The Capital Market opened at a negative pace on Saturday, with the KSE-100 index being sold to sell pressure between thin trading volume.
Investors were cautious before the upcoming International Monetary Fund (IMF) review, while the effects of the seasonal Ramadan played a vital role in the lower market participation.
Pakistan Stock Exchange (PSX) climbed at 340.17 points (0.3 %) to reach the intra -100 index of the Benchmark’s SE -100 index 113,591.83, but later withdrawn, which targeted the lowest level of 112,170.50, which was reduced to 1,081.16 points (-0.95 %).
The cutting movement of the market reflects the hesitation of investors, as the uncertainty of financial goals, financial policy, and the upcoming IMF talks is on the sentiment.
Commenting on the session, the head of the research in Arif Habib Limited, Sana Tofak, said: “This (the trend below) is mainly due to the pressure of sales. Due to the Ramadan element, fewer volumes are also being observed.
It is expected that the State Bank of Pakistan (SBP) is expected to take a stand on further financial relaxation, despite the decline in inflation.
The Financial Policy Committee (MPC) will meet only a few days after the arrival of the IMF delegation to review Pakistan’s $ 7 billion bailout package on March 3.
The Central Bank has reduced the rates to 1,000 twenty points (BPS) before June 2024, which has led to a benchmark policy rate by 12 %. However, analysts suggest that although deduction at another rate is possible, it may be limited to 50bps, in view of Pakistan’s financial challenges and ongoing IMF debates.
In a report, Arif Habib Limited (AHL) highlighted the rapid decline in inflation, which was reduced to 2.4 percent in January – which is the lowest level in 111 months. February inflation is expected to decrease further, which will further strengthen the issue with a further relaxation.
“In view of the rapid decline in inflation and stable reserves, the upcoming policy meeting is a logical step, the AHL report states.”
Since Prime Minister Shahbaz Sharif’s government is preparing for the IMF review, concerns about a massive tax reduction of Rs 604 billion have intensified. The Federal Board of Revenue (FBR) needs to collect Rs 1,825 billion in March to meet the IMF’s target of Rs 9,168 billion by March 31.
However, on the day of Ramadan season, public holidays, and the less work on Eid -ul -Fitr, it is expected to hinder tax collection, which will make it difficult to achieve the target.
With total collections for the first eight months of the financial year, Rs 7,343 billion, FBR is already behind its target of Rs 7,947 billion. It is likely that the reduction will exceed 1 trillion by the end of the financial year in June 2025, which will raise concerns over Pakistan’s IMF’s ability to meet the situation.
There are two powers for Pakistani negotiators as they prepare for dialogue with the IMF. The first IMF is to formally request that the Federal Board of Revenue (FBR) tax collection targets below, to acknowledge the challenges facing a significant shortage of taxes.
The second option is to use a financial space generated by low loan service costs. By re -eliminating these savings, the government can maintain its fiscal deficit in the IMF -approved limits, which can reduce the pressure on tax collection and ensure compliance with the goals of wider financial stability.
On Friday, the KSE-100 Index closed at 113.65 points (-0.47 %) at 113,862.33 points at 113,251.66 points.
