Pakistan’s monetary indicators have remained broadly conducive to maintaining stable inflation, while the Pakistan Stock Exchange (PSX) has continued its remarkable upward trajectory, achieving record-breaking levels amid improving investor sentiment and macroeconomic stability.
According to the latest monetary statistics, during the period from July 1 to October 3, FY2026, Pakistan’s overall money supply (M2) recorded a contraction of 2.6 percent, compared to a 1.9 percent contraction during the same period last year. The moderation in monetary expansion indicates a cautious liquidity environment, reflecting the government’s efforts to manage inflationary pressures and sustain financial discipline.
Within the money supply composition, the Net Foreign Assets (NFA) of the banking system grew by Rs. 173.8 billion, compared to an increase of Rs. 188.6 billion recorded in the corresponding period of the previous year. This rise suggests improved external sector performance, driven by stable remittance inflows, steady exports, and enhanced foreign exchange reserves.
Conversely, the Net Domestic Assets (NDA) of the banking system declined significantly by Rs. 1,245.5 billion, compared to a decrease of Rs. 863.9 billion last year. The contraction in NDA primarily reflects a tightening of domestic liquidity conditions and reduced reliance on central bank borrowing, indicating fiscal restraint and improved budgetary management.
Under budgetary financing, the government retired Rs. 2,039.6 billion in borrowings during the same period, marking a notable improvement over last year’s Rs. 1,282.0 billion retirement. This substantial reduction in government borrowing highlights the fiscal consolidation efforts underway, supported by higher non-tax revenues, increased State Bank profits, and prudent expenditure controls.
The private sector, meanwhile, exhibited a modest decline in borrowing activity, retiring Rs. 18.6 billion compared to Rs. 297.0 billion in the same period last year. Analysts note that this shift indicates cautious private sector credit demand amid evolving economic conditions and moderate cost-of-capital dynamics.
On the capital market front, the Pakistan Stock Exchange sustained its bullish momentum throughout September 2025. The benchmark KSE-100 Index soared by an impressive 16,875 points, closing the month at a record 165,493 points. This robust rally was fueled by strong corporate earnings, renewed investor confidence, and improved outlooks from global rating agencies.
The total market capitalization expanded by Rs. 1,608 billion during the period, reaching Rs. 19,264 billion by the end of September. As of October 22, 2025, the KSE-100 Index had further advanced to 166,553 points, with overall market capitalization standing at Rs. 19,212 billion, underscoring sustained investor optimism and positive economic sentiment.
Market experts attribute the PSX’s bullish rally to a combination of factors, including fiscal stability, successful IMF program reviews, strengthened foreign reserves, and improved business confidence. The continued easing of global commodity prices and Pakistan’s commitment to structural reforms have also bolstered investor trust.
Furthermore, the ongoing momentum in the capital market is seen as a reflection of Pakistan’s broader macroeconomic resilience, with stable inflation expectations, controlled fiscal deficits, and rising participation from both institutional and retail investors.
As Pakistan progresses through FY2026, policymakers remain focused on maintaining monetary discipline, curbing inflationary risks, and ensuring sustainable growth across key sectors. The combined strength of fiscal consolidation, positive external balances, and record stock market performance points toward an improving economic trajectory, reinforcing the country’s gradual but steady recovery path.
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