That’s All That’s Needed; For Now

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All it took was one line from the IMF that Pakistan had met the last “prior condition” for the revival of the bailout program, for the equity and currency markets to roar back to life. The local stock market rallied almost all day on Wednesday and settled with a rise of about 900 points. And the rupee, whose incessant fall had made it the butt of all jokes on international trading floors, jumped more than four per cent to mark four straight sessions of rising against the greenback. This is proof enough if any were still needed, that of late, the capital markets have been taking cue mostly from the news cycle.
And, even though the Fund qualified its statement about the prior conditions by securing guarantees from other bilateral sources, mostly friendly countries before it finally signs on the dotted line, Mr Market has clearly priced in a smooth resumption of the Extended Fund Facility (EFF) sometime late August/early September. That means the finance and foreign ministers have been making phone calls to a few friendly capitals that they visited not long ago, with guarantees that Pakistan’s agreement with the Fund and themselves will now go hand-in-hand. That’s a whole lot better than last time, when we asked them for loans and they told us, in return, to come back when the IMF was back in play.
Now, whether this slight relief for national reserves also builds investor confidence remains to be seen. And it depends, more than anything else, on political stability in the country. Nobody ought to need reminding that as much as the stalled IMF program, the antics of our senior-most politicians also played a part in creating uncertainty, strangulating the market and wrecking the economy. And while it is good that we will be able to borrow in the international market once again, at bearable rates, it would be infinitely better if we could create the right conditions for traders and foreign investors.
For now, though, there is some certainty, which is quickly bringing a little bit of stability as well. And that is all that is needed, at least for the remainder of this year.