Pakistan's benchmark KSE-100 index hit an all-time high after the announcement of the $7 billion IMF bailout deal today. Economic indicators such as inflation, exports and remittances are also showing significant improvement as well. Speaking to reporters after the IMF deal, the Fund Managing Director Kristalina Georgieva acknowledged progress made by Pakistan. She said "The economy is on the sound path. Growth is up and inflation is down". The KSE-100 index rose in early trade to a record high of 82,905.73 points, before giving up those gains later in the day to close 0.7% down at 81,657. It still represents an annual gain of nearly 100%.
 |
| Pakistani Stock Market Outperforms Asian Peers. Source: Bloomberg |
Pakistan rupee has remained essentially stable at around Rs. 277 to a US dollar over the last year. Inflation has come down from 37% last year to less than 10% this year. Exports have climbed 10.54% ($2.921 billion) to $30.645 billion during the fiscal year 2023-24 compared to $27.724 billion in the corresponding period of 2022-23. Overseas workers' remittances have surged 44% to $5.94 billion in the first two months (July-August) of the current fiscal year 2024-25, compared to the same period last year. Current account deficit has declined to $681 million in FY24 from $3.275 billion in FY23. The budget deficit for the 2023–2024 fiscal year has been reduced to 6.8% of GDP from 7.7% in the previous year.
The stock market gains are driven primarily by the increasing profitability of the firms making up the index, in addition to improvement in macroeconomic indicators. The companies listed on Pakistan’s KSE-100 Index have reported their highest-ever earnings of Rs1.7 trillion in FY24, marking a 25% year-on-year increase from Rs1.3 trillion in FY23. In US dollar terms, profits after tax (PAT) rose 10% to $5.8 billion during the same period, according to data compiled by brokerage firm Topline Securities. Dividend payouts soared 30% as banking, fertilizer, and cement sectors led growth, according to media reports.
Pakistan has a long tough road ahead to carry out the reforms promised to the IMF in the latest bailout deal. Renegotiating unsustainable IPP (Independent Power Producers) contracts and carrying out long-delayed privatization of state-owned enterprises to reduce major drain on the taxpayers will not be easy, Boosting tax collection is not easy either. Offering incentives for savings, investments and exports while reducing budget deficits is a difficult feat. It will take a lot of fortitude, finesse and political will to get the results to improve the economy. Pakistani leaders' biggest challenge is to find a way to grow the economy to create enough jobs for the country's growing working age population. Failure to do so could cause major social unrest in the nuclear-armed country of 240 million people.
Related Links:
Haq's Musings
South Asia Investor Review
Why Hasn't Pakistan Economy Grown Faster the 5% Average Since 1960s?
Pakistan to Swallow IMF's Bitter Medicine
Agriculture: A Bright Spot in Pakistan's Economy
Following the Money: Insights into Pakistan Budget 2024-25
Pakistanis Consuming More Calories, Fruits and Vegetables
Pakistan Stock Market is World's Best Performing in 2024
Pakistan's Rural Economy
Pakistan Among World's Largest Food Producing Countries
14 comments:
I guess this isn't the first time the Pakistani stock markets have hit a "high" after a prolonged period of uncertainity about an IMF bailout. And it may not be the last time either, though every political setup in Islamabad who have signed up for an IMF bailout earlier have made unfulfilled claims and unrealized hopes of that bailout being the last the country needs to endure. Meanwhile, a few months back India's stock markets rose higher than the Himalayas on expectations of Modi govt sweeping the general elecions, and then plunged deeper than the oceans after results started showed him falling short of a majority, only to recover later when he managed to cross the half-way mark on the crutches provided by regional allies. If stock markets abhor something, it is instability and uncertainity. Beyond that its more of a merry ride that goes up and down on a whim, and is no reliable indicator of the underlying health of an economy. A country that is perpetually on life support from IMF can have its stock markets perform "better" over a period than far more stronger and stable economies (Pakistan and India), just as a country with a smaller and lesser industrialized economy can grow "faster" over a period than a neighbouring counterpart that is 6 times larger (India and China).
As you have mentioned, the structural weaknesses ailing Pakistan's economy go deep and requires sustained reforms that may come with political costs for the ruling setup, and the pertinent question is whether the current setup in Islamabad would show the courage and will to pursue them even at the risk of resentment from its votebanks and financial backers, or it would choose to kick the can down the road as its predecessors have done.
"Pakistani leaders' biggest challenge is to find a way to grow the economy to create enough jobs for the country's growing working age population. Failure to do so could cause major social unrest in the nuclear-armed country of 240 million people."
Why would that Pakistani nukes matter in this context? Are you suggesting that a major social unrest or instability in Pakistan could result in its nuclear arsenal falling into the hands of non-state actors?
Shehbaz lauds army chief for role in securing IMF deal
https://www.dawn.com/news/1861872/shehbaz-lauds-army-chief-for-role-in-securing-imf-deal
"Months ago, Finance Minister Muhammad Aurangzeb had made a similar statement, saying that China, Saudi Arabia and the UAE are crucial in helping Pakistan secure its IMF deal due to their potential to extend the maturity in debt owed to them."
"PM Shehbaz said that chief of the army staff himself went to a brotherly country to tell them that Pakistan’s IMF time is coming soon, and asked for their support."
Evidently, Pakistan is a nuclear-armed nation that needs a foreign diplomatic trip by its Army Chief to "friendly" and "brotherly" countries to secure to an IMF bailout. And here I am, an Indian, who needs to Google to find out who our Army Chief is!
Honestly, I am not exaggerating when I say that I do not know who India's current Army Chief is. He is hardly ever seen in the news. (The late Bipin Rawat was an exception.) Despite similarities in language, culture, societal and developmental issues, the military's oversized role in politics and economy of Pakistan is something I have never found easy to relate to as an Indian.
Okay, here is another.
COAS assures traders of road repairs, tariff cut
https://www.dawn.com/news/1861659/coas-assures-traders-of-road-repairs-tariff-cut
"Chief of the Army Staff (COAS) General Asim Munir has assured Karachi’s businesspersons of a reduction in industrial electricity tariff and repairs of roads in trading areas, according to a businessman with knowledge of the matter."
Doesn't Pakistanis see any oddity in their COAS being involved in such matters that have nothing remotely to do with their constitutional role in defending the country's borders? I can understand the military's dabbling with politics, but such open involvement in economic policy, electricity tariff and road repairs is beyond my comprehension. Its quite intriguing. Perhaps you can enlighten me why this is so?
Pakistan Economy Grows 3.07% Buoyed by IMF Loan, Lower Rates
Gross domestic product rose 3.07% in the three months to June from a year ago, the Pakistan Bureau of Statistics said Monday. That compares with a forecast of 2.7% in a Bloomberg survey of economists and a revised print of 2.36% in the January-March period.
https://www.bnnbloomberg.ca/business/international/2024/09/30/pakistans-economy-expands-307-buoyed-by-imf-loan-lower-rates/
-----
Pakistan’s economy grew faster than expected last quarter as funds from the International Monetary Fund and lower interest rates buoyed activity.
Gross domestic product rose 3.07% in the three months to June from a year ago, the Pakistan Bureau of Statistics said Monday. That compares with a forecast of 2.7% in a Bloomberg survey of economists and a revised print of 2.36% in the January-March period. For the financial year that ended in June, growth was revised to 2.52% from a reading of 2.38% earlier.
Pakistan was locked in a cycle of overlapping political and economic crisis that drove the nation close to default last year, but funds from multilateral lenders and loans from friendly countries have helped in stabilizing the country.
Foreign exchange reserves have strengthened from previously critically low levels, import and currency restrictions that hurt industrial activity have eased. Inflation has also cooled, helping monetary authority to lower borrowing cost by 450 basis points since June this year.
Last week, the government secured a final approval from the IMF for a fresh $7 billion loan program, that will bring certainty over financing over the next few years. The nation faces about $26 billion in loan repayments in the fiscal year started July.
The agriculture sector expanded 6.76% during the quarter on the back of a bumper wheat crop, while services sector expanded 3.69%, the data showed.
Prime Minister Shehbaz Sharif’s government has pledged to achieve a sustained growth by undertaking structural reforms in the economy. His administration forecasts an expansion of 3.6% in the year through June 2025.
Pakistan's Annual Consumer Price Inflation Slows to 6.9% in September
https://money.usnews.com/investing/news/articles/2024-10-01/pakistans-annual-consumer-price-inflation-slows-to-6-9-in-september
ISLAMABAD (Reuters) - Pakistan's annual consumer price inflation slowed to 6.9% in September, data showed on Tuesday, the lowest in more than three years, as the government seeks to implement IMF conditions that many households fear will hit them hard financially.
Annual inflation had slowed the previous month to 9.6%, the first single digit reading in more than three years.
Tuesday's data from the Pakistan Bureau of Statistics also showed that the monthly consumer price index in September stood at -0.5%.
"Due to aggressive monetary tightening, SBP (State Bank of Pakistan) has achieved in bringing inflation below 7% one year ahead of target," said Mohammad Sohail, chief executive officer at brokerage Topline Securities.
Pakistan's central bank has cut interest rates three times this year, saying it is confident that inflation is in check after it previously lifted rates to an all-time high of 22%.
In an economic outlook published last week the finance ministry said it expected annual inflation to decrease to 8-9% in September and October.
The International Monetary Fund approved a $7 billion loan programme for Pakistan last month that includes tough measures such as higher taxes on farm incomes and electricity prices.
The prospect of such moves has spurred concerns among poor and middle-class Pakistanis about higher prices after years of soaring inflation despite the recent downward trends.
Pakistan Is Only the Beginning of the Cheap Solar Revolution
By Ryan Cooper, managing editor at The American Prospect, and author of the book "How Are You Going to Pay for That?: Smart Answers to the Dumbest Question in Politics."
No need for expensive imported fuel when your energy is coming from the sun.
https://heatmap.news/economy/pakistan-solar
Pakistan imported a whopping 13 gigawatts of solar panels, mostly from China, in just the first half of 2024, mostly for rooftop installations for homes and businesses. That’s a mind-boggling amount of new solar for a country that only had about 50 gigawatts of installed generation capacity in total in 2023.
----------
Fuel imports are one of the largest expenses for even prosperous countries. For places like Pakistan, they are a punishing economic drain. Paying for vast amounts of imported coal, gas, and oil in scarce foreign currency is hard enough in good times, but it’s disastrous when one’s currency has depreciated by about 40% over two years.
Dirt cheap solar power could ameliorate or solve many of these problems at a stroke. Panels are now so cheap, even Pakistan can afford to import them by the millions — an expense, yes, but a one-time one. And while solar is inherently intermittent, and therefore not a solution to Pakistan’s reliability problems, batteries are also plummeting in price — down about 90% between 2010 and 2023 — and can help balance out supply. Cheaper batteries also mean cheaper EVs, with (as usual) Chinese models coming out at bewilderingly low prices. And because Pakistanis mostly drive motorcycles (often manufactured domestically) over relatively short distances, electrifying the personal vehicle fleet there will be far cheaper than in America or Europe; vastly smaller batteries require vastly simpler charging infrastructure.
If all goes well, this will free up vast amounts of economic capacity for Pakistan to invest in domestic development. Businesses will have stable, reliable power supplies that will justify more investment. Households will be able to upgrade their insulation, install heat pumps, and generally spend more on things other than energy. The government will be able to upgrade legacy transmission lines to accommodate solar production from the remaining hydro and nuclear plants.
Finally, of course, there is the climate benefit. Pakistan is one of the countries most threatened by climate change. Summer heat waves are bad and getting worse, to the point where murderous wet bulb events are increasingly likely. Catastrophic warming-fueled storms in 2022 caused the worst flooding in the country’s history, inundating about a third of Pakistan’s land area, killing nearly 2,000 people and causing billions of dollars in damages.
In short, a path to economic development will be opened. It is by no means guaranteed, but it will be a heck of a lot easier than trying to dig out from under the debt mountain of the collapsing coal-powered system. Look around the developing world and you’ll find there are a great many nations in similar situations.
Arif Habib Limited
@ArifHabibLtd
Tax collection increased by 32% YoY to PKR 1,100bn during Sep’24
Tax collection for the month of Sep’24 increased by 32% YoY to PKR 1,100bn against a target of PKR 1,098bn. On MoM basis, tax collection increased by 38% in Sep’24
During 1QFY25, FBR collected revenue of PKR 2,556bn, up by 25% YoY. The collected amount is PKR 96bn short than the target of PKR 2,652bn.
https://x.com/ArifHabibLtd/status/1840975573146890642
Good news, Brofessor sb. Solar power is indeed a blessing and the fact that Pakistan has zillions of hectares of barren wasteland blessed with ample sun and wind is a gamechanger if it can be utilised. Energy and food are two of Pak's large and unnecessary imports. Solar power and even bringing up the productivity of farmlands to Indian Punjab standards would wipe out much of the CAD. Regards
See new posts
Conversation
Arif Habib Limited
@ArifHabibLtd
KSE100 Index recorded its highest-ever closing at 82,722
KSE-100 index went up by 755 points (+0.92% DoD) to close at 82,722 pts.
https://x.com/ArifHabibLtd/status/1841801335013859417
---------------------
Arif Habib Limited
@ArifHabibLtd
AHL reported that this surge in sales is attributed to rising demand alongside a notable decline in the prices of Motor Spirit (MS) and High-Speed Diesel (HSD), which fell by 20.19% and 20.06% year-on-year, respectively.
https://x.com/ArifHabibLtd/status/1841701062866051564
Petroleum product sales surge 20% in September fueled by increased demand
https://profit.pakistantoday.com.pk/2024/10/02/petroleum-product-sales-surge-20-in-september-fueled-by-increased-demand/
Pakistan's petroleum consumption hits 1.27 million tons, driven by falling prices and robust petrol and diesel offtake
Petrol sales saw a remarkable 22% year-on-year rise, totaling 0.63 million tons in September 2024, up from 0.52 million tons the previous year. Meanwhile, HSD dispatches surged by 25% year-on-year, reaching 0.49 million tons in the same month.
Conversely, Furnace Oil (FO) sales experienced an 18% decline, dropping to 0.07 million tons due to diminished demand for FO in power generation, compared to 0.08 million tons in September last year.
On a month-on-month basis, petroleum product offtake increased by 5% from August’s 1.22 million tons, attributed to lower demand in August due to heavier rainfall.
For the first quarter of FY25, total petroleum product sales fell by 3% year-on-year to 3.68 million tons, compared to 3.81 million tons in the same period last year. While sales of HSD and FO declined, petrol sales remained stable, with volumes recorded at 1.85 million tons for petrol, 1.42 million tons for HSD, and 0.21 million tons for FO.
Company-wise, Pakistan State Oil (PSO) reported an 8% increase in offtake for September 2024, totaling 0.55 million tons. Additionally, HASCOL and Shell Petroleum saw substantial growths of 76% and 17% year-on-year, respectively, while Attock Petroleum Limited (APL) experienced an 8% decline in dispatches.
Dear Sir
Thanks for sharing this, Sir have you seen the recent speech of the foreign minister of India Mr. Jaishanker in UNGC? He says that Pakistan has nothing good to do and offer, he further said that the only GDP( Gross Domestic Product) which Pakistan has is radicalization and the only thing Pakistan exports is terrorism.
It clearly shows ignorance on the part of Indian side but the question is Sir that don't the authorities in Pakistan specially the prime minister of Pakistan and his delegations have enough knowledge about how to respond to these Indians?
Doesn't the government of Pakistan even knows that recently the professors of economics in the universities of America and in other western countries have said that it is not just GDP which shows real progress and development of a country but in fact it is GDP per capita which shoes real development and progress of a country . In inclusive development index released by WEF each year, India is ranked well below Pakistan at number 162 or 163 as far as I remember and Pakistan is ranked at number 148. This index clearly shows that no matter how big the economy of India is and how fast it's GDP is growing but inspire of that their government has failed to translate the economic growth of their country for the well being and welfare of its people unlike Pakistani authorities that have performed much better than India in this aspect relatively.
Dear Sir
Their are many MPs or MNAs in UK and with each MP and MNA their is a researcher who guides them on several matters specially on the matters of economy.
Indian government has far as I know has board of economic advisory Council and the Chief of economic advisory Council guides Indian PM on matters of economy and it's decisions. Does government of Pakistan has any such position?
Danish shipping giant Maersk has announced a significant $2 billion investment in Pakistan’s port and transport infrastructure over the next two years. This investment aims to contribute to the country’s infrastructure development and drive economic growth, according to a state-owned news agency.
https://www.globaltrademag.com/maersk-commits-2-billion-to-boost-pakistans-port-and-transport-infrastructure/
As part of this initiative, Pakistan’s Minister for Maritime Affairs, Qaiser Ahmed Sheikh, is scheduled to visit Denmark this month to sign a Memorandum of Understanding (MoU) between Maersk Shipping Company and Karachi Port Trust.
This announcement follows the recent commitment by Abu Dhabi Ports Pakistan CEO, Khurram Aziz Khan, who unveiled a $250 million investment in Karachi Port over the next decade during a meeting with Prime Minister Shehbaz Sharif. Khan also outlined plans for a $130 million investment in a state-of-the-art multipurpose terminal, expected to be completed within two years. Enhancements to the container terminal facility at Karachi Port will include automated gates, an expanded berth, a crane rail track, and additional infrastructure upgrades.
UNGA is merely a talk shop and I don't think anyone over there bother to listen to (or care about) the barbs that Indians and Pakistanis routinely trade against one another. When Pakistan pokes India about Kashmir or its treatment of Muslims, India returns the favour by highlighting Pakistan's history of sponsoring and harbouring jihadi terror groups and its leaders and the sorry state of its economy. Having said that, it is reality that a country that teeters on the brink of bankruptcy every three years, and then barely managing to scrape it through by IMF bailouts and pestering "brotherly nations" for cash handouts cannot command respect or influence among the international community. The social development indicators and per-capita numbers of both India and Pakistan are equally pathetic (even if one country scores a bit higher or lower than the other in some indices), but the saving grace for India is that its a far more stable and faster growing economy with stronger macro-economic fundamentals and more prudent financial management.
Ahmed, perhaps a more pertinent question that needs to be answered first would be: who really runs the show as regards to the economic policy matters these days in Pakistan (besides IMF, that is)?
Is it (a) the figurehead Prime Minister, (b) the Finance Minister, (c) the acting Foreign Minister (and ex-Finance Minister) who does his best to sideline and undermine the afore-mentioned Finance Minister, or (d) the COAS himself?
Post a Comment