KARACHI: The KSE-100 index plummeted 1,400 points in intraday trading as the Pakistan Stock Exchange (PSX) opened on Monday.
Trading opened at 40,496 points and dropped to 39,177 points within an hour ─ a change of 1,319 points ─ before further diving down to 39,090, down 1,406 points or 3.5 per cent.
The fall comes after the State Bank of Pakistan’s (SBP) raises key lending rate by 150 basis points to 10 per cent on Friday and a fall in the value of the rupee on the same day.
The benchmark index has shed more than 3,000 points during the tenure of the current ruling regime. The benchmark KSE-100 Index had closed at 42,447 points at the start of the era of the present government. Currently, the index was floating at around 42,447 points at 12:45 midday.
While the government has been pretty comfortable politically, the economy remains in the eye of the storm. The government has had to grapple with fast depleting foreign exchange reserves and ever-widening deficits.
The rupee closed at 139.06 to the dollar in the inter-bank market on November 30, a depreciation of 3.8pc in its value.
Bankers said the rupee plunge happened as the SBP silently watched the demand for dollars rising on imports and external debt payments. It was so intense and sudden that the dollar surged to Rs144 at one point on Friday before closing lower.
Also on Nov 30, the SBP raised its key policy rate by 150 basis points to contain inflation, a product of several economic factors, most notably a weaker rupee.
Spectators and analysts, however, had expected just a 1pc hike in the policy rate, according to media sources, adding that the increase brings the policy rate into double digits amid reports that the move is linked to talks with the International Monetary Fund (IMF) on a bailout package.
The timing of the twin moves suggests Pakistan has finally started fulfilling some pre-conditions of a fresh IMF loan, though Finance Minister Asad Umar has said he is in no hurry to get it. The government does not disagree with the Fund’s concerns on economic fundamentals, bankers and analysts say.
Also, it does not disagree with the Fund’s prescription for curing our ailing economy: let the overvalued rupee find its real market worth, minimise energy subsidies, reduce development and non-development expenses, hike interest rates — and choose economic stability over growth in the process.