Inside Financial Markets
“Making Risk-Free-Debt, Risky” - IK’s new spree against elites - Inside Financial Markets

“Making Risk-Free-Debt, Risky” – IK’s new spree against elites

– Sanie Khan

Inflated Economy, Printing of notes outcropping of domestic debt explain the hyperinflation

These are some of the topics which are holding onto the nerves of an average player in the Market?

Can the state of Pakistan exercise a default on domestic debt?

Who has instigated Shabbar Zaidi to open a debate about Pakistan’s Default?

Why SBP want Commercial Banks to stay wary of sovereign loan defaults?

Why IMF is pushing for SBP’s Autonomy bill before resumption of 6th program?

Is there going to be BIG NO at IMF Program on 2nd of Feb 2022?

Are we heading toward a no-confidence move against Imran Khan?

Are we heading towards the Presidential form of Government? What are FATF’s latest restrictions about Real-estate, Jewelers, Lawyers and Notaries?

If one were to rate as to which news item shattered the market confidence most, then, one would :

  1. rate doubts over resumption of IMF Program as first,
  2. likelihood of a no-confidence “MOVE” against IK as second, and
  3. speculations about sovereign was the last and third line item.

Initiation of debate over the possibility of State Level Default is a serious cause of concern that shall engulf the financial markets for a longer period than one could imagine. It may not be a decent question as to who instigated Shabbar to spark a debate about the “Default of Pakistan”, the real and genuine question lies in the mindset of IK. Defaulting on domestic would hurt the elites which are his right, left and epicenter. His warning to undisclosed-enemy about making things horrible turns dreadful when one looks Central Banks warns about the possibility of “Default on Domestic Debt” and CCP inquiry into cartelization in the auction of Treasury Bills.

This is for first time in the history of Pakistan that elites with oceans of money are worried because of warning of Central Bank and action of CCP. Some intellects opine that he has threatened the very elite-class of Pakistan, and have told them, the process of State Default wouldn’t commence with external default, but could start with domestic defaults.

Hence, the interoperation that “nothing can happen without drawing-room politics” is true to the core, as IK has challenged and threatened the very elite class of dire consequences which may terrible for state institutions, but horrible for many elites.

The State Bank of Pakistan has asked Commercial Banks to start taking into account the probability of default on loans that are taken by the Federal Government. Competition Commission of Pakistan has formed an opinion that there is a likelihood of cartelization in the auctions of treasury bills.

Pakistani Banks are nothing but just a function of the treasury, i.e. in loaning depositor’s money to the government. Central bank’s advice to Commercial Banks about the possibility of Default is ALSO a message to those, who are invested in the Treasury Bills.

The other jolts in the Financial Markets are under the flat advice of FATF where a tightening of rope around designated Non-Financial Businesses and Professionals is stalled through a government notification. The grey economy appears to be deluded under Real-Estate, Trusts, Jewelers and Lawyers which have fallen victim of fresh restrictions new guidelines released on 26th day of January 2022.

 The Financial Markets are disturbed as the “by-the-book” exit of IK would require a no-confidence move, which would anyway entail provisions that IK is able to take some measure in ad-interim which are “break-and-break” for elites.

by Sanie Khan

Syed Zaki Hussain

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)