KARACHI - Pakistan's stock market fell by nearly 3% on Monday after higher taxes for corporates and banks were announced in Friday's budget, analysts said.

In the budget for the 2022/23 financial year that starts on July 1, Finance Minister Miftah Ismail raised the tax rate on banks to 42% from 39%, increased capital gains tax to 15% if assets are sold within a year, and raised withholding tax to as much as 5%.

Experts said the tax increases could boost government revenues by 80 billion rupees ($393 million) in 2022/23.

“Market primarily reacted due to higher tax measures for corporates and banks introduced in the budget. Also, removal of tax credit for investment in mutual funds is also bearing on the market,” Saad Hashemy, CEO at BMA Capital, told Reuters.

However, any positive developments over negotiations with the International Monetary Fund (IMF) and the Financial Action Task Force (FATF), an intergovernmental group that combats money laundering, should help improve sentiment, he added.

An FATF meeting is scheduled for June 14.

The Pakistan Stock Exchange 100 index dropped by 1,134.80 points, or 2.70%, to 40,879.93 on Monday.

On May 9, the market fell by more than 3% amid uncertainty over the new government's plans to restart a stalled IMF programme.

The IMF has expressed concerns about Pakistan's budget, but the government is confident it can make changes to satisfy the lender.

Pakistan is looking to get a staff level agreement with the IMF this month, its finance minister has said.

(Reporting by Syed Raza Hassan, Editing by Mark Potter)