EUR 9.28 For Business Accounts Only

Pakistan Strategy_The road back to IMF, (AKD Daily, May 27, 2022)

AKD Daily

Pakistan Strategy: The road back to IMF

• Week long parleys between IMF and Pakistani authorities concluded on a positive note and the two parties have seemingly worked out the modalities regarding the release of the next ~US$900mn tranche which will not only help instill the confidence in the market but also support the dwindling FX reserves.
• The talks in Doha concluded this past Wednesday with Pakistan authorities mandated to roll back the subsidies provided on the consumption of fuel and electricity. The incumbent government has since decided to increase the fuel prices by PkR30/ltr, paving way for the disbursement of the next IMF tranche.
• The pending IMF tranche of US$900mn, which is contingent to a successful IMF review, will help unlock further funding avenues for the cash strapped country which is faced with daunting debt repayments over the next couple of months. The country is also in talks with KSA on a new the rollover of US$3bn of maturing debt.
• The news of potential revival of IMF program has already resulted in a feel good factor returning in the market. The local currency has already started paring some of the losses it made over the last couple of weeks, appreciating to ~PkR200/US$ at the time of writing. With fresh inflows likely to materialize once the IMF deal is closed, the currency may make further gains in the coming weeks.
• A successful resolution of political stand-off between the sitting government and PTI, revival of IMF program after the revision of fuel prices has lifted the gloom in the market. The market which had touched the low of 41,950 recently, has already rallied by ~1400 points. The multiples, however, are still depressed at 4.45x and any positive news-flow will help in re-rating the multiples. We retain our liking for Refineries and IT sector in the current backdrop.  

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