Pakistan rupee and stock market knocked because government budget failed to boost investor confidence

Pakistan rupee and stock market knocked because government budget failed to boost investor confidence

The Pakistani currency and stock market were hammered on Monday after the annual budget for fiscal year 2022-23 failed to inspire confidence among investors. During intraday trading, the local currency surpassed the 204-mark versus the US dollar in the interbank market, while the benchmark KSE-100 index, which had began in the red, fell by 1,134.80 points to settle well below the 41,000-mark.

But Ismail has conceded the international lender was not particularly pleased with the budget as it was concerned about the fuel subsidies and the widening current account deficit. Salman Naqvi who is head of research at Ali Habib Securities said Ismail’s statement that the IMF is not happy with the budget is a contributing factor. ”It is a strange thing that he (Ismail) said.”

The dismal start has been linked by analysts to Finance Minister Miftah Ismail’s annual federal budget presentation on Friday. “You can expect this because the government is hiking prices and also taxing the banking sector in the budget,” an analyst said. The USD 47.12 billion budget, which aimed at a 5 per cent economic growth, was unveiled at a time when Pakistan is facing a crisis in the balance of payments, and with the hope of getting an International Monetary Fund (IMF) bailout.

Naqvi added that the stock market was under pressure on Monday due to the index heavyweight banking sector being sharply down. “The bearish trend is a result of increased taxes on the banking sector, which has significant weightage in the stock market,” he explained. ‘ Moreover, he said that the government had proposed more taxes for the construction sector in the new budget and that had led to a slump in cement and steel shares.

The volatility also hit the currency market, which saw the US dollar rising to a historic high of PKR 204 during the interbank market on Monday, with analysts attributing the rupee’s decline primarily to pending oil-related payments and declining foreign exchange reserves.

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