ISLAMABAD: Pakistani stocks increased by 4 percent on a month-on-month basis on the back of a successful staff level agreement with the International Monetary Fund, among other factors, top brokerage house Topline Securities said in a monthly market review on Friday.
On Tuesday, IMF staff reached a deal with Pakistan for a new $1.3 billion arrangement and also agreed on the first review of the ongoing 37-month bailout program. Pending board approval, Pakistan can unlock the $1.3 billion under a new climate resilience loan program spanning 28 months. The IMF will also free $1 billion for the South Asian nation under its $7 billion bailout program, which would bring those disbursements to $2 billion.
The program, secured mid-year in 2024, has played a key role in stabilizing Pakistan’s economy and the government has said the country is on course for a long-term recovery.
“KSE 100 Index increased by 4 percent on MoM basis, this gain can be attributed to staff level agreement with IMF, circular debt resolution plan where news flow suggest that significant progress has been made and noise that government is working on plan to reduce the electricity prices,” Topline Securities said in its review.
Plugging unresolved debt across the power sector is a top priority under the ongoing IMF bailout, which has helped Pakistan dig its way out of an economic crisis.
Pakistan’s government, the largest shareholder or owner of most power companies, faces a challenge in resolving debt due to fiscal constraints. To address this, Islamabad has raised energy prices, as recommended by the IMF, but still needs to settle the accumulated debt.
The government plans to reduce “circular debt” — public liabilities that build up in the power sector due to subsidies and unpaid bills — this year by eliminating government-guaranteed debt and moving to a revenue-based system.
This approach is expected to lower financing costs, enabling the government to pay off interest and service debt obligations, the power ministry said earlier this month.
Other major developments during this month have been the inflation rate for February coming in at 1.5 percent, the lowest reading in nearly a decade. The monetary policy committee also kept the policy rate unchanged at 12 percent, while the remittance figure for the month of February 2025 clocked in at S$3.1 billion, up 39 percent YoY and 4 percent MoM.
Pakistan’s inflation is likely to remain steady in March, in the 1 percent to 1.5 percent range, the country’s finance ministry said in its monthly economic outlook, after slowing to its lowest level in almost a decade the previous month.
Inflation in Pakistan has been declining for several months after it soared to around 40 percent in May 2023.
Pakistan says its $350 billion economy has stabilized under the $7 billion IMF bailout that had helped it stave off a default threat.
“While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger,” the IMF said about Pakistan.
