KARACHI: Pakistan’s stock and currency markets witnessed another bloodbath on Monday, traders and economists said, after weeks of indecisiveness of the country’s new administration to implement prior actions demanded by the International Monetary Fund (IMF) and a lack of clarity on the future roadmap.

The benchmark KSE100 index of the Pakistan Stock Exchange (PSX) shed more than 1,000 points in the early trading before closing at 42,667 level, losing 819 points.  This brought the stock market down to its lowest since December 2020. 

However, the trading volume increased from 208.1 million shares to 250.4 million shares, while the average value rose by 27.8 percent to $45.9 million against $35.9 million.

The currency market continued to experience a declining trend as the rupee hit another all-time low against the United States (US) dollar. The greenback closed at Rs194.18 in the interbank market.

Financial experts believe the stock and currency markets suffered the losses due to the government’s inaction on the economic front, including the decision to not withdraw fuel subsidies, a prior action to resume talks with the IMF for the completion of seventh review of the $6 billion program. 

“The stocks were down due to uncertainty surrounding the IMF program as no steps were taken to adjustment oil prices and the investors expected some decisions yesterday,” said Khurram Schehzad, chief executive officer of the Alpha Beta Core financial advisory firm. 

The government “needs to move fast and take the markets and investors into confidence if there is any alternate plan, otherwise the outcomes are scary,” he said.  

Economists say the country’s economy is paying the price for the government’s indecisiveness as investors lack clarity of action. 

“The current crisis is not macroeconomics-driven, rather it stems from the government’s inaction because markets need clarity of action and a future roadmap,” Dr Sajid Amin, deputy executive director at the Sustainable Development Policy Institute (SDPI), told Arab News.   

“The government needs to swiftly declare its economic agenda, including its position on the IMF program and clearly inform about its tenure as to how long it is going to stay.” 

Pakistan and the IMF are currently negotiating the country's seventh review under the $6 billion Extended Fund Facility (EFF), which has so far disbursed $3 billion. Islamabad is expected to receive another $1 billion after the completion of the review. 

The review has been stalled since the previous government announced in February around $1.7 billion relief in energy prices, deviating from the objectives of the IMF program.   

Economists say the success of talks with the IMF would help the Pakistani currency regain some lost ground. 

“The dollar is expected to slide by Rs11-12 immediately once talks with the IMF are positively materialized,” Amin said. 

Pakistan officials and IMF representatives are expected to meet in Doha this week to draw a line of action for the completion of the South Asian country's seventh review. 

Pakistan's Finance Minister Miftah Ismail on Sunday said he was going to hold talks with the IMF, but the government did not raise the petroleum prices under its fortnightly schedule, contrary to expectations. 

“I think Pakistan is expected to talk to the IMF about keeping the fuel subsidies unchanged till June, as announced by the former government of prime minister Imran Khan,” Amin said. 

“Petrol subsidy given in March, April and May equals the BISP (Benazir Income Support Program) for the whole fiscal year 2020-21 and it could have saved Rs27 billion.”  

Analysts say the country has no other options but to avail the IMF program that is needed to stabilize the wobbling economic indicators.