JS Securities Limited – Morning Briefing

Karachi, February 11, 2019 (PPI-OT): Key
highlights of the PM’s UAE visit

On sidelines of the 7th World Government
Summit (WGS), the PM held meetings with top officials from the UAE government
as well as the IMF.

In the WGS speech, the PM highlighted
ongoing efforts to improve governance, key export sectors such as tourism and
improvements in ease of doing business, while emphatically stating that it is
the time for making an investment in Pakistan.

As far as the PM’s talks with the IMF
are concerned, we flag that despite all the positive vibes, up until now
nothing concrete has been revealed regarding the specifics of a new IMF
program.

PM Imran Khan makes Pakistan’s case at
WGS in Dubai

On the sidelines of the 7th World
Government Summit (WGS) held in Dubai on February 10th, the Prime Minister
Imran Khan held meetings with top officials from the UAE government as well as
the Managing Director of the IMF, Christine Lagarde. Although details of any
potential upcoming IMF program are yet to meet the public eye, there have been
news stories circulating of talks being in penultimate stages of an economic
assistance package. A statement on social media from the PM also suggests both
the government and IMF being on the same page regarding a need for “deep
structural reforms” to take the country into a phase of sustainable
development.

Regarding the WGS event, in a typically
charismatic speech, the PM addressed world leaders and highlighted Pakistan’s
potential which was set to be unlocked in coming years. Key points emphasized
in the speech by the PM included (1) improvement in governance which would
unlock Pakistan’s true potential, and (2) opportunities in the tourism sector
given the country’s topographical blessings. In a bid to attract investment,
the PM also assured of a shift in mindsets to cater to investors and allow them
to earn profits from their investments. Finally, it was unequivocally stated
that things can only get better from here and now is the best time to invest in
Pakistan, given that a turnaround is on the cards.

Clarity still missing regarding IMF,
despite positive vibes

Despite being on the cusp of a potential
economic revival, Pakistan has recently been downgraded by international credit
ratings‟ agencies such as Fitch and S and P. In other news, the National
Accounts Committee has revised GDP growth for FY18 downwards to 5.2% from 5.8%.
If fiscal consolidation measures, which were missing in the mini-budget, have
to be implemented (with or without IMF), it will inevitably lead to lower
economic growth during the ongoing fiscal year. This would not be too
surprising, given that it is now a consensus view that the growth rate would be
slower during this year.

At the same time, we concur with the
PM‟s statement where he mentions this is the time to invest in Pakistan. We use
the premier’s own cricketing analogy regarding risk-takers being rewarded.
These are the moments when investments could yield healthy and long-term
returns. From a forward perspective, as far as the external account is
concerned, SBP‟s FX reserves (see table) could settle at ~US$10.4bn by the end
of FY19. We have assumed a current account deficit of US$1bn per month for
2HFY19 and deferred oil facility of US$4bn during the same (we have already
utilized US$375mn from IDB). As far as the PM‟s talks with the IMF are
concerned, we would again flag that despite all the positive vibes, up until
now nothing concrete has been revealed regarding the specifics of a new IMF
program.

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