Bloodbath at PSX amidst political uncertainty, IMF review delay
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Shares at the Pakistan Stock Exchange (PSX) fell sharply Tuesday as the political uncertainty in the country reached a new level and a delay in the completion of the International Monetary Fund’s (IMF) ninth review.
The benchmark KSE-100 index plunged by 1378.54 points, or 3.47 per cent, to close at 38,342.21 points. It was the highest one-day slide since June 24, 2022.
The index reached an intraday low of 38,287.81 points, down 1,432.94 points, or 3.74pc, at 3:23pm.
According to the analysts, the market is under pressure after the dissolution of the Punjab Assembly and the prospect of the dissolution of KP Assembly.
However, the market came under added pressure on signs that the government’s negotiations with the IMF may be delayed.
According to the experts, the index fell on reports of the IMF’s harsh conditions, including an end to managing the exchange rate, increase in gas prices and a resolution of the circular debt issue.
In addition, reports of an increase in the benchmark interest rate at the central bank’s upcoming Monetary Policy Committee meeting also weighed down sentiment.
The KSE-100 index had closed 684 points down last week due to political uncertainty after Punjab Chief Minister Parvez Elahi formally advised the governor to dissolve the provincial assembly.
The Punjab Assembly stood dissolved on Saturday and a caretaker chief minister is yet to be appointed. The KP Assembly is also expected to be dissolved soon as part of the opposition’s strategy to force the government to hold early general elections.
Meanwhile, the country’s forex situation has worsened with the State Bank of Pakistan’s (SBP) reserves falling to $4.34 billion, the lowest since February 2014.
The country has been facing a serious dollar shortage, which is resulting in restricted imports of even food and industrial raw materials. The latest position of foreign exchange reserves reflects that the country doesn’t have sufficient dollars to cover even one month of average imports. In the prevailing situation, Pakistan needs to complete the much-delayed ninth review of the IMF for the release of $1.18bn.
Pakistan entered a $6 billion IMF programme in 2019, which was increased to $7bn last year. The programme’s ninth review had earlier been put off for two months due to the PML-N-led government’s unwillingness to accept certain conditions placed before it by the Fund, and the disagreements have yet to be resolved.