PSX Shares Fall 2,000 Points Due to IMF Fears Over Electricity Tariffs
PSX shares plummeted on Monday, erasing earlier gains. The KSE-100 index fell by 2,002.55 points, or 1.69%, to close at 116,439.62 points from 118,442.17 points.
The market was under pressure, as per Topline Securities, a Karachi brokerage firm, following concerns of the International Monetary Fund (IMF) in relation to electricity tariffs. There were reports that the IMF was not pleased with the failure to make adjustments in electricity prices and the fact that property tax rates were not reduced. Such concerns have had an impact on investor sentiment.
Earlier, the Prime Minister was expected to announce a cut in electricity rates by Rs8 per unit in his March 23 speech. However, the announcement did not materialize, which left investors disappointed. The promised tariff cut did not satisfy the IMF, delaying a crucial agreement on Pakistan’s $7 billion Extended Fund Facility (EFF).
Aside from this, the suggested increase in royalties for Khyber Pakhtunkhwa cement manufacturers contributed to the negative sentiment of the market.
The decline in the stock market was largely contributed by significant losses in stocks like OGDC, ENGRO, FFC, PPL, and MARI, leading to an 811-point fall on the index. Total shares traded stood at 311 million, while turnover was worth Rs20 billion. PAEL was the largest traded stock, with 28 million shares trading.
Even just last week, the market was in an optimistic mode, and the KSE-100 index had gone up for the sixth consecutive week. The investors remained optimistic that a staff-level agreement (SLA) would get approved by the IMF, promising the disbursement of $1.1 billion of aid. The IMF had already given a preview of a draft of its economic policies to the government, and that sent out a feel-good message. But the new fears have now negated these gains.
In the meanwhile, the economy of the country is still plagued by problems. The Large-Scale Manufacturing (LSM) industry contracted by 1.2% on a year-on-year basis in January, while foreign direct investment (FDI) plunged a steep 45% on a year-on-year basis in February. This reduction in FDI, coupled with recent terrorist incidents in Khyber Pakhtunkhwa and Balochistan, has eroded foreign investors’ confidence.
In spite of some enhancements in major economic indicators, there are still tremendous challenges facing Pakistan. The LSM sector is weak, and economic stability in the country is questionable despite some improvements with the IMF.
