Karachi: The pandemonium that struck the stock and money markets last Wednesday in event of the depreciation of the rupee against the dollar by 3.1pc created shock-waves in the financial circles. The refusal of the State Bank of Pakistan (SBP) to intervene in the open market to halt the slide of the PKR against the dollar infuriated Finance Minister Ishaq Dar.
On Thursday, while addressing the media Finance Minister Ishaq Dar had stated that the sudden surge in US dollar value was due to “miscommunication between certain people”. He further assured that the market would adjust itself back to stability.
Dar chaired a meeting of bank CEOs earlier to discuss the recent economic development. He termed depreciation of rupee “surprising” and “artificial”.
“The hike in the dollar was artificial and happened as a result of miscommunication between certain people. A transparent investigation into the matter would be conducted and we will gather all the facts, including who profited and who bore losses from this hike,” he asserted.
Last week, an article on the investment website ValueWalk had stated Pakistan Stock Exchange (PSX) suffered its worst performance in June since 1999. It had been proclaimed the best performing stock market of 2016 in Asia with an astounding return of 46pc.
In the midst of the JIT investigation into the Prime Ministers family in regard to the Panama leaks, the stock market has been rocked by political uncertainty and has suffered a fall as a result of it too. As per research released by the International Journal of Accounting and Economics Studies on the stock market fiasco, which cited that political events and performance of the PSX were closely interconnected.
The research conducted into three previous elections by this think-tank revealed that political events in the country can have a significant impact on stock returns. It went onto mention that before elections in 2002 and 2008, the stock market had experienced a steep level of uncertainty in comparison to 2013 when it surged after the PML-N came into power.
In a notification issued by the Ministry of Finance on Friday, the President of Pakistan appointed a recently retired bureaucrat from the civil service and ex-finance secretary Tariq Bajwa as the new governor of the State Bank of Pakistan for a period of three years.
Tariq Bajwa is a renowned bureaucrat with a reputation for being upright and competent who served with distinction in the civil service. Bajwa also served as the chairman of the Federal Board of Revenue for 2.5 years.
On Sunday, the finance ministry sought a report from the Governor State Bank of Pakistan (SBP), within ten days by conducting inquiry into the sharp decline of Pak Rupee against US dollar in the interbank market on 5th July 2017.
However, the finance division further directed the SBP that the inquiry should not include two most important members of the Monetary and Fiscal Policies Coordination Board, including the finance minister and finance secretary, as they were not taken on-board on the matter.
It is important to mention that under the State Bank of Pakistan Act 1956, the Monetary and Fiscal Policies Coordination Board – comprising of the Federal Minister for Finance Ishaq Dar (Chairman) and other members, including governor SBP and finance secretary –are responsible for coordinating the exchange rate policy as well as the fiscal and monetary policies, to ensure consistency among macroeconomic targets.
As the JIT concludes its investigations into the PM and his family in regards to the Panama Leaks today, it would be interesting to see the impact it would have on the money and stock markets as the day progresses.
