Pakistan’s main stock index hits year-end high amid optimism over budget, IMF outlook
KARACHI: Pakistan’s stock market ended fiscal year 2024 on a high with the main stock index hitting 78,444 points on Friday, its highest ever close on the final day of the fiscal year amid renewed investor optimism that Islamabad would secure fresh loans from the International Monetary Fund (IMF).
Pakistan’s parliament on Friday passed the government’s tax-increasing finance bill for the next fiscal year starting July 1, 2024. Finance Minister Muhammad Aurangzeb presented the budget on June 12, which included an aggressive tax revenue target of 13 trillion rupees ($46.55 billion), about 40 percent higher than the target set for the current fiscal year.
The new budget places a heavier burden on Pakistan’s salaried workers through higher direct taxes on their incomes, while taxes on textile and leather products and mobile phones are also raised to 18 percent. But analysts say the tax bill meets the IMF’s conditions for Pakistan to secure a new financial rescue package.
Pakistan’s stock market recovered last year after the South Asian country secured a $3 billion short-term loan of last resort from international lenders, helping it avoid a sovereign debt default.
“The KSE-100 index increased by 36,992 points or 89.2 percent year-on-year in FY24 to close at 78,445 points,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News, noting that this was the largest increase in percentage terms since FY2003.
However, the market ended the last trading day of the last fiscal year on a bearish note with the index falling 83 points.
“The stock price closed lower due to fiscal year-end pressures and concerns about expected rise in CPI inflation in June 2024 and large overseas outflows due to repatriation of profits of $918 million in May 2024,” explained senior equity analyst Ahsan Mehanti.
Pakistan’s currency also stabilised during the last fiscal year, with the Pakistani rupee appreciating 2.8% annually against the US dollar. The strengthening of the local currency is welcome, given that the Pakistani rupee has been sluggish for the past three years.
The currency appreciation was mainly due to the decline in current account deficit, improvement in foreign inflows into Pakistan, narrowing gap between open and interbank rates and other administrative measures taken by the government.
According to official data, inflation, which surged to a record high of 38% in May 2023, has fallen sharply to 11.8% in May 2024.
However, while the inflation outlook for June 2024 has increased slightly compared to the previous month, it remains well below the level of June 2023. The increase is mainly due to higher prices of fresh food due to the Eid al-Adha festival, according to the monthly report released by the Ministry of Finance.
“FY2024 is expected to end on a stable economic path with improving macroeconomic indicators,” the Finance Ministry said in a June 2024 report.
Confidence among economic actors is being restored due to easing inflationary pressures, stabilization of the external balance and exchange rate, fiscal consolidation and a gradual recovery in industrial activity, the report added.
