By Ali Imran
ISLAMABAD: The stock market surged to an all-time high on Wednesday, continuing its bullish momentum as investor confidence remained strong.
The market gained traction following optimism surrounding progress in resolving circular debt issues.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index surged by 972.93 points, or 0.83%, to close at 117,974.02, up from the previous session’s 117,001.09. The index hit an intraday high of 118,243.63, while the session’s lowest point was recorded at 116,882.80.
According to Arif Habib Limited, this was the all-time high level at close of session for the KSE-100 Index, a milestone that reflects the market’s resilience amid broader economic recovery efforts.
The rally was largely driven by optimism surrounding the potential resolution of circular debt and a cash infusion into the energy sector, which has been a key concern for the economy.
“Potential resolution of circular debt and cash infusion into the energy chain are driving today’s market gains,” said Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company.
In the energy sector, Pakistan’s furnace oil exports reached a record 933,000 tonnes in the first eight months of the current financial year, as the country continues phasing out its use due to high costs and environmental concerns.
However, fuel oil exports declined to 39,000 tonnes in February, down from 190,000 tonnes in January. Industry sources attributed the drop to an accumulation of furnace oil in local refineries, as buyers prefer bulk purchases.
Power generation data for the July-February 2024 period revealed that furnace oil now plays a minimal role in Pakistan’s energy mix. The government’s new refining policy aims to cut high-sulphur furnace oil production by 78%, reducing daily output from 15,500 metric tonnes to 3,400 metric tonnes once planned upgrades are completed.
Meanwhile, Pakistan’s information technology (IT) exports maintained their upward trajectory, recording $305 million in February, reflecting a 19% year-on-year (YoY) increase. However, exports declined by 3.0% on a month-on-month (MoM) basis. This marks the 17th consecutive month of YoY growth in IT exports, which reached $2.48 billion in the first eight months of FY25, up 26% from the previous year.
Analysts at Topline Securities attributed the YoY increase in IT exports to several factors, including an expanding global client base for Pakistani firms, particularly in the Gulf Cooperation Council (GCC) region.
Additional factors included the State Bank of Pakistan’s (SBP) policy changes allowing IT firms to retain a higher portion of their foreign currency earnings and increasing stability in the rupee, which encouraged exporters to bring a larger share of their profits back to Pakistan.
Investors responded positively to reports that the IMF approved Pakistan’s request to borrow Rs1.25 trillion ($4.5 billion) from domestic banks to help reduce its mounting circular debt without adding to the official public debt stock.
This agreement, finalised during policy discussions between Pakistani authorities and the IMF, provides much-needed fiscal breathing room while addressing inefficiencies in the power sector.
To finance these loans, Pakistan will continue levying a Rs3 per kilowatt-hour Debt Service Surcharge (DSS) on electricity bills, projected to generate over Rs300 billion annually. The government also plans to retire Rs1.5 trillion in circular debt through a combination of bank borrowings and funds from the surcharge.
Additionally, renegotiations with Independent Power Producers (IPPs) are expected to yield savings of Rs463 billion by lowering capacity payments and adjusting tariff structures.
The IMF’s approval of this debt restructuring underscores its commitment to supporting Pakistan’s structural energy reforms under the ongoing $7 billion Extended Fund Facility (EFF). Government officials have assured the Fund that enhanced collection practices and improved operational efficiencies will prevent future debt accumulation.
Power Minister Awais Ahmed Khan Leghari commented that while the government has not yet received a formal decision, he remains optimistic that the IMF has approved the borrowing plan. He clarified that the DSS will remain unchanged, staying below Rs3 per unit as part of the final term sheet negotiations with banks.
The IMF has also shared a draft of the Memorandum of Economic and Financial Policies (MEFP) with Pakistani authorities, another step toward finalising the ongoing loan review process.
The Fund has indicated a willingness to provide some relief for the construction and real estate sectors, though it remains unclear whether such incentives will be implemented immediately or in the next fiscal budget.
Pakistan and the IMF team concluded discussions last week without securing a staff-level agreement (SLA), which is a prerequisite for Islamabad to formally request the next $1 billion tranche under the EFF. As a result, additional policy negotiations are expected in the coming days before the IMF’s Executive Board reviews Pakistan’s case.
The PSX continued its rally on Tuesday, reflecting the market’s growing confidence in ongoing economic reforms. The benchmark KSE-100 Index climbed 801.50 points, or 0.69%, to close at 117,001.09, up from the previous close of 116,199.59. The index reached an intraday high of 117,202.09, while the lowest level recorded during the session was 116,490.82.
