The Pakistan Stock Exchange (PSX) continued to witness a negative trend, as the benchmark KSE-100 Index fell below the 40,000 level in the early hours of trading on Friday amid uncertainty over the resumption of the International Monetary Fund (IMF) bailout programme.
The KSE-100 Index dropped 382.73 points and 0.95% as of 10:30 a.m. It was humming around the 39,993.37 level.
Automobile, cement, chemical, banking, oil, and fertilizer sectors—all index-heavy industries—traded downward.
According to Sana Tawfik, an analyst at Arif Habib Limited (AHL), the market is concerned that the recently proposed fuel subsidy package by the government may cause the IMF programme to be further delayed.
Last week, Prime Minister Shehbaz Sharif stated the government’s plans for fuel pricing. Some experts worry that this programme may prevent the IMF from making an important payment that is necessary to prevent the collapse of the economy.
This Thursday, Esther Perez Ruiz, a resident IMF representative, claimed that the government had not consulted the fund about the fuel pricing plan.
She said the fund would request further information from the government regarding the idea, including how it will be put into practice and what safeguards will be put in place to prevent abuse.
Tawfik stated that until there is clarity on the IMF front, the market will trade negatively.
Investor confidence is currently being undermined by continuous political uncertainty in addition to persistent uncertainties around the IMF bailout, Tawfik stated.
The market expects that the Monetary Policy Committee (MPC) will raise policy rates by another 100 to 200 basis points at their upcoming meeting.
In an effort to rein in spiralling inflation, the MPC of the State Bank of Pakistan (SBP) hiked the benchmark interest rate by 300 basis points last month, bringing it to 20%, its highest level since October 1996.