Karachi: The KSE-100 Index concluded the year with a remarkable 51% increase, buoyed by a series of economic reforms and strategic financial maneuvers. The index reached 175,000 points, marking a 4.4% gain in December alone, driven by a combination of policy rate cuts and improved foreign exchange reserves following an IMF disbursement.
The State Bank of Pakistan's unexpected decision to cut the policy rate by 50 basis points to 10.5% catalyzed the market rally. This decision, taken during the Monetary Policy Committee meeting, was influenced by stable inflation rates and a favorable external economic outlook. November's CPI inflation rate stood at 6.1%, with expectations of a further decrease in December.
The IMF played a significant role in stabilizing Pakistan's economy by disbursing a US$1.2 billion tranche under its Extended Fund Facility and Resilience and Sustainability Facility. However, this assistance came with 11 new conditions targeting anti-corruption measures and reforms in the tax and energy sectors. Despite the support, the IMF adjusted Pakistan's GDP growth forecast for FY26 to 3.2%.
In a significant development for Pakistan's privatization agenda, the national carrier, Pakistan International Airlines (PIA), was successfully privatized. A consortium led by AHCL emerged victorious in the bidding process, offering Rs135 billion for the airline. This move aligns with the government's efforts to streamline public enterprises and meets IMF guidelines.
Looking ahead, market analysts anticipate further rate cuts in the first half of 2026, along with continued stability in Pakistan's external accounts. FX reserves are projected to reach US$17.7 billion by mid-2026. The construction and consumer sectors are expected to recover, bolstering economic growth prospects for the upcoming year. Top investment picks include companies such as OGDC, PSO, and UBL.
Overall, the year 2025 marked a period of significant economic strides for Pakistan, with strategic financial and policy decisions paving the way for potential growth in the coming year.