IMF Deal
The Pakistan Stock Exchange (PSX) experienced a strong bullish rally on Wednesday, fueled by renewed investor confidence following the staff-level agreement between Pakistan and the International Monetary Fund (IMF) regarding the ongoing bailout package. Additionally, the announcement of a new $1.3 billion arrangement under the IMF program further boosted market sentiment.
The benchmark KSE-100 Index surged by 1,189.22 points, reaching an intraday high of 118,220.88, reflecting a 1.36% increase. This significant jump was driven by optimism surrounding key economic developments, particularly the IMF’s endorsement of Pakistan’s economic policies.
“The IMF review is the major positive trigger,” said Sana Tawfik, Head of Research at Arif Habib Limited. “We’ve seen the market respond with a gain of over a thousand points. OGDC and PPL announcing the completion of the feasibility study on Reko Diq has also supported sentiment, but overall, it’s IMF-driven.”
The IMF’s statement acknowledged Pakistan’s progress in stabilizing its macroeconomic framework despite facing global economic challenges. The agreement includes a 28-month Resilience and Sustainability Facility (RSF) arrangement, alongside the completion of the first review of the 37-month Extended Fund Facility (EFF).
Upon formal approval from the IMF’s Executive Board, Pakistan is set to receive an immediate disbursement of $1 billion, increasing the total amount received under the program to $2 billion.
In addition to the IMF agreement, market confidence was further strengthened by developments in the Reko Diq mining project. OGDC (Oil & Gas Development Company) confirmed the completion of an updated feasibility study, which outlined a 37-year mine life and an investment plan of $5.6 billion for Phase 1 of the project, set to begin operations in 2028.
The estimated production capacity includes 13.1 million tonnes of copper and 17.9 million ounces of gold, making it one of Pakistan’s most significant mining ventures.
However, while investor confidence surged, Pakistan’s broader economic indicators presented a mixed outlook. The Ministry of Finance projected a rise in the Consumer Price Index (CPI) inflation rate, forecasting an increase of 2-3% in April, compared to a 1-1.5% rise in March. Inflation in February stood at 1.5% year-on-year, marking a significant decline from the staggering 23.1% recorded in February 2024.
The oil sector continues to face challenges due to a sales tax exemption introduced in the 2024 Finance Act. Industry analysts estimate total losses of Rs35 billion, affecting both oil refineries and oil marketing companies, which are struggling to claim input tax refunds.
Concerns persist as the newly appointed petroleum minister has yet to engage with industry stakeholders, delaying key refinery upgrade agreements with the Oil and Gas Regulatory Authority (OGRA).
The rally on Wednesday followed a smaller but positive trend observed in the previous trading session. On Tuesday, the KSE-100 Index had already hinted at growing market optimism, closing 193.55 points higher, or 0.17%, at 116,633.17 points. The index fluctuated throughout the session, reaching a high of 116,904.55 points and a low of 115,877.88 points before closing in positive territory.
Overall, Wednesday’s session at the PSX reflected renewed investor optimism, driven by the IMF agreement and progress in key economic sectors. However, lingering challenges in inflation, the oil sector, and policy implementation remain key areas of concern for market participants.
