KARACHI: The Pakistan Stock Exchange (PSX) soared past the 118,000-point mark for the first time in history during Thursday’s trading session, fueled by easing inflation, macroeconomic stability, and optimism surrounding the government’s ambitious economic reforms.
The benchmark KSE-100 Index surged 1,359.73 points (1.16%), reaching an intraday high of 118,367.81 as investor confidence rallied on signs of sustained recovery and growth.
Key Drivers of the Market Rally
- Easing Inflation:
The Consumer Price Index (CPI) fell to a 6.5-year low of 4.1% year-on-year in December 2024, a sharp decline from 29.7% in December 2023. This significant drop bolstered investor sentiment, despite a slight month-on-month increase of 0.1%. - Economic Stability:
Recent improvements in revenue collection and liquidity inflows, coupled with enhanced macroeconomic indicators, have created a conducive environment for growth. - Reform Agenda:
The unveiling of the government’s “Uraan Pakistan” National Economic Transformation Plan, focusing on export-led growth and private sector contributions, has further strengthened market optimism.
Government’s Focus on Growth
Prime Minister Shehbaz Sharif expressed satisfaction with the progress toward macroeconomic stability during a federal cabinet meeting on Wednesday. He emphasized the urgent need to pivot toward export-led growth to sustain development.
“This is the time to take off in the export sector. There is no other option for economic growth,” the prime minister said, underscoring the need for robust measures to meet the revenue targets under IMF conditions.
Highlights of the Uraan Pakistan Plan
- Target: $10 billion in annual foreign investment.
- Focus Areas: Exports, e-Pakistan, environment, energy, equity, and empowerment (5Es).
- Goals: Six percent GDP growth by 2028, one million new jobs annually, and sustainable private-sector-driven development.
Challenges on the Trade and Revenue Front
Despite the promising market outlook, challenges persist:
- Trade Deficit: The trade deficit widened by 35% year-on-year in December 2024, reaching $2.44 billion, driven by a surge in imports to a 27-month high of $5.285 billion. Exports, meanwhile, saw only a modest 0.67% growth to $2.84 billion.
- Revenue Collection: The Federal Board of Revenue (FBR) reported collecting Rs5,623 billion in the first half of FY2024-25, falling short of the IMF target of Rs6,009 billion. However, measures such as a fixed tax on banking profits generated Rs72 billion in additional revenue.
Outlook for the PSX
On Wednesday, the KSE-100 Index had already posted a strong gain of 1,881.18 points (1.63%), closing at 117,008.08. Analysts attribute this performance to better-than-expected tax collection numbers and fresh allocations, suggesting that further taxation measures might not be required.
With a combination of easing inflation, a clear economic strategy, and rising investor confidence, the PSX appears poised for sustained upward momentum. However, addressing trade imbalances and achieving revenue targets will be critical for maintaining long-term growth and stability.
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