ISLAMABAD: Pakistan’s caretaker Finance Minister Dr. Shamshad Akhtar has envisaged a task force to reform the tax system and increase revenue collection. This shows that the country’s tax system needs more improvement to meet the IMF conditions.
The market men are anxious about high inflation in the country after the substantial rise of petroleum products and other key food items. However, the continuous improvement in the value of the domestic currency has been a sigh of relief for the investors, which if prolonged might help cool down the inflation.
During the four-day sessions of the preceding week, the market exhibited lackluster activity, remaining relatively unchanged as investors were anticipating an impending increase in gas prices for the week, which did not materialize.
Foreign Investors
“This anticipation, coupled with profit-taking activities, contributed to the subdued market performance. Meanwhile, repatriation of profits and dividends by foreign investors on their investment in Pakistan sharply rose by 74.46 percent during the two months of the current fiscal year.
Repatriation during the period amounted to $49.2 million as against $28.2 million of the same period a year ago, according to the data of State Bank of Pakistan.
The Rupee settled at 287.74, appreciating by Rs 4.02 or 1.4%, since its high the rupee of Rs 307.10 has gained nearly Rs 19.36 or 6.3%. Meanwhile, the SBP reserves fell by $59 million, settling at $7.6 billion.
The foreigner buying was witnessed during this week, clocking in at $0.19 million compared to a net buy of $0.29 million last week.
Major buying was witnessed in Commercial Banks ($1.54 million) and Oil & Gas Marketing Companies ($0.22 million). On the local front, sales were reported by Banks / DFIs ($3.66 million) followed by Companies ($1.42 million).
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Shahyrar Butt, Portfolio Manager at Darson Securities said the preceding sessions coming week will see similar behaviour with the market to range from 45700 to 46500.
“If IMF tables more demands for Pakistan to qualify for the next tranche, the index might see some fresh falls. But meetings between IMF and government yield positive results, and the government to satisfy the donor agency with regard to reforms, expansion in tax base and revenue collection target achieved for the quarter, PSX to gain by 700 to 1000 points”, he said.
Moreover, Shahryar said crucial talks on cards with the IMF, any reservation from multilateral donor agencies to prove a setback for investors.
An analyst from AKD Securities said that looking ahead, the market’s performance is anticipated to be significantly influenced by the upcoming IMF review scheduled for November.
Salaman Ahmad, head of institutional sales at Aba Ali Habib said that the market looks strong in anticipation of upcoming Corporate results from banking, refineries, oil marketing, and power sectors, expected gas price, expected IMF approval of dividend plug-in back scheme for slashing gas sector’s circular debt and continuously appreciating Pakistan Rupee Rs, and declining yield on treasury bills.
FOREX MARKET
Faisal Mamsa, CEO Tresmark said that there are many reasons to stick to the forecasts of 285/$ being the short term consolidation level.
Dollar deposits held with other banks have consistently increased since June. Foreign exchange reserves in banks were around $4.7 billion by June versus current status of $5.5 billion.
Faisal Mamsa said that the country’s projected GDP Growth is 3 percent. This number needs to increase significantly for Pakistan to have more forex depth and liquidity.
While essential fiscal and export-centric reforms are being discussed, it will take time to implement them in letter and spirit.
