Pakistan stocks rally after policy rate cut, positive developments on IMF front

Stockbrokers monitor the latest share prices at the Pakistan Stock Exchange (PSE) in Karachi on July 3, 2023. (AFP/File)
Short Url
Updated 13 September 2024
Follow

Pakistan stocks rally after policy rate cut, positive developments on IMF front

  • The benchmark KSE-100 index rose by more than 800 on Friday morning
  • It declined in the afternoon session to close at 79,333, up by 315 points

ISLAMABAD: The Pakistan Stock Exchange (PSX) on Friday rallied by more than 300 points, according to the PSX website, following a policy rate cut by the central bank and positive developments with regard to the country’s International Monetary Fund (IMF) bailout.

The benchmark KSE-100 index rose by more than 800 on Friday morning, but declined in the afternoon trading session to close at 79,333, up by 315 points.

A day earlier, the central bank cut its key policy rate by 200 basis points to 17.5 percent — the third straight reduction since June as the country looks to spur growth as inflation eases.

“The MPC assessed the real interest rate to still be adequately positive to bring inflation down to the medium-term target of 5–7 percent and help ensure macroeconomic stability,” the State Bank of Pakistan’s Monetary Policy Committee said in a statement, announcing the cut.

“This would be essential to achieve sustainable economic growth over the medium term.”

Separately, the IMF said its board would meet at the end of this month to discuss Pakistan’s new $7 billion bailout program that was agreed in July.

“All matters with the IMF have been settled amicably,” Finance Minister Muhammad Aurangzeb said in a statement on Thursday. “These matters will be finalized in the meeting of the IMF board this month.”

Pakistan’s sovereign dollar bonds also rallied on Thursday, with the 2031 maturity trading 1 cent higher to bid at 79.93 cents on the dollar, according to Tradeweb data.


Latest Pakistan-India conflict cost both nations $1 billion an hour combined — economist

Updated 5 sec ago
Follow

Latest Pakistan-India conflict cost both nations $1 billion an hour combined — economist

  • Estimated daily losses amounted to around $20 billion per day, with Pakistan losing up to $4 billion and India as much as $16 billion a day
  • 30-day conflict would cost the countries around $500 billion combined, with over a $400 billion loss for Indian economy, economists estimate 

ISLAMABAD: A four-day military standoff between arch foes Pakistan and India last week cost both nations an estimated $1 billion an hour combined, a leading economist said this week, as a finance adviser to the government argued the conflict would have “minimal fiscal impact” for Islamabad.

Tensions between nuclear-armed neighbors India and Pakistan escalated after a deadly April 22 attack on tourists in Indian-administered Kashmir that India blamed on Pakistan, which denied involvement. On the night of May 6/7, India struck multiple sites in Pakistan that it said was “terrorist infrastructure” and Pakistan retaliated, downing five Indian fighter jets. 

Over the next four days, the two nuclear-armed rivals engaged in the worst fighting between them since 1999, pounding each other with fighter aircraft, missiles, drones and artillery fire, until a ceasefire was brokered by the US and other nations on Saturday. 

The military confrontation had in the meantime disrupted stock markets, led to airspace closures, escalated defense spending and caused economic losses amounting to billions of dollars.

Asked about the economic cost of the conflict, Farrukh Saleem, a prominent Pakistani political scientist and economist, said he estimated the 87-hour confrontation cost “about a billion dollars an hour for both countries put together,” breaking it down into estimated costs borne by either of the neighbors.

“India has a much larger army, much larger air force. Once it starts moving, once it starts mobilizing its troops, it costs about, let’s say, 12 to 20 times more for the Indian army to mobilize itself as compared to the Pakistani army,” Saleem said.

“So, when I say a billion dollars an hour, you’re probably looking at 20 percent of that being incurred by Pakistan and a good 80-85 percent by India.”

The investment in war was also different, Saleem said, comparing India’s French Rafale fighter jets to Pakistan’s Chinese J-17 Thunders and J-10cs. 

“You look at Rafale, for instance, which is the French aircraft, with its paraphernalia, it’s about $240 million apiece. India has a $16 billion investment into Rafales,” Saleem explained. 

“On the other hand, Pakistan Air Force has gone for cheaper platforms. They are either JF-17 Thunders or J-10Cs and they’re like $20-25 million.”

In terms of missiles, the Indian ballistic missile BrahMos is $3 million apiece. 

“If you’re firing, let’s say, 8 to 10 [missiles] a day, that’s 10 times $3 million, that’s $30 million in one day,” the economist said. 

Arab News reached out to the defense ministry and Pakistan’s military media wing for official estimates of the latest conflict’s cost but did not receive a response. 

But Khurram Schehzad, an adviser to the Pakistani finance minister, said the fiscal impact on Pakistan would not be large.

“The current standoff with India won’t have a large fiscal impact on Pakistan,” he told Arab News. “It can be managed within the current fiscal space, with no need for a new economic assessment.”

Schehzad said Pakistan’s economic resilience was evident from a new record at the Pakistan Stock Exchange, which on Monday posted the highest single-day gain in over 26 years, surging by 10,123 points or 9.45 percent, significantly surpassing the losses recorded last week following the Indian strikes.

“Pakistan’s measured and responsible response, in both its narrative and actions on the ground, has caught investors’ eye, alongside the potential positive spillover effect of a possible settlement in the US-China tariff issue,” he added.

But economists say the recent military standoff has already inflicted heavy financial losses on both countries.

Saleem said daily economic losses from the conflict, including stock market declines and other impacts, amounted to around $20 billion per day, with Pakistan losing up to $4 billion and India as much as $16 billion a day.

“I have tried to put things together. If this conflict had continued for 30 days, my estimate is that both countries would have lost a good $500 billion, with over a $400 billion loss for the Indian economy,” he said.

Dr. Ali Salman, Executive Director of the Policy Research Institute of Market Economy (PRIME), an Islamabad-based independent economic policy think tank, said the conflict had disrupted economic sentiment and affected investor confidence.

“Certainly, investors would not like to come into countries, whether India or Pakistan, if they are in a constant war-like situation,” he told Arab News.

He also warned that a prolonged conflict would push people in both countries deeper into poverty, noting that one in four poor people in the world lived in India or Pakistan.

“We have 27 percent of the world’s poor in just these two countries, and I believe that we need to come out of the military contest and go into an economic contest,” he added.

Another economist, Shakeel Ramay, said every war had an economic dimension and this conflict too had imposed a heavy financial burden on both economies.

“Pakistan’s military expenditure over the four-day conflict, including jets, artillery and missiles, amounted to around $1.5 billion from the national budget, by my estimate,” he said, a significant cost as the country walked a tricky path to economic recovery bolstered by an $7 billion IMF bailout.

“The good thing is our economic activities continued without interruption, retail markets operated smoothly with no shortages and trade routes remained open, all indicating that the direct economic cost was minimal,” Ramay added. 


Pakistan military gets social media boost after India flare-up

Updated 7 min 32 sec ago
Follow

Pakistan military gets social media boost after India flare-up

  • Social media has been flooded with images of romanticized soldiers and pilots surrounded by hearts
  • One high-ranking officer in particular seems to have won hearts in Pakistan: Air Vice Marshal Aurangzeb Ahmed

ISLAMABAD: The brief conflict between India and Pakistan last week may have left no clear victor, but Islamabad’s generals are taking a win, riding a wave of approval on social media to burnish their recently tarnished image.

Much of the praise for the military, which had faced increasing criticism over its involvement in politics, has been driven by young people online, with nearly two-thirds of Pakistan’s 240 million people younger than 30.

The last major conflict between the nuclear-armed rivals was in 1999 and confined to the disputed region of Kashmir, so young Pakistanis have been more accustomed to seeing the neighboring countries clash on the cricket pitch, said digital rights activist Nighat Dad.

But from the start of Indian strikes on Wednesday, “for the first time, they were able to listen to the shots, the blasts, the drone strikes and they witnessed drones flying over their very own houses” in major cities, including the capital, she told AFP.

She said it sparked “an emotionally charged sentiment that someone who is our neighbor, who has been blaming us for terrorist attacks in their country for decades attacks us.”

New Delhi launched strikes after accusing Pakistan of backing a deadly attack in Indian-administered Kashmir in April, a charge repeatedly denied by Islamabad

By retaliating, Pakistan’s “army cooked Bollywood in front of the whole world,” joked one social media user, claiming the military exploits outshone Indian blockbusters.

“Even Indians would fall for (our) generals,” another said, as social media has been flooded with images of romanticized soldiers and pilots surrounded by hearts.

A man uses his mobile phone while standing in front of banners supporting country's soldiers in Rawalpindi on May 9, 2025.  (AFP)

The social network X had been blocked in Pakistan for over a year before coming back online just as hostilities flared, with the army praising the efforts of young “cyber and information warriors.”

The platform went down in Pakistan during the 2024 general elections as anti-military sentiment had begun to spread in the country where analysts say the armed forces have long been considered untouchable and the institution pulling the strings.

Former prime minister Imran Khan and hundreds of his supporters were jailed after riots against the army on May 9, 2023.

This year, on May 10, India and Pakistan agreed to a ceasefire, and it will now be commemorated in Pakistan as the day of “the battle for justice.”

“We are all behind our army,” proclaim posters put up on streets across the country by both the state and private citizens.

But the honeymoon with the army may not last.

Already, Khan’s party, which, along with all the others, has voted for anti-India resolutions in the Senate, is calling for a return to “the real fight.”

That battle is for the release of their champion, who sees the criminal accusations against him as a means by those in power to sideline him.

For more than half of its 78-year history, Pakistan has been directly ruled by the military.

Today, the army is still seen as a kingmaker, even though it claims to have stepped away from politics.

Army chief General Asim Munir, who had long drawn criticism from the opposition, stayed out of the spotlight during the conflict with India, with only the army and government spokespeople speaking publicly.

One high-ranking officer in particular seems to have won the hearts of Pakistanis online: Air Vice Marshal Aurangzeb Ahmed, spokesperson for the Air Force, who revelled in the victories of his pilots, with Pakistan having claimed to have downed three French Rafale jets belonging to India.

A European military source considered it “highly unlikely” that three Rafales were destroyed, but said it is “credible” that one may have been.

The “Rafale is a very potent aircraft... if employed well,” quipped Ahmed during a press conference.

The clip quickly spread on social media, with users hailing a “David versus Goliath victory” of their military, which has far less funding, manpower and equipment than the armed forces of India.

“Young Pakistanis used the memes culture, using Indian misinformation as a joke and humor,” with India in response blocking dozens of accounts belonging to Pakistani public figures on X and YouTube, said Dad.

Under the guise of humor, these memes became a way to spread opinions, information and support, she added.

These same people might have reacted strongly online to a Supreme Court decision to allow Pakistani military courts to try civilians — but announced the same day as the start of the confrontation between Islamabad and New Delhi, it went relatively unnoticed.

“The crisis bolstered the army,” said researcher Michael Kugelman. 

“It was able to rally the country around it in the face of Indian attacks and to play the role of protector that is such an important part of the military’s identity and legitimacy.”


Pakistan’s record gold exports set to suffer after government moves to curb outflows to India — analysts

Updated 14 min 5 sec ago
Follow

Pakistan’s record gold exports set to suffer after government moves to curb outflows to India — analysts

  • Commerce ministry banned import and export of gold on May 6, just a day before Indian strikes on Pakistan
  • Experts says the ban will impact nation’s jewelry exports that rose by record 58 percent this year through March

ISLAMABAD: Pakistan’s increasing gold exports are likely to take a hit due to a ban on the import and export of precious metals introduced amid last week’s military standoff with India, analysts said on Wednesday.

On May 6, the government enforced a 60-day ban on the import and export of precious metals, jewelry and gemstones to stabilize its foreign exchange reserves, just one day before India attacked Pakistan.

The deadly escalation followed an attack in Indian-administered Kashmir on April 22 that killed 26 tourists, which New Delhi blamed on Pakistan despite Islamabad’s denial of any involvement.

Nearly two weeks after the incident, the nuclear-armed neighbors exchanged ballistic missiles and artillery fire after India targeted what it called “terrorist infrastructure” inside Pakistan.

Gold remains a traditional store of value in the country, which primarily sources its imports of the metal from the United Arab Emirates, Switzerland, Turkiye and other major gold-trading global centers.

“This ban is expected to be lifted,” Ahsan Mehanti, the Chief Executive Officer at Arif Habib Commodities Ltd, told Arab News. “However, it is negatively impacting the country’s gold exports that were increasing to a record level.”

According to the Pakistan Bureau of Statistics, the country’s jewelry exports rose by 58 percent to Rs3 billion ($11 million) in March this year, matching the total for the entire previous year.

“This 58 percent surge is a record,” Mehanti said, adding the ban will have a short-term impact on gold exports this year, which are bound to increase later when the ban is lifted in July.

“The ban was imposed when the [Pakistan-India] border tensions started intensifying,” he continued. “This military escalation could have led to an increase in the circulation and prices of gold in Pakistan, but no such thing happened because of the government’s ban.”

He maintained the ban helped the gold market avoid speculative trading that kept the prices in check.

Mehanti said since international gold prices have declined on the back of the US-China trade war’s settlement, “we expect the surge [in Pakistan’s gold exports] to be higher than the previous record surge of 58 percent.”

Pakistan’s Dawn newspaper reported on May 8 the export curb aimed to limit the flow of gold and other precious metals to India via Dubai, citing unnamed government officials.

It added the ban was also intended to restrict the outflow of dollars from the cash-strapped country, which has spent over $28 million on importing 368 kilograms of gold so far this year.

However, the commerce ministry spokesperson, Muhammad Ashraf, denied the ban had any “relevance to the Pak-India conflict.”

A member of the managing board of Karachi Sarafa & Jewellers Group, M. Iqbal, said Pakistan’s gold market was linked to the international gold market, which is mainly driven by the dollar.

“Gold would take a hit when the United States faces an issue like what we saw during the US-China tariffs war,” he explained.

The cash-strapped country also exported $4.1 million worth of gems in the first nine months of FY25 ending in June.

Prime Minister Shehbaz Sharif’s administration is relying mainly on the International Monetary Fund’s (IMF) $7 billion loan program to keep debt-ridden Pakistan’s balance of payments in check, as exports have grown only six percent this year while foreign direct investment has remained stagnant for decades.

The government has incentivized jewelry exporters through duty drawbacks and zero-rating for specific inputs, which helped the country’s jewelry exports rise 43 percent last year.

Gold prices in Pakistan hit a record high late last month but have been declining since the US and China resolved their trade tariff dispute. 

On Tuesday, 12 grams of the yellow metal were priced at $1,222 (Rs344,200).

In 2023, Pakistan relaxed several gold import regulations to promote transparency, minimize smuggling and establish computerized customs valuation and tracking systems.
 


Pakistan returns Indian border guard captured after April Kashmir attack

Updated 22 min 52 sec ago
Follow

Pakistan returns Indian border guard captured after April Kashmir attack

  • BSF says Purnam Kumar Shaw, in custody of Pakistan Rangers since April 23, handed over to India
  • Handover was “conducted peacefully and in accordance with established protocols,” BSF added

NEW DELHI, India: Pakistan handed over on Wednesday an Indian border guard captured a day after an April attack in Indian-administered Kashmir which killed 26 people, the paramilitary border guard said.

The attack near the tourist town of Pahalgam sparked a four-day conflict between India and Pakistan, which ended with a ceasefire on Saturday.

Border Security Force soldier “Purnam Kumar Shaw, who had been in the custody of Pakistan Rangers since 23 April 2025, was handed over to India,” BSF said in a statement.

The handover was “conducted peacefully and in accordance with established protocols,” it added.

No group has claimed responsibility for the April 22 attack but India blamed Pakistan for backing the attack, sparking a series of heated threats and diplomatic tit-for-tat measures.

Islamabad rejects the accusations and has called for an independent probe.
 


Pakistan receives second tranche under IMF extended fund facility — central bank

Updated 9 min 5 sec ago
Follow

Pakistan receives second tranche under IMF extended fund facility — central bank

  • IMF last week approved $1.4 billion climate loan, $1 billion under bailout loan
  • Funds under climate resilience fund to be gradually released over 28 months

KARACHI: Pakistan has received the second tranche of special drawing rights worth 760 million ($1,023 million) from the International Monetary Fund under an extended fund facility (EFF) program, the State Bank of Pakistan said on Wednesday, bringing disbursements to $2 billion within a $7 billion bailout program. 

The IMF last Friday approved a fresh $1.4 billion loan to Pakistan under its climate resilience fund and approved the first review of its $7 billion program, freeing about $1 billion in cash. 

“SBP has received the second tranche of SDR 760 million ($ 1,023 million) from the IMF under the EFF program,” the central bank said on X. 

“The amount will be reflected in SBP’s foreign exchange reserves for the week ending on 16th May 2025.”

In a statement released on Friday, the IMF said Pakistan’s policy efforts under the program had “already delivered significant progress in stabilizing the economy and rebuilding confidence, amidst a challenging global environment.” 

“Moving forward, policy priorities will include advancing reforms to strengthen competition, raise productivity and competitiveness, reform SOEs, improve public service provision and energy sector viability, and build climate resilience.”

The IMF also approved a request for an arrangement under the Resilience and Sustainability Facility (RSF), which will support Pakistan’s efforts in building economic resilience to climate vulnerabilities and natural disasters, with access of around $1.4 billion.

“The RSF funds will be released gradually over the next 28 months,” the government’s finance adviser Khurram Schehzad told Arab News, declining to specify when the first tranche would be received. 

Pakistan’s 37-month EFF, approved on Sept. 25, 2024, aims to build resilience and enable sustainable growth. Key priorities include entrenching macroeconomic sustainability through implementation of sound macro policies, including rebuilding international reserve buffers and broadening of the tax base; advancing reforms to strengthen competition and raise productivity and competitiveness; reforming state-owned enterprises and improving public service provision and energy sector viability; and building climate resilience.

Highlighting progress in stabilizing the economy, the IMF said Pakistan’s fiscal performance had been strong, with a primary surplus of 2.0 percent of GDP achieved in the first half of FY25, keeping Pakistan on track to meet the end-FY25 target of 2.1 percent of GDP. 

“Inflation fell to a historic low of 0.3 percent in April, and progress on disinflation and steadier domestic and external conditions, have allowed the State Bank of Pakistan to cut the policy rate by a total of 1100 bps since June 2025,” the IMF added.

“Gross reserves stood at $10.3 billion at end-April, up from $9.4 billion in August 2024, and are projected to reach $13.9 billion by end-June 2025 and continue to be rebuilt over the medium term.”