PSX Soars Past 45,000 Mark Following $2 Billion Boost from Saudi Arabia

In a monumental development on Tuesday, the Pakistan Stock Exchange (PSX) experienced a significant surge, crossing the 45,000 mark for the first time in over a year.

The notable upswing is attributed to finance minister Ishaq Dar’s confirmation of receipt of $2 billion from Saudi Arabia, providing much-needed liquidity to the cash-strapped nation.

The Benchmark KSE-100 Index

The market saw a remarkable rally as a direct result of this financial influx. The benchmark KSE-100 index, a measure of market performance, recorded an addition of over 500 points. Precisely at 12:24 pm, the index marked an increase of 555.18 points, equivalent to a 1.24% gain, causing it to leap to 45,140.30 points. This is a substantial leap from the previous close of 44,585.12 points.

Fitch, the renowned credit rating agency, has upgraded Pakistan’s long-term foreign currency issuer default rating. The rating has moved from CCC- to CCC, indicating a positive shift for the country grappling with its worst economic crisis.

According to analysts, the upgraded rating is expected to contribute to a continuous rise in the stock market throughout the week. In a statement, Fitch attributes this upgrade to Pakistan’s improved external liquidity and funding conditions following a staff-level agreement with the International Monetary Fund (IMF). However, the agency highlighted that Pakistan’s fiscal deficit remains significant.

IMF Agreement

The financial boost from Saudi Arabia comes on the heels of Pakistan’s short-term IMF deal, signed on June 30 under a standby arrangement. This agreement is set to disburse $3 billion over nine months, contingent on approval by the IMF’s board in its meeting scheduled for July 12.

Previously, securing multilateral and bilateral funds was a significant hurdle in Pakistan’s dealings with the IMF, leading to a delay that stretched over nine months and ended with the agreement’s expiration. However, this Standby Arrangement (SBA) has provided a crucial respite for the nation, averting a sovereign default and assisting the government in refining fiscal policies.

Pakistan’s economy, grappling with soaring inflation and foreign exchange reserves barely sufficient for a month’s controlled imports, could have plunged into a debt default without this IMF bailout. With the deal, Pakistan is poised to unlock further external financing.

Fitch cites that local authorities are projecting $25 billion in gross new external financing in FY24 to counterbalance $15 billion in public debt maturities. These maturities include $1 billion in bonds and $3.6 billion owed to multilateral creditors.

Political Uncertainty

The country has also been wrestling with substantial political uncertainty since the removal of former prime minister Imran Khan through a no-confidence motion in April last year.

To ensure the implementation of the IMF programme’s measures leading up to the upcoming elections in October, IMF representatives met with all major political parties seeking consensus and support for the SBA. Khan’s party, Pakistan Tehreek-e-Insaf, has confirmed their backing for the deal.