KARACHI: Pakistan’s currency, bonds, and stocks have rallied after the South Asian country managed to secure a much-needed $4.2 billion in funds within the last three days from the International Monetary Fund (IMF) and Gulf states, reflecting a boost in local and international investors' confidence in Pakistan, financial analysts said on Thursday.
Pakistan on Thursday received $1.2 billion from the IMF after the lender approved a crucial $3 billion bailout program that mitigated the looming risk of default. The IMF's funds are followed by $2 billion deposits from Saudi Arabia and $1 billion from the UAE which were deposited in Pakistan's central bank on Tuesday and Wednesday, respectively.
After the latest inflows, Pakistan's overall foreign exchange reserves are expected to hit the $13-14 billion mark from the $9.8 billion figure recorded on July 7, 2023. Pakistan's official reserves are expected to increase to $8-9 billion, which would be reflected in the central bank's data on Friday.
“Inflows from the IMF, Saudi Arabia, and the UAE have boosted the confidence of investors which was reflected through bullish sentiments in currency, bonds, and stock markets,” Samiullah Tariq, director of research at the Pakistan Kuwait Investment Company, told Arab News.
“Our currency has appreciated, the stock market has continuously rallied over the last six trading sessions while international bonds have also performed well and rallied," Tariq added.
Pakistan’s national currency has been under tremendous pressure for the past year as the country's foreign exchange reserves depleted to alarming levels and a high demand for dollars for import payments.
The rupee, which had depreciated to an all-time low at Rs298.93 on May 11, 2023 against the greenback and had been trading at the Rs285 mark in the interbank market, has recovered by 3.4% or Rs9.53 since the new IMF bailout program was announced.
Pakistan's national currency closed at Rs276.46 on Thursday, gaining by Rs1 against the greenback after Finance Minister Ishaq Dar announced Islamabad had received $1.2 billion in funds from the global lender.
However, Pakistan's stock market closed in red after the key stock index shed 247 points to close at 45,266 level, mostly due to investors' long-term concerns.
“The stocks closed lower on institutional profit-taking in over-bought scrips amid a weak earnings outlook,” Ahsan Mehanti, CEO of Arif Habib Corporation, told Arab News.
“Investor concerns for soaring external debt, tight monetary policy, further IMF disbursements conditional upon IMF reviews, and pending power sector circular debt reaching Rs2.64 trillion played a catalyst role in the bearish close," he explained.
Inflows from the IMF came as a sigh of relief for the South Asian country amid concerns it might default on its external financial obligations.
The finance minister said that the remaining $1.8 billion under the short-term loan program would be disbursed after two economic reviews carried out by the IMF.
During a televised address to the nation on Thursday, Prime Minister Shehbaz Sharif said the dark clouds of default looming over the South Asian country had been purged, urging the nation to work towards economic revival and "break the begging bowl."
