KARACHI, July 22: The government would launch a stock market stabilisation fund starting with Rs20 billion as early as this week, Finance Minister Syed Naveed Qamar told a gathering of jubilant stockbrokers and investors at the Karachi Stock Exchange on Tuesday.

The minister said that the National Investment Trust -- the largest mutual fund in the country -- would manage the fund.

Over the last two weeks, the market regulators and participants had been struggling to set up a ‘Stock Market Opportunity Fund’ to inject liquidity into a market, which had witnessed one of the worst period of a bear hug in three months between April 21 and July 20, when the KSE-100 index had plunged by more than 5,200 points, losing 34 per cent of the stock values. But, on their own, the market participants had met with little success due to the reluctance of financial institutions to commit funds.

The woes of the market had gone unnoticed until early this week, when the governor of State Bank of Pakistan visited the bourse on Monday.

Naveed Qamar hoped that the solution to the stock market turmoil would be found soon.

The minister discussed the macroeconomic problems being faced by the three-month old government and its efforts to ride out the challenge. He made no bones about the inflation figure which was galloping at a three-year high of 21 per cent, the worrisome fiscal and current account deficits and the depletion in foreign exchange reserves.

The country was seeking crude oil from Saudi Arabia on deferred payment basis and the minister said an announcement from the brotherly country was expected soon, which would help tide over the current account deficit. The US had given assurance of providing $7.5 billion of non- military assistance.

In an oblique reference to the tight monetary policy followed by the State Bank of Pakistan, the minister said that the government would desist from borrowing from the central bank or resort to minimum borrowings so as to allow the SBP to ease its tight monetary stance. He said that his ministry was in constant contact with the central bank.

Naveed Qamar emphasised that the government’s expenditure would be curtailed. He maintained that subsidy on POL products would have to be phased out and the prices brought up to the international standard.

The finance minister reiterated that the government was determined to put the financial policy on the rails and would not take any measures that could hurt the country’s industrial growth.

The finance minister stated that the government intended to start the process of privatisation of the state-owned entities through the stock exchange.