Shares at PSX nosedive amidst political uncertainty, delay in IMF review

Published January 17, 2023
A snapshot of trading activity at the Pakistan Stock Exchange on Tuesday. — Photo via PSX website
A snapshot of trading activity at the Pakistan Stock Exchange on Tuesday. — Photo via PSX website

Shares at the Pakistan Stock Exchange (PSX) fell sharply on Tuesday, with analysts attributing the sell-off to political uncertainty and 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, its lowest level since July 27, 2020.

Today’s sell-off marked the highest one-day slide since June 24, 2022, according to Arif Habib Limited.

The index reached an intraday low of 38,287.81 points, down 1,432.94 points, or 3.74pc, at 3:23pm.

First National Equities Limited Director Amir Shehzad said the market was already under pressure because of political uncertainty after the dissolution of the Punjab Assembly. He noted that Khyber Pakhtunkhwa Chief Minister Mahmood Khan is also expected to send a summary to the governor to dissolve the provincial assembly today.

However, the market came under added pressure on signs that the government’s negotiations with the IMF may be delayed, he added.

Arif Habib Corporation’s Ahsan Mehanti said the index fell on reports of the IMF’s harsh conditions, including an end to managing the exchange rate, increase in gas prices and 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, he said.

Dalal Securities CEO Siddique Dalal also attributed the plunge to political uncertainty. “If the National Assembly is also dissolved and a caretaker government is installed, who will negotiate with the IMF? The IMF has reportedly reiterated its conditions again today to increase electricity and gas tariffs, hike the petroleum levy and impose additional taxes.

“The situation is bad. Nothing will change until the IMF’s ninth review is completed,” he stressed.

Separately, there was a sell-off due to mutual funds’ redemption, he added.

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.

On Jan 6, Prime Minister Shehbaz Sharif had said an IMF delegation would arrive in Pakistan in the next two to three days to finalise the ninth review.

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