Pakistan’s stocks, sovereign bonds and currency have been lifted by growing hopes that the country can unlock loans from the International Monetary Fund after its decision last week to cancel a fuel price freeze.
Pakistan’s KSE 30 has risen more than 3% in the past week and the country’s sovereign dollar bonds jumped more than 3 cents.
The government announced it would raise fuel prices after an agreement with the IMF that included an end to fuel subsidies, allowing the resumption of aid from a $6 billion package signed with the fund in 2019.
“The market is reacting to the government’s move to withdraw fuel subsidies,” Saad Hashemy, executive director at BMA Capital Management, said.
“It shows the government’s resolve to address teething issues in the economy and will pave the way for the IMF programme and other funding sources.”
Pakistan’s sovereign bond maturing in 2027 gained 3.5 cents to trade at 72.26 cents in the dollar, while the more liquid 2025 bonds are up 3.4 cents, Tradeweb data showed.
The currency has also rebounded against the dollar on Friday, traders said, following days of declines. On May 20, the rupee fell past 200 per dollar for the first time ever, hitting a record low of 202.5614 on May 26. It has since firmed to 198 per dollar.
Pakistan’s new government, which took charge in April, had been reluctant to remove the fuel price caps, fearing political consequences with elections expected within 16 months.
“The removal of fuel subsidies will likely have political consequences in a period where ex-prime minister Imran Khan gave the government six days to announce a date for elections or face further protests,” Milo Gunasinghe at JPMorgan said in a note.
- Reuters, with additional editing by George Russell