PSX benchmark sheds 660 points as finance minister leaves for IMF talks

Published May 23, 2022
A screenshot of market activity on the KSE-100. — PSX website
A screenshot of market activity on the KSE-100. — PSX website

The Pakistan Stock Exchange (PSX) witnessed selling pressure on Monday as the benchmark KSE-100 index lost over 500 points within the first hour of trading.

According to the PSX website, the KSE-100 Index opened at 43,100.71 points and immediately fell by over 400 points. After around 9:30am, the bourse saw a brief correction before, once again, going down.

At around 12:30pm, the benchmark had shed 526 points or 1.22 per cent. By the day's end, the bourse had slid 660.46 points, or 1.53pc.

Today's plunge comes as Finance Minister Miftah Ismail leaves for Doha today to participate in talks with the International Monetary Fund (IMF) for the resumption of a $6 billion loan programme that has been stalled since early April.

Talking to reporters at the Jinnah International Airport earlier today, he said that Prime Minister Shehbaz Sharif and PML-N supremo Nawaz Sharif had ruled out the possibility of ending the fuel and power subsidies —introduced by the PTI government in February.

Ismail said that according to the deal finalised by former finance minister Shaukat Tarin, Pakistan would have to raise the price of diesel by over Rs150 and petrol by Rs100. "It will not happen. I have refused. Shehbaz Sharif has refused. Nawaz Sharif has refused," he asserted.

Raza Jafri, head of Equities at Intermarket Securities, said that the market was under pressure as it was high time the government took quick decisions for the economy. "But it is just not coming through.

"As the IMF talks conclude this week, Pakistan can not afford to leave the table without a staff-level agreement being reached," he added.

Experts have repeatedly said that Pakistan needs to immediately reverse the unfeasible fuel and energy subsidies, a pre-condition set by the IMF for the resumption of its loan programme. The new coalition government's insistence on continuing with thee subsidies has been hurting investor sentiment for weeks now.

Ahsan Mehanti, director of the Arif Habib Corporation, told Dawn.com that the monetary policy announcement, which is expected to hike policy rate by at least a hundred basis points later in the evening, contributed to the market's fall.

"The devaluation of rupee against the dollar, [which touched an all-time high of Rs201 against the dollar last week] is also responsible for the dwindling trust of investors," he said.

Mehanti also warned that rising political tension, specially after the announcement of the former prime minister Imran Khan's march to Islamabad, could further pressurise the market.

Govt's indecision keeps economy on edge

The PSX and the rupee have both come under pressure over the past week as the new coalition government has failed to take decisive economic decisions, most prominent among which is a reversal of fuel subsidies.

According to a Dawn report, the sentiments of the investors were hurt because of the stalled IMF programme and rising import bills. Earlier this month, the country posted its highest-ever monthly oil import bill in April, which surged by 58.98 per cent to $24.77 billion in the July-April period compared to $15.58bn in the corresponding period last year owing to higher international prices and a massive depreciation of the rupee.

In recent meetings with the new finance minister, the IMF has linked the continuation of its loan programme with the reversal of fuel subsidies, which were introduced by the previous government. However, Prime Minister Shehbaz Sharif has consistently rejected summaries by the Oil and Gas Regulatory Authority and the finance ministry to increase fuel prices.

The PTI had announced a four-month freeze (until June 30) on petrol and electricity prices on February 28 as part of a series of measures to bring relief to the public.

At the time, and even after coming into power last month, the PML-N and other parties part of the new coalition government had severely criticised Imran Khan's government for "derailing" the IMF programme through unfunded fuel subsidies. But despite being at the helm for over a month, these parties have not reversed the subsidies; although the finance minister has repeatedly said these subsidies are not feasible and are costing the government Rs120 billion a month.

Earlier this month, Ismail said petrol should have been priced at Rs245 per litre according to the agreement the former government did with the IMF. However, the PML-N led government was still selling it at Rs145 per litre and would try its best to maintain that price, he added — a sign that the new government is finding it difficult to take a decision that might be unpopular with its voters.

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