ISLAMABAD: The Pakistan Stock Exchange (PSX) extended its rally on Thursday, driven by optimism after Fitch Ratings expressed confidence in the country’s prospects of securing an International Monetary Fund (IMF) bailout.
The benchmark KSE-100 index of PSX surged by 1,646.24 points, or 2.15%, to reach 78,353.01 points during intra-day trading, up from the previous close of 76,706.77 points.
Analysts said that the market rally is continuing due to increased optimism for another IMF programme, bolstered by the recent budget and a base power tariff hike implemented before the Eid holidays.
“Fitch Ratings believes the budget is robust enough for an IMF program. Additionally, the market is responding positively to the Prime Minister’s plan to reduce power tariffs for industries,” Ali added.
The federal government has set an ambitious tax revenue target of Rs13 trillion for FY25, marking a nearly 40% increase from the current year, alongside a sharp reduction in its fiscal deficit to 5.9% of GDP from the current 7.4%.
Pakistan needed to reduce its fiscal deficit as part of its negotiations with the IMF, from which it is seeking a loan of $6-8 billion to avoid a debt default, given its slow economic growth.
In a statement released the previous day, Fitch Ratings noted that Pakistan’s ambitious FY25 budget enhances the likelihood of securing an IMF deal. “We believe a new IMF deal will be agreed upon, supporting other external funding,” the statement read.
Analysts also noted that the budget did not include major changes affecting the stock market and that the budgetary framework aligns with IMF recommendations, raising expectations for a new and larger programme.
He added that a downward inflation trend and the potential for further interest rate cuts are sustaining positive market sentiment.
Experts commented that the market is bullish due to anticipated major inflows from retail investors. “In my view, the market is rising because there is anticipation of significant inflows from retail investors, as alternative investment options like real estate have been heavily taxed in the budget,” an expert explained.
