Pakistan government must act to stem market crisis

Islamabad: Pakistan's stock market crisis has indeed deepened in the past week in the wake of a spectacular fall in share prices on the Karachi stock exchange (KSE) where the representative KSE-100 index has altogether fallen by about 35 per cent from its lifetime high in April this year.

The index on Friday closed well over 12 per cent in a week where scuffles broke out at the KSE building. Similar signs of acrimonious exchanges were also witnessed outside the Lahore stock exchange and the Islamabad stock exchange buildings.

After an unprecedented battering, the KSE will open on Monday amid expectations of an ambitious bailout package coming to the rescue of small investors.

This is a follow-up to the Pakistani government's decision to establish a Rs50 billion fund to stabilise the stock market.

By now, commitments of about one-third of that amount have been brought forward by financial institutions whose cooperation has been sought by the Pakistani government.

Going forward, there may be a temporary halt to the slide of the stock market. But it is far from clear if the most prominent of all barometers of Pakistan's economic confidence - the KSE - will recover conclusively and return to its high days of being one of the world's fastest growing stock markets.

The issues at the forefront of challenges in reviving the KSE sentiment range from the apparently defunct state of Pakistani politics to the fallout from a fast weakening economy.

The new Pakistani government which was elected in February this year is still finding room to settle its feet. Faced with allegations of its failure to take conclusive charge of the country, the new regime is nevertheless confronted with mounting criticism.

Criticism

The government's critics often say that it has lost the ability to bring together a strong enough focus to deal with the most difficult challenges faced by Pakistan.

This failure essentially means that the government is nowhere even near bringing together a strong focus to its actions in convincing its worst sceptics that it means business.

Problems such as dealing with constitutional reforms or indeed the future of president Pervez Musharraf are central to the government's failure to establish a clear foothold as a legitimate wielder of power in Pakistan.

Other problem areas include the government's failure in dealing with challenges like restoring judges who were dismissed by president Musharraf just last year.

Similarly on the economic front, there are a number of clear cut challenges. Investors in Pakistan put across a litany of complaints ranging from the obvious falling value of the stock market and the Pakistani rupee, to the decline in returns for key sectors such as industry and agriculture.

Prime minister Yousuf Raza Gilani faces the argument from his critics that he is far from being a credible player in the country.

Gilani must now prove himself to be a problem solver or indeed solution provider. Without emerging with an independent profile of his own, his ability to deal with Pakistan's challenges including the stock market crisis, will remain in doubt.

The writer is a journalist based in Pakistan.