· The wait is finally over. IMF program has resumed with the board approving US$1bn tranche, taking cumulative program disbursements to US$3bn (or 50.0% of the total program disbursements).

· Personal income tax reforms, further harmonization of GST and power sector reforms would continue to form base of the program, going forward. The extent of reforms under revenue mobilization remains to be seen with the incumbent Govt. already battling higher inflation and eroding purchasing power of consumers amid election year in sight.

· Even power sector reforms are likely to bring inflationary pressure in our view, considering potential tightening of cap on Govt. guarantees limiting options of direct settlement of circular debt in the sector (guarantees likely to reach PkR3.2trn by Jun’22 — above original PC of PkR2.7trn).

· IMF program resumption and the Govt.’s intent to remain in the program is likely to bring much needed certainty in the market. Additionally, we see easing pressure in the currency market with CY22 PkR/US$ averaging at 170-175. In this backdrop we may see margin expansion in Autos and Foods while Cements and Steel are likely to have added advantage of election year development projects.

AKD Research