The capital market prolonged its downward pattern on Tuesday as profit-taking, pushed by mutual fund redemptions, and strain on vitality shares dampened investor confidence.
Concerns about round debt within the gasoline sector and the federal government’s escalating debt ranges additional contributed to the cautious market sentiment.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index confirmed early features, climbing 588.29 factors, or 0.51%, to an intraday excessive of 116,843.41. However, promoting strain dragged the index to a low of 113,677.5, reflecting a decline of two,577.62 factors, or -2.22%, from the earlier shut.
“Profit-taking pushed by redemptions at some main mutual funds,” mentioned Muhammad Saad Ali, Director of Research at Intermarket Securities Ltd.
“Pressure in vitality names pushed by information of diversion of RLNG to residential customers, which might result in a contemporary buildup in round debt,” he added.
The diversion of re-gasified liquefied pure gasoline (RLNG) to the home sector surged to 450mmcfd in January 2025, in comparison with 250mmcfd in December 2024, below Sui Northern Gas Pipelines Limited’s jurisdiction. This enhance is anticipated to exacerbate the round debt within the gasoline sector.
The present common home tariff is Rs1,250 per MMBTU, whereas the RLNG tariff stands at Rs3,600 per MMBTU. This Rs2,350 per MMBTU differential will straight contribute to the rising round debt, elevating issues concerning the monetary pressure on gasoline utilities.
Finance Minister Muhammad Aurangzeb, talking at a Senate Standing Committee assembly on Monday, projected a powerful present account surplus for FY25 whereas ruling out any determined measures that would jeopardize financial stability.
“Three years in the past, the federal government pressed the expansion accelerator, straining the steadiness of funds,” Aurangzeb mentioned. “But irrespective of how a lot strain there may be now, we is not going to repeat that mistake.”
The minister dismissed liquidity issues, clarifying that there had been no complaints about letters of credit score (LCs) being opened within the final 10 months. “No international firm has been stopped from sending income overseas, which exhibits there’s no strain on the forex,” he famous.
Highlighting international curiosity in Pakistan’s economic system, Aurangzeb talked about vital funding commitments from main world gamers, together with Saudi Aramco, Chinese agency Norinco, and electrical auto large BYD.
The State Bank of Pakistan (SBP) reported on Monday that the federal government’s whole debt elevated by Rs1.452 trillion, or 2.1%, within the first 5 months of FY25, reaching Rs70.366 trillion as of November 2024. This rise is attributed to authorities spending exceeding income assortment and exterior debt reimbursement necessities.
As of June 30, 2024, the overall debt stood at Rs68.914 trillion. The debt rose 1.8% month-on-month and 11% year-on-year (YoY) by the top of November.
Domestic debt grew by 3% throughout July to November FY25, reaching Rs48.585 trillion, marking an 18% YoY enhance. Meanwhile, exterior debt rose marginally by 0.11% to Rs21.78 trillion in the identical interval, although it declined 2.91% YoY and 0.5% month-on-month.
The authorities’s rising debt ranges, mixed with pressures within the vitality sector, have raised issues about fiscal sustainability. These points come as Pakistan prepares for a important overview below the International Monetary Fund’s (IMF) Extended Fund Facility (EFF) to unlock the subsequent tranche of $1 billion in March.
The IMF’s proposed levy on gasoline provides to industrial captive energy crops (CPPs) stays a important structural benchmark below the EFF.
In addition, Pakistan is ready to obtain $20 billion from the World Bank over the subsequent decade as a part of its Country Partnership Framework 2025-35.
This funding, pending approval on January 14, will align with the federal government’s National Economic Transformation Plan, concentrating on GDP progress, poverty discount, and infrastructure enchancment.
Inflation tendencies confirmed some respite, with short-term inflation, as measured by the Sensitive Price Indicator (SPI), recording a marginal weekly decline of 0.26% for the week ending January 2, 2025. However, year-on-year inflation remained elevated at 3.97%.
Textile exports, a key contributor to the economic system, rose by 10% year-on-year within the first half of FY25, reaching $9.9 billion. This displays resilience in certainly one of Pakistan’s important sectors regardless of exterior challenges.
On Monday, the PSX witnessed a major decline, with the KSE-100 Index closing at 116,255.12, down 1,331.86 factors, or -1.13%, from the earlier session’s shut of 117,586.98.
