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Pakistan, Qatar working to bring Iran, US back to negotiating table: report: Khamenei laid to rest amid fresh US-Iran strikes

Iranian armed forces launched attacks on US military infrastructure in Gulf states on Thursday following US strikes on Iran's southern coastal and eastern provinces, putting further strain on a three-week-old ceasefire agreement.

The attacks came on the day that Iran buried its martyred Supreme Leader Ayatollah Ali Khamenei at a shrine in Mashhad, the culmination of a week of mass funeral processions and rallies. Khamenei was killed in a US airstrike on the first day of the war on February 28.

Khamenei's body was carried by truck slowly through crammed streets towards the Shrine of Imam Reza. Black-clad mourners waved Iranian flags, photographs of the late leader and red placards with revolutionary slogans.

Iran's Revolutionary Guards Navy said the US attacks and intervention in redirecting shipping through the Strait of Hormuz were disrupting the waterway's gradual reopening.

The Guards said the number of vessels transiting the strait under Iranian supervision had recovered to about 50 per cent of pre-war levels over the past two weeks, adding that permission was being granted only to ships using routes designated by Tehran. Any further US intervention will draw a "crushing response", the Guards said.

The US military said on Wednesday that its latest strikes were aimed at keeping the Strait open after it said Iranian forces had struck three tankers in the area. The assault came hours after US President Donald Trump said he believed the interim ceasefire with Iran to be "over". Iran has not claimed responsibility for the ship attacks.

Oil prices, which had spiked amid concerns over the impact of the renewed attacks on shipping and global supplies, fell back on Thursday as investors weighed whether the flare-up was tactical and temporary or might augur a complete collapse in the ceasefire.

Iranian officials said the US attacks had killed 17 people and injured 78 across five provinces on July 8 and 9, state media reported. The Fars news agency said one US strike had hit a rail bridge used for trade with Russia and China.

Several explosions were heard on Thursday morning in Iran's Bushehr province and in Bandar Abbas, a port city on Iran's south coast, the semi-official Mehr news agency reported.

Bushehr is home to a Russian-built nuclear power plant and a local official later told state media that a US projectile had hit the perimeter area of the facility. The perimeter had already been hit several times before an April 8 ceasefire.

Iran's army said in a statement released by state media that it had launched attacks at US Patriot systems in Kuwait, an early-warning site in Qatar and a U.S. Army fuel depot in Bahrain.

Kuwait said its armed forces had engaged with a cruise missile, three ballistic missiles and 10 drones in its airspace, and that one person had been injured from falling shrapnel.

Sirens also sounded in Jordan after missiles launched from Iran were detected, the state news agency reported. Eight were intercepted, with no injuries or damage reported.

The Revolutionary Guards later said Iran had fired 10 ballistic missiles at Jordan's Azraq military base, which is used by US forces, and also a US military control centre in the Middle East, without elaborating.

Qatar, which hosts the largest US base in the region and has often mediated between Washington and its adversaries including Tehran, condemned attacks on commercial shipping but also called for a return to diplomacy.

The foreign ministers of Turkiye and Oman also stressed the need to avoid further military escalation in separate calls with their Iranian counterpart, Abbas Araghchi. "The Strait of Hormuz will be reopened only under Iranian arrangements, not through US threats," Iran's top negotiator, Mohammad Baqer Ghalibaf, wrote on X.

US Central Command (CENTCOM) said on Wednesday its forces had struck approximately 90 Iranian military targets, including air defence systems, coastal surveillance assets, and missile and drone storage sites. "This is in retribution for yesterday's bombing of ships by Iran. If it happens again, it will get much worse!" Trump wrote on his Truth Social platform.

However, the US leader, who was attending a Nato summit in Turkiye, also said he did not think the latest military strikes would escalate into a full-fledged conflict with Iran.

"Anything that happens is going to be over very quickly ... and will only make it safer, including for oil," he told reporters in Ankara. Asked before the Nato summit on Wednesday whether the memorandum of understanding with Iran was over, Trump said: "It's a very interesting question. To me, I think it's over. I don't want to deal with them."

State media said the US targeted a section of the Tehran-Mashhad railway 55 kilometres from Mashhad, forcing the closure of the line. Passengers were transferred to buses.

In a sign of the security tensions, at least one fighter jet escorted the plane carrying Khamenei's coffin to its final burial in Mashhad, footage from the supreme leader's website showed.

Meanwhile US President Donald Trump used his old Air Force One plane to leave Turkiye after a Nato summit instead of his new Qatari-gifted jet, a move the New York Times described as a security precaution in the current context.

Israel's Defence Minister Israel Katz warned at a military ceremony on Thursday that Israel was prepared to attack Iran for a "third time" if needed, vowing to do so "with even greater force". "We are preparing for every scenario," added Prime Minister Benjamin Netanyahu. Traffic through the Strait of Hormuz has fallen sharply since Wednesday, especially through the UN-backed Omani route, analysts said, after vessels were attacked earlier this week and as the United States and Iran traded renewed strikes.

Flows through the strategic waterway reached their highest levels since the start of the war after a truce was agreed between the two sides in mid-June, although they remained at around a third of peacetime levels.

However, the recovery appears to have stalled -- just six commodity tankers have crossed so far on Thursday, and 21 such vessels transited the waterway on Wednesday, according to Kpler data as of 1430 GMT.

At least one person was injured on Tuesday, Kuwait's defence ministry said, following the latest Iranian attack on the country.

Iran's foreign ministry denounced US strikes against the country on Thursday, which it said targeted civilian infrastructure including railway bridges, as a "gross war crime". The ministry in a statement said it "condemns in the strongest terms the aggressive attacks by the US terrorist army on several points in the southern coastal provinces and two bridges in the eastern provinces on the railway route to the holy city of Mashhad" and called the US administration "evil and psychopathic". Iran summoned the British ambassador to Tehran to protest what it called "baseless accusations", state media said on Thursday, after a London court jailed two people for a knife attack it said was carried out at Iran's behest.

France's Foreign Minister Jean-Noel Barrot on Thursday said that had brought new US attacks upon itself by violating a truce deal.

Overnight US strikes on Iran hit the Aq Taqeh Khan railway bridge in northern Iran's Golestan province, Fars news agency said on Thursday, a trade link to Tehran's strategic partners China and Russia.

German exports unexpectedly rose in May, their fourth straight monthly increase, official data showed Thursday, as Europe's biggest economy defied headwinds from the Iran war. US military officials said Wednesday that approximately 90 Iranian military targets were hit in their latest strikes, targeting air defense systems, missile and drone storage sites, and other assets. Qatari Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani told Iranian Foreign Minister Abbas Araghchi in a phone call on Thursday that Iran and the United States should commit to diplomacy. Al-Thani added that Washington and Tehran should implement the signed memorandum of understanding aimed at ending the war, the Qatari foreign minister said.

Iran launched drones towards a site in Qatar earlier on Thursday and a Qatari tanker was attacked in the Strait of Hormuz earlier the week. Al-Thani condemned the attack in the call, the foreign ministry said.

Maersk, one of the world's biggest container shipping groups, said on Thursday it would resume its Middle East-to-US East Coast service through the Suez Canal, as the Danish group takes another step towards restoring routes through the Red Sea.

The European Union plans to introduce a raft of policies and funding schemes to shift more of its economy to run on electricity, instead of oil and gas, a draft European Commission proposal seen by Reuters showed. A Commission spokesperson declined to comment.

Meanwhile, Pakistan and Qatar are working to bring the US and Iran back to the negotiating table, regional sources confirmed to CNN. Pakistan and Qatar were the key mediators in previous negotiations held in Switzerland, which ultimately led to the Memorandum of Understanding that was signed in mid-June. Oman also helped facilitate earlier rounds of diplomatic talks. Iranian Foreign Minister Abbas Araghchi discussed the latest regional developments with Chief of Army Staff (COAS) and Chief of Defence Forces (CDF) Field Marshal Asim Munir, according to an official statement issued on Thursday.

During the conversation, the Iranian foreign minister also condemned recent US military attacks on Iran. The statement added that Araghchi warned against any further US military "adventurism".

Araghchi held separate phone calls with his Omani and Turkish counterparts on Thursday and discussed latest developments in the region, particularly in the Strait of Hormuz, the Iranian foreign ministry said. The parties stressed the need to use diplomatic channels to prevent escalation, a ministry statement said.

Israeli Prime Minister Benjamin Netanyahu and US President Donald Trump held a call on Thursday and agreed to continue coordination between their countries on various fronts, Netanyahu's office said.

It added in a statement that Trump updated Netanyahu on "American moves in the Gulf."

Meanwhile, a US defence official confirmed to Al Jazeera late Thursday that the military has not carried out strikes in Iran in the past few hours. This is consistent with other media reports in the United States.

A group of U.S. lawmakers is urging fellow Democrats to block military spending legislation until the Senate debates proposals to deepen ties with Israel, highlighting growing unease within the party over support for Prime Minister Benjamin Netanyahu's government. In a letter seen by Reuters and led by Democratic Senator Chris Van Hollen of Maryland, they urged senators to oppose advancing the National Defense Authorization Act, or NDAA, until lawmakers can debate measures that would strengthen US-Israel military and intelligence cooperation.

Iran's FM Abbas Araghchi discussed the latest security situation in the region with his Saudi counterpart, Faisal bin Salman, according to Iran's foreign ministry, Al Jazeera reported.

Russia's Foreign Minister, Sergey Lavrov, has called for an equitable end to the US-Iran war, saying any agreement must reflect the interests of all parties, not just the warring sides. "Not only Iran, its neighbours, the United States, but all countries that in one way or another suffer from the negative impact on the global economy from the current situation," Lavrov told reporters after visiting Mozambique.

International oil benchmark Brent North Sea climbed Thursday but remained below $80 a barrel, having briefly topped the threshold Wednesday for the first time in two weeks, reviving fears of a spike in inflation and a hit to the economy.

Iranian state media reported Thursday that a US-Israeli projectile hit military headquarters on the outskirts of Bushehr, hours after clashes between the United States and Iran flared.

A US official said on Thursday that Washington is still committed to finding a resolution with Iran and that technical talks were continuing.

📌 Brief Summary: US-Iran clashes escalated again after Khamenei's Mashhad burial, with strikes on Iranian rail infrastructure and Iranian retaliation against US bases in Gulf states. Hormuz shipping traffic dropped sharply, though oil prices eased on hopes the flare-up stays contained. Pakistan and Qatar continue mediating toward renewed talks. 📈 Company Impact: Negative for Pakistani energy-import-dependent sectors (OMCs, IPPs, cement, fertilizer) via risk of higher spot LNG/oil costs and shipping disruption; broadly risk-off for KSE-100 given renewed Gulf conflict escalation.

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ADB cuts growth forecast to 3.7%

The Asian Development Bank (ADB) on Thursday cut Pakistan's economic growth forecast to 3.7%, the third lowest in South Asia, and raised its inflation forecast to 8.3% for the new fiscal year, the second highest in the region after Bangladesh.

The Asian Development Outlook report – the flagship biannual publication – has also listed Pakistan among countries that could face 10% permanent additional tariffs on exports to the United States. The Manila-based lender made the adjustments due to the broader impacts of the Middle East conflict. However, the nation's comparison with other South Asian countries shows it is more affected than others, partly due to the government's energy taxation policies.

The ADB report noted that Pakistan's "economic growth forecast is revised down to 3.7% for FY2027 due to higher energy costs and pressure on remittances". The economy had grown at the same rate in the last fiscal year.

In April, the ADB had projected Pakistan's economy growing at 4.5% in this fiscal year, which it has now revised down by almost one percentage point.

At 3.7%, Pakistan will be the third slowest growing economy after Afghanistan and Maldives, both growing at 3%. India is projected to grow at 7.3%, the highest in the region, followed by Bhutan at 7.2%.

The International Monetary Fund (IMF) has given a 3.5% growth forecast for the new fiscal year.

The ADB said Pakistan's "inflation forecast for FY2027 is also revised up, to 8.3%, given persistent adverse spillover from the Middle East conflict". This is the second highest inflation rate in the region after Bangladesh's forecast of 8.8%, indicating Pakistan is facing more troubles than Afghanistan, Bhutan, Maldives, Nepal and Sri Lanka. India's inflation forecast is just 4% despite being impacted by the war. However, the Indian government did not increase taxes on petrol and diesel the way Pakistan's government has.

For the last fiscal year, the ADB said inflation breached target ranges in early 2026 in Armenia, Georgia, Mongolia, Nepal, Pakistan, the Philippines, and Viet Nam, and remained above target. In response, monetary policy decisions shifted toward rate holds and selective rate hikes, with central banks calibrating the pace of tightening to contain inflation while limiting the drag on growth. In April-June, policy rates were raised in Indonesia, Pakistan, and Sri Lanka by 100 basis points; the Philippines by 50 points; and Georgia by 25 points.

US tariffs

The ADB also commented on US trade tariffs and listed Pakistan among 60 nations that may face 10% to 12.5% additional tariffs from July 24. The ADB said recent trade policy developments indicate US trade restrictions are likely to remain broad despite the Supreme Court's invalidation of key tariff measures.

On February 20, 2026, the US Supreme Court ruled invalid tariffs introduced under the International Emergency Economic Powers Act (IEEPA). The Trump administration responded the same day, invoking Section 122 of the Trade Act of 1974 to establish a 10% global import surcharge, effective 24 February 2026.

Section 122, however, provides a narrower basis: tariffs are capped at 15% and limited to 150 days, so the measure is due to expire on 24 July 2026. The administration has signalled it will seek a more durable legal basis through Section 301 of the Trade Act of 1974.

The ADB said the Asian region remains disproportionately exposed to elevated US tariffs. The effective tariff rate for developing Asia and the Pacific stands at 24.8%, nearly double the rate before the April 2025 tariff announcements.

With Section 122 surcharges set to expire, the administration is moving toward replacement measures under Section 301. In March, the US Trade Representative launched two investigations: one into alleged failure in 60 economies to prohibit and enforce bans on imports of goods produced with forced labour.

The ADB said one Section 301 investigation has led to proposed tariffs on 60 economies. On 2 June 2026, the USTR proposed additional tariffs of 10%-12.5%. Among economies in Asia and the Pacific, a 10% tariff was proposed for Bangladesh, Cambodia, Indonesia, Malaysia, Pakistan, and Taipei, China, said the regional lender.

Compared with IEEPA and Section 122 measures, Section 301 rests on a firmer legal basis and carries broader operational scope, but requires a longer implementation process. Public hearings are scheduled for 7-15 July 2026.

The commerce ministry said Pakistan has already banned imports of goods mined, produced or manufactured by forced labour. A Pakistani delegation is currently in the US to broker a deal to avoid the charge that will apply from July 24.

📌 Brief Summary: ADB cut Pakistan's FY27 growth forecast to 3.7% and raised inflation to 8.3%, citing Middle East conflict spillovers and energy costs. Pakistan also faces a potential 10% US tariff from July 24 under Section 301, with a delegation in Washington negotiating a possible exemption. 📈 Company Impact: Negative for export-oriented listed textile and apparel companies (Nishat Mills, Interloop, Kohinoor) if the 10% US tariff takes effect; weaker growth outlook is broadly negative sentiment for cyclical KSE-100 sectors like cement, autos, and banks.

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SBP forex reserves rise $1.9bn to $18.47bn as of July 3

Pakistan's foreign exchange reserves held by the central bank increased by $1.944 billion to $18.471 billion during the week ending July 3 due to official inflows, the State Bank of Pakistan said on Thursday.

"The increase in the SBP's FX reserves is due to the realisation of GoP [government of Pakistan] inflows," the SBP said in the statement. The country's total liquid foreign reserves rose by $1.944 billion to $23.989 billion. However, the reserves of commercial banks remained almost flat at $5.518 billion.

The SBP has been able to increase its FX reserves from approximately $3 billion in 2023 to above $18 billion. The increase in reserves occurs despite large debt repayments besides a reduction in forward and SWAP liabilities. The forex reserves have increased sixfold over the past three years. According to the bank, it didn't boost its reserves through borrowings but by purchasing dollars from the interbank market. The SBP purchased over $27 billion from the market over the last three years, using these funds to make debt repayments while building FX reserves. The SBP expects the upward momentum in FX reserves to continue this fiscal year, as the central bank targets reserves exceeding $20 billion by the end of December 2026.

Pakistan received $306 million in gross inflows under the Roshan Digital Account (RDA) in June, slightly down from $312 million in the previous month, according to data from the State Bank of Pakistan published on Thursday.

The RDA has attracted a total of $13.365 billion in funds from September 2020 to June 2026. The scheme continues to grow, with the number of digital accounts reaching 946,201 as of June, up from 936,165 in May.

Inflows under the Roshan Digital Account reached $2.8 billion during the fiscal year, up 21 percent year-on-year, said AKD Securities in a note. The net repatriable amount stood at $2.8 billion as of June 2026. So far, the country has received funds of $13.4 billion in RDA, out of which $8.5 billion has been utilised locally, while $2.1 billion has been repatriated, it added.

📌 Brief Summary: SBP's FX reserves rose $1.94bn to $18.47bn as of July 3, driven by government inflows, with total liquid reserves at $23.99bn. Reserves have grown sixfold since 2023 through interbank dollar purchases. Roshan Digital Account inflows also grew 21% YoY to $2.8bn. 📈 Company Impact: Positive for banks (higher RDA-linked deposits and forex income) and broadly supportive for PKR stability, easing input-cost pressure for import-heavy sectors like autos and cement.

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Remittances hit $41.5b without structured support

Despite the absence of structured educational, training or welfare support, remittances sent by Pakistani workers hit a record $41.58 billion through formal banking channels during FY2025-26, providing a vital cushion to the country's external account.

According to provisional data released by the State Bank of Pakistan (SBP), inflows rose 8.6% in fiscal year 2026 from $38.30 billion in FY2025, adding nearly $3.29 billion. The strong performance came despite geopolitical tensions and conflicts in parts of the Middle East, where a large share of Pakistan's overseas workforce is employed. Remittances helped strengthen foreign exchange reserves, ease pressure on the current account and contribute to several monthly surpluses. Monthly inflows averaged $3.465 billion, with June recording $3.475 billion, up 2% from the previous year but down from May's peak of $4.25 billion.

Saudi Arabia remained the largest source with $9.783 billion (+4.7%), followed by the UAE at $8.807 billion (+12.5%), where Dubai contributed $6.765 billion. The United Kingdom sent $6.326 billion (+7.1%), while EU countries posted the fastest growth at $5.227 billion (+15%). Other GCC countries added $3.934 billion (+6%). In contrast, inflows from the United States declined marginally by about 2.6% to $3.624 billion.

The growth reflects greater use of formal channels, improved digital payment systems and steady demand for Pakistani labour, particularly in the Gulf. Banking expert Ibrahim Amin attributed the rise to expanding overseas employment and fintech-driven convenience. "Collaborative efforts by banks, exchange companies and fintech operators have made remittances faster and safer," he noted. Technology expert Saad Shah highlighted opportunities in Saudi Arabia's development projects, where Pakistani IT professionals and skilled workers are finding new roles. "Saudi economic diversification is creating demand in tech, construction, engineering and healthcare," he said, forecasting further gains if Pakistan aligns workforce skills with international needs.

Yet this remarkable contribution comes with glaring shortcomings at home. Successive governments have failed to devise a structured, long-term plan for overseas workers, who leave primarily due to a lack of decent opportunities at home. There is no comprehensive, targeted education and vocational training programme designed to equip workers with skills demanded by host markets, leaving many in low-paying, high-risk blue-collar jobs.

Authorities appear equally indifferent to the welfare of these workers and their eventual return. While expats endure hardships abroad to support their families and the national economy, there is little planning for their reintegration. No robust welfare framework exists to support returning migrants with skills recognition, job placement, housing support or financial literacy programmes that could help them invest their savings productively.

Critics argue that remittances are largely being used to finance the persistent trade deficit rather than build a self-sustaining economy. Instead of channelling this foreign exchange into productive investments, such as export-oriented industries, SME development or human capital formation, the inflows often support consumption and import bills. This offers short-term relief but does little to improve long-term productivity or uplift the lives of ordinary citizens who remain trapped in low-growth cycles.

Pakistan possesses significant untapped potential. Experts like Amin stress the need for deeper engagement with the diaspora, expanded banking partnerships in the Gulf and stronger coordination between diplomatic missions, employment promoters, regulators and welfare organisations. Shah echoed this by calling for a national human resource strategy to match training with global labour demands.

Without such measures, Pakistan risks continuing to export its manpower as a stopgap solution while failing to create an enabling environment at home. The record $41.6 billion inflow reaffirms the resilience of overseas Pakistanis, but it also underscores the urgent need for visionary policymaking. Future growth will depend not just on sending more workers abroad, but on treating their contributions as a catalyst for genuine structural reforms.

SBP foreign exchange reserves increased by $1.94 billion during the week ended July 3, 2026, reaching $18.47 billion, mainly driven by government inflows. Total liquid foreign reserves crossed $23.98 billion as of July 3, 2026, including $18.47 billion held by the SBP and $5.52 billion in net reserves held by commercial banks. The rupee stood at Rs278.06 per dollar on Thursday in the interbank, showing Rs0.01 change from Rs278.07 the previous day.

Gold prices in Pakistan rose on Thursday, tracking international gains. The price per tola increased by Rs3,600 to Rs433,836, while 10-gram gold rose Rs3,086 to Rs371,944, according to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA). Internationally, gold gained $36 per ounce to $4,114. Silver remained unchanged at Rs6,421 per tola.

📌 Brief Summary: Pakistan's remittances hit a record $41.58bn in FY26, up 8.6% YoY, led by Saudi Arabia and UAE, easing pressure on the external account. Critics note the lack of structured welfare or training support for overseas workers, and that inflows mostly fund consumption rather than productive investment. 📈 Company Impact: Positive for banks and exchange companies handling remittance flows (HBL, UBL, MCB); supportive for PKR stability, indirectly benefiting import-reliant listed sectors.

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PSDP spending surpasses revised allocation by Rs92b

The federal development spending shot up to Rs912 billion, exceeding the downward revised allocation by Rs92 billion, after key ministries incurred more expenses than their authorisations and put the annual budget surplus condition to a test.

The provisional spending estimates show that, as against the twice-downward revised allocation of Rs820 billion, the Public Sector Development Programme (PSDP) expenditures remained at Rs912 billion for the fiscal year 2025-26, which ended on June 30.

The government had slashed the development budget by Rs180 billion, or 18% of the annual allocations, to offset the impact of the Middle East conflict on the primary budget surplus condition agreed with the International Monetary Fund (IMF) before the war.

The PSDP had been diverted towards picking up fuel subsidies for a few weeks after the government had unduly exhausted the Rs389 billion contingency budget.

The government officials said that till the weekend, the expenses were Rs820 billion, but in the past couple of days, these have significantly risen, indicating higher sanctions from the Accountant General of Pakistan Revenue Office.

This raises a question on the country's fiscal management systems, as the ministries were found to be spending more than what had been allocated and authorised to them.

One of the reasons for higher spending was that the foreign loans against development projects remained higher than estimated. Out of the Rs912 billion, the foreign loans amounted to Rs244 billion, or 26% of the total federal spending, for the last fiscal year.

The sources said that this came at a time when the finance ministry slowed releases of the provincial governments' shares from the National Finance Commission (NFC) pool to make sure that the IMF's condition on primary budget surplus was met for the last fiscal year.

The government had agreed to show a primary budget surplus of 2.6% of GDP with the IMF, which it assured to deliver despite the adverse impacts of the Middle East conflict.

Despite repeated attempts, the finance ministry's concerned officials did not comment on the development. Although the spending was higher than the allocation, it was still Rs176 billion less than the preceding fiscal year when the country had spent Rs1.1 trillion under the PSDP.

The federal government needs Rs11 trillion to just complete the ongoing projects, which is causing cost escalations and undermining the objectives of some of these mega development projects.

The details showed that the Power Division spent Rs122 billion compared to its revised allocation of Rs73 billion. A significant amount was booked in the last few days of the fiscal year. The Power Division's allocation had been cut by Rs18 billion to Rs73 billion, but it ended up booking expenses more than its original allocation.

The maximum cut of Rs38 billion has been placed in the budget of the National Highway Authority (NHA). The NHA's budget had been reduced to Rs182 billion. The NHA has spent its entire budget without exceeding the limit.

The government had cut the Water Resources budget to Rs102 billion. But the actual spending surged to Rs137 billion, according to the officials.

Pakistan's mega dams are facing huge cost escalations and a shortage of funds. To expedite their construction, the Centre has lately reached out to the provinces with a demand for over Rs1 trillion in cash grants to meet additional spending on dams and defence.

The government was in the process of buying three helicopters for each mega dam, which it said was required for the security of foreign nationals working on these projects.

Among the ministries that exceeded their authorisations was the Revenue Division or the Federal Board of Revenue (FBR). Although it missed the downward revised target of the IMF by roughly Rs970 billion, the FBR ended up spending Rs2.6 billion more than its development allocation. It spent Rs14.8 billion in the last fiscal year on development.

The Railways Division also spent Rs35 billion, Rs16.5 billion more than its allocation. But the additional spending was financed by the government of Sindh against the Thar coal project.

The Ministry of Finance, the custodian of the fiscal purse, also spent a few million rupees more than the allocations. Its total development spending amounted to Rs1.9 billion.

Out of the total Rs912 billion, Rs382 billion in spending was booked in the last month of the fiscal year, indicating that the government had not been timely in booking these expenses to keep the overall spending bill in line with the IMF's targets. The spending on provincial nature projects and in special areas remained at Rs191 billion, Rs4 billion less than the downward revised allocation.

On merged districts of Khyber-Pakhtunkhwa, Rs50 billion was spent on development, while in Azad Kashmir and Gilgit-Baltistan, Rs66.5 billion in development expenses were incurred in the last fiscal year.

The provincial nature projects received Rs74 billion in funding, although such spending is in breach of the National Fiscal Pact and puts additional stress on the federal fiscal purse.

📌 Brief Summary: Pakistan's PSDP spending hit Rs912bn in FY26, Rs92bn above the twice-revised allocation, driven by overspending in Power Division, Water Resources, and FBR development budgets. The overrun raises concerns about fiscal discipline even as the government targets an IMF-agreed 2.6% primary budget surplus. 📈 Company Impact: Positive for construction, cement, and steel companies tied to NHA/dam projects (LUCK, DGKC, MLCF, ASTL) via continued development spending, though fiscal overrun risks tighter future budget cuts affecting infrastructure order books.

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ECCoC clears MoNFS&R's revised summary on two SNGPL-based urea plants

The Economic Coordination Committee (ECC) of the Cabinet has reportedly cleared a revised summary of the Ministry of National Food Security and Research (MoNFS&R) regarding the operation of two SNGPL-based urea manufacturing plants—Fatima Fertilizer and Agritech—following a controversy over the approval status of its earlier decision of June 16, 2026, sources in the Petroleum Division told Business Recorder.

The summary was tabled with the approval of the Chair after directions from the Prime Minister, who had asked the Ministry to resubmit the case with complete data and updated inputs.

The revised summary, covering the period from January 1 to June 30, 2026, was presented after incorporating the views of the Petroleum Division.

The MoNFS&R informed the ECC that urea accounts for nearly 65 percent of total fertilizer consumption in Pakistan, making its uninterrupted availability critical for the agriculture sector.

The country has ten operational urea plants with a combined annual production capacity of about 6.7 million tonnes, which is sufficient to meet domestic demand, provided gas supply remains uninterrupted.

However, two plants—Fatima Fertilizer and Agritech—depend on gas supplied through the SNGPL network and have a combined capacity of around 900,000 tonnes per annum. Due to shortages of indigenous gas, these plants have been operating on RLNG since October 2018, with their operations contingent upon ECC decisions based on national demand-supply requirements.

The Ministry highlighted that since April 2023, both plants have largely remained operational, contributing to the accumulation of buffer stocks exceeding 300,000 tonnes per month. This improved supply position has helped stabilize the domestic market and contributed to a decline in urea prices.

According to official data presented to the ECC, the domestic urea price stood at Rs4,591 per 50 kg bag, compared to Rs4,705 in July 2024, reflecting a decline of 2.4 percent. In contrast, international urea prices have surged by 38.7 percent, with the ex-Karachi price of imported urea reaching Rs8,553 per bag in June 2026.

The MoNFS&R further apprised that for Kharif 2026, total urea availability is estimated at 4.073 million tonnes, comprising 804,000 tonnes of opening stock and 3.269 million tonnes of domestic production. Against this, projected demand stands at around 3.417 million tonnes, ensuring buffer stocks well above 300,000 tonnes during the season.

The two SNGPL-based plants are expected to produce approximately 290,000 tonnes of urea during the first half of 2026, significantly contributing to supply stability and averting potential shortages. These buffer stocks are also expected to support demand during peak consumption months of December 2026 and January 2027, driven by wheat sowing requirements.

The Petroleum Division, whose input was incorporated in the revised summary, did not object to the continuation of gas/RLNG supply to the two plants up to June 30, 2026, under existing arrangements or until the operationalisation of ECC-approved third-party gas access, whichever occurs earlier.

The Ministry further informed that earlier approval for the operation of these plants had been granted till December 31, 2025. Subsequently, the plants continued operations until early March 2026, when RLNG supply disruptions due to import constraints forced temporary shutdowns. Agritech resumed operations on March 12, 2026, followed by Fatima Fertilizer on May 2, 2026.

Despite these interruptions, the plants utilized available gas for urea production. The Ministry emphasized that continuous operation remains essential to maintain buffer stocks and ensure price stability in the domestic market.

During the ECC meeting, it was also noted that the earlier decision taken on June 16, 2026, had not been approved by the Prime Minister for onward submission to the Cabinet for ratification. The Cabinet Division had conveyed specific observations, which were read out during the meeting. The MoNFS&R confirmed that all directives from the Prime Minister's Office had been duly complied with in the revised submission.

It was further placed on record that while the Special Secretary, Petroleum Division, attended the earlier ECC meeting via Zoom, the Minister for Petroleum was present in person during the latest meeting held on June 24, 2026, where the revised summary was considered.

The development underscores the government's continued reliance on RLNG-based operations to ensure adequate urea availability, while navigating fiscal constraints, circular debt pressures, and persistent gas supply shortages.

📌 Brief Summary: The ECC approved continued RLNG supply to Fatima Fertilizer and Agritech's SNGPL-based urea plants through June 2026, ensuring buffer stocks stay above 300,000 tonnes. Domestic urea prices have fallen 2.4% even as international prices surged 38.7%, supporting price stability ahead of Kharif and wheat-sowing seasons. 📈 Company Impact: Directly positive for Fatima Fertilizer Company and Agritech Limited via continued gas/RLNG access supporting production; broadly stable outlook for the fertilizer sector (Engro Fertilizers, Fauji Fertilizer) given controlled domestic pricing.

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Hormuz crisis pushes Pakistan to float fresh spot LNG tender

Pakistan LNG Limited (PLL), on the directives of the National Crisis Management Committee (NCMC), has floated a tender seeking one spot LNG cargo carrying 140,000 cubic metres of liquefied natural gas for delivery during the July 15-16 window.

The move comes as QatarEnergy has extended its force majeure on LNG supplies to Pakistan until August. The company had initially declared force majeure on March 4 following an attack on the Ras Laffan LNG complex, Qatar's largest LNG production facility. The deteriorating security situation around the Strait of Hormuz has further heightened concerns, raising the possibility that QatarEnergy may extend the force majeure again if the waterway remains closed.

The continued disruption in long-term LNG supplies is expected to force Pakistan to rely more heavily on the spot market, where cargoes are significantly more expensive than contracted supplies from Qatar. Under Pakistan's two government-to-government LNG supply agreements with QatarEnergy, LNG is priced at 13.37 per cent and 10.2 per cent of Brent crude, respectively. Greater dependence on costly spot cargoes is likely to increase the cost of RLNG-based power generation, ultimately putting upward pressure on electricity tariffs.

According to the tender issued by PLL on July 9, 2026, bids have been invited from international LNG trading companies for one spot cargo to be delivered at the Pakistan GasPort Consortium Limited (PGPCL) LNG terminal during July 15-16. The deadline for submission of bids is 2:30pm on July 10, while the bids will be opened at 3:30pm after technical and commercial evaluation.

Under the amended Public Procurement Regulatory Authority (PPRA) rules, PLL will be required to communicate its acceptance or rejection of the lowest evaluated bid by 10pm on the same day the bids are opened.

Meanwhile, TotalEnergies, the successful bidder in an earlier tender, is scheduled to deliver another spot LNG cargo to Pakistan on July 10-11 at a price of $17.37 per mmBtu to help meet the country's energy requirements.

Since the disruption in supplies following the outbreak of the Iran conflict on February 28, 2026, Pakistan has received five term LNG cargoes from QatarEnergy under the government-to-government agreement at a price linked to 13.37 percent of the Brent crude benchmark. These include Al Kharaitiyat (210,000 cubic metres), which arrived on May 12; Mihzem (160,000 cubic metres) on May 16; Fuwairit (123,000 cubic metres) on May 28; Lebrethah (164,000 cubic metres) on June 12; and MRAIKH (170,148 cubic metres) on June 22. These cargoes had been loaded before the conflict erupted but remained stranded due to the regional security situation.

In addition to the term supplies, Pakistan has imported three spot LNG cargoes. The latest vessel, ARADA, arrived on July 4 at a price of $16.7372 per MMBtu. Earlier, Seapeak Magellan, carrying 140,000 cubic metres and supplied by TotalEnergies, arrived on April 30, while BW Helios, carrying 167,000 cubic metres sourced from Oman, reached Pakistan on June 9.

The government is now set to receive its fourth spot LNG cargo on July 10-11 after securing the shipment through competitive bidding at $17.37 per mmBtu. With the arrival of the additional spot cargo scheduled for July 15-16, Pakistan's LNG imports this year will increase to 10 cargoes, comprising five term cargoes from QatarEnergy and five spot purchases.

📌 Brief Summary: Pakistan floated a fresh spot LNG tender for July 15-16 delivery as QatarEnergy extended its force majeure on term supplies until August due to Hormuz-related risks. Greater reliance on costlier spot cargoes (~$17/mmBtu vs. Qatar's Brent-linked pricing) threatens higher power-generation costs and tariff pressure. 📈 Company Impact: Negative for RLNG-based IPPs and gas distribution companies (SNGPL, SSGC) via higher input costs; indirectly negative for Pakistan LNG Limited's cost structure and consumer electricity tariffs, with a knock-on risk for circular debt.

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Cabinet committee denies gas utilities exemption from international accounting standards

The Cabinet Committee on state-owned enterprises on Thursday rejected a request from two circular debt-hit state-owned gas utilities — Sui Southern and Sui Northern — for exemption from international accounting and financial reporting standards to avoid being declared insolvent.

However, the cabinet committee, headed by Finance Minister Muhammad Aurangzeb, "instructed the Petroleum Division to undertake further deliberations with the Finance Division and the Law and Justice Division and submit a revised proposal for consideration", according to an official statement.

The Petroleum Division had sought exemption for specified energy-sector state-owned enterprises (SOEs) from the applicability of International Financial Reporting Standards (IFRS-14 and IFRS-9), the statement added.

Informed sources said a similar three-year exemption had already been availed of by these entities.

The finance minister reportedly observed that such an exemption could not be allowed while the SOEs Act 2023 remained in place. He therefore directed that the matter, being of a serious nature, be deliberated upon at length, given the strong opposition from the Finance Ministry's Central Monitoring Unit (CMU), which monitors all SOEs under the requirements of the International Monetary Fund (IMF).

Sitting on a mammoth Rs3.44 trillion gas-sector circular debt, the applicability of IFRS-9 and IFRS-14 could have required the utilities to make provisions for liabilities, many of which would have been unrecoverable, while some could have been recovered from other SOEs, thus eroding their equity despite reasonable billing cash flows to meet operational needs.

The official said the two entities, supported by the Petroleum Division, wanted the continuation of their accounting and reporting standards in line with the old Generally Accepted Accounting Principles (GAAP) for operations under a regulated business model.

IFRS-9 requires the classification of assets based on a business model and cash flow characteristics, including the expected credit loss and impairment model.

According to the International Accounting Standards Board, "IFRS 9 requires an entity to recognise a financial asset or a financial liability in its statement of financial position when it becomes party to the contractual provisions of the instrument."

"At initial recognition, an entity measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability".

The CMU believed both rules should be applied to ensure transparency, as required under the SOE Act, in the accounts and financial results, along with proper footnotes explaining how receivables would be settled as part of the circular debt management plan currently under discussion with the IMF.

The cabinet body also rejected the appointments of two board members, one each from the Petroleum Division, to the boards of directors of two other SOEs — Pakistan Petroleum Limited (PPL) and Sandak Metals Limited (SML) — finding them contrary to good governance standards.

It nevertheless approved the other board members and directed that one member from the Petroleum Division be nominated to the PPL and SML boards. The nominations would subsequently be approved formally by the federal cabinet.

An official statement said the committee "emphasised that the composition of the Boards of State-Owned Enterprises should remain fully aligned with the principles of good governance and the provisions of the State-Owned Enterprises (Ownership and Management) Act and Policy, including the principle of limiting representation from the sponsoring ministry/division to one ex officio director on each board".

The meeting also considered a summary submitted by the Ministry of Industries and Production regarding the categorisation of the Small and Medium Enterprises Development Authority (SMEDA).

The committee approved the proposal to exclude SMEDA from the list of SOEs in view of its statutory and non-commercial nature.

📌 Brief Summary: The Cabinet Committee rejected Sui Southern and Sui Northern's request for exemption from IFRS-9/IFRS-14 accounting standards despite Rs3.44 trillion in gas-sector circular debt, citing the SOE Act 2023. It also blocked two board appointments to PPL and Sandak Metals over governance concerns. 📈 Company Impact: Negative/neutral for SSGC and SNGPL, as stricter IFRS compliance could force liability provisioning and equity erosion; governance-related board rejection is a minor overhang for Pakistan Petroleum Limited (PPL).

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Refining Policy 2023: Amendments set to return to CCoE

The long-awaited amendments to the Pakistan Oil Refining Policy 2023 are set to return to the Cabinet Committee on Energy (CCoE), with the Petroleum Division proposing a fresh implementation framework to revive multi-billion-dollar refinery upgrade projects that have remained largely stalled for almost three years.

According to official documents available with Business Recorder, the Petroleum Division has proposed constitution of a high-level committee, headed by the Secretary Petroleum and comprising the Secretary Law, Chairman OGRA and a representative of the Special Investment Facilitation Council (SIFC), to finalise the template of the Upgrade Agreement between OGRA and individual refineries for operationalization of the Brownfield Refining Policy.

The proposed amendments come after the Finance Act 2024 altered the sales tax regime for petroleum products, making refineries ineligible for input tax adjustments and significantly affecting the financial viability of upgrade projects.

The Petroleum Division has informed the CCoE that the issue has now been resolved with the support of the Finance Division, allowing the policy to move forward.

Industry sources told Business Recorder that refinery upgrades have investment horizons extending over two decades and financing institutions require certainty that agreed fiscal incentives will not be altered midway through project implementation.

The sources said recent changes to the policy framework have reinforced investor concerns, making a stability clause indispensable for attracting financing.

Another major concern relates to the government's proposal to retrospectively reduce the 2.5 percent deemed duty on High-Speed Diesel (HSD) for refineries that did not execute Upgrade Agreements. Refineries argue that the deemed duty is part of the overall tariff protection available to the sector, which remained in place since 2002 and represents the only effective tariff protection available to domestic refineries across their product slate.

Industry representatives contend that applying the reduction retrospectively merely because refineries did not sign the Upgrade Agreement is unjustified, particularly when implementation of the policy itself remained pending at Government's end which is the counter signatory with refineries as it remained uncertain due to unresolved taxation issues.

According to refinery officials, retrospective implementation would compel companies to restate their financial statements for the previous three years, potentially creating significant accounting losses and weakening already stressed balance sheets.

They maintain that most domestic refineries have reported substantial losses in recent years owing to weak international refining margins, exchange rate volatility and policy uncertainty. Additional retrospective financial adjustments, they argue, would further erode profitability and adversely affect their ability to secure financing for refinery modernization projects.

A senior executive of a refinery argue that the recent Iran-US conflict has once again demonstrated the strategic importance of domestic refining capacity, strengthening the case for preserving investor confidence instead of introducing retrospective fiscal measures.

The Petroleum Division has itself acknowledged in the summary that operationalization of the Refinery Upgrade Policy has acquired greater importance in the wake of the recent regional conflict.

Meanwhile, OGRA has reiterated its reservations over the proposed implementation framework, arguing that entering into contractual arrangements with refineries, managing escrow accounts and supervising project execution falls outside its statutory mandate under the OGRA Ordinance, 2002. It has proposed that these functions be assigned to a dedicated Project Management Unit or a government-owned Special Purpose Vehicle.

The Petroleum Division; however, has rejected the proposal, maintaining that OGRA itself had originally developed the implementation mechanism and had already signed an Upgrade Agreement with Pakistan Refinery Limited (PRL). It has warned that changing the implementation structure at this stage would further delay the refinery upgrade programme.

The 2023 Brownfield Refining Policy was approved by the CCoE to facilitate production of Euro-V compliant fuels, reduce furnace oil output and improve energy security.

However, despite subsequent amendments, only PRL has executed an Upgrade Agreement to date but no real progress on ground has been made because of inconsistency of policy.

PRL has so far signed two agreements and once the existing draft policy is approved, they will sign its third agreement. This inconsistency in policy is slowing the progress of their upgrade project.

📌 Brief Summary: Amendments to the 2023 Refining Policy are returning to the CCoE to revive stalled refinery upgrade projects, addressing tax and implementation disputes. A key sticking point is a proposed retrospective cut to the HSD deemed duty for refineries without Upgrade Agreements, which refiners say could force costly financial restatements. 📈 Company Impact: Directly relevant to Pakistan Refinery Limited (PRL), the only refinery with a signed Upgrade Agreement — positive if policy clarity proceeds; potential negative for other listed refineries (Attock Refinery, National Refinery, Cnergyico) facing retrospective deemed-duty cuts and balance-sheet risk.

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FBR anticipates digitalisation to boost tax collection

The Federal Board of Revenue (FBR) has anticipated that the effective taxation of the digital economy in the budget (2026-27) would increase direct taxes collection during the current fiscal year.

According to the FBR's revenue forecasting report (2026-27), the increasing share of direct taxes in total revenue is a structurally positive development; however, sustaining this momentum requires deeper tax base broadening and formalisation of economic activity.

Strengthening documentation, improving third-party data integration, and reducing informality will be central to maintaining long-term growth in direct tax collections.

At the same time, diversifying revenue streams beyond traditional categories can enhance fiscal resilience. This may include more effective taxation of the digital economy, rationalisation of exemptions, and improved efficiency in indirect tax collection.

A diversified tax structure reduces reliance on cyclical sectors and enhances overall revenue stability, FBR added.

📌 Brief Summary: FBR expects digital-economy taxation under the FY27 budget to boost direct tax collection, alongside efforts to broaden the tax base and reduce informality. It also flagged rationalising exemptions and improving indirect tax efficiency as key to long-term revenue stability. 📈 Company Impact: Mild negative for e-commerce and digital-platform-linked listed businesses due to expanded digital economy taxation; broadly neutral-to-positive for fiscal credibility supporting bond/rating sentiment.

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Anti-terror campaign to intensify in Balochistan: PM

Prime Minister Shehbaz Sharif on Thursday reaffirmed the government's unwavering resolve to eradicate terrorism, declaring that the state would continue its operations until the last terrorist was eliminated, and all available resources would be mobilised to restore lasting peace and stability in the country.

Chairing the provincial Apex Committee meeting, the prime minister said the recent wave of terrorist attacks in Balochistan, which claimed the lives of security personnel and civilians, would not weaken the state's determination.

He paid tribute to martyrs and praised the sacrifices rendered by the armed forces, law enforcement agencies and innocent citizens in the fight against terrorism.

The prime minister said security forces had neutralised 54 terrorists during recent operations, adding that the campaign against terrorists would continue until the complete elimination of Fitna al-Khawarij. He said the entire nation stood shoulder to shoulder with the armed forces and law enforcement agencies and expressed confidence that their sacrifices would soon lead to the complete defeat of terrorism.

Shehbaz underlined hostile elements, particularly Pakistan's eastern neighbour, were providing financial and military support to terrorist groups, while militants were also launching attacks from the Afghan territory. He said there were other external actors involved but refrained from elaborating further.

He stressed that the country's political and military leadership was united in its commitment to defeat terrorism, saying no effort would be spared in eliminating the menace. He said enemies of Pakistan wanted to undermine the country's growing international stature, diplomatic achievements and recent strategic successes, but their designs would be defeated.

Announcing the outcome of the meeting, the prime minister said that in consultation with Field Marshal Syed Asim Munir and the Government of Balochistan, it had been decided to intensify efforts against terrorist groups and employ every available resource to restore peace across the province and the country.

He offered prayers for the martyrs' highest ranks in Jannah and patience and fortitude for their families, while expressing confidence that their sacrifices would pave the way for a peaceful, stable and prosperous Pakistan.

During the Apex Committee meeting, the prime minister was given a detailed briefing on the overall law and order situation in Balochistan, with particular focus on recent terrorist incidents, ongoing intelligence-based operations and measures taken by the armed forces and law enforcement agencies for the protection and security of the province's people.

The prime minister paid rich tribute to the martyrs who rendered great sacrifices in the line of duty and expressed solidarity with their families. He reiterated the unwavering support of the entire nation for the armed forces, law enforcement agencies and the people of Balochistan in the fight against terrorism.

He emphasised that peace in Balochistan was indispensable for Pakistan's stability, development, and prosperity. He made it clear that the efforts of Pakistan's enemies to halt the country's positive trajectory, development and prosperity would not be allowed to succeed under any circumstances.

Expressing concern over recent incidents, Shehbaz acknowledged the tireless efforts and determination of law enforcement agencies in combating the cancer of Indian-sponsored terrorism in Balochistan. He stressed a policy of "zero tolerance" against all forms of terrorism to ensure the protection and security of the people of Balochistan and expressed the resolve that Pakistan would crush internal and external terrorist networks seeking to undermine the province's security.

He reiterated the commitment that the federal government, in close coordination with the provincial government, would continue to support all efforts to eliminate terrorism, strengthen the writ of the state and ensure that the people of Balochistan can move towards a future filled with peace, development and opportunities.

The meeting was attended by Chief of Army Staff and Chief of Defence Forces Field Marshal Syed Asim Munir, Balochistan Governor Jaffar Khan Mandokhail, Chief Minister Mir Sarfraz Bugti, heads of law enforcement agencies, federal ministers Ahad Khan Cheema and Attaullah Tarar and Prime Minister's Adviser Rana Sanaullah.

📌 Brief Summary: PM Shehbaz Sharif chaired an Apex Committee meeting on Balochistan, vowing to intensify anti-terror operations after security forces neutralised 54 terrorists in recent operations. He accused external actors of backing militants and stressed continued federal-provincial coordination to restore peace. 📈 Company Impact: No direct listed-company impact; sustained security operations broadly support investor confidence in Balochistan-linked mining/resource projects (e.g., Reko Diq-related sentiment) over the longer term.