Karachi: The Alhamra Opportunity Fund – Dividend Strategy Plan reported strong performance for the fiscal year ending June 30, 2024, driven by Pakistan's macroeconomic recovery. The report highlighted the government's success in averting a potential default by entering into a new International Monetary Fund (IMF) program after months of delay. As part of the arrangement, the government secured a $3.0 billion Stand-by Arrangement (SBA) from the IMF, with timely inflows from friendly countries. Pakistan also managed to remain in compliance with IMF targets, according to the fund's report.

The caretaker government, which took office in August 2023, tackled speculative pressure on the currency, which had spiked to a high of 307 in the interbank market. The exchange rate in the informal market reached a peak of nearly 330 PKR/USD, driven by speculative activity and uncertainty. According to information available from the Pakistan Stock Exchange (PSX), the government responded with measures against smuggling and illicit dollar trading, which improved confidence in the currency and narrowed exchange rate spreads. By the end of the fiscal year, the Pakistani rupee had appreciated by 2.6%, closing at 278.3 PKR/USD.

The current account deficit (CAD) for the first 11 months of FY2024 dropped by 88% year-over-year to $464.00 million, a significant improvement from the $3.8 billion deficit in the corresponding period last year. This progress was attributed to a 13.1% increase in exports and a 2.3% reduction in imports, leading to a 17.0% contraction in the trade deficit. Foreign exchange reserves rose to $9.4 billion by the end of June 2024, supported by inflows from the IMF and other multilateral sources.

Headline inflation for the year averaged 23.9%, compared to 29.0% last year. Inflation remained high due to the currency depreciation and an increase in energy and food prices. The government’s compliance with IMF conditions, including higher electricity tariffs and gas prices, further added to inflationary pressures. However, the State Bank of Pakistan (SBP) reduced the policy rate by 150 basis points to 20.5% by the end of June 2024, signaling a shift toward monetary easing.

Pakistan’s GDP grew by 2.4% in FY2024, in contrast to a contraction of 0.2% last year. Agriculture, which grew by 6.3%, was the primary driver of economic growth, while the industrial and services sectors grew by 1.2%. Despite positive developments, industrial and services output remained subdued due to political uncertainty and high interest rates.