The equity market is dancing around a very crucial psychological barrier at the 40,000 mark. One day it is down a hundred or so points, and the next it’s up three or four hundred. But, as last Monday’s 800-point-plus nosedive proved, some days are worse than others. That doesn’t just mean a bad day at the office, but rather collective losses in the millions and billions. Chartists fear that a fall below the 40k support line risks something of a wild freefall for a bit, and surely investors will beeline for the exit lounge in a panic. That is because while it is routine for capital markets to run on sentiment once in a while, in our particular case, sadly, it is more the norm than the exception. And with a broken down economy like ours that shows very little signs, frankly, of reviving anytime soon, it really doesn’t take much to spook the market. The market is more important today than at any time in the past because, owing to speed-of-light transactions, it can attract FPI (foreign portfolio investment) even when it’s hard to get a hold of much FDI (foreign direct investment). And for a country as hungry for foreign exchange as ours, every little bit matters. Therefore it’s very, very important to keep the market in order. It is the life and blood of the modern financial system on which the economy really runs. No doubt the government expects the nod from the IMF to buoy the market at least in the near term. But it’s not quite a nod yet even though it will get there eventually. There is still the matter of devising means of raising revenue to come at least within fighting distance of the revised target. And that brings the government to its most critical crossroad so far. Squeeze the economy more, whether by another mini budget or more indirect taxes, to get that final tick mark from the Fund and keep the money flowing? Or not risk the wrath of the people by further reducing their purchasing power and take a stand regardless of how that might impact the release of the next tranche? One is a necessity; indeed a matter of life and death for the government. The other is necessary political correctness and yet more; indeed a matter of life and death for at least a bulk of the people. What, then, to do? Let’s not forget that even if the government takes the bitter pill this time, pleases the Fund and gets the next instalment, what’s it going to do in the next quarterly meeting? It’s not as if the economy will have turned around by then. How do you think the market will position itself? So another Pakistani government learns that getting along with the IMF and getting along with the people can be two very different things. *