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Another Week, Another Pulse!

Ramadan began with its usual sense of calm, but the week itself was anything but quiet. From rising regional tensions to important economic signals, the headlines carried consequences that could shape the months ahead.

On the geopolitical front, tensions escalated after Pakistan carried out strikes inside Afghanistan, raising fresh concerns about cross-border stability. At the same time, relations between the United States and Iran remained strained. US negotiators are scheduled to meet Iran in Geneva on Friday to continue nuclear talks, but major disagreements remain over Iran’s nuclear activities.

 In another significant development, US President Donald Trump announced an increase in the US global tariff rate from 10% to 15%. When a major economy raises tariffs, global trade becomes more expensive, and that pressure eventually filters through supply chains and prices worldwide.

Domestically, attention is now turning toward the upcoming review by the International Monetary Fund. A mission led by Iva Petrova is scheduled to arrive on February 26 to assess Pakistan’s progress under its $7 billion Extended Fund Facility and $1.1 billion Resilience and Sustainability Facility programs. Ahead of that review, authorities are arranging a $600 million loan to strengthen external financing and manage near-term obligations.

Those obligations are significant. Around $1.3 billion is due in April 2026 with the maturity of an international Eurobond, covering both principal and interest. With reserve targets under the IMF program in focus, meeting these repayments smoothly is essential for maintaining financial stability and investor confidence.

Inflation also edged higher last week. Short-term inflation rose 5.19% year-on-year in the week ending February 19. Food and energy prices were the primary drivers, reflecting seasonal demand during Ramadan alongside broader price pressures.

Government borrowing increased sharply as well. In the first seven months of FY26, borrowing from banks was nearly five times higher than during the same period last year, indicating elevated spending requirements despite stronger revenue collection.

There were some encouraging signs. Large-Scale Manufacturing grew 4.82% year-on-year in the first half of FY26, pointing to gradual industrial recovery. The current account posted a $121 million surplus in January, compared to a $393 million deficit a year earlier, according to the State Bank of Pakistan. That improvement suggests some easing in external pressures.

At the same time, foreign direct investment declined 41% year-on-year in the first seven months of FY26, showing that investor sentiment remains cautious. 

On the reform front, the Asian Development Bank (ADB) announced technical assistance to support the expansion of artificial intelligence applications in Pakistan’s health sector. Meanwhile, the Pakistan Virtual Assets Regulatory Authority launched a regulatory sandbox for virtual assets, allowing innovation in digital finance within a supervised framework.

Punjab also introduced two new ordinances aimed at reforming land management and strengthening property rights. Land transfers will move to a fully digitized e-registration system, while patwaris will be limited to handling inheritance-related transfers, part of an effort to modernize land administration and reduce disputes.

In another development, Pakistan and the United States formally launched a strategic economic initiative that includes collaboration on the operation and redevelopment of the Roosevelt Hotel, a long-debated overseas asset.

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Pakistan’s equity market stayed on the back foot last week, extending its losing streak as investors opted for caution. The benchmark KSE-100 Index at the Pakistan Stock Exchange fell to 173,170 points, reflecting a broad-based decline across sectors.

Selling pressure came from continued foreign outflows, rising regional tensions, and cautious positioning ahead of the upcoming review by the International Monetary Fund. At the same time, relations between the United States and Iran remained strained. US negotiators are set to meet Iran in Geneva on Friday for a new round of nuclear talks, with significant gaps remaining over enrichment limits and Trump’s “zero enrichment” stance.

After the market’s strong run earlier this year, this correction shows investors are recalibrating risks. The coming week will likely hinge on developments in both international diplomacy and economic policy signals from the IMF.

IMF Notes Improvement in Pakistan’s Economy Before Key Review

The IMF has noted improvement in Pakistan’s economy, highlighting stronger fiscal discipline, better revenue management, and controlled inflation ahead of its review mission starting February 25. The assessment will evaluate Pakistan’s progress under the Extended Fund Facility and Resilience and Sustainability Facility, influencing the country’s access to IMF support and shaping the next phase of economic reforms.

Rs1.3tr Raised, Rs1.57tr Injected: SBP Maintains Market Liquidity

The State Bank of Pakistan (SBP) raised over Rs1.31 trillion through T-bill and Pakistan Investment Bond (PIB) auctions and injected an additional Rs1.57 trillion into the banking system via open market operations, while its foreign exchange reserves edged up $19 million to $16.19 billion. These moves highlight the government’s continued reliance on domestic borrowing to finance its budget and maintain liquidity, while the modest reserve increase points to a stabilizing external position. The next focus will be on how these measures impact interest rates, inflation, and overall financial stability in the coming weeks.

Pakistan’s Mutual Fund Assets Soar to Record Rs4.32 Trillion in January 2026

January 2026 was a landmark month for Pakistan’s mutual fund industry, with total assets under management (AUMs) hitting an all-time high of Rs4.32 trillion, thanks to strong market performance and robust investor inflows. Curious how your favorite funds performed?

Compare fund-wise returns, track top performers, and see where your investments stand on Behtari.com your gateway to smarter investing!

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