Pakistan Economy: IMF Negotiations— Searching for common ground
Recent headlines suggest that the GoP and the IMF have reached a broad level consensus with regards to potential bailout package amounting to US$6bn. The final agreement however is expected to be inked by Apr’19, with flows likely to materialize Jun’19 on-wards.
The said development is broadly positive with additional spillovers for building confidence, with critical implications on unlocking funding flows from other multilateral agencies, where adherence to IMF imposed structural benchmarks raises creditworthiness.
While we await details of any finalized agreement, initial policy focus would be on the fiscal side, in our view, with other macro adjustments including further tightening and market based currency depreciation complementing the adjustment process.
Initial market reaction is observed to be mixed given the statement of commitment from the IMF is tempered with hints of ‘do more’. Eyeing continued interest rate up-cycle, we stick to our preference for the Banking sector where top picks include UBL and MCB.
Sectors including E&Ps, Textiles, and Power that favorably play on macro-theme of consolidation are also part of our preference list, with particular liking for NML, HUBC, and OGDC.
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