The performance of Pakistan Stock Exchange (PSX) in the better part of last week was simply unbelievable. The shares hit a record low and, ironically, on the day when PSX was re-included in the MSCI Emerging Markets Index after a gap of almost one year.
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The performance of Pakistan Stock Exchange (PSX) in the better part of last week was simply unbelievable.
The shares hit a record low and, ironically, on the day when PSX was re-included in the MSCI Emerging Markets Index after a gap of almost one year.
Pakistani stock exchange has been performing exceptionally well for many years and was declared Asia’s best performing stock market just last year.
There was an all out expectation that the inclusion in the MSCI emerging market index would be taken as a shot in the arm and there would be huge inflows in the market, but to the utter shock of many there was total carnage as benchmark KSE-100 index lost 1,810 points or 3.58 percent by the close of the trading session to reach 48,780.81 on Thursday.
The market watchers gave many reasons, but agreed that unending political tensions in the country could be one of the many reasons behind their crash as investors, mainly foreigners, getting panicky over the rising uncertainty, decided to pull out their money to avoid any risks. They warned that if political crisis deepened then it would have negative impact on stock markets as well.
“Micro level (political) changes have very little impact but if there are macro level changes then definitely it would have very big impact,” Zafar Motiwala, a director of Karachi Stock Exchange said.
“If Hassan and Hussain (Nawaz) appear before JIT then it does not make any big difference but if the Nawaz government is sent packing than it would have a huge impact,” he said, and added that the situation was not good. “There is something wrong somewhere.”
Senior economist Dr Shahid Hassan Siddiqui believed that big investors orchestrated the carnage at the stock exchange to pocket maximum benefits. "It is manipulation of market to earn big profits."
The political situation in the country is getting tense with each passing day and there are fears that they could exacerbate as the JIT probe into Panamagate case against Prime Minister Nawaz Sharif and his family goes ahead.
The angry remarks of the Supreme Court judges equating government functionaries with members of “Silicion mafia” in the wake of the unsavoury outburst of PML-N Senator Nihal Hashmi against those probing Sharif family followed by government spokesman’s strongly worded statement expressing concern over judges’ remarks show that situation might move from bad to worse.
If the JIT probe comes up with an adverse finding about Sharif family there is a fear that polarisation would deepen and might continue until general elections that are due by the middle of next year, which could be detrimental for the economy of the country.
Economic experts fear a repeat of 2007-08 situation when the economy was doing well, but the political turmoil had wiped away all gains made on the economic front.
Finance minister Ishaq Dar himself is mindful of those concerns, which is why he has been stressing on the need for a consensus among the political leadership on vital economic issues to evolve a ‘charter of economy’.
If history is any guide, one can ask whether our political parties would agree on such a document at a time when they believed this move could ease pressure on the embattled government. Observers say that though it is the responsibility of every stakeholder to take measures to prevent the situation from getting worse, the primary responsibility rests in the government.
The government right now is facing numerous challenges on different fronts and it is advised to defuse tension, so it could concentrate on addressing more pressing issues which needed resolution as it was heading towards elections.
On the foreign policy front, Pakistan’s relations with its immediate neighbours, particularly Afghanistan and Iran, are deteriorating. On domestic front, the biggest challenge for the government right now is the power crisis which has so far refused to subside.
Prime Minister Nawaz Sharif has been pledging the nation for almost a year that the power outages would be eliminated by 2018, but there was scepticism whether this commitment could be fulfilled.
The general public was asking how would the government meet the deadline when it failed miserably to fulfil its promise of ensuring zero load shedding in the country for iftar and sehri during Ramazan.
The PM has personally chaired several meetings of the energy committee of the cabinet in recent days but they could not find a solution how to address this problem.
It sounds ironical that after four years in power, the government could not find a way to resolve the circular debt issue which was the biggest problem afflicting the energy sector of the country.
As the deadline for ending the load shedding in the country comes closer, the prime minister has intensified pressure on the officials of the Ministry of Water and Power to come up with a practical solution.
In the last meeting of the energy committee, the prime minister ordered independent audit of the circular debt as well as power’s demand and supply figures put up by the ministry, virtually reflecting a loss of trust in the energy team.
While no one could exonerate the ministry officials for their lethargy and failure to address this issue one should keep in mind that energy related ministries are headed by the close confidantes of the prime minister.
The PM’s younger brother and chief minister of Punjab Shahbaz Sharif has been personally involved in major decisions related to energy issues since this government came into power.
From the conclusion of LNG deals with Qatar to installation of new power stations under China-Pakistan Economic Corridor (CPEC), it was Punjab chief minister who was the driving force behind all these projects.
Moreover, the ministry of water and power is headed by a senior PML-N stalwart, Khawaja Mohammad Asif who is assisted by Abid Sher Ali, another confidante of the Sharif family.
Similarly, the Ministry of Petroleum and Natural Resources is also led by Shahid Khaqan Abbasi, another close confidante of Sharif family.
The prime minister needs to hold his key advisors also accountable for failure to address this issue.
Though the previous governments are also responsible for failing to anticipate the energy crisis which has been engulfing Pakistan since 2000, the present government cannot absolve itself from this responsibility.
There was a general belief in the country that the PML-N government, which came into power with a landslide victory in 2013, has done its homework to address this issue on priority basis.
Soon after coming into power it paid off Rs480 billion in circular debt with a promise that it would not let this problem recur by taking stringent measures to plug the loopholes in the energy sector. But after four years into power, there are fears that the PML-N government will leave behind a bigger circular debt for its successors to pay than the one it inherited from its predecessors.
Critics say the government itself did not take these issues seriously in the initial years and tried to politicise issues. Tax evasion, power pilferage and non-payment of bills is a general problem across the country, but the government figures tried to politicise the issues by blaming provinces ruled by their opponents for the problem.
For example, the government has been saying that huge money is owed by the provinces to WAPDA, etc, on account of electricity bills. Now that Sindh as well as Khyber Pakhtunkhwa governments have almost cleared those dues, there still has been no relief in load shedding in these provinces.
Over the past two weeks, the people of Karachi and Hyderabad have been facing worst kind of power outages and the K-Electric, which many believed would do well after privatisation, miserably failed to address this issue.
Khawaja Asif has reportedly expressed his regret over the situation, but without any serious effort to resolve this issue immediately.
Khyber Pakhtunkhwa is also badly hit by the power outages. Recently, there have been violent protests in Malakand division over power outages where at least one person was killed and several wounded. Angry protests have also been held in Karachi and several other parts of Sindh.
If the power crisis continued, it would be a major political setback for the ruling party, as it is heading towards elections. The minister of water and power himself has admitted that the government is mindful of this fact.
The government must have taken a sigh of relief when power generation capacity reached record level of close to 19,000 megawatt last week, but it cannot mitigate the power crisis until the deep rooted problems afflicting the power sector like circular debt, line transmission losses, pilferage are addressed seriously.
The government hopes to overcome power outages to a large extent when early harvest projects under CPEC come on line in coming months, and such developments may help it politically, but it will not resolve the real problems of this vital sector.
In view of the rising political storm and deepening challenges, it is advisable for the government to avoid jittery decisions and handle the matters carefully, failing which it will not only cause harm to itself but to the nation as well.
"If there is clash between institutions of the country then the ultimate casualty would be the economy of Pakistan and this should be avoided at all costs," Siddiqui said.
The writer is a senior journalist based in Islamabad
