Just as expected, the local equity market gyrated all day and ended close to two hundred points in the red. And the rupee had an even worse day after inconclusive talks with the IMF raised all sorts of fear all around the place. Let’s not forget that the stock market finally rose for two days at the end of last week, after dropping like a rock for numerous sessions before it, because of expectations that the bailout program with the Fund would be back on track in a matter of days and the rush of liquidity, not to mention being on the right side of IFIs (International Financial Institutions) that take their cue from the IMF, would support the market, bolster the rupee, and provide enough fiscal cushion to reserves to make things alright once again. That hasn’t happened, of course, and now the finance ministry is running from pillar to post in an exercise in damage control. But it will take a lot more than mere words, especially from people whose promises have just proved false, to calm markets spooked by uncertainty. Former finance minister and now advisor to PM on finance, Shaukat Tarin, tried to restore some order by assuring traders and investors that the impasse in talks is “not a failure”, but traders and investors know only too well that to salvage anything at all at this stage will require a lot more sacrifices from the government. That, in layman’s terms, means implementing the kind of fiscal policy that taxes common people to the eyeballs and does away with almost all kinds of subsides that the lower classes survive on. So the market is factoring in either no resumption of the program or the kind of kind of continuation that will not sit well with voters at all. Meantime foreign portfolio investment (FPI) will keep lining up at the exit lounge and the rupee will continue its fall through the floor, making everything from reserves to imports and the current account look much worse. In these circumstances, whatever the government intends to do must be done very quickly because businesses are already up in arms since their own estimations, which were based on this fiscal’s budget, are also going astray and they simply cannot take the kind of fiscal hits that the government can. And since they are the central pillar of the expansionary budget, keeping them happy and satisfied, especially only one quarter into the fiscal, is extremely important. Markets hate confusion even more than bad news. So the first order of business ought to be restoring clarity to the debate about the present status and future of the Extended Fund Facility (EFF). Simply saying all is well isn’t helping, so it’s better if the government works on a concrete, quantifiable plan of action that can be sold to the IMF as well as the suffering Pakistani public. *