Meanwhile, investors anticipated an imminent cut in policy rate and progress on resolving the circular debt crisis under a new IMF programme. As a result, Pakistan Stock Exchange (PSX) rebounded and crossed the 75,000-milestone buoyed by positive sentiment.
The global lender has opened discussions with Pakistan on a new loan programme after the government last month completed a short-term $3 billion programme, which helped stave off a sovereign debt default.
Headed by mission chief Nathan Porter, a delegation of the Fund concluded discussions with the authorities on Thursday after arriving in Pakistan on May 13, the lender said in a statement.
“The mission and the authorities will continue policy discussions virtually over the coming days aiming to finalise discussions, including the financial support needed to underpin the authorities’ reform efforts from the IMF and Pakistan’s bilateral and multilateral partners,” Porter said.
“The authorities’ reform program aims to move Pakistan from economic stabilisation to strong, inclusive, and resilient growth,” the statement added.
It noted that the Pakistani authorities “plan to continue to strengthen public finances to reduce vulnerabilities by improving domestic revenue mobilisation through fairer taxation while scaling up spending for human capital, social protection, and climate resilience”.
They also plan to “secure energy sector viability, including reforms to reduce the high cost of energy; continue progress towards low and stable inflation by appropriate monetary and exchange rate policies; improve public service provision through state-owned enterprise (SOE) restructuring and privatisation; and promote private sector development, by securing a level-playing field for investment and stronger governance”, Porter added.
Terming the discussions as “fruitful”, Porter said the global lender and the Pakistani authorities will “continue policy discussions virtually over the coming days aiming to finalise discussions, including the financial support needed to underpin the authorities’ reform efforts from the IMF and Pakistan’s bilateral and multilateral partners”.
Pakistan is likely to seek at least $6 billion under the new programme and request additional financing from the IMF under the Resilience and Sustainability Trust.
The global lender has emphasised that prioritising reforms to revitalise the Pakistani economy outweighs the size of the new loan package being negotiated.
Ahead of the discussions, the IMF had earlier this month warned that downside risks for the Pakistani economy remained exceptionally high.
Meanwhile, the KSE-100 index started the day on a lacklustre note and dropped to the intra-day low at 74,726.06 points in the first hour. However, after fluctuating between green and red zones in a narrow range, the market bounced back at midday.
The fall in government’s bond yields, leading to a potential reduction in the State Bank of Pakistan (SBP)’s policy rate, sparked buying interest and pushed the index upwards.
Moreover, investors were optimistic about the resolution of the circular debt challenge as part of the new IMF loan package.
Index-heavy sectors, particularly fertiliser, power and exploration and production (E&P), helped take the KSE-100 to the intra-day high of 75,284.74 towards the close of trading. The bourse closed with gains of over 150 points.
