Shares lose 503 points as forex reserves dwindle

Published January 9, 2023
A snapshot of trading activity at the Pakistan Stock Exchange on Monday. — Photo via PSX website
A snapshot of trading activity at the Pakistan Stock Exchange on Monday. — Photo via PSX website

Shares at the Pakistan Stock Exchange (PSX) fell on Monday, with analysts attributing 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 502.76 points, or 1.23 per cent, to close at 40,504.76 points. It reached an intraday low of 570.7 points, or 1.39pc, at 2:01pm.

First National Equities Limited Chief Executive Ali Malik said share prices fell because of Dar's statement that “dollars held by commercial banks also belonged to the country”.

Earlier, several reports had stated that after recent debt repayments, Pakistan’s foreign reserves had fallen to $4.5 billion, 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.”

Former PSX director Zafar Moti agreed with Malik, saying reports that USD accounts would be frozen drove 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 was 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 that 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 friendly countries. However, there is little clarity about these inflows from friendly countries as the government first needs to finalise the pending agreement with the International Monetary Fund (IMF) for the ninth review, which would pave way for the release of $1.18bn.

An IMF spokesperson earlier said that a delegation from the Fund 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.

Opinion

Editorial

Taking cover
Updated 09 Jan, 2025

Taking cover

IT is unfortunate that, instead of taking ownership of important decisions, our officials usually seem keener to ...
A living hell
09 Jan, 2025

A living hell

WHAT Donald Trump does domestically when he enters the White House in just under two weeks is frankly the American...
A right denied
09 Jan, 2025

A right denied

DESPITE citizens possessing the constitutional and legal right to access it, federal ministries are failing to...
Closed doors
Updated 08 Jan, 2025

Closed doors

The nation’s fate has been decided through secret deals for too long, with the result that the citizenry has become increasingly alienated from the state.
Debt burden
08 Jan, 2025

Debt burden

THE federal government’s total debt stock soared by above 11pc year-over-year to Rs70.4tr at the end of November,...
GB power crisis
08 Jan, 2025

GB power crisis

MASS protests are not a novelty in Pakistan, and when the state refuses to listen through the available channels —...