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Pakistan Stock Exchange plunges by 1000 points; rupee touches all-time low against US dollar

For months, the government has been in talks with the IMF not only for the revival of the $6 billion bailout package but also for extending the program's scope to $8 billion and period. After coming to power in April and promising to prioritize the economy, the new government led by Shehbaz Sharif now appears reluctant on tough measures, possibly due to the prevailing uncertain political environment

May 16, 2022
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Pakistan Stock Exchange (Photo: Dawn)

In what seems troubling signs for the country’s struggling economy, the Pakistan Stock Exchange (PSX) benchmark index dropped by over 1400 points within an hour after opening on Monday, a day after the government ruled out withdrawing fuel subsidy. This was followed by the Pakistani rupee falling to an all-time low of 194 against the US dollar.

Investors pulled out their money as the government showed reluctance in increasing fuel prices, a measure, among others, demanded by the International Monetary Fund (IMF) for the revival of a $6 billion bailout package. This means further delay in the resumption of the bailout IMF package needed for stabilizing the country’s economy.

The PSX benchmark KSE-100 Index came down to a two-month low at 42,443 points, registering a fall of 2.4 percent, at around 10:22 am. On Sunday, Miftah Ismail, the country’s finance minister, announced the coalition government was “not increasing petroleum product prices for the time being".

In recent months, the country’s import bills grew exponentially, resulting in a historic trade deficit of over $39 billion in ten months of the current fiscal year. The country’s foreign exchange reserves are depleting and the recent visits of Pakistan Prime Minister Shehbaz Sharif to Saudi Arabia and the United Arab Emirates have failed to bring any relief.

For months, the government has been in talks with the IMF not only for the revival of the $6 billion bailout package but also for extending the program's scope to $8 billion and period. After coming to power in April and promising to prioritize the economy, the new government led by Shehbaz Sharif now appears reluctant on tough measures, possibly due to the prevailing uncertain political environment.

This week on Wednesday, the government will undertake the next round of the talks with the IMF in Doha, Qatar. Finance Minister Miftah Ismail has already said that he will discuss the options so that the government doesn’t have to withdraw fuel subsidies, something, he added, people would not be able to afford.

There also appears division within the government on ways to tackle the crisis. Foreign Minister Bilawal Bhutto Zardari said on Sunday that tough measures are needed to stabilize the economy.  Despite record inward remittances, the country's reserves have depleted quickly and are now at a critical level of around one and half months of import cover at around $10.3 billion.

(SAM)

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