Foreign Exchange Reserves followed a v-shaped recovery pattern declining from US$ 11.4b at end June 2008 to US$ 6.4 billion on 25 th November 2008 and then recovering to US$ 11.6 b by the end of May 2009. The import coverage ratio improved to 18 weeks as of May 2009. The exchange rate after remaining stable for more than four years, lost significant value against the US$ and the rupee fell 16.3% during July 2008-October 2008. With the signing of the Standby Arrangements with IMF, the rupee got back some of its lost value and with substantial import compression, and improvement in overall external balance including revival of external inflows from abroad, the exchange rate hovered around Rs.80.50 during April 2009. The country’s debt burden ratio declined from 50.9% at the end of 2001-02 to 27.6% of GDP by June 2008; however, it increased to 27.9% by September 2008. In relative terms, External Debt and Liability (the “EDL”) as a percentage of GDP increased from 28.1% at end-June 2008 to 30.2% by end-March 2009— an increase of 2.1% points. This is the highest ever rise in a single year for almost one decade depressed economic growth and the massive depreciation of rupee against the dollar partially explains this increase in EDL as a percentage of GDP. The EDL stood at 31.2% at the end of the first quarter of FY2010, witnessing a decrease of 0.4% points. Pakistan’s foreign exchange earnings have been falling due to sluggish performance of exports and volatile capital flows. Capital Markets The Karachi Stock Exchange (the “KSE”) 100 index hit its peak at 15,739.28 points on 21 April 2008 and by August 2008, the capital markets went into a tailspin, declining by 43% from its peaks. As a safety measure the Pakistan stock exchange authorities placed a floor on KSE at the level of 9,144 points, which resulted in a virtual halt of the stock market. The index underwent a gigantic loss of 58.3% to close at 5,865 points on 31 December 2008 as against 31 December 2007. The market capitalization experienced a huge fall of PKR 2,471b (US$ 47b) since 31 December 2007. Prices nosedived due to waning macroeconomic fundamentals, a worsening law and order situation and international capital flight. The market resumed to its normal cycle after more than 4 months of delay on 15 December 2009. Thereon, after suffering further decline, the KSE-100 share index has witnessed growth from 12 March 2009 and registered an increase of almost 2,000 points till the first week of April 2009. During this period the KSE-100 index improved to over 7,500 points, breaking the psychological barrier of 6,000 and 7,000 points. Since the commencement of the FY2009 equity investors had embarked on a fractional recovery of their fortunes with an upsurge in the KSE-100 KSE 100 index index of 22.5%, driven up chiefly by signs of returning 16,000 economic stability. 14,000 The aggregate market capitalization decreased by 43.4 percent during 2009 to stand at PKR 2,137.3 billion on May 15, 2009 compared to PKR 3,777.7 billion at the end of FY2008. According to figures released by KSE, the total market capitalization during March 2010 stood around PKR 2,753 billion. The magnitude of the fall in the market capital in terms of USD is comparatively 12,000 10,000 8,000 6,000 4,000 2,000 - Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Source: Karachi Stock Exchange KSE 100 index 12-Mar- 10 greater, up to 52%, during the same period amid increasing rupee-dollar parity. The market has become more attractive. 26 <strong>Keenjhar</strong> <strong>Lake</strong> <strong>Resort</strong> <strong>Project</strong> - <strong>Project</strong> Information Memorandum
During FY2010 Pakistan’s financial markets have seen positive results. The KSE saw a renewed foreign buying interest especially towards mutual funds. Recently various blue chips such as National Bank of Pakistan, Oil and Gas Development Corporation have recorded outstanding results which further attracted local and foreign investors. As a result the KSE index crossed the 10,000 points mark in during the 3 rd quarter of FY10 and hit a nineteen month high on 1 st April 2010. 27 <strong>Keenjhar</strong> <strong>Lake</strong> <strong>Resort</strong> <strong>Project</strong> - <strong>Project</strong> Information Memorandum