Uncertainty grips the Pakistan Stock Exchange as IMF skepticism on government plans sends KSE-100 tumbling.
Story Snapshots:
- The KSE-100 index plunged below 60,000 amidst concerns over the circular debt plan.
- IMF’s disapproval of the current strategy casts doubt on Pakistan’s energy sector reform.
- Index-heavy energy stocks took a considerable hit during early trading.
What is causing the recent downturn at the Pakistan Stock Exchange, and how is the IMF involved? The downturn at Pakistan Stock Exchange is attributed to the IMF’s lack of support for the Pakistani government’s circular debt plan, which has raised questions about the reform of the country’s energy sector and prompted a significant drop in the KSE-100 index.
The Pakistan Stock Exchange (PSX) experienced a wave of negativity as it was revealed that the International Monetary Fund (IMF) is not in agreement with the government’s approach to managing its circular debt. This revelation has introduced skepticism among investors, contributing to a marked decline of the benchmark KSE-100 index during Tuesday’s trading session.
Read: Rupee Makes Modest Gains Against US Dollar in Intra-Day Update
In a considerable downturn, the index plummeted to a low of 59,613.17, eroding over 1,450 points, although a semblance of recovery was observed within the next hour. As trading progressed, the index remained in the negative territory, down by 513.32 points, hovering around 60,551.99.
The descent was led by energy giants, including OGDC, PPL, PSO, and SNGP, which bore the brunt of the sell-off, remaining deep in the red. The fall in stock prices can be directly linked to the IMF’s critical view of the interim government’s tariff and circular debt management plans. Nathan Porter, the IMF Mission Chief, communicated that these strategies fail to tackle the foundational issues plaguing the nation’s energy sector.
Essential to Pakistan’s economic resurgence and fiscal stability is the restoration of energy sector viability. Porter emphasized the necessity for comprehensive reforms aimed at cutting exorbitant energy costs, enhancing compliance, curtailing theft and line losses, phasing out captive power, and rectifying the governance and management of distribution companies (DISCOs).
Experts note that the market’s downward trend was also driven by political uncertainty, with the coalition government’s formation still appearing unresolute. Mohammed Sohail, CEO of Topline Securities, observed that the market had held expectations for substantial dividends, only to be met with disappointment.
The wider market’s sentiment was not helped by Monday’s sell-off, which saw index-heavy stocks like OGDC and PPL leading the downward pressure. These movements coincided with political instability post-General Elections, further exacerbating the market’s concerns.
At the close of Monday’s trading, the KSE-100 settled at its
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