For a long time, the Pakistan Stock Exchange performed exceptionally well. Over the years, the indicator of political and enhanced security continued to further strengthen economic activity in the country. Suddenly, political turmoil gripped the country in the wake of leaks from Panama accusing the head of the ruling party.

These are the reasons why the Pakistani stock market has been experiencing high volatility.

Political domino effect:

Pakistan’s largest party and prime minister indicted at Panama Gates and ousted after marathon hearings in the country’s highest court. As a result, PSX, the largest stock market in Pakistan, invariably had a ripple effect everywhere. When the KSE100 index fell after hitting an all-time high of around 53,000, it fell more than 30% despite venturing into the MSCI regime.

Risk of tax error:

Persistent increase in the current account deficit due to a larger trade gap caused by a significant increase in imports compared to exports. Pakistan’s trade deficit widened 24.18% to over $9.2 billion in the first seven months of the current fiscal year, while foreign exchange reserves were declining at a rapid pace. Markets are concerned about how the local rupee’s payback in the recent past, the larger trade deficit may put additional pressure on the Pakistani rupee.

The total liquid foreign reserves held by the country stood at $18.413 million at the end of February 2018, including $12.34 held by the SBP and $6.067 million remaining in commercial banks.

Foreign remittances:

According to figures released by the State Bank of Pakistan for the July-February period it increased by 3.41% to $12,833.64 million compared to $12,410.54 million for the corresponding period last year.

Foreign direct investment (FDI) remained dry in the seven months of fiscal year 2018, as FDI inflows reached $1.487 billion during July-January of fiscal year 2018, compared to $1.532 billion a year ago.

Export Recovery:

Exports achieved the highest monthly growth to date in the fiscal year, registering a 16% increase in dollar export terms in February 2017. However, exports in the current year have already brought additional inflows of around USD 1.5 billion during the first eight months and is expected to reach an additional USD 2.5 billion during 2017-18. This increase in economic activity in the foreign sector reflects an increase of 0.8% of GDP.

Monitor macroeconomic trends:

The economic manager must maintain CONTROL of current macroeconomic trends in order to maintain the growth achieved and a great recovery in the coming financial years as long as there is controlled fiscal discipline. Here are the encouraging signs for the buildup.

Timely completion of power projects and low cost of production would reduce the cost of production.

Inflation rate around 4%.

CPEC projects underway.

Elections to the Senate clearing the political wave.

attractive qualifications.

Potential growth of FDI.