Pakistani stocks rebound after Saudi Arabia financial deal
Benchmark index gains 1,556 points to 39,271 points; Dollar falls by Rs1.89 on news of Saudi assistance deal
October 24, 2018
KARACHI: Pakistani stocks climbed by more than four percent on Wednesday, hours after Saudi Arabia pledged to provide Islamabad with $6 billion in financial assistance to shore up a widening balance of payments crisis.
The benchmark KSE 100 index of the Pakistan Stock Exchange gained 1,556 points or 4.13 percent to push the index to 39,271 points at the close of trading.
This was only the second time in history that the index rose by more than 1,550 points in a single day. The last time the market witnessed such gains was on June 5, 2017, when the benchmark index recorded a rise of 1,566 points at closing.
The gains followed a string of losses on the bourse after mixed signals from newly-minted Prime Minister Imran Khan's government on plans to address the country's deteriorating finances.
On Tuesday, the government struck a 12-month deal for a balance of payments lifeline during a visit to Saudi Arabia, which will deposit $3 billion with Pakistan's central bank and provide a matching one-year deferred payment facility for oil imports.
"The market has welcomed the Saudi package which has eased off the situation Pakistan was faced with of late," Muzammil Aslam, former chief executive of EFG Hermes Pakistan – the only foreign brokerage house in the country.
Dollar dips by 1.4 percent
The US dollar also fell by Rs1.89 or 1.4 percent against the Pakistani rupee in the interbank market, and was trading at Rs132.03 at the end of the day.
In the open market, the US dollar slipped by Rs 2.40 and was trading at Rs 131.50 at the time of filing of this report.
Experts say the dip is likely to help reduce the burden on loans by Rs 179 billion for the Pakistani government.
Imran Khan's government has also entered talks with the International Monetary Fund (IMF) as it seeks a potential bailout package to stem its balance of payment and current account deficits.
Tuesday's relief package will likely lessen the amount of funds the country will need to secure from the IMF, analysts said.
"Pakistan might get a $6-7 billion financial package from the IMF" in the wake of the Saudi deal, said Aslam.
An IMF team is set to arrive in Pakistan in early November to begin negotiations.
Since taking power in August, the prime minister has sought loans from friendly countries such as China and Saudi Arabia, promised to recover funds stolen by corrupt officials, and embarked on a series of high-profile populist austerity measures.
