According to estimates from Ministry of Agriculture, assessed losses may cross PKR240bn (USD2.9bn). Value erosion from major crops alone sums to PKR180bn or 3% of GDP (initially expected growth of 4.5% was to add PKR255bn to GDP during FY11)

   We thus expect GDP to grow by 2.1% in FY10 followed by 4.1% in FY10 while inflation to peak at 17-18% during FY11

   In Pre-flood scenario, govt. was estimating fiscal deficit of PKR780bn for FY11 - 4% of GDP. Potential shortfall in tax collection is estimated at PKR60bn in the current scenario which is expected to curtail tax to GDP under 10%

   IMF is to provide USD450mn in Immediate Emergency Assistance to Pakistan and seems committed to work towards Completion of Stand-By Arrangement Program Review. Other outcomes of the ongoing review include 200bps relaxation in fiscal deficit

   Overall investment theme for Pakistan equities stay intact which is largely driven by domestic demand, favorable demographics and rich natural resources

   For the rest of the 2010 however, equity markets may continue to remain hostage to negative news flow emanating from the situation. Moreover, concerns on rising inflation and fiscal deficit and consequent risk of SBP further tightening the monetary environment will continue to loom over investor sentiments

   We thus believe that our initially set KSE100 target of 11,500 may not be met during 2010 while upside risks to this thesis largely rest on introduction of a timely and effective leverage tool i.e. Margin Trading System

   Kindly refer to our detailed report to be released shortly