Stocks slide
The week started with a bloody Monday on the stock market, which crashed by over 500 points within 10 minutes of the opening bell and was almost 1,500 points down by midday, before recovering slightly to close at ‘only’ 1,284 down. Almost every market analyst in the country has placed the blame solely on the government, and particularly on Prime Minister Imran Khan. Even the handful of analysts with differing opinions were indirectly pointing to the government, citing an uncertain political situation in the country.
There is also concern that the slide will continue, given the almost unprecedented confluence of concerning news. Apart from domestic factors such as the no-confidence motion that was submitted in the National Assembly Secretariat yesterday, there is now also international pressure resulting from the Russian invasion of Ukraine and Pakistan’s response, including PM Imran’s decision to not cancel the previously planned trip to Moscow.
Imran is also being blamed for making things worse with his recent speeches, where he has accused the EU, the US and several other western powers of treating Pakistan like a “slave” or otherwise bullying the country due to the PTI government’s refusal to condemn Russia. In addition, the UK recently cancelled a moot with National Security Adviser Moeed Yusuf, reportedly because London is reexamining its relationship with Islamabad over the Russia situation.
The problem is that these countries represent Pakistan’s biggest and most important trading partners, while trade with Russia is currently minuscule. In fact, the US remains Pakistan’s top export destination by far, while almost half of Pakistan’s top 20 export destinations are EU countries. If they were to take trade actions to punish Pakistan, much of our economy would collapse overnight. And even though this may sound like a worst-case scenario, it is worth noting that foreign institutional investors were net sellers to the tune of Rs163 million.
Meanwhile, the war and ensuing sanctions on Russia have also caused oil prices to shoot up, creating more inflation concerns. As the world contemplates adding sanctions on Russian oil, expect prices to rise further, and place even more stress on the economy. Unfortunately, there is very little wiggle room remaining for policymakers to put the economy on track without finding common ground with the western powers.
Published in The Express Tribune, March 9th, 2022.
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