After the International Monetary Fund (IMF) authorized the disbursement of a $1.1 billion loan tranche, the stock market surged on Tuesday morning.
Shortly after trading started, the benchmark KSE-100 index started to rise. By 9:38am, it had risen 436.11 points, or 1.03 percent, to reach 42,940.45 points.
Raza Jafri, Head of Research at Intermarket Securities, said the KSE-100 index kept bouncing back strongly from intraday lows yesterday and “cheered up” at the restart of the IMF program.
The IMF program is not a surprise, so some profit-taking may occur, but overall, there is optimism, especially because valuations are so low, he continued.
Ali Malik, Chief Executive Director of First National Equities Limited, on the other hand, claimed that the stock market had already risen earlier due to expectation of the IMF’s approval. He noted that the market was currently analyzing how the flood has affected local trade and output.
“Although the flood damage is extensive, it cannot yet be quantified. Pakistan’s inflation would increase significantly as a result of the wasted crops and animals. We will have to import things on a net basis, requiring foreign exchange. Second, local consumption will increase and exports will decline.
According to Malik, rising local consumption will boost the commodity industry, which includes steel and cement.
A day earlier, the IMF’s Executive Board completed the combined 7th and 8th reviews of a loan facility for Pakistan, allowing immediate disbursement of $1.1bn to the country, said an official IMF announcement.
The statement pointed out that the disbursement “brings total purchases (money made available) for budget support under this arrangement to about $3.9bn.”
The board also approved “rephasing and augmentation” of Pakistan’s access to the funds by SDR720 million ($934m) which will bring the total access under the EFF to about $6.5bn.
The executive board also approved Pakistani authorities’ request for waivers of nonobservance of performance criteria.
