akistan Stock Exchange had a jittery trading trend during the year 2022, mostly due to political turmoil and the worldwide economic recession. The market witnessed great volatility, especially after the submission of a vote of confidence against former prime minister Imran Khan in April. The political turmoil has continued.

Experts believe that during the year the equity market was affected by both external and internal factors. This impacted the trading volume and gains. Political uncertainty had a major contribution in market disruptions as the situation went from bad to worse. The key KSE-100 index had lost at least 5,253 points in the year till December 21, after closing at 44,596.07 on December 31, 2021.

Pakistan suffered rapid depletion in its foreign exchange reserves and had a growing price hike. The central bank increased the policy rate to 16 percent to curb the inflation, hovering at 26 to 29 percent.

“The increase in fuel prices due to the Russia-Ukraine war since February has impacted the whole world. Pakistan is not an exception,” says Fahad Rauf, head of equity research at Ismail Iqbal Securities (Pvt) Limited.

Delays and suspension of IMF loans during the year have squeezed the economy negatively, adds Rauf. According to him, “domestically, frequent changes in economic teams have prolonged the economic recession, which ultimately impact the stock market and investments.”

The political upheavals have contributed a lot towards depressing the markets. The current turmoil in the Punjab caused by PTI chairman Imran Khan’s announcement that the Punjab and Khyber Pakhtunkhwa provincial assemblies are going to be dissolved has put the market under severe pressure.

The KSE-100 index shed 1,138.37 points on December 20 and another 489.56 points the next day as legislators from the Pakistan Democratic Movement parties in the Punjab Assembly submitted a no-confidence motion against Chief Minister Chaudhry Parvez Elahi and the speaker and deputy speaker of the assembly to prevent dissolution. This was a big single-session dip after November 2020. The KSE-100 index closed at 39,342.89 points on December 21.

Besides the submission of the no-confidence motion, Governor, Baligh-ur Rahman, issued a proclamation order asking the chief minister to take a vote of confidence from the assembly on December 22 at 4pm. Some of the government leaders have also spoken about the possibility of imposing governor’s rule in the Punjab. This could further deepen the crisis and the PTI is expected to challenge such a move before the Lahore High Court.

Political turmoil aside, the economic situation has not improved the way it was expected to following the change of government in April 2022 and the appointment of Ishaq Dar as finance minister in September.

The gold prices touched record high levels on Tuesday as one-tola and 10-gram rates hit the all-time highs of Rs 178,800 and Rs 153,292 after raises of Rs 3,900 and Rs 3,344, respectively.

Market analysts believe that the resumption of the IMF’s programme will help Pakistan get more funds, especially from friendly countries like Saudi Arabia and China. Saudi Arabia is expected to provide another $3 billion besides extending the repayment period for previous deposits.

The shares market situation is worsening with every passing day. Pakistan’s programme with the International Monetary Fund remains suspended. This has put further pressure on the balance of payments and the current account deficit. The country’s foreign exchange reserves have depleted fast despite the fact that the government made the timely $1 billion payment on the euro (sukuk) bond. At one time, rumours were circulating that Pakistan on external payments following the potential suspension of the IMF programme. The foreign reserves stood at $12,570.2 million on December 9. This included $6,700 million held by the State Bank of Pakistan.

Initially, the change of government through a vote of no-confidence against Imran Khan had had a positive impact on the economy and the exchange rate had started improving. However, the respite was short-lived as rapid changes on the political front and continuous agitation by the ousted prime minister put the economy under pressure.

The US dollar continued its surge and in the open market was at one point traded at Rs 250. On Wednesday, the exchange rate was $1: Rs 225.40.

The gap between the interbank and open-market rates was wide as the dollar was available at Rs 232-233 in the open market. To control the exchange rate, the government took some stringent measures, including curbs on imports and increased surveillance at the airports.

The rupee had gained some confidence after Ishaq Dar was appointed finance minister on September 28. Dar had then claimed that the actual value of the dollar was below Rs 200. But after falling for a brief period the dollar again started surging. Dar blamed this on the smuggling of US dollars to a neighbouring county. Two essential commodities, wheat and fertilizers, are also going to the country. Under the circumstances, the finance minister seems helpless to take any fruitful measures.

The perpetual political turmoil has shattered the investors’ confidence and there seems to be no respite in the near future.

The release of a $894 million tranche under the IMF programme has been halted following the postponement of the 9th review, originally scheduled in November.

Market analysts believe that the resumption of the IMF programme will help Pakistan get more funds, especially from friendly countries like Saudi Arabia and China. Saudi Arabia is expected to provide another $3 billion besides extending the repayment period for previous deposits. This will be possible once the IMF programme is restored.

Experts are not very hopeful for the economic revival in the short term as political turmoil will not settle till the next general elections. Economic revival is possible with a resumption of the IMF programme and structural reforms, says Rauf. “Other lenders and donors provide funds when the IMF programme is available to a country,” he adds.

The government is hoping for the revival of the IMF programme and claims to have taken measures to meet all its conditions. The outlook for the next year is uncertain as Pakistan will need $20-30 billion. This will be possible only once the IMF programme is resumed.

The writer is a senior journalist, working for a news channel in Karachi. He can be reached shuja98@gmail.com