On Thursday, Pakistan’s equity market experienced a significant rebound, largely due to a positive investor response to the federal cabinet’s approval of a landmark circular debt resolution plan and the finalization of new foreign financing arrangements. The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index surged to an intraday high of 121,745.30, marking a gain of 1,279.37 points (1.06%). Earlier in the day, the index had briefly touched a low of 120,023.03, reflecting a modest dip of 442.90 points (-0.37%).
Market Rally Fueled by Cabinet Decisions and Global Factors
Ahsan Mehanti, Managing Director and CEO of Arif Habib Commodities, commented, “Stocks showed recovery led by blue-chip scrips as investors weighed the federal cabinet’s approval of the Rs1.275 trillion bank loan under the circular debt management plan.” He further added that “surging global crude oil prices and expectations over rationalization in industrial power tariffs played a catalytic role in bullish activity at PSX.”
Historic Circular Debt Resolution Plan Approved
The federal cabinet, in its Wednesday session, greenlit Pakistan’s largest-ever financial scheme, specifically designed to restore stability to the beleaguered power sector by tackling its substantial Rs1,275 billion circular debt. This comprehensive plan aims to resolve the entire amount over a six-year period, crucially without imposing additional pressure on the national budget. Chaired by Prime Minister Shehbaz Sharif, the cabinet meeting also approved the refinancing of Rs683 billion owed by the Power Holding Company and the clearance of long-standing dues of Independent Power Producers (IPPs).
Securing Substantial Foreign Financing
In a separate but equally significant development, the Ministry of Finance finalized a $1 billion syndicated term finance facility. This crucial financing is partly backed by a policy-based guarantee from the Asian Development Bank (ADB) under its “Improved Resource Mobilization & Utilisation Reform” program. Dubai Islamic Bank served as the Sole Islamic Global Coordinator, while Standard Chartered Bank acted as the Mandated Lead Arranger and Bookrunner. Additional arrangers for this facility include Abu Dhabi Islamic Bank, Sharjah Islamic Bank, Ajman Bank, and HBL. The facility is structured as a multi-tranche, five-year agreement, encompassing both Islamic and conventional financing, and fully adheres to AAOIFI standards. Notably, the Islamic tranche accounts for 89% of the total funding, with the remaining portion derived from conventional sources.
Recovery After Previous Day’s Decline
This market recovery comes on the heels of a sharp drop on Wednesday, when the KSE-100 Index had lost 1,505.11 points (-1.23%), closing at 120,465.93. That volatile session, primarily driven by geopolitical tensions, saw the index record a high of 121,905.50 and a low of 120,418.
