The capital market kicked off the second trading session of the New Year with impressive gains, surpassing the 118,000 points mark for the first time in history.
Investor confidence surged due to easing inflation, improving macroeconomic indicators, and optimism surrounding the government’s reform initiatives.
The positive market sentiment was further strengthened by recent efforts to boost revenue collection and the announcement of an economic transformation plan designed to stimulate growth through investments and exports.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index rose by 1,359.73 points, or 1.16%, in early trading on Thursday, reaching an intraday high of 118,367.81.
Sana Tawfik, Head of Research at Arif Habib Limited, noted key factors driving the surge, including a 6.5-year low Consumer Price Index (CPI) reading of 4.1% and improved liquidity through fresh investments and conversions from fixed income assets.
At a federal cabinet meeting on Wednesday, Prime Minister Shehbaz Sharif expressed satisfaction with the macroeconomic stability achieved so far but emphasized the need to focus on export-driven growth. He highlighted the importance of achieving economic development through exports and called for stronger enforcement measures by the Federal Board of Revenue (FBR) to meet revenue targets set by the International Monetary Fund (IMF).
Prime Minister Shehbaz also pointed out the recent increase in revenue receipts, which have reached a 25-year high, but acknowledged the gap between actual revenue and IMF targets.
The CPI data has further boosted investor sentiment, with inflation falling to 4.1% year-on-year in December 2024, down from 4.9% in November and 29.7% in December 2023. However, month-on-month inflation rose slightly by 0.1%, signaling some underlying cost pressures.
The prime minister also unveiled “Uraan Pakistan,” a five-year National Economic Transformation plan aimed at attracting $10 billion annually in foreign investment and boosting local investments through sustainable, export-led growth. The plan focuses on the “5Es”—exports, e-Pakistan, environment, energy, equity, and empowerment—and targets a 6% GDP growth rate by 2028, creating one million jobs annually, and strengthening the private sector.
On the trade front, Pakistan’s trade deficit widened by 35% year-on-year in December, reaching $2.44 billion—the highest since April 2024. Imports surged to a 27-month high of $5.285 billion, while exports increased slightly by 0.67% year-on-year to $2.84 billion. The trade deficit also expanded by 47% month-on-month, reflecting a sharp rise in imports.
The FBR reported collecting Rs5,623 billion in the first half of FY2024-25, though it fell short of the IMF target of Rs6,009 billion. Measures such as a 44% fixed tax on banking sector profits generated Rs72 billion in revenue, helping to mitigate the shortfall.
On Wednesday, the PSX posted another strong gain, with the KSE-100 Index rising by 1,881.18 points, or 1.63%, to close at 117,008.08. Analysts attributed the gain to fresh allocations and better-than-expected tax collection, suggesting that additional taxation measures may not be necessary.
With a clear economic strategy, easing inflation, and improving investor confidence, the PSX is poised for sustained positive momentum.
