The stock market rallied on Thursday as investor confidence was buoyed by optimism over a potential resolution to circular debt in the energy sector and an upgrade of Pakistani banks by Moody’s Ratings.
The market also remained upbeat ahead of the ongoing International Monetary Fund (IMF) review, which investors hope will lead to the approval of the next loan tranche.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index surged by 1,162.86 points, or 1.02%, to reach an intraday high of 115,247.39, reflecting a strong rebound in energy stocks. The market recorded a low of 114,429.93, with investors showing increased buying interest amid positive economic developments. Analysts pointed to multiple catalysts driving market sentiment.
“Markets are up based on a rally in energy stocks due to the potential solution of circular debt and the upgrade of Pakistani banks by Moody’s,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities.
“Both these factors and the hope for a positive IMF negotiation are keeping the sentiments positive and encouraging investors to buy,” he added.
Moody’s Ratings upgraded its outlook on Pakistan’s banking sector to positive, citing improved macroeconomic conditions and the sector’s resilience in financial performance. This shift aligns with the government’s improved outlook, as banks hold significant exposure to sovereign debt.
“We have changed our outlook on Pakistan’s banking system to positive from stable to reflect the banks’ resilient financial performance as well as improving macroeconomic conditions from very weak levels a year ago,” Moody’s said. The agency projects Pakistan’s economy to grow by 3% in 2025, following a 2.5% growth rate in 2024 and a contraction of 0.2% in 2023.
Meanwhile, Pakistan’s workers’ remittances continued their strong upward trend, rising 38.6% year-on-year to $3.1 billion in February 2025, up from $2.2 billion in the same month last year, according to the State Bank of Pakistan (SBP).
On a month-on-month basis, remittances rose 3.8% from January’s figure. For the first eight months of the fiscal year (July-February 8MFY25), remittances totaled $24 billion, reflecting a substantial 32.5% increase compared to $18.1 billion in the same period last year.
Analysts attribute the rise to economic recovery, improved incentives for banks and exchange companies, a stable rupee, and increased skilled worker emigration. Measures taken by the SBP to curb illegal foreign exchange trading have also contributed to the higher inflows.
At the policy level, an IMF team led by Mission Chief Nathan Porter is currently in Pakistan for the first review of the $7 billion Extended Fund Facility (EFF) secured last year. If the review is successfully completed, Pakistan is expected to receive the next $1 billion loan tranche, which would further support economic stability.
The PSX had seen a mixed session on Wednesday, as the KSE-100 Index closed 93.12 points lower, or 0.08%, at 114,084.54 points, down from 114,177.66 points recorded in the previous session. The highest index level of the day stood at 114,661.89 points, while the lowest was recorded at 114,001.50 points.
