KARACHI: Pakistan’s stocks closed at a record high on Monday as investors
binge-bought, cheering a new deal reached with the International Monetary Fund
(IMF) believed to bail out the battered economy, traders said.
Pakistan and the IMF struck a staff-level agreement (SLA) for a 37-month-long,
$7 billion loan programme with tough measures such as raising tax on farm
income.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Shares Index surged
1211.51 points or 1.52% to reach 81,155.60 points compared to the previous
close of 79,944.10 points.
The SLA caps negotiations that started in May after Islamabad completed a short-
term, $3 billion programme that helped stabilise the economy, avert a sovereign
debt default and set challenging revenue targets in its budget to get IMF approval.
The benchmark share index has almost doubled since Pakistan signed its last SLA
for the $3 billion standby arrangement, and is up more than 10% since Pakistan
presented its annual budget.
“The market has grown used to the IMF deal being a highly politicised, news
event and the IMF asking Pakistan to do more. This time it was a silent agreement
between the government and the IMF staff,” said Adnan Sami Sheikh, assistant
vice president of research at Pak Kuwait Investment Company.
EFG Hermes Pakistan’s CEO Raza Jafri, while speaking to Geo.tv, said the
market is reacting positively to the SLA with the IMF for a $7 billion agreement
spanning over 37 months.
“This is expected to help support macroeconomic stability and help Pakistan
conduct necessary reforms in areas such as taxation, energy, and more equitable
spending between the centre and the provinces,” said the analyst.
Analyst Ahsan Mehanti at Arif Habib Corp said the stocks reached an all-time high
as investors weighed the SLA with IMF on the $7 billion Extended Fund Facility.
“Speculation on easing SBP (State Bank of Pakistan) rates played a catalyst role
in bullish activity of the earnings season,” he added.
The stocks had Friday witnessed a volatile session after the decision of the
Supreme Court on reserved seats, decreasing by 48.26 points or 0.06% to close at
79,944.10 points.
The new agreement introduced increased tax on agricultural incomes,
underscoring the need to increase government revenue and reduce recurrent
deficits to win the lender’s approval.
The IMF said it had got assurances from Pakistani authorities – provincial and
federal – that they would bring taxation on agricultural incomes on par with
corporate and other tax rates.
Agricultural income has historically been taxed much lower than other sectors,
despite contributing 23% to the GDP, employing 35% of the labour force, and
bringing in an annual income of around 9 trillion Pakistani rupees ($32.37
billion).