November 6, 2019 (MLN): The month of October proved to be nothing less than a turning point for Pakistan, as the country saw a number of positive improvements within its economic milieu. Whether its the appreciation in local currency or significant uptick in KSE-100 index, it would be fair to say, and to believe, that Pakistan is indeed on a path towards recovery.
Equity market
The month of October witnessed a significantly improved performance of KSE-100 index, as it moved up by 2,125 points or 6.62% and closed at 34,204 points. A bullish bar appeared with encouraging volume signaling bullish sentiments among the investors, as during the month all share market capitalization increase by 4.43% or PKR283.49 billion MoM.
Improving macroeconomic factors and a descending revision in T-bills and PIBs yields helped lift stocks in October. Moreover, Gov’t relaxation for traders on axle load and CNIC condition has helped to further uplift investor’s sentiment.
Forex market
Pakistan rupee witnessed another round of appreciation by 0.44% in October, where the rupee traded at PKR 155.67 against the USD in the Intermarket (appreciated by 69 paisa as of October 31, 2019).
PKR has improved by Rs. 8.32 against the dollar since its lowest value set on June 27, 2019, marking a gain of 5.10%. This appreciation in the value of the currency reduced the value of external debt by Rs. 891 billion till October 30.
This appreciation in the value of currency is attributed to several factors which include: improvement of external account on the back of some structural reforms and contraction in the current account deficit (down by 13% MoM in September 2019); hefty decline in oil import bill by 11.63% MoM in September 2019; marginal increase in foreign reserves in October by 0.06% MoM and funding by IMF for all major outflows.
Current Account Deficit
Pakistan current account deficit during the first 3 months of FY20 stood at USD 1.548 Billion compared to USD 4.287 billion from the corresponding period last year.
According to the data released by the State Bank of Pakistan (SBP), the current account deficit during the month of September 2019 was USD 259 million compared to USD 1.278 billion from September 2018, showing a decline of a massive 79.71 percent.
Recently, the Federal Minister for Economic Affairs Hammad Azhar said that the Government of Pakistan with the help of Prime Minister of Turkey, had amicably resolved the issue of Karkey Power Plant which helped government got a waiver of Rs 200 billion. After this resolution, the country’s current account deficit has shrunk by 64%.
FBR
Federal Board of Revenue collected Rs. 320 billion revenues during the month of October and maintained overall increase over last year of 16% and domestic tax over 25%, after taking into account negative aspect of import contraction of around Rs50 billion.
Inflation
The market is expecting CPI figure to land within the range of 10.07% to 10.50% in the month of October, as compared to 11.38% recorded in September, 2019 and 6.5% in October, 2018.
Exports
Total exports from Pakistan in September 2019 amounted to $1.77 billion (provisional) as compared to $1.8 billion (provisional) in August 2019, showing a decrease of 4.99% but an increase of 2.67% as compared to $1.72 billion in September 2018.
Exports during July-September, 2019 totaled Rs. 871 billion (provisional) as against Rs. 666 billion during the corresponding period of last year, showing an increase of 30.65%.
LSMI
The overall output of LSMI decreased by 6.04% for July-Aug, 2019-20 compared to July-Aug, 2018-19. The LSMI output decreased by 7.06% for Aug 2019, compared to Aug 2018 and 4.08% if compared to July 2019.
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