ISLAMABAD: Accepting the demand of stockbrokers, the government on Thursday approved Rs20 billion fund to support struggling stock market through state-run National Investment Trust (NIT).

Read: ECC expected to approve Rs25bn stock market support fund

A formal decision to this effect was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet presided over by Finance Adviser Dr Abdul Hafeez Shaikh.

“In order to stabilise stock market of the country, the ECC approved the proposal of Finance Division authorising the Government of Pakistan to issue sovereign guarantee amounting to Rs20bn for investment in NIT State Enterprise Fund,” said a brief official statement after the ECC meeting.

During a visit to Pakistan Stock Exchange last week amid plummeting market index, Shaikh had reportedly promised to brokers to come in their aid to lift capital market through public sector institutions. Some brokers had then told the media that the adviser had accepted their demand for Rs20bn government to support the market.

Interestingly, in his talks with brokers, Shaikh was accompanied by a team of the State Bank of Pakistan without any participation from the apex capital market regulator — the Securities and Exchange Commission of Pakistan (SECP).

When contacted, Finance Ministry’s Spokesman Dr Khaqan Najeeb said the government would provide a sovereign guarantee for a consortium of banks to lend Rs20bn to NIT for investment in the capital market. He said the National Bank of Pakistan was leading the consortium comprise 5-6 other leading commercial banks.

He said the stock prices were expected to improve going forward and profits would be shared with the government in the form of dividend under a set formula. He said a similar scheme had also been used in the past as a government intervention and had earned it dividends.

Najeeb was non-committal when asked if the fund would become operational by coming Monday, saying “it will be operational soon.” A few steps remain before full activation, such as publication of the minutes and formal notification.

Responding to a question, he said ECC did not take up any provision for buyback shares.

The KSE-100 index had come down to about 34,000 points from a peak of 53,000 a couple of years ago before it responded positively last week to staff-level agreement between the government and the International Monetary Fund over the 39-month bailout programme.

The ECC was also given a presentation on wheat situation in the country by secretary of Ministry of National Food Security and Research. He said the country was in a comfortable position with 7.257 million tonnes of wheat available in stock. The Ministry of Maritime Affairs suggested various proposals on the revival and development of shipping industry in Pakistan.

The committee noted the proposals and advised Ministries of Petroleum and Maritime Affairs to jointly come up with a comprehensive proposal in next ECC meeting for introducing a dynamic shipping policy focusing on expansion and development of local shipping industry.

The ECC acceded to the proposal of Ministry of States & Frontier Regions to grant Rs781.59 million for arranging 20,000 tonnes of wheat for Temporarily Displaced Persons of erstwhile Federally Administrative Tribal Areas.

It also approved supplementary and technical supplementary grants for various ministries and divisions and decided not to make them public and get them formally approved by the parliament as part of next year’s budget.

Published in Dawn, May 31st, 2019