The Pakistan Stock Exchange (PSX) experienced a significant boost on Friday as positive developments regarding the International Monetary Fund (IMF) and the United Arab Emirates (UAE) drove the benchmark KSE-100 index above the 76,000 level. By 11:50 am, the index was at 76,036.52 points, marking a gain of 922.05 points or 1.23%.
This surge in the stock market was fueled by across-the-board buying in key sectors including automobile assemblers, cement, chemical, commercial banks, oil and gas exploration companies, oil marketing companies (OMCs), and refineries.
A significant factor contributing to the market’s positive performance was the announcement by the UAE on Thursday that it would allocate $10 billion for investment in promising economic sectors in Pakistan. This announcement followed a meeting between UAE President His Highness Sheikh Mohamed bin Zayed Al Nahyan and Pakistan’s Prime Minister Shahbaz Sharif. The investment is expected to stimulate various sectors of Pakistan’s economy, providing a much-needed boost amidst ongoing economic challenges.
The UAE’s investment announcement, there were optimistic developments regarding Pakistan’s discussions with the IMF. The IMF mission concluded its visit to Islamabad on May 23 and reported significant progress towards reaching a staff-level agreement (SLA) on a new program. This new program aims to build on the economic stabilization achieved through the successful completion of the 2023 Stand-by Arrangement (SBA).
The discussions with Pakistani authorities focused on a comprehensive economic policy and reform program that could be supported under an Extended Fund Facility (EFF). Nathan Porter, the IMF Mission Chief to Pakistan, stated, “Building on the economic stabilization achieved through the successful completion of the 2023 Stand-by Arrangement (SBA), the IMF and the Pakistani authorities made significant progress toward reaching a Staff Level Agreement (SLA) on a comprehensive economic policy and reform program that can be supported under an Extended Fund Facility (EFF).”
Pakistan’s previous $3-billion SBA concluded last month. However, Islamabad is keen to pursue a 24th bailout with the IMF, hoping that a longer, larger EFF will provide lasting economic stability and reform.
The positive sentiment at the PSX was evident on Thursday as well, with the benchmark index regaining the 75,000 level and settling at 75,114.47 points, up by 157.8 points or 0.21%.
In contrast, Asian stocks fell on Friday, and the US dollar advanced. Strong US economic data bolstered the prospect of interest rates staying higher for longer and the Federal Reserve taking its time in cutting rates, which kept investors away from riskier assets. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5% and was on course for a 1% weekly decline, snapping a four-week winning streak.
The IMF and Pakistani authorities are working towards finalizing discussions virtually over the coming days. The reform program under discussion aims to transition Pakistan from economic stabilization to strong, inclusive, and resilient growth. The Pakistani authorities plan to strengthen public finances by improving domestic revenue mobilization through fairer taxation while scaling up spending for human capital, social protection, and climate resilience.
They also intend to secure energy sector viability through reforms to reduce the high cost of energy, continue progress towards low and stable inflation with appropriate monetary and exchange rate policies, and improve public service provision through state-owned enterprise (SOE) restructuring and privatization. Additionally, promoting private sector development by securing a level-playing field for investment and stronger governance is a key focus.
Pakistan is likely to seek at least $6 billion under the new program and request additional financing from the IMF under the Resilience and Sustainability Trust. The IMF has emphasized that prioritizing reforms to revitalize the Pakistani economy outweighs the size of the new loan package being negotiated.
