Investors Celebrate Pakistan's Continuing Economic Recovery

[Riaz Haq]

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

Pakistan Sets New Record For Rice Exports

Riaz Haq's Youtube Channel

PakAlumni Social Network

[Riaz Haq]

Textile exports jump to $7.6bn - Business - DAWN.COM

https://www.dawn.com/news/1879463


ISLAMABAD: The textile and clothing exports increased 10.51 per cent in the first five months of the current fiscal year, Pakistan Bureau of Statistics data showed on Tuesday.

After contracting 3.09pc in the first month of 2024-25 in July, the textile exports maintained a bullish trend with robust growth of 13pc in August, 17.92pc in September, 13.11pc in October, and 10.81pc in November, respectively.

Many experts believe it would take a lot of struggle for the sector to compete with regional rivals due to the implementation of harsh taxation measures in the current fiscal year. However, the disruption in supply from Bangladesh has also boosted demand for Pakistani garments.

Textile and clothing exports have been static for the last two years despite having a $25 billion installed capacity due to structural issues, according to textile players.

[Riaz Haq]

Pakistan Notches Best Stock Rally Since 2002 on Growth Momentum


https://finance.yahoo.com/news/pakistan-notches-best-stock-rally-05...

Pakistani stocks recorded their biggest annual gain in 22 years, outperforming nearly all markets worldwide as economic conditions improve and traders bet on more interest-rate cuts.
The South Asian nation’s benchmark KSE-100 Index rose about 84% this year. That makes the index the second-best performer in local currency terms among the more than 90 tracked globally by Bloomberg.
Country watchers expect the boom to continue next year, bolstered by likely more cuts in borrowing costs and easing inflation, while a loan program from the International Monetary Fund helps to stabilize the economy. Pakistan’s economy expanded more slowly than expected last quarter, but has broadly recovered from 2023 when it narrowly escaped a default.
“This year was all about the return of domestic mutual funds to the market following a much steeper cut in rates than expected,” said Bilal Khan, head of international equity sales at Arif Habib Ltd. “Next year, we will see notable inflows from foreigners as investors will not be able to ignore allocating to Pakistan given the performance.”

[Riaz Haq]

Pakistan central bank cuts key rate to 12% amid easing inflation | Reuters

https://www.reuters.com/markets/rates-bonds/pakistan-central-bank-c...

Pakistan central bank cuts key rate by 100 bps to 12%
Inflation forecast to ease, core inflation stays high
Maintains full-year GDP growth forecast at 2.5%-3.5%
Outlook for current account balance has improved
IMF to conduct first review of $7 bln loan in March
KARACHI, Pakistan, Jan 27 (Reuters) - Pakistan's central bank cut its benchmark interest rate by 100 basis points to 12% on Monday, in line with expectations, as inflation eases and growth looks to set to pick up after 1,000 basis points of rate cuts over the last six months.
The State Bank of Pakistan has slashed rates from an all-time high of 22% last June, one of the most aggressive moves among central banks in emerging markets and exceeding its 625 bps of rate cuts in 2020 during the COVID-19 pandemic.
The bank's governor Jameel Ahmad said at a press conference that the inflation rate would ease further in January but noted core inflation remained elevated. He forecast full-year inflation in the year to June would average 5.5%-7.5%.
"Considering these developments and evolving risks, the Committee viewed that a cautious monetary policy stance is needed to ensure price stability," the bank's monetary policy committee said in a statement accompanying the decision.
"The real policy rate needs to remain adequately positive on a forward-looking basis to stabilize inflation in the target range of 5 – 7 percent," it added.
Fourteen of 15 analysts surveyed by Reuters expected the central bank to cut its key rate by at least 100 bps mainly due to weaker inflation.

-----------------------
The bank maintained its forecast of full-year GDP growth at 2.5%-3.5% and predicted faster growth would help boost the country's previously struggling foreign exchange reserves.
"The improved current account outlook, along with the expected realization of planned financial inflows, is likely to increase the SBP's FX reserves beyond $13 billion by June 2025," the bank's statement said.
Pakistan posted a current account surplus of $0.6 billion in December, bringing the cumulative surplus to $1.2 billion for the first half of the current fiscal year, the bank said, adding the outlook for the current account balance had improved considerably.

[Riaz Haq]

China, Pakistan pledge to boost cooperation on infrastructure, mining projects | Reuters

https://www.reuters.com/world/asia-pacific/china-pakistan-pledge-bo...

HONG KONG, Feb 6 (Reuters) - China and Pakistan will upgrade and reconstruct Pakistan's railway network and further develop its Gwadar port, while Chinese companies can invest in the South Asian nation's offshore oil and gas developments, the official Xinhua news agency reported on Thursday.
The comments came as Pakistan's President Asif Ali Zardari visits China from February 4-8, where he will also attend the opening ceremony of the Asian Winter Games.
Chinese investment and financial support for Pakistan since 2013 have been a boon for the South Asian nation's struggling economy.

Pakistan and China recognised the importance of Pakistan's "Gwadar Port and agreed to fully unleash its potential as a key node for connectivity and trade," Xinhua said quoting a joint statement from the two countries.
Chinese-funded enterprises would be encouraged to "carry out mining investment cooperation in Pakistan" and cooperate in terrestrial and marine geological resources.

"Pakistan welcomes Chinese companies to participate in the development of offshore oil and gas resources in Pakistan."

Longtime Pakistan ally China has thousands of nationals working on projects grouped under the China-Pakistan Economic Corridor (CPEC).

The $65-billion investment is part of President Xi Jinping's Belt and Road Initiative, designed to Beijing's global reach by road, rail and sea.

[Riaz Haq]

Is Imran Khan losing momentum?

https://www.dw.com/en/taking-stock-of-pakistans-government-a-year-a...

Economic indicators improving
For years, Pakistan has been dealing with an economic crisis marked by high inflation, a depreciating currency and International Monetary Fund (IMF) bailouts.

However, there is some room for optimism this week after the Pakistan Bureau of Statistics reported year-on-year inflation came in at 2.4% ­— the lowest in nine years. This marks a significant decline from the 28.3% recorded in January 2024.

"One year after the February 2024 election, Pakistan's economy seems to have stabilized and this has certainly boosted the confidence of the current 'hybrid regime,'" said Rumi.

"Politicians in power have made arrangements to continue the current regime and have removed all the threats, in particular, the independent judges who may have questioned the act of the current hybrid order," he added.

Currently, Pakistan is benefiting from a $7-billion (€6.7-billion) support package from the IMF, which was granted in September, as it works toward economic recovery.

In January, Pakistan agreed to an unprecedented 10-year plan with the World Bank which will see $20 billion (€19.4 billion) worth of loans for the country's cash-strapped economy.

Last week, Pakistan's central bank reduced its benchmark interest rate by 100 basis points to 12%, reflecting the easing of inflation and the anticipated growth following a total of 1,000 basis points in rate cuts over the past six months.

The State Bank of Pakistan has significantly lowered rates from a peak of 22% in June, marking one of the most aggressive actions among central banks in emerging markets, surpassing the 625 basis points cut implemented in 2020 during the COVID-19 pandemic.

In December, Pakistan's consumer inflation rate was recorded at 4.1%, the lowest in over six years, aided by favorable base effects. This figure was below the government's expectations and a notable decrease from the multi-decade high of approximately 40% observed in May 2023.

'Path toward will not be easy'
Analyst Rumi said a stable path forward for Pakistan's democracy would require a "broad base consensus on the next election and how it should be held under a neutral election commission."

"Perhaps this quagmire can best be addressed through an early election, and history tells us that handling the current level of political instability would require an understanding of a free and fair election within the next two years," he said.

On healing political wounds, Kugelman said the "only way forward is dialogue."

"Talks [between government officials and Khan's aides] collapsed in recent days, but at least there was an effort to sit together. This offers something to build on for the future. Even with all the anger and ill will, the two sides have been willing to engage," he added.

Afzal agrees that Pakistan's opposing political parties need to bury the hatchet.

"The current level of political fighting will continue until there is some sort of reconciliation and political space allowed to the opposition — and that would be the right path forward for Pakistan and for its democracy — but the path toward will not be easy."
-----------------

Despite continued political protests carried out by PTI supporters, analysts contend that this has not been enough to move the needle, as the PML-N enjoys significant support from Pakistan's powerful military.

"A year after a marred election, the civilian coalition government, in partnership with the military, has consolidated control over the country," Madiha Afzal, a fellow at the Brookings Institution, told DW.

"Of course, it has come at quite a bit of cost — to the country's democracy, to the judiciary's independence, to people's freedom of speech and right to information — and its benefits are in question," she added.

Khan was removed from premiership in 2022 through a no-confidence vote in Pakistan's parliament.

[Riaz Haq]

Pakistan Reforms Report 2025 Launched

https://www.kron4.com/business/press-releases/ein-presswire/7843141...

Governance & Public Sector Reforms
- 150,000 federal workforce positions eliminated to reduce expenditures.
- 33% female representation mandated on government boards.
Economic & Financial Reforms
- Inflation reduced from 38% in May 2023 to 4.1% by December 2024.
- Foreign exchange reserves increased from $4.4 billion to $11.73 billion by the end of 2024.
- Helped maintain currency stability and prevent extreme fluctuations.
- GDP growth improved from 0.29% to 2.38% in the past year, projected to reach 3.5% in FY25.
- Trade deficit reduced from $27.47 billion to $17.54 billion in 12 months.
- Defined contribution pension reform expected to save Rs. 1.7 trillion over 10 years.
- Rs. 83 billion expected reduction in pension allocations for FY 2025–2026.
- Restored investor confidence; encouraging local and foreign investment.
- Averted a severe economic crisis through strategic intervention, through SIFC.
- Expanded crackdown on illicit trade through targeted illegal activities under the Afghanistan Transit Trade Agreement (ATTA).
- Addressed the influx of untaxed, smuggled goods into Pakistan.
Investment & Industrial Reforms
- 34 Memorandums of Understanding (MoUs) signed with Saudi Arabia, worth $2.8 billion.
- SEZ expansion and industrial policy reforms expected to boost exports and attract FDI.
- Business Facilitation Centers (BFCs) to ease regulatory burdens.
Security & Immigration Reforms
- Visa Prior to Arrival (VPA) facility granted to 120 countries; over 120,000 visas approved in 6 months.
- All madrassas must register within six months (new ones within a year).
- Madrassas are required to submit financial audits annually to ensure transparency.
- Encourages the inclusion of modern education subjects alongside religious studies in madrassas.
- Madrassas can register under either the Societies Act or the Ministry of Education.
- Creation of the National Forensics and Cybercrime Agency (NFCA) to tackle cyber threats.
- 1,600 Special Protection Unit (SPU) personnel deployed to safeguard non-CPEC projects.
- 100 surveillance cameras installed under the Islamabad Safe City Project.
- 973 officers recruited for the new Anti-Riot Force.
Digital Transformation & Cybersecurity
- National Forensics and Cybercrime Agency (NFCA) established.
- The Digital Case Flow Management System implemented in 178 federal courts, tracking 130,000 cases via SMS.
- AI-driven National Registration & Biometric Policy Framework launched.
- Introduced new policies to protect users from data breaches and cyber threats.
- Updates outdated cyber laws to align with global best practices.
- Strengthens laws against false, misleading, and harmful digital content.
- Establishment of Social Media Protection and Regulatory Authority for digital oversight.
- Adjustments made to penalties for fake news while

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
Remittances increased by 25% YoY to $ 3.0bn during Jan’25

Remittances by overseas Pakistani's increased by 25% YoY to USD 3.0bn during Jan'25 compared to USD 2.4bn during Jan’24. On MoM basis, remittances decreased by 3%.

In 7MFY25, remittances increased by 32%YoY to USD 20.8bn.

https://x.com/ArifHabibLtd/status/1888969491092062600

[Riaz Haq]

Pakistan, China sign $300mn MoUs in energy, coal, and cement sectors
Agreements include renewable energy projects, cement production, and coal gasification

https://profit.pakistantoday.com.pk/2025/02/06/president-zardari-wi...

The agreements, signed between Pakistani stakeholders and Chinese investors, aim to enhance the country’s industrial growth and energy sustainability.

The Energy Department of the Government of Sindh and Ming Yang Renewable Energy (International) Company Ltd. signed an MoU to advance renewable energy projects in the province.

Pakistan’s Ambassador to China, Khalil Hashmi, signed on behalf of the Ministry of Energy, while Ming Yang Renewable Energy Chairman Li Jianzhang represented the Chinese side.

The partnership will focus on wind and solar hybrid power generation projects, including a 75 MW facility in the Kotri/Nooriabad Industrial Area and a 350 MW plant in Jhimpir, Thatta.

In the cement sector, Thatta Cement Company Limited and Zhonggang Construction Group signed an MoU outlining plans for a new 5,000 t/d cement production line.

Additionally, the Sindh Government reached an agreement with MESKAY FEMTEE CG&M Pvt. Ltd. for a coal gasification and urea production plant in Pakistan, Gwadar Pro reported on Thursday.

The signing ceremony was attended by key officials, including Sindh Chief Minister Syed Murad Ali Shah, Senator Saleem Mandviwalla, Chief Whip of the Senate, Senior Minister of Sindh Sharjeel Inam Memon, Minister for Energy and Planning Syed Nasir Hussain Shah, Pakistan’s Ambassador to China Khalil Hashmi, along with senior government representatives, business leaders, and industry stakeholders.

[Riaz Haq]

Arif Habib Limited
@ArifHabibLtd
The auto sales numbers increased to 17K units, up by 65% MoM

Auto sales (Cars, LCVs, Vans, Jeeps & EVs) increased by 65% MoM to 17K units (+61% YoY) during Jan’25 (assuming SAZEW sold 500 units in Dec’24).
During 7MFY25, auto sales clocked in at 78.2K units up by 56% YoY.

https://x.com/ArifHabibLtd/status/1889280038668816746

[Riaz Haq]

Global funds turn to Pakistan as 84% stock rally set to extend


https://www.thenews.com.pk/print/1282136-global-funds-turn-to-pakis...

Some of the world’s top money managers are once again favoring Pakistan’s stocks after the market returns last year were among the best globally, reports Bloomberg.

From BlackRock Inc to Eaton Vance Corp, asset managers are warming up to the South Asian nation’s $50 billion market that handed investors 84 per cent returns in 2024. Attractive valuations and a stabilising economy have improved the outlook for local shares, with Intermarket Securities Ltd. predicting a gain of about 40 per cent for the main KSE-100 index this year.

“You don’t have to stretch your imagination to make an investment case for Pakistan,” said Steven Quattry, New York-based portfolio manager at Morgan Stanley Investment Management Inc. The rally has been supported by strong earnings growth, he said.

Pakistan’s stocks surged last year, helped by improving economic outlook and crucial loan deals with the International Monetary Fund. More recently, the nation’s current account balance has improved, and easing inflation spurred the central bank to cut rates.

The optimism is reflected in foreign fund allocations. The nation’s stocks had a 5.0 per cent weight in BlackRock Frontiers Investment Trust as of December, marking a return for the money manager for the first time since March 2022. Eaton Vance also reentered the market in the June quarter following a brief exit.

Legal & General Investment Management Ltd and Evli Fund Management Co have also raised holdings, according to data compiled by Bloomberg. The level of foreign investor interest at present is comparable to the peak years of 2014-2018, according to Mohammed Sohail, chief executive officer of Topline Securities Ltd.

Political Instability

Still, risks remain. The political environment is fragile, with former Prime Minister Imran Khan wielding power to mobilise nationwide protests from behind bars -- unrest that threatens to derail economic activity.

Economic challenges also persist. The nation fell 6.0 per cent short of its six-month tax collection target -- a key condition for its $7 billion IMF loan -- raising concerns about its ability to win the next tranche of the funding.

A downgrade in the nation’s status to frontier market status by FTSE Russell that took effect in September hurt sentiment, prompting foreigners to turn net sellers in the last three months of 2024.

Despite these headwinds, investors are bullish given the improving external finances. Foreign exchange reserves now cover more than two months of imports, inching closer to the IMF-prescribed levels. That’s an improvement from less than a month’s coverage before the IMF bailout in 2023.

“If Pakistan can manage its current account deficit, which they should be able to, we can see a multi-year rally in the market,” said Ruchir Desai, a fund manager at Asia Frontier Capital Ltd in Hong Kong.