The Pakistan Stock Exchange (PSX) surged as investor confidence grew over the circular debt resolution and progress in the International Monetary Fund (IMF) program. The KSE-100 Index gained 801.50 points (0.69%), closing at 117,001.09, extending its bullish momentum.
Market Performance and Investor Sentiment
The KSE-100 Index saw a strong trading session, reaching an intraday high of 117,202.09 and a low of 116,490.82. The energy sector attracted heavy buying as investors anticipated improved cash flow due to the government’s debt restructuring measures. Analysts linked the rally to hopes of circular debt resolution and financial relief under the IMF program.
IMF Approves Debt Management Plan
In a key development, the IMF authorized Pakistan to borrow Rs1.25 trillion ($4.5 billion) from domestic banks without increasing the country’s official public debt. This move provides fiscal space to manage the Rs2.4 trillion circular debt, which has burdened the energy sector.
To fund these repayments, the government will continue levying a Rs3 per kilowatt-hour Debt Service Surcharge (DSS) on electricity bills, expected to generate over Rs300 billion annually. Authorities also aim to retire Rs1.5 trillion in circular debt through bank loans and revenue from the surcharge.
Energy Sector Reforms and Future Savings
Officials anticipate saving Rs463 billion after renegotiating agreements with Independent Power Producers (IPPs). These adjustments will lower capacity payments and modify tariff structures. The IMF’s support reflects confidence in Pakistan’s energy sector reforms under the $7 billion Extended Fund Facility (EFF).
Pakistan has assured the IMF that improved collection mechanisms and operational efficiencies will prevent a resurgence of circular debt. Power Minister Awais Ahmed Khan Leghari stated that while a formal decision is awaited, he is optimistic about the IMF’s approval of the borrowing plan. He confirmed that the DSS will remain unchanged in any final agreement with banks.
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Next Steps in IMF Loan Program
The IMF shared a draft of the Memorandum of Economic and Financial Policies (MEFP) with Pakistani officials, marking another step toward finalizing the ongoing loan review. The Fund has also indicated potential relief for the construction and real estate sectors, though it remains unclear whether these incentives will be implemented immediately or included in the 2025-26 fiscal budget.
Pakistan and the IMF concluded discussions last week without reaching a staff-level agreement (SLA). This delay means further policy negotiations are necessary before Islamabad can request the next $1 billion tranche under the EFF. The IMF’s Executive Board will review Pakistan’s case once an agreement is finalized.
Strong Start to the Trading Week
The PSX continued its upward momentum from the previous session. On Monday, the KSE-100 Index closed 663.42 points higher (0.57%), settling at 116,199.59. The index reached a high of 116,626.83 and a low of 115,883.22 during the session.
With continued optimism over economic stability and the IMF’s support, investor confidence remains strong, driving positive sentiment in the stock market.
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