More on Black Friday
From an editorial today in The News1:
The KSE crash is of course only a reflection of the overall situation of the economy and, dare one say, the polity. The grim reality is that Pakistan finds itself in the grip of both economic and political turmoil. The two are indeed closely tied together. The economic crisis – high inflation along with a mounting budget and trade deficit along with declining investment, a weakening currency and capital flight – is contributing to political uncertainty, with expectations that it may be used against the government with the grim inflation figures and lowered debt rating offered up as evidence of the inability of government to deliver. At the same time, in the immediate future, there can be little hope of the political stability that would be needed to boost investor confidence and create an environment conducive to economic growth. The vicious cycle seems unbreakable for the present. The mood at the stock market has indeed remained downbeat for weeks. This is unlikely to change soon given the turbulence in the political atmosphere, and a long, rocky road towards recovery from both political and economic crisis still lies ahead.
1 “Black Friday”. The News. May 25, 2008.
No commentsKarachi stock market reflects political, economic uncertainty
The Karachi stock market closed down over 4.5% on Friday in the largest single-day loss of 2008. According to Dawn1, investors had expected a drop after the State Bank of Pakistan raised the discount rate to 12% from 10.5% on Thursday in a bid to curtail inflation. However, the size of the drop suggests that the rate increase was a pretext for exiting the market as Pakistan faces tough political and economic challenges. Since mid-April, the Karachi stock market has lost about 20% of its value. Inflation has increased dramatically, the government budget deficit has reached record heights, and foreign exchange rates have fallen.
1 Hussain, Dilawar. Billions wiped off on KSE’s ‘black Friday’. Dawn. May 24, 2008. No comments