Shares at the Pakistan Stock Exchange (PSX) fell on Monday, with analysts attributing that the sell-off to the country’s forex reserves dropping to dangerous levels and Finance Minister Ishaq Dar’s comments giving rise to fears that the government may confiscate dollars from private banks.
The KSE-100 index lost 415.56 points, or 1.01 per cent, to reach 40,591.96 points at 10:52am.
First National Equities Limited Chief Executive Ali Malik said share prices fell because of Dar’s statement that Pakistan’s foreign exchange reserves stood at $10 billion, not $4bn, as reserves held by commercial banks also belonged to the country.
Earlier, several reports had stated that the foreign reserves had fallen to $4.5bn after debt repayments, which were not enough to cover even a month’s imports.
Malik said that the PML-N had frozen US dollar accounts in its past tenure in 1998 and Dar’s recent comment had led to apprehensions that it was planning to do it again.
“That panic is putting pressure on the market. There is also no clarity on the amount of money that will be raised at the Geneva conference. If the accounts are frozen, remittances will decrease further.
“Investor confidence has been weakened and there is panic in the market,” he added.
Former PSX director Zafar Moti agreed with Malik, saying reports that USD accounts would be frozen were driving the market down. “The public and brokerage houses are worried. It is being reflected in the market,” he commented.
Meanwhile, Intermarket Securities Head of Equity Raza Jafri noted that energy stocks were up on expected circular debt resolution. “However, this is being more than offset by selling in other sectors, particularly technology which is giving up last week’s gains, and banks which seem to be suffering from the general weak sentiment regarding the economy,” he said.
Jafri said bilateral assistance, especially from Saudi Arabia, was urgently needed and could help shore up the foreign reserves and improve sentiment.
The country is currently in the midst of a severe cash crunch, with the State Bank of Pakistan’s foreign exchange reserves depleting to an eight-year low of $5.576bn during the week ended on Dec 30, 2022. This amounts to three weeks of imports. Later, media reports said the reserves fell further to $4.5bn after loan repayments to two foreign banks.
This decline left no space for the government to pay back its foreign debts without borrowing more from friendly countries.
Despite fast dwindling SBP reserves, Dar is still hopeful about reverting the situation with expected financial help promised by the friendly countries. However, there is little clarity about inflows from friendly countries and international lenders since the government is still in talks with the International Monetary Fund (IMF) for the ninth review, which would release $1.18bn.
An IMF spokesperson earlier said that a delegation would meet the finance minister on the sidelines of the International Conference on Climate Resilient Pakistan being held in Geneva today.
The spokesperson also said that the global lender’s managing director had a “constructive call” with Prime Minister Shehbaz Sharif on January 6.
