMAN-25, the Pakistan Navy is eager to engage in deeper collaboration with Iran, especially through more focused bilateral and multilateral exercises,” Admiral Ashraf stated.

“As neighboring nations, we share a strong bond, and our mutual stance on maritime threats and challenges remains unwavering,” he added.

Admiral Ashraf highlighted his visit to Iran in 2021 and the reciprocal visit by Iran's naval commander to Pakistan in the summer of 2023. “The current level of cooperation between our naval forces is commendable, and I am optimistic that it will continue to grow,” he said.

Admiral Ashraf also discussed the evolving maritime security landscape in the region. He noted that the geopolitical environment remains unstable and complex, especially in the context of the region's growing geoeconomic competition.

“Our maritime security is closely linked to the rapidly changing dynamics of the Indian Ocean, and we must recalibrate our mutual interests accordingly,” he explained.

The Admiral also touched on the ongoing threats posed by actions in the Red Sea, particularly from Israel, which have escalated tensions and disrupted safe passage through vital maritime routes such as the Gulf of Aden.

“I believe neighboring countries can strengthen their collaboration within a focused regional maritime security framework to ensure that stability at sea is maintained through collective efforts,” Admiral Ashraf emphasized.

Further discussing regional security and naval capabilities, Admiral Ashraf highlighted Pakistan Navy's strides in domestic production, self-sufficiency, and technological advancements in shipbuilding, combat warships, missile systems, and commercial vessels.

He expressed a strong desire to partner with regional allies like Iran in areas of mutual interest, including advancing maritime technologies and capabilities. 

The multinational AMAN-25 maritime exercise is expected to draw over 50 nations, making it one of the most significant maritime exercises in the region.

The theme for this year is "Together for Peace," with a focus on strengthening regional and extraregional cooperation to maintain maritime order, enhance collective capabilities, and foster mutual understanding.

On Friday, Iran’s Islamic Revolution Guards Corps (IRGC) naval forces have begun their solo large-scale military exercises in the southern provinces of Bushehr and Khuzestan, focusing on their coastal waters. 

In alignment with the guidance of Ayatollah Seyyed Ali Khamenei, the Leader of the Islamic Revolution, Iran's Armed Forces—comprising both the Army and the IRGC—have consistently been upgrading their military equipment and improving their operational readiness.

 

 

Iran's economic relations with its neighbors

In recent years, the economic relationships between Iran and its neighboring countries have grown in both complexity and significance. This economic integration is crucial for the development of Iran’s non-oil sector and its broader economic strategy, especially considering the geopolitical challenges that the country faces.

In this article, an effort has been made to explore the current state and future prospects of Iran’s trade with its neighbors, examine key sectors, trade volumes, and strategic partnerships.

As of late 2024, Iran’s non-oil trade with its neighbors has seen a notable increase. Non-oil trade volumes reached US$55.3 billion in the first 11 months of the year, with exports constituting 67 million tons of goods valued at US$25.8 billion and imports amounting to 21.4 million tons valued at US$29.4 billion.

This represents a significant increase in trade flows, driven by an increase in exports of petrochemical products, minerals, and agricultural goods.

Iran’s primary trading partners in the region include Iraq, the UAE, Turkey, Pakistan, and Afghanistan. The UAE and Iraq are Iran’s two largest trade partners, especially in terms of exports.

For example, in the first seven months of 2024, Iran’s trade with Iraq was valued at US$7.6 billion, making it one of the most crucial destinations for Iranian goods. The major exports to Iraq include petrochemicals, cement, and agricultural products, while imports primarily consist of machinery and food items.

Turkey has also maintained its position as a key trading partner, with trade between the two countries amounting to US$9.9 billion in the same period. Iranian exports to Turkey largely consist of natural gas and petroleum products, while imports from Turkey are diverse, including electrical machinery and textiles.

Iran’s geopolitical location, bordered by 15 countries, gives it a strategic advantage in the trade of goods and services. This advantageous position allows Iran to serve as a key transit hub for goods moving between Central Asia, the Caucasus, and West Asia.

In particular, the development of international transport corridors, such as the North-South Transport Corridor (INSTC), which links Iran with Russia, India, and Central Asia, is expected to enhance Iran’s role in regional trade.

Furthermore, the expansion of special economic zones, such as the Lamerd Free Trade Zone, has created new opportunities for businesses to engage in regional trade. This diversification of trade routes and infrastructure investment is expected to foster deeper economic ties with countries in the Persian Gulf and beyond.

Despite challenges, such as global sanctions and regional instability, Iran’s government has focused on expanding its non-oil exports, particularly to its neighbors. This strategy is part of a broader effort to reduce Iran’s dependency on oil revenues and diversify its economy.

The Iranian government’s push for stronger trade relations with Central Asia, Russia, and even countries like Oman and Turkmenistan, is driven by the need for economic diversification and the potential to access new markets. Iran’s trade with Russia, for example, has grown steadily, with recent figures showing a trade volume of US$1.5 billion in 2024.

The economic outlook for Iran’s trade with neighboring countries is promising. The country’s strategic location, combined with increased infrastructure investment and a strong focus on non-oil exports, positions Iran as a key player in the regional economy.

However, the ongoing challenges of sanctions and geopolitical tensions remain factors to consider as Iran continues to navigate its path toward economic diversification.

If these trade relationships continue to strengthen, Iran could significantly enhance its role as a regional economic hub, ensuring long-term stability and growth for its economy.

 

Pakistan: Parachi­nar killing big question mark

The death toll from Thursday’s attack on passenger vehicles in Khyber Pakhtun­khwa’s Kurram district area has surpassed 40. The district is located near Afghanistan border and has a history of sectarian violence.

The convoy of around 200 vehicles, carrying Shia passengers between Peshawar and Parachi­nar, came under heavy gunfire in the densely populated Bagan town.

The convoy was escorted by police when it came under attack. The incident has attracted condemnation and law enforcement agencies are being criticized for the negligence.

Thursday’s ambush is the latest in a series of sectarian clashes between Sunni and Shia tribes in Kurram. Previous clashes in July and September claimed dozens of lives.

The frequency of such incidents confirms the failure of the federal and provincial governments to protect the ordinary citizens.

Authorities have imposed curfew and suspended mobile service. Businesses, educational institutions and markets were closed.

Pakistan-Netherlands business collaboration

Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, met with Henny de Vries, Ambassador of the Kingdom of the Netherlands to Pakistan discussed ways to strengthen existing economic and trade ties.

The two countries are exploring avenues to deepen their bilateral relations, with a focus on key sectors including mining, IT, oil and gas, agriculture, dairy, and farm production

During the meeting, various aspects of the longstanding friendship and bilateral cooperation between Pakistan and the Netherlands were discussed and priority areas like mining, IT, oil and gas, agriculture, dairy, and farm production for further business collaborations were identified.

The Minister highlighted the government’s economic plan and reform agenda for promoting economic growth and ensuring fiscal sustainability.

He mentioned the economic gains achieved over the last 14 months and reiterated the government’s resolve to stay the course to move the economy on the path to sustained, export-led growth.

He also highlighted the challenges faced by Pakistan on climate front, and its efforts for climate financing and building capacity to ensure climate resiliency through sustainable solutions.

Ambassador de Vries reciprocated the sentiments on strengthening bilateral ties and further expanding cooperation in various fields, including sports.

She mentioned the Dutch cricket team was scheduled to visit Pakistan early next year to play matches and learn from Pakistan’s cricketing prowess.

She also appreciated the ongoing structural reforms in major economic and financial sectors and assured her country’s support for Pakistan’s trade and commerce with European Union.

 

Trump's Victory: Implications for Pakistan

Donald Trump’s second term as the US President is expected to have profound impact on geopolitics and global asset/ commodity prices, which would ultimately have implications for the ongoing macro recovery in Pakistan.

There is a high probability of a “clean sweep” by the Republican Party (it is likely to take control of both the US Senate and House), which will give Trump greater ability to execute his campaign pledges.

Trump’s policies – cracking down on immigration and large import tariffs on China – are expected to be inflationary for the US economy and negative for global growth. If he is able to bring a quick end to both the wars, in Ukraine and Gaza, oil prices are likely to continue falling under the weight of weakening global demand.

There are various caveats to these expectations:

Global experts point to the strength of US institutions in checking/ taming some of the draconian policies Trump has pledged. Second, China has begun rolling out huge stimulus measures, both fiscal and monetary, to revive its ailing economy (particularly its large property sector). This could serve as a boost to global commodity prices.

For Pakistan, the prospect of lower or stable oil/ commodity prices is positive. US-China trade war improves the opportunity to attract Chinese industries into Pakistan. Certain exports out of Pakistan, including steel and textiles, may become more competitive in the US. But, it could be a challenge for Pakistan to execute CPEC Phase 2 in the face of deteriorating US-China relations.

At this stage, the event does not materially affect outlook of continued macro stability in Pakistan – continued disinflation and foreign exchange reserves buildup – and equity market re-rating,

According to Pakistan’s leading brokerage house, Inter Market Securities:

Oil prices are more likely to fall or stabilize around US$70/bbl over the medium term. Trump is likely to encourage greater shale oil production in the US, while at the same time, he would work to bring an end to the conflicts in Ukraine and the Middle East.

Global inflation could make a comeback as Trump promises to slap up to 60% import tariffs on China and up to 20% from elsewhere. He has also committed to deport illegal immigrants from the country – which could stoke another round of labor shortage in the United States.

US interest rates may remain elevated as the resurgent inflation could lead to a slowdown of rate cuts in the US, leading to a stronger greenback against other major currencies. This could mean that global equity flows into the emerging and frontier markets would remain weak.

Raising debt through Eurobonds could therefore become difficult for Pakistan. The USD index has appreciated 5% since September, while the US 10-year bond yield has risen to 4.5% from 3.6% by end September – both have risen in anticipation of Trump’s re-election.

Global growth could be slower and commodity prices, depressed if Trump administration impose higher import tariffs on China, then growth in China could be undermined (notwithstanding the stimulus measures the Chinese government has recently begun rolling out. This would spell an extended period of down-trending commodity prices and a global oversupply in some key commodities (steel, petrochemicals) and products (EVs).

Weak US participation in achieving global climate goals could reverse or slow down the recent trend of multilateral lenders (IMF, WB and ADB) ramping up loans to developing economies for building defense against climate change.

Possible implications for Pakistan

A decline in global commodity prices would maintain the dis-inflationary trend in Pakistan. However, a fresh wave of global inflation will be felt in Pakistan through a stronger greenback and imported inflation. At this stage, the brokerage house maintains it outlook for average inflation in Pakistan over the next 12 months to be around 9% and expect the State Bank of Pakistan (SBP) to cut the policy rate up to 11% by June 2025.

US-China trade war could make some exports out of Pakistan more competitive in the US, compared to imports from China. These would include HVA textiles, flat steel, tires and cement. However, if PKR-US$ remains stable while other regional currencies depreciate against the greenback, it could undermine the competitiveness of Pakistani exports.

Pakistan could see greater Chinese FDI. As Chinese industries would continue to set up facilities outside China to avoid import tariffs, some could potentially be set up in Pakistan. However, for this to happen, Pakistan would have to offer a more stable policy environment to Chinese investors, and the government may have to drop plans to renegotiate the power tariffs of CPEC power plants, in our view.   

 

Iran-Pakistan to finalize free trade agreement

Iranian Industry, Mining, and Trade Minister Mohammad Atabak said a free trade agreement with Pakistan has been finalized and the list of commodity items subject to the agreement will be prepared and released in two months.

In a meeting between the Head of the Iran Chamber of Commerce, Industries, Mines, and Agriculture (ICCIMA) Samad Hassanzadeh and Pakistani Ambassador to Iran Muhammad Mudassir Tipu in Tehran in late June, the officials stressed the need for Iran and Pakistan to exercise barter trade and free trade to materialize a US$10 billion trade target.

During a meeting between Atabak and Pakistan’s Federal Minister for Commerce Jam Kamal Khan in mid-October, the two sides discussed trade ties between the two countries, with both agreeing that economic exchanges should be promoted further.

The two ministers met in Pakistan’s capital Islamabad on the sidelines of the 23rd meeting of the Council of Heads of Government of the Shanghai Cooperation Organization (SCO).

Atabak told IRNA that he and the Pakistani minister discussed trade ties between the two countries and agreed to hold further talks in order to explore ways to remove obstacles to the promotion of bilateral trade.

“Considering the historical and cultural commonalities of the two countries, we should take advantage of the strong potentials to expand trade exchanges between Iran and Pakistan,” the minister stated.

He also said that he invited Kamal Khan to visit the Islamic Republic.

According to the official, the necessary measures will be taken to prepare an agreement to be signed between the two countries during the visit of the Pakistani minister to Iran.

He stated that the current amount of trade exchanges between the two countries is not acceptable from the point of view of both Iran and Pakistan, and considering the strong relations and common links of the two countries, the two sides are confident that they will be able to increase the volume of trade exchanges several times.

The Pakistani minister spoke with IRNA as well. He described his talks with the Iranian minister as constructive, and said that visiting Iran is on agenda of his plans.

“We had good talks with my Iranian counterpart and reached constructive agreements, and we believe that there are many remaining tasks that the two countries are determined to pursue,” he said.

In mid-July, the 11th meeting of the Joint Border Trade Committee of Iran and Pakistan opened in the southeastern Iranian city of Zahedan, where the two sides pursue the increase of bilateral trade to US$10 billion per annum.

Pakistan's Ambassador to Iran Muhammad Mudassir Tipu, who attended the meeting online, announced that Iranian and Pakistani delegations are scheduled to discuss the mechanism to increase mutual trade.

The Islamic Republic of Iran's consul general in Quetta, Pakistan's consul general in Zahedan, and other senior officials of Sistan-Baluchestan province took part in the meeting.

Such joint meetings are held to pave the way for reviewing obstacles, removing barriers, and developing trade and economic relations between the two friendly and neighboring countries.

The two sides make the necessary coordination to help improve trade and economic ties, exchange economic delegations, organize joint exhibitions, attract bilateral investment, and establish joint industrial centers and retail markets.

The head of the Pakistani delegation to the 11th meeting of the Joint Border Trade Committee said that Islamabad strongly supports the development of joint markets and investment, which can increase the level of trust between the two nations.

Irfan Javed added that Pakistan also calls for cooperation in the field of transportation because it can affect the livelihood of the people who are living in border regions.

The deputy coordinator of economic affairs of Sistan-Baluchestan governor’s office said that Iran is keen on expanding trade exchanges with Pakistan.

PSX benchmark index inches closer to 90,000

Pakistan Stock Exchange (PSX) witnessed bullish sentiments throughout the week ended on October 25, 2024. The benchmark KSE-100 index recorded its highest-ever closing, just shy of the 90,000 mark ‑ closing at 89,994 points, up by 5.6%WoW.

This marked the highest weekly return in 27 weeks and 47th highest weekly return since the index's inception.

More importantly, KSE30 index also reached all-time high at 28,395 points.

The week started with positive momentum buoyed by settlement of political noise following the passage of stalled 26th Constitutional Amendment.

The optimism consolidated with swing of corporate result announcements and favorable economic developments.

According to AKD Securities, the rally was broad-based, with 80 out of 100 companies delivering positive returns.

Leading sectors were Fertilizer, Cement, and Banks, primarily due to strong annual growth in results. On the macro front, current account posted a surplus for the second consecutive month at US$115 million for September 2024.

Foreign exchange reserves held by State Bank of Pakistan (SBP) increased by US$18 million to US$11.0 billion as of October 18, 2024.

Market participation also improved significantly, with average daily traded volume rising by 23%WoW to 532 million shares from 432 million shares a week ago.

The PKR remained stable against the greenback, closing the week at 277.6 to a US$.

Other major news flows during the week included: IT exports surged 42%YoY in September 2024, 2) Banking sector deposits were up by 19%YoY to PKR31.3 trillion at end September 2024, 3) Sales tax on tractors hiked to 14% from 10%, 4) Loans to private sector were up 4.9% to PKR8.4 trillion at end September 2024, and 5) Nepra approves KE's generation tariff with key adjustments.

Cement, Refinery, and Mutual Funds were amongst the top performers, while Modarabas, Textile composites, and Vanaspati & allied industries were amongst the worst performers.

Major net selling was recorded by Foreigners with a net sell of US$16.4 million. Mutual Funds and other organizations absorbed most of the selling with a net buy of US$20.4 million.

Top performing scripts of the week were: KOHC,CHCC, AICL, KEL, and ATRL, while laggards included: ILP, PIBTL, LOTCHEM, IBFL, and NESTLE.

Market is expected to remain positive, with primary focus on the upcoming MPC meeting, where an anticipated rate cut could further bolster market momentum.

Despite the recent rally, valuations remain attractive, with the market trading at a P/E of 4.0x and offering a dividend yield of 11.2%.

AKD Securities recommends focusing on sectors that stand to benefit from monetary easing and structural reforms, particularly high-dividend-yield stocks that are likely to re-rate as yields converge with fixed-income returns.

Top picks include, OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.

 

Pakistan: 200bps cut in policy rate anticipated

Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) is scheduled to meet on November 04, 2024 for adjustment in policy rate

According to a poll conducted by Pakistan’s leading brokerage house, Topline Securities, 85% of the participants expect that the central bank will announce a minimum rate cut of 200bps.

Out of these 63% expect the interest rate to be cut by 200bps, 30% expect a cut of 250bps, while 8% anticipate a cut of more than 250bps.

The brokerage house believes that the larger rate cut expectations in the upcoming monetary policy meetings are driven by the single-digit inflation reading of 6.9% in September 2024, which is expected to continue in October 2024 within a range of 6.5% to 7.0%.

Significant fall in YoY inflation in recent months is on the back of faster food disinflation and downward electricity prices adjustments (FCA).

The brokerage house is also of the view that the SBP will announce a rate cut of 200bps, similar to the cut of 200bps in the last monetary policy meeting, taking total cut to 650bps.

This will be 4th consecutive cut of this cycle.

Post this rate cut of 200bps, real interest rates will remain at +860bps, still higher than Pakistan’s historic average of 200-300bps.

In order to absorb any external and budgetary shock, the brokerage house believes, Central bank will continue to keep positive real rate in range of 300 to 400bps in medium terms over forward looking inflation.

6-minth KIBOR and 6-months T-Bills are down 324-359 bps from last MPC meeting.

Falling inflation expectations, the 6M KIBOR and Treasury bills rate are down 324-359bps since last monetary policy meeting on September 12, 2024 and currently hovering at 14.43% and 13.8%, respectively. This also suggest, market participants are expecting a big rate cut in upcoming meetings.

The brokerage house expects policy rate to come down to 13% by Jun 2025 with average inflation expectation of 7%for FY25.

 

Pakistan Stock Exchange posts 2.3%WoW gain

Pakistan Stock Exchange began the week ended on October 11, 2024 on a strong positive note, sustained its momentum through the initial days, with the benchmark index rising to a record high of 85,669 points on Wednesday. However, concerns in the power sector amid the termination of IPP contracts, coupled with some profit-taking in the last two sessions, dragged the index to close at 85,483 points on Friday, posting an increase of 1,951 points or 2.3%WoW gain.

Overall positive sentiments were largely driven by improved liquidity in equity market, as local funds continued to shift flows from fixed-income assets due to declining interest rates.

Investors’ optimism was further bolstered by the visit of a Saudi delegation, which resulted in the signing of 27MoU’s worth US$2.2 billion, and discussions surrounding the Reko-Diq stake sell.

The GoP finally terminated Power Purchase Agreements (PPA) with five Independent Power Producers (IPPs) during the week, with discussions regarding 17 more IPPs lined up for future negotiations to shift from Take-or-pay model to Take-and-pay.

On the macroeconomic front, workers' remittances inflow remained robust in September 2024, totaling US$2.85 billion or 29%YoY increase.

While the trade deficit for the month was reported at US$1.78 billion, current account is expected to remain stable, with a potential surplus for the period.

Moreover, in efforts to address the tax gap from the 1QFY25 deficit, GoP communicated likely tax hikes to the IMF, particularly on direct imports (mainly machinery) and advanced import taxes.

Furthermore, a tax on agriculture is expected to be implemented from July 2025, according to the Finance Minister.

Amid the positive momentum, market participation also surged by 51.3%WoW, with average daily traded volume rising to 518 million shares, from 342 million shares in the earlier week.

Foreign exchange reserves held by SBP increased by US$106 million WoW to US$10.8 billion as of October 04, 2024, a 2.5-year high.

Other major news flows during the week included: 1) Public debt in August 2024 surged to PKR70.4 trillion, 2) Task force to discuss mechanism for 35% gas sale to private firms, 3) Rebasing of electricity tariffs likely from January 01, 2025, and 4) Car sales surged by 24%YoY in September 2024.

Transport, Modarabas, and Woollen were amongst the top performing sectors while the laggards included: Power Generation & Distribution, Vanaspati & Allied industries, and Paper & board.

Major selling was recorded by Foreigners with a net sell of US$18.9 million. Mutual Funds absorbed most of the selling with a net buy of US$22.6 million

Top performing scrips of the week were: PTC, PSO, ATLH, LCI, and PPL, while top laggards included: HUBC, KOSM, NCPL, YOUW, and LUCK.

Going forward, the market is expected to remain positive, supported by declining interest rates, likely to continue driving flows towards equity market.

Despite recent highs, market remains attractive, trading at P/E of 3.7x and a dividend yield of 12.7%.

Pakistan’s leading brokerage house, AKD Securities recommend focusing on sectors that stand to benefit from monetary easing and structural reforms, particularly high-dividend-yielding stocks, which are expected to rerate as yields align with fixed-income instruments. Top picks include: OGDC, PPL, MCB, UBL, MEBL, FFC, PSO, LUCK, MLCF, FCCL and INDU.