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Stock brokers monitor the share market prices at a booth, during a trading session at the Pakistan Stock Exchange, in Karachi, July 3, 2023. — Reuters
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The stock market maintained its positive pace on Tuesday, which closed 801 points more as investors’ confidence in the circular loan resolution and the stable progress in the International Monetary Fund (IMF) program increased.
The SE -100 index of the Pakistan Stock Exchange (PSX) benchmark increased by 801.50 points or 0.69 %, which closed at 117,001.09, which is close to 116,199.59.
The index touched the intra -day height of 117,202.09, while the lowest level recorded during the session was 116,490.82. Especially in the energy sector, there was a strong interest in buying, as investors responded to the wider implications of potential improvement in cash flow and government loan reorganization efforts.
“Hope about circular loan solutions, improve energy China’s cash flow and the success of the International Monetary Fund (IMF) program,” said Samiullah Tariq, head of the Pak Kuwait Investment Company’s research.
According to officials familiar with the matter, in a significant development, the IMF has given Pakistan the option of borrowing Rs 1.25 trillion ($ 4.5 billion) from domestic banks, so that according to the officials familiar with the matter, it is for the growing circular debt without increasing its public debt stock.
The agreement came after a policy debate between Pakistani authorities and the IMF, during which Islamabad presented a six -year roadmap to manage the circular loan of Rs 2.4 trillion in the power sector.
The approval of the IMF gives the government excessive financial space, as the new loan will not be included in the country’s government loan data. To pay for these loans, Pakistan will continue to impose Rs 3 per kilowatt -hour loan service surcharge (DSS) on electricity bills, which is expected to generate more than Rs 300 billion annually.
Under this scheme, the government plans to retire Rs 1.5 trillion in circular loan, which combines bank loans and surcharge through the revenue. In addition, authorities expect a savings of Rs 463 billion after re -negotiation with the Free Power Create (IPP), which reduces capacity payment and adjusts the tariff structure.
The IMF’s willingness to adjust the reorganization of the IMF reflects its extensive support for reforming Pakistan’s energy sector under the Billion 7 billion Extension Fund Facility (EFF). Officials have said that Pakistan has assured the fund that the collection method and operational eligibility have been improved, which will prevent the re -emergence of circular debt in the future.
Commenting on the matter, Minister of Power Awas Ahmed Khan Legree said that the government has not yet received any formal decision, but he is hopeful that the IMF has approved the borrowing plan. He further made it clear that there will be no change in the DSS and will be part of any final term sheet with the banks, in which the surcharge will remain below Rs.
Meanwhile, the IMF shared a draft of the Memorandum of Economic and Financial Policy (MEFP) with Pakistani authorities, which has identified another step towards finalizing the ongoing debt review process. The fund has also indicated its consent for providing some relief for the construction and real estate sectors, though it is not certain that such privileges will be implemented immediately or included in the next financial budget of 2025-26.
The Pakistan and the IMF team last week concluded the talks without receiving the staff level agreement (SLA), which is a prerequisite for a formal request for Islamabad to receive the next $ 1 billion pledge under the EFF. The delay means that the executive board of the IMF will have more policy talks in the coming days to reach the consensus before reviewing the issue of Pakistan.
PSX started on a strong week’s note, continuing the rapid pace observed in the previous sessions. On Monday, the benchmark KSE-100 Index closed at 663.42 points or 0.57 %, at 116,199.59 points, more than 115,536.17 points listed in the first session.
During the Monday meeting, the highest index level was 116,626.83, while the lowest level was recorded at 115,883.22 points.
