KARACHI, Oct 31: The right to a decision about the removal on the ‘floor’ at the Karachi Stock Exchange rests with the Board of Directors, Advisor to the Prime Minister on Finance, Shaukat Tarin, told the members of the KSE on his visit to the bourse on Friday.

Mr Tarin said that the liquidity issue, which was at the heart of the problem, would be resolved soon. He assured the members that the stabilisation fund of Rs20 billion would be injected into the market in the next few days, this would precede the removal of ‘floor’. Four institutions contributing Rs5 billion each to the Fund included: the National Investment Trust, Employees Old- Age Benefits Institution, State Life Insurance and the National Bank of Pakistan. The Fund to be managed by the NIT would invest in stocks of identified government-controlled entities.

Mr Tarin observed that the government would compensate if participants incur loss in the Fund.

With regard to the ‘put option’ of Rs30 billion to be offered to foreign investors, the advisor said that the government planned to prepare a bouquet of government equities and offer them to non-resident Pakistanis.

He said that the twofold advantage would be that it would convert rupee into dollars and also serve as an investment instrument for overseas Pakistanis.

Mr Tarin reminded the members that being the former chairman of the KSE, he was aware of the market issues and problems.

He said that the Ministry of Finance had nothing to do with the ‘flooring’, but said that in his opinion, the market should not be tampered with, but left to free movement so as to keep up its reputation.

Mr Tarin highlighted the importance of the KSE, as a barometer of economy.

Investment in equities required investor confidence, safety of investment and peaceful environment, the advisor said. One of the challenges facing the government, he said, was to encourage private sector to boost investment.

Allaying fears of the business community, the advisor affirmed that the country would not default on foreign obligations.

He said it was necessary to endure pain to put the economy on a progressive path and stabilise macro-economic indicators.

He said that harsh decisions would be taken only if absolutely necessary, on a short-term basis and after taking all stakeholders on board.

The advisor made straight breast of difficult issues facing the economy and said that his ultimate aim was to pull inflation down and cut discount rates to a single digit, between seven to eight per cent.

Mr Tarin said that the government would pursue production-led growth by focusing on agriculture, manufacturing and trade.

He asked banks to offer new products and expand their reach. Regarding the capital markets, Mr Tarin stated that there was a need to develop debt market and expand capacity of stock exchanges in areas of more products, greater sophistication and increased number of investors.

Mr Tarin noted that the government has taken a lead by establishing a “yield curve” through a regular auction of Pakistan Investment Bonds (PIBs) and long term paper auction.

Mr Tarin dealt at length on a host of issues such as the need to cut government expenditure; development of public-private partnership; providing safety net to the poor, growth in the agriculture, industry and trade, energy, the restructuring of planning commission, fisheries, development of human resources and the financial sector.