Pakistan Stock Exchange (PSX) KSE-100 Underlying Index Opens in green on Friday, continuing to gain momentum from the previous day and rapidly more than 900 points in in first hour of trading, just hours after government raised prices of petroleum products to match with Regulations of the International Monetary Fund (IMF).
According to the PSX website, the index hit 43,509.38 by 11:24 a.m. – up 2.27% – after rising 967.67. points from the close of the previous day of 42,541.71.
Rally in stock market belong to governments move to finish months of fuel price freeze imposed by previous PTI government in February.
” market responds to governments move abolish fuel subsidies. it shows in governments resolve to solve problems with teething in in economy and pave way for program of the IMF and other sources of funding,” Saad Hashemi, Executive director at BMA Capital Management, told Reuters.
Raza Geoffrey, head of research in Intermarket Securities, called the increase in fuel prices “strong step” for revival of the IMF program.
“It helps KSE-100 [index] restore some of his sharp loss earlier this month, and also give confidence forex market. Still need clarity on politics but the markets are relieved that the doomsday scenario of default is likely to be avoided,” he said. Dawn.com.
Former PSX director Zafar Moti was also optimistic about fuel price hike and subsequent cap. on fuel subsidies paving the way way for issuance of IMF loans and other friendly countries.
He said move would lead put an end to “uncertainty” about the IMF program, and this boosted investor sentiment.
Moti hoped that today’s rally would continue into next a week.
Fuel price to travel on foot
On Thursday evening, government raised prices of all petroleum products at 30 rupees per liter – highest- ever increase in prices of all oil products in one go – in an attempt to curb in fuel subsidies that have been a stumbling block in negotiation with IMF and renewal of a $6 billion loan that has been on hold since early April.
An official previously said Dawn What was it first step persuade the IMF to issue next tranche of 1 billion dollars soon.
Ad price campaign, Finance Minister Miftah Ismail expressed the hope that now the exchange rate improve, markets stabilize, economy will balance out and investors will take decision positively.
Finance minister said that with Rs 30 jumpstock prices of gasoline will rise to 179.86 rupees per liter.speed diesel (HSD) up to Rs 174.15, kerosene up to Rs 155.56 and light diesel fuel (LDO) up to Rs 148.31. Nonetheless, government will pay about Rs 56.71 per liter of subsidy on HSD, Rs 37.84 on LDO, Rs 21.83 on gasoline and 17.02 rupees on kerosene, he added.
On Wednesday, after closing of latest round of negotiation with Pakistan governmentIMF called for “specific policy action”, including the cancellation of fuel subsidies to achieve program goals.
Economy on edge in past few weeks
PSX and rupee under pressure in recent weeks as government It was failed make decisive economic decisions, the most notable of which was the appeal of fuel subsidies.
Analysts and experts link economic pressure to uncertainty over continuation of combined IMF loan program with a rising oil import bill and expansion trade deficit.
PSX lost 1447.67. points on 9th May in what was called a “bloodbath”.
BUT Dawn editorial on May 11 noted that the most important factor behind erosion of investor sentiment was failure of in new coalition government come up with credible plan for making politically tough decisions to fix in economy. For example, he constantly against appeal of financially unsustainable fuel and energy subsidies, which is the “preliminary action” the IMF wants to take before it agrees to resume funding.
At previous meetings with Ismail, IMF tied continuation of credit program with appeal of fuel subsidies that were introduced by the previous government. However, Prime Minister Shehbaz Sharif has several times rejected the Oil and Gas Regulatory Office and the Treasury Department’s summary of fuel price hikes.
PTI had announced four-month freeze (until June 30) on petrol and electricity prices on February 28 with of a series of relief measures public.
At that time and even after coming to power last month, PML-N and other parties part of in new coalition government strongly criticized Imran Khan. government for “Derailment” of the IMF program due to unsecured fuel subsidies. But despite being at the helm for over per month, these parties have not canceled subsidies; although finance minister repeatedly stated that these subsidies are not feasible and cost government 120 billion rupees per month.
Earlier this month, Ismail said that gasoline should under the contract the price is 245 rubles per liter. former government did with IMF. However, PML-N brought government was still selling it for 145 rupees a litre, and wanted to try it. best keep it price added – a sign what new government hardly accepts decision it might be unpopular with his voters.
In an editorial published on may 13, Dawn said that PML-N was caught up in ‘private consultations – link to senior management trip to London for a meeting with Nawaz Sharif – as the panic continued to grow over this is inability to start working on correction economy.
The editors called for PML-N is hard to decide future well of action, saying “It’s time lead or get out of in way.”
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