Pakistan’s economy is on track for sustained recovery, with GDP growth projected at 2.7% in FY25 and 3.75% in FY26. This growth is supported by easing inflation, declining interest rates, and a stable PKR. Inflation is expected to moderate to 8% YoY in FY25, aided by a high base effect, declining global commodity prices, better agricultural output, and completion of major energy tariff adjustments.

The IMF agreement has boosted investor confidence, while a clear roadmap for debt management, FDI commitments from friendly countries, and ambitious privatization efforts signal an economic turnaround. High-impact projects like Reko Diq and energy sector reforms under the SIFC enhance Pakistan’s appeal as an investment destination, presenting opportunities for investors to leverage these developments at the PSX.

The PKR appreciated 1.2%YoY in CY24, reflecting improved forex reserves, reduced import bills, and reforms in the exchange rate system. The SBP’s vigilant policies are expected to maintain the PKR in the 280-300/USD range in CY25, bolstering purchasing power and forex stability.

A 900bps reduction in policy rate during CY24 has played a pivotal role in driving economic recovery. With an additional 300-500bps cut expected in CY25, monetary easing will unlock liquidity, lower borrowing costs, and stimulate private sector credit, further fueling growth.

The PSX is poised for robust performance in CY25, supported by easing inflation, lower interest rates, a stable PKR, and improving liquidity. With valuations well below regional peers and historical averages, the PSX offers an attractive entry point for local and foreign investors.

We project the KSE-100 Index to reach 148,779 levels by Dec’25, driven by 12% corporate earnings growth and an 8% dividend yield. Key drivers include abundant liquidity, easing monetary policy, government efforts to formalize untaxed sectors and a sustainable IMF program.

Courtesy – AHCML Research