Latest news with #ShankarTalreja
Arab News
13-06-2025
- Business
- Arab News
Pakistan eyes over $6 billion in Saudi support as top foreign financier in FY26
KARACHI: Saudi Arabia is expected to be Pakistan's largest source of external financing in the upcoming fiscal year with over $6 billion in support as the South Asian country seeks to raise more than $20 billion from international lenders to uplift its fragile economy, official budget documents released this week showed. In the 2025–26 fiscal year starting July 1, Pakistan aims to secure $6.46 billion from Riyadh, including $5 billion in time deposits, $1 billion in oil on deferred payments, and $46.4 million in economic assistance, according to the budget documents. The financial support is intended to help stabilize the country's external account and meet its balance of payments needs. Islamabad has long relied on financial support from its Gulf and Chinese partners to shore up its foreign reserves and avoid default. In 2023, these inflows played a key role in helping Pakistan avert a sovereign debt crisis. 'The support from Saudi Arabia in the form of deposits and oil facility is undoubtedly the major source of the external stability,' said Shankar Talreja, head of research at Karachi-based Topline Securities. Pakistan's government unveiled a Rs17.6 trillion ($62 billion) federal budget on June 10, aiming to consolidate what it describes as fragile macroeconomic stability achieved under a $7 billion bailout loan from the International Monetary Fund (IMF). Notably, Pakistan has not earmarked a specific amount under the International Monetary Fund (IMF) in its external financing estimates for 2025-26. The country is currently operating under a 37-month IMF Extended Fund Facility approved last year. In total, Pakistan has budgeted for Rs5.78 trillion ($20.4 billion) in foreign assistance in FY26, including both loans and grants from bilateral and multilateral partners, to help shore up reserves and finance its current account. The country's total external receipts for the year are budgeted at Rs20.3 trillion ($71.9 billion). China, Pakistan's largest trading partner and longtime ally, is projected to be the second-biggest lender after Riyadh with $4.37 billion, including $4 billion in 'safe deposits,' a form of central bank support, and $37 million in economic assistance. 'China is a major bilateral partner… supporting Pakistan with both commercial loans and time deposits,' said Talreja. 'Both types are refinanced and renewed annually.' Pakistan's multilateral lenders include the Asian Development Bank (ADB), World Bank, Islamic Development Bank (IsDB), Asian Infrastructure Investment Bank (AIIB), and others such as the United Nations, OPEC Fund, and International Fund for Agricultural Development (IFAD). SMALLER LENDERS AND REMITTANCES Besides Saudi Arabia and China, Pakistan will also seek smaller amounts of aid and financing from countries including the United States, France, Germany, Denmark, Italy, Japan, and South Korea, according to the budget documents, which also list smaller expected inflows from Kuwait ($21.4 million) and Oman ($5.14 million). However, a long-delayed Saudi oil facility, initially expected last year, has yet to materialize. Media reports have suggested Riyadh has linked its final approval to progress on Saudi investment in Pakistan's Reko Diq copper and gold mining project. State media reported in September that Saudi Arabia had offered a 15 percent equity stake in the multibillion-dollar Reko Diq mine in Pakistan's southwestern Balochistan province. The project, one of the world's largest undeveloped copper-gold reserves, is operated by Canada's Barrick Gold. Islamabad also plans to raise $1.3 billion in commercial loans and $400 million through international bond issuances, though the finance ministry has not specified the sovereign guarantees or instruments. Finance Minister Muhammad Aurangzeb has separately said the government aims to issue Panda bonds, yuan-denominated debt instruments issued in China, to raise around $200 million from Chinese investors to boost foreign exchange reserves. In addition to official financing, Pakistan continues to benefit significantly from worker remittances, particularly from the Gulf region. According to the Pakistan Economic Survey 2024–25, released this week, Saudi Arabia accounted for $7.4 billion in remittances in the last fiscal year, about 25 percent of the national total. Remittances from all six Gulf Cooperation Council (GCC) countries — Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain — totaled $16.1 billion, or more than half of Pakistan's total remittance inflows in 2024. 'In the GCC region, expanding Saudi mega-projects led to higher migrant employment, further contributing to inflows,' the economic survey said. 'It's not just deposits and oil facilities helping Pakistan,' added Talreja. 'Remittances from Saudi Arabia alone are a quarter of Pakistan's total remittances.' 'Saudi Arabia is a key nation for Pakistan in terms of foreign inflows, whether in the form of remittances or economic assistance,' Sana Tawfik, head of research at Arif Habib Ltd. said.
Express Tribune
15-05-2025
- Business
- Express Tribune
SBP receives $1.1b second IMF tranche
Listen to article The State Bank of Pakistan (SBP) has received the second tranche of funding under the International Monetary Fund's (IMF) Extended Fund Facility (EFF), amounting to SDR760 million - approximately $1.023 billion following the successful completion of the program's first review by the IMF Executive Board on May 9, 2025. The inflow was credited on May 13 and will be reflected in Pakistan's foreign exchange reserves for the week ending May 16, according to SBP. The disbursement is part of a broader support package aimed at bolstering Pakistan's economic recovery and macroeconomic stability. The IMF board recently also approved a new Resilience and Sustainability Facility (RSF) for Pakistan worth $1.4 billion, with initial disbursements expected after its first review later this year. "The IMF's second tranche of $1.023 billion will strengthen Pakistan's foreign exchange reserves, support currency stability, and boost investors' confidence," said the Head of Sales at Insight Securities, Ali Najib. It improves the balance of payments and signals the IMF's trust in ongoing economic reforms, potentially attracting further external support by opening other bilateral and multilateral lenders' doors. The inflow eases pressure on the rupee and reduces default risk, enhancing macroeconomic stability. However, sustained benefits require continued structural reforms and fiscal discipline to ensure long-term economic resilience and reduce dependence on external financing. To recall, Pakistan authorities reached Staff Level Agreement (SLA) with International Monetary Fund (IMF) on first review of Extended Fund Facility (EFF) on Mar 25, 2025. Today, in its board meeting, the IMF board has approved the first review and a new facility under the Resilience and Sustainability Facility (RSF) of US$1.4 billion, said Director Research of Topline Securities, Shankar Talreja. This will unlock inflows of $1 billion after this approval under the EFF facility, bringing total inflows under EFF to $2.1 billion, he said. While inflows from RSF facility will be released after its first review, likely in September 2025, in our view. It is important to note that Bangladesh received the RSF installment during the first review of its program, not at the time of approval. Approval of first review of EFF was in line with our expectations considering the fact that Pakistan achieved the required quantitative indicative criteria of the program, he said. However, there were some fears, India may create some blockages in approval of this program due to ongoing border tensions. "We view this as a positive development as this signals Pakistan's reform agenda is in progress and afloat," Talreja said. In our annual strategy released in Nov 2024, we mentioned, approval of first review of IMF in Mar 2025 would be a key trigger in re-rating of market multiple to historic average. Currently, the PSX is trading at an estimated 2026 price-to-earnings (P/E) ratio of 4.7 times, which is 32% lower than the historical forward price-to-earnings ratio of 7 times. Furthermore, recent tension between India and Pakistan wiped out 13% from the market in last 11 sessions between Apr 22 to May 08, 2025 before recovering 3.5% on May 09. We consider this as an opportunity for value investors to ride on Pakistan's improving macro indicators, he said. For the first time in almost last 2 decades, Pakistan is set to post current account and primary account surplus, Talreja added. Furthermore, interest rates are down 1100bps from peak of 22% to 11% in last 1 year, this will further augment the market rally through induction of more funds in equities from fixed income. Talreja said they maintain their PSX's base case index target of 127,000 for December 2025. However, with higher liquidity, index can cross 150,000 mark assuming successful IMF reviews and political and geo-political stability. In its latest projections, the IMF now expects Pakistan's real GDP growth to reach 2.6% in FY25, down from the earlier forecast of 3.2% published in October 2024. Inflation is projected to average 5.1%, a significant downward revision from the previous estimate of 9.5%. The primary balance is expected to post a surplus of 2.1% of GDP, slightly up from the earlier estimate of 2%, while the current account deficit is now seen at just 0.1% of GDP, compared to the previously projected 0.9%. Additionally, foreign exchange reserves are forecast to reach $13.9 billion by June 2025, higher than the earlier estimate of $12.75 billion. In comparison, our own projections anticipate real GDP growth in the range of 2.5% to 3.0% during FY25, with average inflation between 4.5% and 5.5%, said Talreja. We expect a primary surplus of 2% of GDP, a current account surplus in the range of 0.3% to 0.7%, and foreign exchange reserves to rise to approximately $14.3 billion by the end of June 2025.
Arab News
12-05-2025
- Business
- Arab News
Pakistan stocks record single-day gain, bonds rally after ceasefire with India, IMF tranche approval
KARACHI: Pakistan's stocks rose more than 9 percent, the highest single-day gain in decades, and its international bonds rallied on Monday, analysts said, following a ceasefire with India and the approval of $1 billion tranche by the International Monetary Fund (IMF). The Pakistan Stock Exchange (PSX) suffered losses in the last three sessions since India struck multiple Pakistani cities with missiles on Wednesday. Pakistan responded with fighter jet, drone and artillery strikes and four days of conflict between the two sides came to a halt on Saturday evening after the United States announced a surprise ceasefire. On Monday, the benchmark KSE-100 index rose by 9.45 percent, or 10,123 points, to close at 117, 297 points, compared to Friday's close of 107,174 points. The country's currency and international bonds also surged, paring their losses since tensions rose with India over an attack in Indian-administered Kashmir on April 22. 'The highest single-day gain in almost three decades comes after the ceasefire announcement of India and Pakistan,' Shankar Talreja, head of research at Karachi-based Topline Securities brokerage firm, told Arab News. The KSE-30 index, which includes the top 30 most liquid companies, increased about 9.7 percent during the intraday trade, forcing the bourse to halt trading at 9:37am Pakistan time for an hour. The geopolitical tensions had led to aggressive selloffs and fueled widespread investor concerns at the bourse which lost more than 12 percent between April 22 and May 8. Monday's rally triggered the upper circuit breaker for the second time in the PSX's history since July 2023, according to Adnan Sami Sheikh, an analyst at Pakistan Qatar Investment Company Ltd. The otherwise risk-averse investors went on a buying frenzy primarily on the back of a US-brokered ceasefire agreement between India and Pakistan. 'Local individual investors who had been net sellers in the recent past were aggressive buyers,' Talreja said, adding that according to Bloomberg-compiled data, PSX had become the world's third best performing stock index over the last one year. The other factor behind Monday's rally was the IMF's approval of $1.4 billion loan to Pakistan under its climate resilience fund, and the release of a $1 billion as part of the country's $7 billion bailout program secured in Sept. last year, taking the total disbursements under the program to $2.1 billion, according to analysts. The much-awaited inflows will boost the cash-strapped nation's foreign exchange reserves, which Islamabad seeks to increase to $14 billion by June. The IMF, which the once-near-default Islamabad has visited frequently in recent years, wants Pakistan to hold enough dollars for at least three months of imports. PAKISTANI RUPEE AND BONDS Pakistan's currency marked the first gain in the last seven sessions this month and rose 0.1 percent, with the US dollar closing at Rs281.57, according to the State Bank of Pakistan. The rupee had devalued 0.3 percent since last month, when Pakistan's now-de-escalating border tensions with India had first resurfaced. The South Asian nation's global bonds also rallied sharply and rose as much as 5.7 cents globally, Reuters news agency reported, citing Tradeweb data. Most of the bond maturities have clawed back the losses sustained since April 22. 'The investors are now perceiving lower country risk premium for Pakistan,' Talreja added. Commenting on the developments, Pakistan's finance adviser Khurram Schehzad said the South Asian nation has much more to offer. He said positives like the IMF board's approval, declining interest rate, spillover effect of a potential settlement of the US-China tariff issue, and Pakistan's 'measured and responsible' response in terms of narrative and the actions on ground against India have caught the attention of investors. 'Renewed investor IMF funding and support, renewed regional investor interest, one of the lowest inflation rates and stable currency parities in the region all position Pakistan for a more meaningful economic upside moving forward,' he said.
Express Tribune
22-04-2025
- Business
- Express Tribune
Inflation to hit 60-year low in April 2025
Listen to article Pakistan's inflation is expected to bottom out and hit a six-decade low in April 2025, with the Consumer Price Index (CPI) likely to ease to just 0.3% year-on-year (YoY), down from 0.7% in March. Research Head of JS Global, Muhammad Waqas Ghani wrote in a report, "Following a 0.7% YoY increase in March 2025, Pakistan's Consumer Price Index (CPI) is expected to fall further to 0.3% YoY in April 2025marking a six-decade low and reinforcing the country's sharp disinflationary trend". This significant decline is largely attributed to lower food inflation and a favourable base effect, as headline inflation was extremely high during the same period last year. As a result, the average inflation for the first ten months of FY25 (10MFY25) is projected to decline to 4.9%, compared to 26.2% during 10MFY24. "Pakistan's CPI for April 2025 is expected to bottom out, registering below 0.50% YoY," said Director Research of Topline Securities, Shankar Talreja. Inflation is projected to range between 0.05% and 0.50% YoY, translating into a month-on-month (MoM) deflation of approximately -0.8%. This would bring the 10MFY25 average inflation to 4.87%, "sharply lower than the 26.22% recorded during the same period in FY24," he wrote in his report. Food inflation, which makes up 35% of the CPI basket, is expected to post a steep YoY drop of 5.7% in April 2025, compared to 9.7% in April 2024, according to Ghani. The decline is attributed to substantial reductions in prices of essential food items such as rice, potatoes, tomatoes, wheat, and onions. On a monthly basis, food inflation is projected to decrease by 3.32%, led by a 25% drop in fresh fruit prices, a 21% fall in tomato and onion prices, and a 19% decline in egg prices. In contrast, prices of milk, meat, spices, and pulses are expected to rise only marginallyby an average of 0.2%, Talreja explained. Meanwhile, core inflationwhich excludes the more volatile food and energy componentsis expected to stand at 7.7% YoY in April, with a modest MoM increase of 40 basis points. In March 2025, core inflation hovered around 10%, with urban core at 8.2% and rural core at 10.2%.
