The Pakistan Stock Exchange (PSX) extended its rally on Wednesday, driven by optimism following a supportive statement from Fitch Ratings regarding the likelihood of Pakistan securing an International Monetary Fund (IMF) bailout.
The benchmark KSE-100 index surged by 1646.24 points, or 2.15%, reaching 78,353.01 points during intra-day trading, up from the previous close of 76,706.77 points.
Intermarket Securities Director of Research, Saad Ali, highlighted the market’s positive sentiment, noting increased optimism for another IMF program after recent budget announcements and a base power tariff hike preceding the Eid holidays. Ali remarked, “Fitch rating thinks that the Budget is good enough for an IMF program. Also, [the] market [is] taking positively PM’s plan to reduce power tariff for industries.”
The federal government has set a challenging tax revenue target of Rs13 trillion for FY25, a nearly 40% increase from the current year, aiming to reduce the fiscal deficit to 5.9% of GDP from the current 7.4%. This reduction is crucial for ongoing negotiations with the IMF, from which Pakistan seeks a $6-8 billion loan to avoid a debt default amid slow economic growth.
Fitch Ratings, in a statement released the previous day, expressed confidence in Pakistan’s ambitious FY25 budget, stating it enhances the prospects for an IMF deal. “We believe a new IMF deal will be agreed, underpinning other external funding,” the statement read.
Arif Habib Limited (AHL) Head of Research, Tahir Abbas, observed that the budget aligns with IMF recommendations and expectations for a new, larger program. He also pointed to a downward inflation trend and the potential for further interest rate cuts as positive factors for market sentiment.
Samiullah Tariq, head of research at Pak-Kuwait Investment Company, attributed the market’s bullish trend to anticipated significant inflows from retail investors, spurred by heavy taxation on alternative investments like real estate. He noted, “In my view, market is increasing as there is anticipation of major inflow from retail investors in the market as alternate investment avenues like real estate have been heavily taxed on the budget.”
