Stock Market declines amid selling pressure and IMF review uncertainty
KSE-100 Index Drops by 1,264.78 Points as Investors Remain Cautious
The Pakistan Stock Exchange (PSX) opened the week on a bearish note, with the KSE-100 Index closing at 111,986.88 points, reflecting a decline of 1,264.78 points (1.12%). The index briefly touched an intraday high of 113,591.83 points before falling to a low of 111,829.14 points, as investor sentiment remained weak amid sluggish trading activity.
Market uncertainty was fueled by concerns over the upcoming IMF review, monetary policy decisions, and a significant Rs604 billion tax shortfall. Additionally, the seasonal Ramadan slowdown further dampened market participation, exacerbating selling pressure.
Key Market Drivers
- Investor Caution Ahead of IMF Review
The IMF delegation is set to arrive on March 3 to review Pakistan’s $7 billion bailout program, creating uncertainty over fiscal targets and economic policies. - Monetary Policy Expectations
The State Bank of Pakistan (SBP) is scheduled to hold its Monetary Policy Committee (MPC) meeting on March 10. Despite declining inflation, analysts anticipate a modest rate cut of 50 basis points (bps) due to fiscal challenges and ongoing IMF negotiations. - Falling Inflation and Interest Rates
Inflation has dropped significantly, reaching 2.4% in January—the lowest in over nine years—with further declines expected in February. Since June 2024, the SBP has slashed interest rates by 1,000 bps, bringing the benchmark policy rate to 12%. - Fiscal Concerns and Tax Revenue Shortfall
The Federal Board of Revenue (FBR) must collect Rs1,825 billion in March to meet the IMF’s fiscal targets. However, with total collections at Rs7,343 billion—falling short of the Rs7,947 billion target—the shortfall could exceed Rs1 trillion by June 2025, raising concerns about Pakistan’s compliance with IMF conditions.
Possible Government Strategies
- IMF Negotiation: The government may formally request the IMF to revise the FBR’s tax target downward, considering the revenue shortfall.
- Fiscal Adjustments: Lower debt servicing costs could be utilized to offset the shortfall, ensuring fiscal stability while meeting IMF conditions.
The market’s weak performance follows last week’s decline, where the KSE-100 Index closed at 113,251.66 points, down 532.65 points (0.47%) on Friday. Analysts expect low trading volumes to persist until greater clarity emerges on fiscal and monetary policy measures.
