PSX Plunges Over 2,000 Points Amid IMF Concerns on Power Tariffs
The Pakistan Stock Exchange (PSX) witnessed a sharp downturn on Monday, with the benchmark KSE-100 index plummeting by 2,002.55 points (1.69%) to close at 116,439.62 points. The sell-off was triggered by growing concerns over the International Monetary Fund’s (IMF) reservations regarding delays in electricity tariff adjustments and property tax reforms.
IMF Stance Sparks Market Jitters
Karachi-based brokerage firm Topline Securities attributed the market’s decline to reports of IMF pushback against the government’s proposed Rs8 per unit electricity tariff reduction—a relief measure widely anticipated after media leaks suggested its announcement in the Prime Minister’s March 23 address. However, no such relief package materialized, deepening investor unease.
The IMF’s reluctance to approve the tariff cuts has stalled the staff-level agreement (SLA) for the first review of Pakistan’s $7 billion Extended Fund Facility (EFF). “Negative sentiment further intensified due to proposed royalty hikes for Khyber Pakhtunkhwa-based cement manufacturers,” Topline noted.
Heavyweight Stocks Drag Index Lower
The downturn was led by major index contributors including Oil & Gas Development Company (OGDC), Engro Corporation (ENGRO), Fauji Fertilizer Company (FFC), Pakistan Petroleum Limited (PPL), and Mari Petroleum (MARI), collectively eroding 811 points from the index. Trading volumes reached 311 million shares with a turnover of Rs20 billion, with Pak Elektron (PAEL) leading volumes at 28 million shares.
Contrast with Recent Bullish Trend
Last week, the KSE-100 had extended its six-week rally amid optimism over the impending IMF review and the potential release of a $1.1 billion tranche. Positive cues included the IMF’s draft Memorandum of Economic and Financial Policies (MEFP) and progress on power sector debt resolution. The Fund also permitted Pakistan to lower its FY25 tax target to Rs12.35 trillion from Rs12.97 trillion.
Economic Headwinds Persist
Despite these developments, macroeconomic challenges linger:
– Large-Scale Manufacturing (LSM) output contracted by 1.2% YoY in January.
– Foreign Direct Investment (FDI) nosedived 45% YoY to $95 million in February amid security concerns in KP and Balochistan.
– The State Bank’s rate cuts (from 22% to 12% since June 2024) have yet to revive industrial growth, with LSM remaining negative over FY25’s first seven months.
Outlook
While fiscal adjustments and IMF negotiations remain pivotal, investor confidence continues to waver under the weight of structural economic pressures and geopolitical risks. The market’s reaction underscores the delicate balance between reform imperatives and public expectations in Pakistan’s ongoing stabilization efforts.