KARACHI, Pakistan – May 20, 2025 – Pakistan’s capital market experienced a sharp decline on Tuesday as market participants adopted a cautious stance ahead of the upcoming federal budget.
The Pakistan Stock Exchange’s (PSX) benchmark KSE-100 Index closed at 118,971.12 points, down 718.51 points, or 0.60%, from its previous close of 119,689.63. During the session, the index touched an intraday high of 119,900.37 points, gaining 210.74 points (0.18%), before sliding to an intraday low of 118,527.09, reflecting a loss of 1,162.54 points (-0.97%).
“The market is now anticipating the new budget and the new policies or taxation that will be introduced. This is causing participants to adopt a wait-and-watch strategy in order to gain clarity before making any moves,” stated Ahfaz Mustafa, CEO of Ismail Iqbal Securities.
Pakistan and the International Monetary Fund (IMF) are reportedly working on proposals to generate an additional Rs700 billion in revenue through new taxation and enforcement measures for the 2025–26 federal budget, which is scheduled to be presented in Parliament on June 2. As part of these discussions, the government has sought tax rationalization in key sectors, including salaried income, tobacco, and beverages.
According to sources, the IMF has raised objections to proposed tax relief for middle-income earners within the Rs0.2–0.4 million monthly income bracket and has requested clarification on the revenue impact of such revisions.
The Annual Plan Coordination Committee (APCC) is scheduled to meet on May 26 to finalize the macroeconomic framework and recommend a development budget to the National Economic Council (NEC).
In its latest assessment, the IMF has tightened future funding conditions for Pakistan, warning of economic vulnerabilities linked to US President Donald Trump’s tariff policies and regional tensions with India, as reported by Bloomberg. The Fund has also urged Pakistan to seek parliamentary approval of the budget, reform agricultural income taxation across provinces, and prepare a timeline for phasing out industrial incentives. Other conditions include timely adjustment of electricity and gas tariffs, as well as legislation to restructure energy sector debt to ease the financial strain on power companies.
Tuesday’s session followed a largely range-bound performance on Monday. On Monday, the KSE-100 Index closed nearly flat after a volatile session, ending the day up just 40.49 points, or 0.03%, at 119,689.63. The index had traded within a wide range of 1,034.87 points, between a high of 120,285.54 and a low of 119,250.67.
