World News | Pakistani Currency, and Stocks Take a Hit as the Budget Fails to Inspire Investors' Confidence
Get latest articles and stories on World at LatestLY. The Pakistani rupee and the stock market took a massive hit on Monday as the annual budget presented for the next fiscal year 2022-23 failed to inspire investors' confidence.
Karachi, Jun 13 (PTI) The Pakistani rupee and the stock market took a massive hit on Monday as the annual budget presented for the next fiscal year 2022-23 failed to inspire investors' confidence.
The local currency breached the threshold of 204 against the US dollar in the interbank market during the intra-day trading, while the benchmark KSE-100 index, which opened in the red, plunged by 1,134.80 points to close well below the 41,000-mark.
Analysts have attributed the poor opening to the annual federal budget presented by Finance Minister Miftah Ismail on Friday.
“You can expect this because the government is hiking prices and also taxing the banking sector in the budget,” an analyst said.
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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.
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.”
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.
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)