Pakistan’s financial markets have shown significant positive responses following a staff-level agreement with the International Monetary Fund (IMF) for a $3 billion bailout.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index surged past 57,000 points, while the Pakistani rupee also saw a recovery against the dollar during intraday trade in the interbank market. This agreement marks a crucial step for Pakistan, enabling access to around $700 million after approval from the IMF’s Executive Board, bringing the total disbursements under the program to nearly $1.9 billion.
Strengthening of the Pakistani Rupee and Stock Market Rally
The Pakistani rupee broke its 17-session losing streak, gaining 2.14 against the dollar and trading at Rs286 in the interbank market. This marks a recovery from the previous close of Rs288.14. Concurrently, the PSX’s KSE-100 Index achieved a new milestone by crossing 57,000 points around 10:20 am. This rally at the PSX is primarily attributed to the confidence instilled by the IMF agreement, which is expected to facilitate crucial external financing for Pakistan.
Economists believe that the IMF’s approval signifies the government’s efforts in fiscal consolidation and adjustments in energy pricing to curb circular debt. The anticipated flow of external financing is expected to provide relief to the forex market, with contributions from debt instruments, multilateral programs and project loans.
Additionally, loans and rollovers from bilateral agreements and friendly countries will likely commence following the IMF agreement. The long-term stability of the rupee will depend on the inflows and demands in the import sector, as well as the country’s overall productivity.”