The stressed economy has now indirectly started affecting the Pakistan Stock Exchange. A massive selling pressure was witnessed on Thursday as the KSE-Index lost more than 2,000 points. Though the stock is never an indicator of a failed or stressed economy, and the stocks world over work on speculations, it is however, being believed that ever increasing trade deficit is the core reason for the drop in the securities market. It is natural that such a weak economy would call for a significant drop in investor confidence which has led to this stock market plunge. However, this is not the only reason for the drop. The new Coronavirus variant, named omicron, has also led to an overall bearish trend in stock markets around the world and the jolts have been felt in Pakistan as well. However, the problem that exists in Pakistan is that the country is already facing severe economic problems and this is just another nail in the coffin.
Policies that the State Bank of Pakistan is adopting are also a reason for this plunge. The increase in interest rates slowed down the economic growth during the sale of T-bills, which resulted to be a problem for the investors. Moreover, an anticipated hike in the interest rates in the upcoming monetary policy announcement on December 14 has also built pressure on people to sell securities.
Although it is easy to point the fingers at a problem, sometimes it is important to point them out. According to PML-N President Shehbaz Sharif it is not the PSX that crashed, in fact the government’s policies have crashed. The increase in interest rates and the increase in trade deficit were going to lead to a crash in the economy as predicted by many of the opposition leaders and experts of economy. However, the government continued to chase a higher growth rate without worrying about more pressing issues of trade deficit and subsequently inflation. Both of which have skyrocketed.
It is imperative now that the government cuts back on their policy of increasing growth rates as no one is benefitting from the current policies. The prime minister must realize that although long term benefits are important and a non-futuristic approach to policies is the way to go in most cases, currently, the Pakistani economy and people cannot sustain with such rising numbers. This is so especially with COVID job losses and high inflation rates. Relief must be the first and foremost objective of the government.
