Business | Markets
Skyrocketing fuel prices weigh on Karachi exchange
IMF urges 'significant' tightening of both fiscal and monetary policies to contain inflation and reduce external current account deficit
- By Farhan Bokhari, Special to Gulf News
- Published: 23:24 July 26, 2008
Islamabad: The Karachi Stock Exchange will open tomorrow amid concerns over the future of interest rates and expectations of a rise in the discount rate set by the central bank - State Bank of Pakistan.
On Friday, the KSE 100 index fell just over one per cent amid expectations of a rate increase ahead of the central bank's monetary policy statement.
On Thursday, the International Monetary Fund (IMF) warned that Pakistan needs to tighten its fiscal and monetary policies to reduce inflation as well as its current account deficit.
"A significant tightening of both fiscal and monetary policies to contain inflation and reduce the external current account deficit is needed in our view," said David Hawley from IMF's external relations department.
The IMF's warning has coincided with growing concerns over inflation, which at more than 21 per cent is the highest level witnessed in over 30 years.
In the short run, Pakistan will have to bear the burden of high global fuel prices. Approaching solutions to tackle oil prices in a way that the effect on equity markets remains bearable is necessary.
Meeting the challenge is also about making adjustments to energy consumption in a way that we conserve resources and learn to economise on our present day practices.
Salvaging the situation in a way that confidence across the equity markets goes through a recovery is essentially all about the fundamentally vital challenge of ending political uncertainty.
Pakistan's success to meet these key economic objectives will depend on its success in not only finding generous donors among the world's key players to help in the development of infrastructure.
Future success will also depend on reviving the privatisation programme and returning to international capital markets to re-launch Pakistani bonds which spearheaded the country's economic direction not too long ago.
- The writer is a journalist based in Pakistan.
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