The IMF $1.16 billion loan tranche has had a little impact on the Pakistan Stock Exchange due to the colossal losses inflicted on the country by the recent devastating floods.

Talking to WealthPK, Omer Iqbal Pasha, Vice Chairman of Pasha Securities Limited, said the IMF bailout had a very little positive impact on the stock exchange because everything had been washed away by the flood throughout the country.

“The damage caused to the crops means we will have to import wheat, cotton and rice worth billions of dollars, which will widen the trade deficit and increase inflation,” he said.

“The market was also dragged down by rumours of an impending hike in the interest rate. The damage caused by the floods is yet to be calculated. Inflation will increase further because the crops have been washed away and livestock killed. We will have to become a net importer, so the foreign exchange will be involved.

In addition, our exports will reduce and local consumption will rise,” Omer Iqbal said. Chief Executive Officer (CEO) of Fair Edge Securities Limited Muhammad Safdar Kazi echoed Omer Iqbal Pasha’s views.

‘’The $1.16 billion loan is not the actual solution to our problems. It is the short-term relief for payments. Pakistan has received $3 billion from Saudi Arabia, $1 billion from the UAE and $2.5 billion from China to shore up its foreign exchange reserves,’’ Kazi opined.

“The dollar is not stable or fixed at some point but rather it is fluctuating day by day. That’s why investors cannot determine the financial market. The stock market is totally unpredictable. The major reason for unavailability of foreign direct investment (FDI) is inconsistency in the Pakistan exchange rate,’’ he said.

He further said for the past couple of years, the current account of Pakistan was in deficit.

“Pakistan’s imports are greater than exports. The imports are worth $80 billion while the exports stand at $31 billion. So, the trade deficit is $49 billion. The loan from the international financial institution is not the proper solution to the trade deficit.

The solution to make our economy independent is that the government should ban unnecessary imports and focus on industrialization, IT sectors, and agriculture sector to make them more productive”, he added.

Regarding the impact of the current flood, Kazi said, “Crops, houses, cattle, livestock, and infrastructure stand devastated. This loss is many times bigger than the IMF bailout. The government should focus on developing the infrastructure. The country should have more dams which will help produce cheap electricity.’’

He further said it was everybody’s duty to participate in the development of Pakistan. The need of the hour is to increase the GDP growth rate by increasing the literacy rate, exports, allocations and mining of minerals, he added.

Credit : Independent News Pakistan-WealthPk