Political instability, rising cost of doing to business drags KSE-100 down by over 1.82pc

Political instability, rising cost of doing to business drags KSE-100 down by over 1.82pc

Business

Moody’s see very high uncertainty around new IMF deal; Market reacts negatively to gas tariff hike

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KARACHI (Web Desk) – The benchmark KSE-100 Index tumbled in the afternoon session on Thursday and closed at 61,020.05 after a loss of 1,133.79 points, or 1.82 per cent, as the Moody’s – one of the top rating agencies’ in the world – pointed to the threats related to the political instability following the Feb 8 elections.

In its latest report, Moody’s Investors Services said uncertainty around Pakistan’s ability to quickly negotiate a new International Monetary Fund (IMF) programme after the current one expires in April 2024 remained very high.

The report comes Islamabad urgently needs improved its finances in the absence of foreign investment and the inability to tap domestic resources amid a very low tax-to-GDP ratio and high interest rates that have been damaging the investors’ morale.

Read more: Can Nepra refuse power tariff hikes? Will it protect consumers against govt inefficiency?

At the same time, rising energy tariffs means the cost of doing businesses to an unsustainable level and zero incentive for a businessman to invest in Pakistan at a time where political instability and inconsistent polices have remained the rule.

This feeling is also being reflected in the Pakistan Stock Exchange which was hoping for a clear mandate and strong government so that political stability could produce sustained and coherent economic policies.

The huge losses suffered the energy companies and other entities using natural gas also show the overall mood after the government raised the gas tariffs a day earlier, which will only further increase the cost of doing business.

Meanwhile, a weak coalition government will remain susceptible to the IMF pressure and conditions, meaning that the new deal, if any, would bring more austerity measures, adversely affecting the millions of people in Pakistan as well as the businesses.