Karachi: The KSE-100 Index underwent significant fluctuations this week, reflecting the impact of cross-border tensions and local unrest from nationwide protests. The index fell to an intra-day low of 157,678 but quickly recovered as diplomatic tensions with Afghanistan subsided. Market sentiment improved following Pakistan's staff-level agreement with the International Monetary Fund for the second review of the Extended Fund Facility, unlocking US$1.2 billion in funding.

This funding includes US$1 billion under the EFF and an additional US$200 million from the Resilience and Sustainability Facility. The IMF has projected Pakistan's GDP growth to reach 3.6% with inflation at 6% for the fiscal year 2026. The net debt-to-GDP ratio is expected to increase by 0.4% year over year.

In the wake of recent floods impacting the nation, losses have been estimated at Rs822 billion, affecting 229,763 houses. In a related development, Pakistan has signed a memorandum of understanding with China valued at RMB5 billion to address the country's deepening water crisis.

On the fiscal side, the government successfully raised Rs507 billion through Pakistan Investment Bonds and Rs776 billion through Treasury Bills, against a combined target of Rs1.2 trillion. Yields on PIBs increased by 13 to 21 basis points, while those on T-Bills remained stable.

The industrial sector showed signs of recovery, with Large Scale Manufacturing posting a 0.5% year-on-year increase. Additionally, the State Bank of Pakistan's reserves saw a slight increase of US$21 million week on week, bringing the total to US$14.4 billion.