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The stock market rose sharply on Tuesday morning after the International Monetary Fund (IMF) approved the release of a $1.1 billion loan tranche.
The benchmark KSE-100 index started rising shortly after trading began, gaining 436.11 points, or 1.03 percent, by 9:38am to reach 42,940.45 points.
Head of Research at Intermarket Securities, Raza Jafri, said the KSE-100 index continued its strong recovery from intraday lows yesterday and “cheered up” on the IMF programme’s resumption.
“Some profit-taking may come through as the IMF program isn’t a surprise, but the overall sense is one of optimism particularly as valuations are very cheap,” he added.
On the other hand, First National Equities Limited Chief Executive Ali Malik said the stock market had already rallied earlier on expectations of the IMF’s approval. The market was now analyzing the flood’s effect on local production and trade, he added.
“The damage caused by the floods cannot be calculated yet [but it] is widespread. Inflation in Pakistan will rise very high because crops have been wasted and livestock killed. We will have to become a net importer of these, so foreign exchange will be involved. Secondly, our exports will be reduced and local consumption will rise.”
The commodities sector, including steel and cement, will rally because local consumption will increase, Malik said.
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.
