PSX spikes in renewed hopes of IMF revival

The Pakistan stock market spiked 2.5%, or over 1,000 points, to 41,068 points before midday on Monday, as investors bet on the revival of the International Monetary Fund (IMF) programme.

Optimism prevailed at the Pakistan Stock Exchange (PSX) after the incumbent government revised the federal budget in line with IMF’s recommendations.

Ismail Iqbal Securities Head of Research Fahad Rauf projected that over the weekend, stock and currency markets would increase due to hope for the revival of the IMF program.

Earlier, the global money lender presented three conditions for resuming its $6.7 billion loan programme for Pakistan including a reforms-based budget, fixing functioning at domestic currency markets and arranging gap financing of $6 billion from friendly countries.

Hope for IMF revival also strengthened after the central bank lifted the ban on all imports immediately. This move was also in line with the lender's recommendations.

Investors at PSX believe that if the programme resumes before it officially expires on Friday (June 30), the country would fully mitigate the risk of default and economic activities could resume.

Pakistan's foreign exchange reserves are currently at a critical low of $3.5 billion. This has partially closed imports and impacted factories and also jacked up the risk of default.

Read Rs215b new taxes imposed to placate IMF

Pakistan has to repay $23 billion in foreign debt next fiscal year starting July 1, 2023.

The government has improved its functioning on currency markets as well.

Last week, uncertainty prevailed at the PSX as a lack of positive news regarding the ninth review of the IMF’s loan programme took a toll on investor sentiment, leading the market to lose over 1,200 points and settle below the 41,000 mark.

Budget amended to appease IMF

Yesterday, the National Assembly passed the Finance Bill 2023-24 with certain amendments to the proposed budgetary measures with a revised outlay of Rs14.48 trillion.

The budget was approved a day after Finance Minister Ishaq Dar announced fiscal adjustments worth Rs300 billion, including fiscal tightening measures as demanded by IMF in a final push to clinch a much-delayed rescue package.

The new measures announced by Dar, while winding up the budget debate included increasing the tax burden on the salaried class and withdrawing the $100,000 asset-whitening scheme, suggesting that the government accepted the majority of the IMF demands.