KARACHI (News Desk): Pakistan Stock Exchange (PSX) witnessed a downward trend in the outgoing week with the benchmark KSE-100 index losing 1,677 points or 5.4 percent to settle at 29,672 points, media reported on Saturday. On the other hand, the Pakistani rupee has appreciated by 66 paisa against the US dollar in the outgoing week and closed at Rs156.86 in the interbank market on Friday. In the last two months, the local currency has recovered by Rs7.39 against the greenback in the interbank market. Likewise, in the open market, the rupee gained by 70 paisa against the greenback with slight fluctuation in the whole week and settled at Rs157.20. Within two months in the open market, the US dollar has lost its value by Rs6.80 against the rupee.
Earlier, Pakistan had received higher remittance inflows from overseas Pakistanis in the first month of July of the current fiscal year 2019-20. Currency traders were of the view that the increasing inflows of remittance in have supported the local rupee in the market. In the earlier weeks, the rupee was observed to cumulatively depreciate against the greenback, which in turn had resulted in increased prices of goods and hardships for the general public.
The SBP has let the rupee depreciate significantly in the inter-bank market after finalising an agreement with the International Monetary Fund (IMF) for a loan programme on May 12. The IMF has asked Pakistan to end state control of the rupee and let the currency move freely to find its equilibrium against the US dollar. On the other hand, the World Bank Group has also supported the idea of leaving the rupee free from state control in an attempt to give much-needed boost to exports and fix a faltering economy. In the previous weeks, the local currency has depreciated massively despite receiving the first tranche of $991.4 million from the IMF. The stringent conditions on which the global moneylender has formally approved the bailout package of $6 billion for Pakistan seem to have exerted more pressure on the local currency.
The gradual drop in the rupee had come due to high demand for the dollar against thin supply as the country continued to make aggressive international payments to partially pay off huge foreign debt and for imports. Economists are of the view that effective measures must be implemented on the priority basis to recover the state from the balance of payment deficit. Besides increased demand of the greenback in the local market, they had termed ‘balance of payments deficit’ as the main reason in the recent hike in the value of the US dollar. Moreover, they had considered that state’s exports and investment were required to grow significantly, and the imports must be reduced to remove pressure on the local currency.
According to experts, the government must ensure implementations on economic policies after the deal with the IMF. It is anticipated that the US dollar rate would fluctuate for some time, and the value of the Pakistani rupee would stabilise after proper implementation of the economic policies. Collectively, over the course of a week, investors have lost Rs258 billion whereas foreign investors bought a total of $970,000 worth of shares. According to economists, the recent simmering tensions between nuclear-armed Pakistan and India over Kashmir dispute had pushed investors to adopt cautious behaviour in the trading.
Furthermore, they were of the opinion that the PSX was down due to economic slowdown and a record budget deficit and government’s decision to privatise companies were among the factors which have reflected themselves in the stock market. In the previous week, hovering in the green on the back of rumors that “Pakistan might exit the FATF grey list”, 174 million shares of indexed companies had changed hands during the session.
The market value of the shares had clocked in at Rs424 billion. Moreover, since the passage of the financial budget for the fiscal year 2019-20, the stringent policies had been reflecting themselves in the downfall of the stock market. The price of 24 karat gold in the outgoing week has moved up by Rs2,400 per tola and traded around Rs89,500 per tola on Friday. It hit all-time high of Rs90,000 per tola on Wednesday. On August 23, the price of 24 karat gold had decreased by Rs1,900.