Pakistan’s PSX may well be the only stock market in the world to greet President Donald Trump’s announcement of sweeping tariffs with a rise, going up on Thursday to an all-time high, and setting a new high while crossing the 120,000-point barrier of the KSE100 Index. However, the reason for that jubilation was not the 38 percent tariff imposed on Pakistan, as the cut in the power tariff announced by the Prime Minister Shehbaz Sharif the same day. Though Mr Trump’s announcement came on Wednesday evening local time, and Mr Sharif’s on Thursday afternoon, the rime difference was such that the latter served as a reply to the first. The markets seem to feel that the cut in the power price would make up for the rise in the tariff. They are also assuming that Pakistani textiles (the bulk of the exports to the USA are textile made-ups) will become competitive after tariffs also affect other producers.
However, The USA is also not the only market. Exports to the European Union, for example, should benefit. There will also be a positive outcome for the consumer. Domestic bills may not go down, because consumption is about to increase, as summer sets in, and cooling devices go on. However, the rioting of the past may not occur. A more substantial benefit may be visible in the Consumer Price Index, which registered a 1.7 percent increase in March measured year-over-year. One reason for that low figure is the previous reduction in the electricity tariff. That figure did not include the current reductions, so the predictions of an upswing in inflation from this month may well be proven, wrong. The decreases are supposed to be followed by further decreases next month, but that is predicated on reducing line losses and theft, which is easier said than done.
The government should reconcile itself to having shot its bolt, at least as far as electricity tariffs are concerned. Now it will have to lean back and wait for industry to take advantage of the new tariff, and for the consumer to benefit from it. The government may find the consumer taking the benefit for granted, but its activists have been handed a very strong talking point when interacting with their counterparts from other parties.
