Pakistan’s financial markets saw a dramatic rebound on Monday, posting one of their most impressive single-day gains in decades. The shift in sentiment followed two major developments: a sudden ceasefire with India after days of hostilities, and the International Monetary Fund’s (IMF) approval of critical funding support.
Over the past week, tensions between Pakistan and India escalated into aerial, drone, and artillery exchanges, prompting fear-driven selloffs in local markets. That changed swiftly over the weekend when the United States brokered a ceasefire between the nuclear-armed neighbors, pausing a conflict that had begun following an incident in Indian-administered Kashmir on April 22.
Once the market had calmed down, investors flooded back in. The benchmark KSE-100 index closed at 117,297 on Monday, up 10,123 points, or 9.45%, from 107,174 on Friday. This was the biggest one-day increase in over three decades. In the morning, the more condensed KSE-30 index, which includes the 30 most liquid businesses, also jumped by about 9.7%, leading to a one-hour trading stop soon after markets started.
“This rally reflects both relief over de-escalating regional tensions and optimism following the IMF’s latest funding support,” said Shankar Talreja, research head at Topline Securities. The IMF recently approved a \$1.4 billion package under its climate resilience fund, in addition to releasing \$1 billion from a broader $7 billion bailout deal initiated last September. To date, total disbursements have reached $2.1 billion.
Financial analysts suggest these inflows will help Pakistan replenish its foreign reserves—currently under strain—to the targeted $14 billion by June. The IMF requires that Pakistan maintain a cushion of at least three months’ worth of import cover, a vital metric for macroeconomic stability.
Investor sentiment was further buoyed by improved performance in Pakistan’s currency and sovereign bonds. The Pakistani rupee appreciated by 0.1%—its first gain in May—closing at Rs281.57 against the U.S. dollar. Meanwhile, international bonds surged by as much as 5.7 cents, recovering much of the ground lost since the April tensions.
“Markets are recalibrating the risk associated with Pakistan,” Talreja added, noting that the country’s equity market had recently ranked as the third-best performing globally over the past year, according to Bloomberg data.
Commenting on the broader economic outlook, Khurram Schehzad, an economic adviser to the government, highlighted multiple encouraging signs. “Investor confidence is being restored. With IMF support, lower interest rates, stable inflation, and measured diplomatic conduct, Pakistan is positioning itself for renewed growth,” he said.
The rebound shows how closely Pakistan’s economic fate remains tied to both geopolitical events and international financial assistance. While Monday’s surge offers hope, sustained progress will depend on structural reforms and continued fiscal discipline.
