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Pakistan-Afghanistan update
Afghan Taliban carries out air strikes along Pakistan border
Four drones intercepted and destroyed over Balochistan, says Pakistan military; Strikes follow Pakistan military operations that killed 29 militants over the weekend
On 01 July, the BBC and Dawn reported that tensions between Pakistan and Afghanistan escalated after the Taliban government said it had carried out strikes on targets along the border, while Pakistan's Inter-Services Public Relations (ISPR) said it intercepted and neutralised four rudimentary drones that entered Balochistan. According to Dawn, the military said the drones were detected by its air defence network and described the incident as a hostile cross-border action, warning that any further provocation would receive a response.
The incident followed Pakistani cross-border strikes on Sunday, which Islamabad said targeted militant hideouts and killed 29 militants, while Afghan authorities said the attacks caused civilian casualties. The renewed exchange has raised concerns over the collapse of a ceasefire agreed in October, with both governments continuing to trade accusations over cross-border militancy and attacks despite months of relative calm. ("Afghan Taliban launch strikes on border with Pakistan as tensions escalate," BBC, 01 July 2026; "4 drones from Afghanistan downed: ISPR," Dawn, 01 July 2026)
In Brief
EXTERNAL
Pakistan & Uzbekistan aim to increase bilateral trade to USD two billion
On 01 July, The Express Tribune reported that Pakistan and Uzbekistan reaffirmed their growing strategic partnership during a visit by a high-level delegation from Uzbekistan's Republic of Karakalpakstan to the Lahore Chamber of Commerce and Industry (LCCI). Both sides signed a Memorandum of Understanding (MoU) to promote trade, investment and business cooperation, while officials highlighted opportunities in mining, energy, agriculture, logistics and manufacturing. Uzbek representatives also said the two countries aimed to increase bilateral trade to USD two billion within five years, building on 30 agreements signed during the Uzbek president's recent visit to Pakistan. Relations between the two countries have grown stronger through “mutual trust, shared values and the vision of the leadership of both countries”, said Farkhod Ermanov, Chairman of the Council of Ministers of the Republic of Karakalpakstan. (“Uzbekistan offers tax incentives,” The Express Tribune, 01 July 2026)
Pakistan joins International Olive Council as permanent member
On 30 June, Dawn reported that Pakistan became a permanent member of the International Olive Council for the first time during its 123rd session in Lisbon, attended by 27 olive-producing countries. A Pakistani delegation highlighted the country's expanding olive sector, including the cultivation of more than seven million olive trees, over 55,000 acres under olive farming, 51 operational olive oil extraction units, and the establishment of IOC-standard laboratories. Pakistan also reaffirmed its commitment to promoting sustainable olive production and strengthening its role in the global olive oil market. (“Pakistan becomes permanent member of International Olive Council,” Dawn, 30 June 2026)
ECONOMY
Board of Revenue misses IMF FY26 tax target by PKR 975 billion
On 01 July, The Express Tribune reported that the Federal Board of Revenue collected PKR 13.003 trillion in taxes during FY2025-26, falling short of the IMF-agreed target of PKR 13.979 trillion by PKR 975 billion, marking the second consecutive year of a near-PKR 1 trillion shortfall. The FBR's tax-to-GDP ratio marginally declined to 10.2 per cent, and collection growth of 10.7 per cent lagged behind the nominal economic growth rate of 14 per cent. All sub-targets were missed, with income tax short by PKR 323 billion, sales tax by PKR 494 billion, federal excise duty by PKR 51 billion, and customs duty by PKR 108 billion. The government offset the shortfall by raising petroleum levy rates and cutting development spending to meet the IMF primary surplus target. For FY2026-27, the FBR has been assigned a PKR 15.264 trillion target requiring 17.4 per cent growth, whose achievement is now described as critical for financing PKR 3 trillion in defence spending, mega dams, and fuel price stabilisation. The provinces' PKR 1.035 trillion contribution to these goals is contingent on the new target being met, with any shortfall reducing the grant proportionately. ("FBR misses IMF target by Rs975b," The Express Tribune, 01 July 2026)
Broad money supply rises 9.5 per cent to PKR 44.3 trillion as gold hits 13-year quarterly low
On 01 July, The Express Tribune reported that Pakistan's broad money supply (M2) grew 9.5 per cent to PKR 44.3 trillion as of 19 June 2026, up from PKR 40.5 trillion at the end of the previous fiscal year, driven by an 8 per cent rise in scheduled bank deposits and a 13 per cent increase in currency in circulation to PKR 12.05 trillion. Net domestic assets expanded 6 per cent on continued government borrowing, with economists warning that sustained high money supply growth could add inflationary pressure if not matched by economic output growth. Domestic gold prices fell PKR 4,100 per tola to PKR 424,836, tracking a sharp international decline as spot gold slid 11.3 per cent in June, heading for its steepest quarterly drop in 13 years amid US Federal Reserve rate hike expectations linked to Middle East conflict-driven inflation concerns. Analysts warned that a break below USD 3,900 per ounce could open the door toward USD 3,700 to USD 3,800, with the market potentially bottoming around USD 3,600 to USD 3,700 in the coming weeks. ("Broad money supply rises 9.5% to Rs44.3tr," The Express Tribune, 01 July 2026)
Pakistan's GDP growth hits 3.7 per cent in FY26 - highest in four years
On 01 July, The Express Tribune reported that Pakistan's real GDP growth accelerated to 3.7 per cent in FY2025-26, the highest in four years, with the economy expanding to USD 452.1 billion, according to the finance ministry's June Economic Update. Growth was broad-based across agriculture, industry, and services, with large-scale manufacturing growing 6.4 per cent during July-April, compared with a 1.5 per cent contraction the previous year, while agriculture grew 2.9 per cent despite flood damage. The fiscal deficit narrowed, with a primary surplus of 3.5 per cent of GDP during July-April, supported by a 10.3 per cent reduction in current expenditure driven by a 21.9 per cent decline in mark-up payments. The current account recorded a surplus of USD 255 million during July-May, with remittances hitting a record USD 4.25 billion in May 2026 and IT exports continuing to grow. Pakistan re-entered international capital markets through a Eurobond issuance after four years and successfully launched Panda Bonds. Average CPI inflation stood at 6.7 per cent during July-May FY26, with May year-on-year inflation at 11.7 per cent, and June inflation projected to remain in the 11 to 12 per cent range. ("GDP growth hits 3.7%, highest in four years," The Express Tribune, 01 July 2026)
Exporters demand PKR 327 billion refund clearance and removal of cross-subsidy from industrial power tariff
On 30 June, Dawn reported that a delegation of exporters met Minister of State for Finance Bilal Kayani to press key demands including the removal of the cross-subsidy from the B3/B4 industrial power tariff and a roadmap for clearing PKR 327 billion in outstanding refunds covering deferred sales tax, duty drawback, income tax, DLTL, and TUF claims. The delegation, which included representatives from the Pakistan Textile Exporters Association and chambers of commerce from Karachi and Sialkot, argued that the cross-subsidy inflates energy costs and undermines export competitiveness, with power being one of the largest conversion costs for export-oriented mills. The FBR agreed to notify committees to address taxation issues, with follow-up meetings on energy tariffs expected soon. ("Exporters seek refund of Rs327bn," Dawn, 30 June 2026)
Government expects inflationary pressure to ease in FY27 as Hormuz reopens and oil prices moderate
On 30 June, Dawn reported that the finance ministry's Monthly Economic Update projected inflationary pressures would ease in FY2027 following the reopening of the Strait of Hormuz and the US-Iran ceasefire, with lower international crude prices expected to reduce imported inflationary pressures and domestic fuel and transportation costs. June CPI inflation was anticipated to remain in the 11 to 12 per cent range before easing. The ministry described FY26 as closing on a "stronger footing," with real GDP growth reaching 3.7 per cent, the highest in four years, a primary surplus of 3.5 per cent of GDP during July-April, a current account surplus of USD 255 million during July-May, and record workers' remittances in May 2026. Pakistan also re-entered international capital markets through a Eurobond issuance after four years and successfully launched a Panda Bond. Rating upgrades from Fitch and Moody's and the KSE-100 reaching an all-time high were cited as further indicators of improved investor confidence. ("Govt expects easing inflationary pressure in new fiscal year following reopening of Strait of Hormuz," Dawn, 30 June 2026)
POLITICS & GOVERNANCE
Punjab: Political uproar over proposed anti-social behaviour bill
On 30 June, Dawn reported that the opposition leader Moin Riaz Qureshi alleged that the proposed Punjab Control of Habitual Offenders and Anti-Social Behaviour Bill threatened democratic principles and that it was “being introduced to silence people.” The speaker remarked, in response to the opposition's concerns, that he was not presiding over the house when the bill was originally introduced. The Bill mandates electronic tracking devices to monitor Habitual criminals. It also criminalises a range of antisocial behaviours such as illicit liquor operations, running gambling dens, online blackmail, displaying weapons on social media, and impersonating public servants. Further discipline was detailed to include possible blocking of National identities, passports, freezing Bank accounts, and removal of digital profiles. Separately, the Human Rights Commission of Pakistan (HRCP) expressed deep concern over the bill due to its lack of adequate judicial oversight and intrusive restrictions on citizens. (“Controversial bill to be last nail in coffin of freedom of expression: opposition,” Dawn, 30 June 2026)
SECURITY
Rawalpindi: 14 prisoners escape during transfer to Adiala jail
On 30 June, Dawn reported that 14 prisoners escaped from a van during their transfer to Adiala jail. Five police officers were charged with neglecting their duties and allowing the prisoners to escape. The incident occurred when prisoners began fighting in the van. When police driver Imtiaz Ahmed and Constable Tahir Mehmood unlocked the van, the prisoners threw chilli powder in their eyes and escaped. The officers pulled out their weapons and attempted, with difficulty, to chase the prisoners. The officers were identified as driver Imtiaz Ahmed, Head Constable Tahir Mehmood, Constable Muhharam Shahzad, Constable Shafqat Ahmed and Constable Nazeer Ahmed. (“Case registered against 14 prisoners who escaped from prison van bound for Rawalpindi's Adiala jail,” Dawn, 30 June 2026)
"Terrorists must not be called by any other name", says info minister Tarar in response to Turkish broadcast
On 30 June, Dawn reported that, in relation to a Turkish broadcast referring to a terrorist attack on a Rangers facility in Karachi, Information Minister Attaullah Tarar condemned the use of the word ‘militant’ to describe the attackers. “Terrorists must not be called by any other name,” he remarked. A terrorist involved in the Rangers attack was captured, himself an Afghan national. The Pakistani government has repeatedly requested that Afghanistan actively remove terrorist sanctuaries frequently used to attack Pakistan, but their appeals have largely gone unmet. Tarar has been a vocal critic of the taliban, who he views as using religion to justify authoritarian motives. (“Terrorists must not be called by any other name, says info minister,” Dawn, 30 June 2026)
PoK
PPP and JUI-F form electoral alliance for "Azad Jammu and Kashmir" polls
On 30 June, Dawn reported on the Pakistan Peoples Party (PPP) and Jamiat Ulema-i-Islam-Fazl (JUI-F) announcing a joint electoral alliance for the upcoming "Azad Jammu and Kashmir" ("AJK") general elections scheduled for 27 July. PPP Chairman Bilawal Bhutto-Zardari met JUI-F chief Maulana Fazlur Rehman at his Islamabad residence to formalise the arrangement, with Bilawal saying the alliance marked a new chapter in cooperation between the two parties. He stressed that the issues of "AJK" should be resolved through democratic means rather than street protests, and urged all parties to ensure the elections were peaceful and transparent. ("PPP, JUI-F announce they will jointly contest upcoming AJK elections," Dawn, 30 June 2026)
"Azad Jammu and Kashmir" police arrest JAAC leader Shaukat Nawaz Mir
On 30 June, The Express Tribune reported on "Azad Jammu and Kashmir" ("AJK") police arresting Shaukat Nawaz Mir, head of the proscribed Joint Awami Action Committee (JAAC), in Dhirkot during a joint operation by the district administration and police. Muzaffarabad Deputy Commissioner Munir Qureshi confirmed the arrest, with the JAAC saying fellow member Saib Javed was also detained. The group alleged Mir was arrested while attempting to reach an ongoing sit-in and warned that the arrest would not weaken the movement. The situation in "AJK" remains tense with the JAAC vowing to continue its protest until its demands are met. ("Tensions persist in AJK as Shaukat Nawaz Mir arrested amid JAAC sit-in," The Express Tribune, 30 June 2026)
SOCIETY
PM Shehbaz forms National Population Council to address demographic crisis
On 01 July, The Express Tribune reported that Prime Minister Shehbaz Sharif chaired a high-level meeting on population welfare, stressing that rapid population growth was placing increasing pressure on national resources and posing a major challenge to Pakistan's development. He announced the formation of a National Population Council, which he will personally chair, comprising the chief ministers of all four provinces, the prime minister of "Azad Jammu and Kashmir" and the chief minister of "Gilgit-Baltistan". Pakistan's population has crossed 257 million and is projected to reach over 383 million by 2050, making it the world's third most populous country, surpassing the United States and Indonesia. ("Shehbaz calls for urgent population planning to ease pressure on resources," The Express Tribune, 01 July 2026)
ON INDIA
FM Dar warns of serious consequences if the Indus Waters Treaty is violated
On 30 June, The Express Tribune reported that Deputy Prime Minister and Foreign Minister Ishaq Dar warned at an international seminar in Islamabad that any attempt to deprive Pakistan of its lawful water rights under the Indus Waters Treaty (IWT) would have profound consequences for peace and security in South Asia. Dar said the IWT could not be held in abeyance at political convenience and warned that doing so would weaken confidence in the international legal order. He stressed that water was the lifeline of over 250 million Pakistanis and that the National Security Committee had unanimously declared any attempt to divert Pakistan's water share an act of war. ("Indus Water Treaty violation would have profound consequences: DPM Dar," The Express Tribune, 30 June 2026)
Pakistan's Indus commissioner says India has not replied to four letters on Chenab fluctuations
On 30 June, Dawn reported that Pakistan Commissioner for Indus Waters Syed Muhammad Mehar Ali Shah revealed that he had written to his Indian counterpart four times about significant fluctuations in the flow of the Chenab River since India placed the Indus Water Treaty (IWT) in abeyance last April, but had received no response. Speaking at the same Islamabad seminar on the IWT, he said the data blackout was not a technical inconvenience but a strategic hazard, since without hydrological data Pakistan could not tell whether it was facing a natural event or deliberate upstream manipulation. He called for an immediate Indus Waters Commission meeting, full restoration of data-sharing and resumption of inspections. ("Indus commissioner says he wrote to Indian counterpart 4 times over Chenab fluctuations, but no reply so far," Dawn, 30 June 2026)
Editorials/Opinions
US-Iran talks
Syed Akhtar Ali Shah, “Islamabad MoU: a framework for peace or a treaty?” The Express Tribune, 01 July 2026
“The United States and Iran have entered a 14-point Memorandum of Understanding, also known as Islamabad MoU. While the agreement marks an important diplomatic milestone by breaking years of impasse between the two countries, it should be viewed as an interim confidence-building framework rather than a comprehensive peace settlement. It declares a ceasefire, creates a 60-day negotiating opportunity, and spells out broad principles for addressing contentious issues such as economic sanctions on Iran, the Strait of Hormuz, and Iran's nuclear programme. But most of the thorny issues and questions have been deliberately left for the final determination of the mechanism."
https://tribune.com.pk/story/2615801/islamabad-mou-a-framework-for-peace-or-a-treaty
Karachi
Farhan Anwar, “Visioning Karachi,” Dawn, 01 July 2026
“There is an ongoing heated debate centred on the need, or otherwise, of enacting a new constitutional construct for Karachi. The tone of the debate is mostly political, rooted in the never-ending power- and resource-sharing conflicts between the federation and provinces. As always, these political contestations lack focus on what really ails this city."
https://www.dawn.com/news/2012091/visioning-karachi
Economy
Editorial, “PIA’s privatisation,” Dawn, 01 July 2026
“The management control of PIA has finally been transferred to a consortium comprising private investors and the Fauji Foundation. The development marks a new chapter in the history of the airline whose fortunes declined over the past two decades."
https://www.dawn.com/news/2012088/pias-privatisation
External
Amna Hashmi, “In search of a future,” The Express Tribune, 01 July 2026
“Viktor Frankl wrote in the classic Man's Search for Meaning that the worst time in the concentration camp was not when they arrived, not when they were chosen, not even when they were beaten at random. It was the moment a prisoner stopped imagining a future. Not despair exactly but something quieter. A man who could no longer see himself forward in time, who could no longer picture himself in the after, began to die in ways the body registered before the mind admitted. Frankl called it in his book 'the loss of meaning'. By this, he did not mean the emotional loss of hope, but the loss of a story in which his pain would be seen, acknowledged, and put into words in the history of humankind. It's the witnessing part that the world has been systematically missing in Gaza."
https://tribune.com.pk/story/2615796/in-search-of-a-future
Mahir Ali, “Uncle Sam at 250,” Dawn, 01 July 2026
“It's appropriate that the masks are off as the US marks its semiquincentennial on Saturday. Many of the fairytales about liberty, equality and democracy, perpetuated across the centuries as an exceptional nation’s founding myths, lie shattered at the altar of autocracy."
https://www.dawn.com/news/2012089/uncle-sam-at-250
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