Investors Celebrate Pakistan's Continuing Economic Recovery
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%.
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| 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.
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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/
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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.
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.
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.
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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.
@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