Operation Sindoor: Pakistan scrambles to contain fallout after Karachi Stock Exchange falls

Pakistan’s Finance Ministry released an urgent statement on Wednesday afternoon after the country’s stock market collapsed in one of the sharpest single-day falls in recent history.The benchmark KSE-100 index tumbled over 6,500 points, or nearly 6%, amid panic selling, dragging the market to 107,007. The dramatic collapse followed India’s precision military operation named Operation Sindoor, launched in the early hours of Wednesday.
The strike hit nine terror-linked sites — four in Pakistan and five in Pakistan-occupied Kashmir — in response to the recent terror attack in Pahalgam, Kashmir. The move marks a serious escalation in cross-border tensions.
As financial markets reeled from the geopolitical shock, Pakistan’s Finance Minister convened an emergency meeting to assess risks and reinforce contingency planning.At the time of writing, the Karachi Stock Exchange had pared some losses but was still trading nearly 2% lower.

In its official statement, Pakistan’s Finance Ministry said: “A rapid risk assessment was conducted, evaluating current threat perception with an emphasis on ensuring national financial stability and security. Robust measures are being implemented to safeguard Pakistan’s economic infrastructure and provide clarity and confidence to financial markets.”

Also Read: Operation Sindoor: Some pics from India’s attack on Pak terror basesIt added that contingency plans have been reinforced “to ensure operational resilience and secure communication lines across financial institutions.” The Finance Minister said that “Pakistan’s financial system remains stable and secure, and authorities are working to uphold national economic integrity.”

Earlier this week, global ratings agency Moody’s weighed in, warning that “a persistent increase in tensions could impair Pakistan’s access to external financing” and strain its foreign exchange reserves — already well below the level needed to meet external debt obligations over the next few years.

Pakistan currently owes over $131 billion to foreign lenders, and has relied heavily on IMF bailouts in the last two years, borrowing over $3 billion annually in FY23 and FY24. Its foreign reserves barely cover three months of imports.

The country’s economy has been battling one crisis after another — from the pandemic and the Ukraine war to punishing inflation and political instability. But Wednesday’s plunge in market confidence suggests the cost of conflict with India could be economically catastrophic.

Also Read: Pakistan is ready to back off if India halts military offensive, says Defence Minister Khwaja Asif

For now, Pakistan’s finance authorities are talking stability. The markets, however, are telling a different story.