The capital market continued its bullish momentum during the second trading session of the New Year, crossing the 118,000 point mark for the first time in history.
This recovery was driven by falling inflation, strengthening macroeconomic fundamentals and renewed optimism about the government’s ambitious reform program.
This optimistic momentum has been reinforced by the government’s revenue-raising efforts and the unveiling of a transformative economic growth plan focused on boosting investment and spurring export-led development.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 index climbed 1,359.73 points, or 1.16 percent, in early trading on Thursday, hitting an intraday high of 118,169.81.
At a federal cabinet meeting on Wednesday, Prime Minister Shehbaz Sharif expressed satisfaction with the macroeconomic stability achieved so far, but stressed the need to focus more on growth. “Now we have to take off in the export sector because there is no other option for economic development,” he said.
Shehbaz stressed the importance of export-led growth while noting that the Federal Board of Revenue (FBR) needs to take stricter enforcement measures to achieve the revenue targets set under the International Monetary Fund conditions ( IMF).
The Prime Minister also highlighted the recent increase in revenues, which reached their highest level in 25 years. However, he recognized a significant gap between the revenue collected and the ambitious objectives set by the IMF.
Inflation data also boosted investor confidence. The Consumer Price Index (CPI) fell to 4.1% year-on-year in December 2024, from 4.9% in November and a staggering 29.7% in December 2023.
Although the year-on-year decline reflects macroeconomic stability, month-on-month inflation edged up 0.1%, reflecting underlying cost pressures.
Prime Minister Shehbaz on Tuesday unveiled ‘Uraan Pakistan’, a five-year plan for national economic transformation. The initiative aims to attract $10 billion per year in foreign investment and boost local investment through sustainable export-led growth.
Anchored on the “5Es” – exports, e-Pakistan, environment, energy, equity and empowerment – the plan targets a GDP growth rate of 6% by 2028, the creation of one million jobs per year and strong contributions from the private sector.
On the trade front, Pakistan’s trade deficit increased 35% year-on-year in December to $2.44 billion, the highest since April 2024. Imports jumped to a 27-month high of $5.285 billion dollars, while exports recorded a modest 0.67% year-on-year. -annual increase, amounting to $2.84 billion.
From one month to the next, the trade deficit widened by 47%, reflecting a sharp increase in imports.
The FBR said it collected Rs 5,623 billion in the first half of the 2024-25 financial year, although it fell short of the IMF’s target of Rs 6,009 billion. Measures such as a 44% flat tax on banking sector profits generated 72 billion rupees in revenue, providing partial protection against the deficit.
The PSX posted a robust gain on Wednesday, with the KSE-100 index jumping 1,881.18 points, or 1.63 percent, to close at 117,008.08. Analysts attribute it to new allocations and better-than-expected tax collection figures, suggesting additional tax measures may not be necessary.
The combination of a well-defined economic strategy, decreasing inflation and improving investor confidence positions the PSX for sustained positive momentum.