The Ministry of Finance in its latest report has attributed the ongoing bullish wave at the Pakistan Stock Exchange (PSX) to a successful International Monetary Fund (IMF) review and a sustained monetary policy stance.
“Pakistan’s economy is on a gradual but promising path to recovery,” said the Ministry of Finance in its latest Monthly Economic Update and Outlook report for November released on Sunday.
The report was of the view that the stride of economic revival initiatives is driving a surge in economic activity.
“Positive economic signals and recovery indicators have triggered the market sentiment.
“The sustained monetary policy stance and successful IMF staff review in November drove market confidence,” it said.
The remarks come as PSX is enjoying a buying spree which comes on the back of heightened buying from both local and international investors. On Monday, the benchmark KSE-100 Index crossed the 62,000 level for the first time in history.
On the exchange rate, the finance ministry in its report said that owing to reforms in exchange companies and a reduction in illicit transactions, the exchange rate remains stable, exerting a positive impact on overall economic activity
Despite improved economic indicators, authorities in Pakistan are working to increase the dollar inflows by attracting foreign investment.
Last month, IMF staff and the Pakistani authorities reached a staff-level agreement on the first review under Pakistan’s Stand-By Arrangement (SBA). Upon approval, Pakistan will have access to $700 million.
The government expects approval from the IMF’s executive board in December.
The Ministry of Finance in its latest report said that the SBA supports the government’s commitment to advance the planned fiscal consolidation, accelerate cost-reducing reforms in the energy sector, complete the return to a market-determined exchange rate, pursue SOEs and governance reforms to attract investment and support job creation while continuing to strengthen social assistance.
“The government’s execution of the FY2024 budget with continued adjustment of energy prices, and renewed flows into the foreign exchange (FX) market have lessened fiscal and external pressures,” it said.
On inflation, the Ministry of Finance noted that inflationary pressures are receding and the outlook has improved.
“Inflation is expected to decline over the coming months amid receding supply constraints and modest demand. With all these positive developments, further improvement in domestic economic activities is anticipated in upcoming months,” said the report.