PSX surges 700 points after IMF Approval

The Pakistan Stock Exchange (PSX) witnessed a buying spree following the International Monetary Fund’s (IMF) Executive Board completion of the first review of the $3-billion Stand-By Arrangement (SBA) with the benchmark KSE-100 Index increasing over 600 points during trading on Friday.

At 10:25 am, the KSE-100 index was hovering at 65,309.90 level, an increase of 692.34 points or 1.07%.

Across-the-board buying was witnessed with index-heavy sectors including cement, chemical, commercial banks, oil and gas exploration companies, OMCs and the refinery sector trading in the green.

At close on Thursday, the PSX had also rebounded with an over 1% gain amid talks of a rate cut in the next Monetary Policy Committee (MPC) meeting expected in January as the KSE-100 settled at 64,617.57, up by 697.72 points or 1.09%.

On Thursday night, the Executive Board of the IMF completed the first review of Pakistan’s economic reform programme supported by the IMF’s SBA on Thursday. The Board’s decision allows for an immediate disbursement of SDR 528 million (around $700 million), bringing total disbursements under the arrangement to SDR 1.422 billion (about $1.9 billion).

Pakistan’s 9-month SBA was approved by the Executive Board on July 12, 2023, in the amount of SDR 2.250 billion (about $3 billion at the time of approval).

The IMF said that the programme aims to provide Pakistan with a policy anchor for addressing domestic and external balances and a framework for financial support from multilateral and bilateral partners.

Market experts said that the IMF approval would pave the way for funding from other multilateral and bilateral institutions.

“We believe that after IMF board approval, more dollar funding for Pakistan is likely from bilateral, multilateral and other sources,” said Topline Securities, in a note on Friday.

“This will also facilitate rollovers, supporting foreign exchange reserves and bringing stability to the currency.”

Globally, Asian shares were cautious on Friday as the escalating conflict in the Red Sea region sent oil prices surging, while slightly higher-than-expected US inflation data did not dent investors’ views on early and aggressive rate cuts in the US and Europe.

The rally in rates may have been helped by dovish comments from European Central Bank (ECB) President Christine Lagarde who said rate cuts would occur if the central bank had certainty that inflation had fallen to the 2% level.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1%, although Japan’s Nikkei gained 1.2% to another 34-year high, boosted by a weak yen.