What happened on 03 Jan 2026?

Executive Summary

This briefing synthesizes critical developments across Pakistan's economy, global financial markets, and key regulatory and corporate sectors as of early January 2026. The analysis reveals a dual narrative for Pakistan, where a booming stock market and record tax revenues coexist with significant trade imbalances and challenges in the export sector. The Federal Board of Revenue (FBR) is escalating its enforcement measures, introducing stricter scrutiny for exporters and codifying its authority to arrest for major tax crimes, a move that has drawn concern from business leaders.

Globally, financial markets have commenced 2026 with remarkable strength, with major indices in the UK, Europe, India, and Hong Kong reaching new record highs, largely propelled by sustained optimism in the Artificial Intelligence (AI) sector. Concurrently, significant regulatory actions are shaping corporate behavior, evidenced by the Competition Commission of Pakistan's substantial penalty against deceptive marketing practices. In the energy sector, geopolitical considerations are evident as India recalibrates its Russian oil imports amid ongoing trade negotiations with the United States. Positive domestic developments include major natural gas discoveries in Khyber Pakhtunkhwa, signaling a potential boost to Pakistan's indigenous energy resources.

1. Pakistan's Economic and Fiscal Landscape

A complex picture emerges from Pakistan's domestic economic data, characterized by robust fiscal performance and equity market optimism clashing with deteriorating trade figures and industry-specific pressures.

1.1 Aggressive Tax Enforcement and Policy Shifts

The Federal Board of Revenue (FBR) is executing a stringent policy of heightened enforcement and tax base expansion, backed by strong political support.

• Record Tax Collection: The FBR collected a record Rs 1,427.1 billion in December 2025, achieving 99% of its monthly target. This performance was praised by Finance Minister Senator Muhammad Aurangzeb as a validation of the government's fiscal reform, digitization, and enforcement agenda.
• Intensified Enforcement Mandate: The Finance Minister has urged the FBR to "intensify compliance measures," "expand the tax net," and "double down on initiatives" to deepen tax collection, framing it as the only sustainable method to ease the burden on the formal sector.
• Scrutiny of Exporters: A significant policy shift has moved exporters from a Final Tax Regime to a Minimum Tax Regime, effective from tax year 2025. This subjects them to normal income tax returns, detailed income reconciliation, and potential audits. FBR officials have warned that any "concealment or misreporting discovered later will create serious challenges."
• Legal Powers of FBR: The Income Tax Ordinance, 2001 (for tax year 2026) grants the FBR expanded legal authority:
  • Arrest for Tax Crimes: FBR can arrest taxpayers for concealment of income following an audit, with thresholds set at Rs. 100 million for filers and Rs. 25 million for non-filers. Arrest requires approval from a committee including the Finance Minister and FBR Chairman.
  • Whistleblower Rewards: Section 227B incentivizes citizens to report tax evasion, fraud, or misconduct with a financial reward, contingent on the information leading to actual tax recovery.
  • Notice Service: Section 218 establishes multiple legally valid methods for serving notices, including personal delivery, registered post, courier, and electronic service (email/portal), making it difficult for taxpayers to claim non-receipt.

1.2 Trade Performance and Export Sector Challenges

The export sector faces headwinds from both macroeconomic conditions and new domestic tax policies, leading to a worsening trade balance.

• Widening Trade Deficit: In the first half of fiscal year 2025-26 (July-December), Pakistan's exports declined by 8.70% to $15.18 billion, while imports grew 11.28% to $34.39 billion. This caused the trade deficit to widen by a significant 34.57% to $19.20 billion.
• Industry Concerns: Khurram Ejaz, a representative of the Businessmen Panel Progressive (BMPP), warned that the FBR's increased scrutiny could discourage exporters, jeopardize the Prime Minister's "Uraan Pakistan" vision, and compel existing exporters to exit the market. He urged the government to suspend the FBR circular and focus on facilitation rather than creating additional hurdles.

1.3 Domestic Market and Corporate Developments

Despite trade concerns, Pakistan's equity market has displayed extraordinary bullish momentum, driven by positive macroeconomic indicators and significant corporate news.

• Historic Stock Market Rally: The Pakistan Stock Exchange (PSX) KSE-100 Index continued its historic run, settling above 179,000 for the first time on January 2, 2026, with a single-day gain of 2,679.44 points.
• Market Drivers: Analysts attribute the rally to strong liquidity, new-year fund positioning, and expectations of monetary easing. The decline in headline inflation to 5.6% YoY in December 2025 has fueled market expectations of a policy rate cut in the next Monetary Policy Committee meeting.
• Key Corporate Highlights:
  • Energy Discoveries: Pakistan Petroleum Limited (PPL) and the TAL Joint Venture announced a major gas discovery at the Bilitang-1 well in Kohat, Khyber Pakhtunkhwa. This follows a recent OGDCL oil and gas discovery in the same region, boosting prospects for the country's energy security.
  • Refinery Shutdown: Attock Refinery Limited (ARL) announced a temporary 3-4 day shutdown of its main crude distillation unit due to low crude stocks and reduced offtake of gasoline and diesel by oil marketing companies.
  • PSX Delisting: Shield Corporation Limited has formally applied to delist from the PSX, citing low share liquidity, recent financial losses, and a desire for management to focus on the core business. The company proposed a buy-back of minority shares at Rs 465.17 per share.

2. Global and Regional Market Performance

Financial markets across the globe began 2026 on a strong footing, with several key indices setting new records, driven primarily by enthusiasm for the AI sector and expectations of more accommodative monetary policies.

2.1 Record Highs in Key Markets

Index	Location	Performance Highlights (Early Jan 2026)	Key Drivers
FTSE 100	United Kingdom	Surpassed the 10,000-point mark for the first time. Capped 2025 with a nearly 22% gain.	Global AI rally, confidence in earnings, diversified commodity exposure.
STOXX 600	Europe	Hit a record high in the first trading session of the year.	Easing interest rates, defence sector gains.
Nifty 50	India	Scaled a record high of 26,340.	Prospects of strong December quarter earnings growth, rally in financials and metals.
Hang Seng Index	Hong Kong	Climbed to a 1.5-month high, driven by a strong tech rally.	Renewed optimism in China's domestic AI sector, particularly after a new paper from DeepSeek.
CSE All Share	Sri Lanka	Extended its winning run into the new year, posting a 3.6% weekly gain.	Broad-based gains in its seventh consecutive session of rise.
S&P 500 / Nasdaq	United States	Muted start to 2026 after robust double-digit gains in 2025.	Declines in communication and consumer discretionary stocks offset broader gains.
S&P/ASX 200	Australia	Started the year with a slight dip.	Weighed down by losses in heavyweight mining and gold stocks.

2.2 Technology and AI as Primary Catalysts

The overarching theme driving market optimism is the transformative potential of Artificial Intelligence. In Hong Kong, the tech sector index leapt 4% after a paper from AI firm DeepSeek showcased a cheaper development method, "reigniting optimism towards Chinese tech capabilities." This sentiment contributed to the successful debut of AI chip designer Shanghai Biren Technology. Similarly, the UK's FTSE 100 rally was attributed to a "wave of optimism sweeping global markets" linked to the AI boom.

3. Significant Regulatory and Corporate Actions

Key actions by regulators and corporations highlight trends in competition law, technology policy, and geopolitical energy strategies.

3.1 Competition and Consumer Protection in Pakistan

The Competition Commission of Pakistan (CCP) has taken decisive action against deceptive marketing.

• Major Fine Imposed: The CCP imposed a Rs 150 million penalty on Mezan Beverages, the maker of Storm energy drink, for imitating the packaging and trade dress of PepsiCo’s Sting energy drink.
• Legal Precedent: The CCP's order concluded that Mezan's conduct "amounted to parasitic copying and constituted deceptive marketing prohibited under Pakistan’s competition law." The commission affirmed that holding a registered trademark does not provide immunity from competition law when consumer confusion and passing-off are established.

3.2 Technology Sector Policy and Developments

• Proposed Levy on Mobile Phones: Pakistan plans to impose a 5% levy on imported mobile phones under the new Mobile and Electronic Device Manufacturing Policy (MEDMP) to encourage local manufacturing. Critics argue this will raise consumer prices without addressing fundamental barriers like technology transfer gaps and skills shortages, noting that previous localization targets have not been met.
• 5G Spectrum Framework: The federal cabinet approved the Mobile Virtual Network Operator (MVNO) framework, which is designed to guide spectrum needs and support decision-making for the upcoming 5G auction.
• Samsung's HBM4 Chip: Samsung Electronics' co-CEO reported positive customer feedback on its next-generation HBM4 memory chip, a critical component for AI hardware, stating that customers have said "Samsung is back," signaling intense competition in the AI chip supply chain.

3.3 Geopolitics and the Energy Market

• India's Oil Import Monitoring: India’s government is now requiring refiners to provide weekly disclosures on their Russian and U.S. oil purchases. Sources indicate this is part of a strategy to clinch a trade deal with Washington, with an expectation that Russian crude imports will dip below 1 million barrels per day.
• Global Oil Prices: Oil prices dipped on the first day of trading in 2026, following their biggest annual loss since 2020. The market continues to balance concerns of oversupply against geopolitical risks in Ukraine and the Middle East.

4. Key Data Points and Rates (January 2-3, 2026)

Category	Indicator	Value
Pakistan Stock Exchange	KSE-100 Index Close (Jan 2)	179,034.93 (+1.52%)
	BRIndex100 Close (Jan 2)	179,034.93 (+2,679.44 points)
Pakistan Forex	Inter-Bank USD Close (Jan 2)	280.11 (vs PKR)
	Open Market USD Selling (Jan 3)	283.00 (vs PKR)
	Open Market UK Pound Selling	380.75 (vs PKR)
	Open Market Euro Selling	332.00 (vs PKR)
Pakistan Rates	KIBOR (3-Month Offer)	10.58%
	KIBOR (6-Month Offer)	10.58%
Commodities (Pakistan)	Gold Price (Per Tola)	Rs 460,262 (Increased by Rs 5,700)
	Silver Price (Per Tola)	Rs 7,862
International Oil	Brent Crude Futures	60.34 / barrel (-0.51)
	WTI Crude	56.90 / barrel (-0.52)