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Pakistan’s bonds rise to highest level in over a year as IMF tranche nears

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12 months ago

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  • Rise in bonds based on reports of political stability after polls.
  • 2036 dollar-denominated bond gains 2.4 cents. 
  • 2025 maturity lifts to strongest level since May 22. 

KARACHI: Pakistan bonds rose to their highest level in 15 months in hopes that more international financial support is on the way after the country secures the International Monetary Fund’s (IMF) tranche, The News reported Tuesday. 

Optimism about the country’s economy after the tranche has doubled the bonds as they were in late May as the country continues to be gripped by the debt crisis. 

The 2036 dollar-denominated bond rallied the most, gaining 2.4 cents to trade at 57.76 cents on the dollar. The 2025 maturity gained just under 2 cents, lifting it to 82.37 cents on the dollar, its strongest level since May 2022.

The latest leg of the rally, which began last month, was sparked by hopes that an election scheduled for February will provide political stability and enable some economic certainty. An agreement last week to unlock $700 million of IMF funding has also buoyed the country’s bonds.

Meanwhile, the lost some of its trade competitiveness in October as it appreciated against a basket of major trading partners’ currencies, data from the central bank showed. 

The Real Effective Exchange Rate (REER) index, which measures the value of the rupee against a weighted average of several foreign currencies, rose to 98.6 in October from 91.7 in September, according to the State Bank of Pakistan (SBP).

A REER below 100 indicates that the country’s exports are cheaper and imports are more expensive, giving it an edge in international trade. A higher REER means the opposite. The REER increased 7.51% month-on-month in October but declined 2.9% year-on-year when it stood at 101.57.

The Nominal Effective Exchange Rate (NEER) index, which measures the value of the rupee against the same basket of currencies without adjusting for inflation, also increased 6.5% month-on-month in October to 39.18 from 36.79 in September. The NEER fell 21.46% year-on-year from 49.89 in October 2022.

The REER and NEER are calculated using the trade weights of 37 countries, which account for 90% of Pakistan’s trade flows. The rupee continued to rise against the dollar on Monday due to exporters’ dollar sales and optimism about the country’s economy following Pakistan’s deal with the global lender for the next loan tranche.

In the interbank market, the rupee closed at 285.97 to the dollar, compared with the previous close of 286.50. The local unit increased by 0.19% against the dollar during the session. The local currency gained 75 versus the greenback in the open market. 

According to rates released by the Exchange Companies Association of Pakistan (ECAP), the rupee was trading at 287.50 for selling, compared with 288.25 on Friday.

“Despite the drop in forward premiums, exporters are returning to the market to sell dollars, hoping that the rupee will strengthen further in the coming days,” said a currency dealer. The rupee is supported by better supply and an improved economic outlook, the dealer added.

The currency market prediction is that the rupee will rise to approximately 282 per dollar, at which point the SBP will recommence purchasing dollars. The rupee will remain strong due to positive news flows such as multilateral funding and IMF executive board approvals, according to a dealer.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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