Pakistan Stocks Crashed: Why Did The Karachi 100 Index Nosedive By MORE THAN 2,500 Pts On April 23?

Pakistan Stock Exchange Crashed: It was a bloodbath for Pakistani shares on its exchanges, as investors held an intense panic selling after India announced stringent cross-border linkages between the two countries, a bold move after the terror attack in Pahalgam. The major exchange of Pakistan, the Karachi Stock Exchange 100 Index (KSE) nosedived by at least 2,564.95 points to hit an intraday low of 114,661.2.

After market hours of April 23, the KSE 100 index plummeted by 2,206.33 points or 1.88% to end at 115,019.82. This extended its downfall by 2,679 points or 2.3% in a month.

The performance comes as a huge blow for the index which touched its all-time high of 120,796.67 at the start of the current month, on April 4, 2025. From this level, the benchmark has plunged by more than 5% to date.

The latest attack on Kashmir's soil has burst into an outrage across the globe. Reiterating its stance on zero tolerance for terrorism, India has suspended the 65-year-old Indus Waters Treaty with Pakistan, which is a major trade route between the two countries. Further, India has also closed the borders of the Attari-Wagah region, another pivotal trade route. Apart from this, India has suspended visas for Pakistani nationals, while the PAK citizens in the country currently are given 48 hours to leave India. Meanwhile, Indian citizens in Pakistan, are asked to return to the country by May 1, 2025.

To counter India's decision, Pakistan has reportedly called the suspension of the Indus Waters Treaty as 'water warfare'. Further, in a tit-for-tat move, the neighbouring country announced the shut down of 1972 Simla agreement along with closing of airspace for Indian airlines both owned or operated.

In case of Indus Waters Treaty, the Pakistan Prime Minister Office (PMO) 'vehemently rejects' India's announcement, citing that the treaty is a binding international agreement brokered by the World Bank and does not have any provisions for unilateral suspension.

Pakistan's PMO stated that water is of national security, a lifeline for about 240 million people, and its availability "will be safeguarded at all costs".

The PMO declared that any attempt to stop or divert the flow of water belonging to Pakistan as per the Indus Waters Treaty, and the usurpation of the rights of lower riparian will be considered as an "Act of War".

As per a Bloomberg report, any disruption to the flow of water from the largest irrigation systems could impact the planting schedules in Pakistan, and that would be a drawback for the agriculture sector. Currently, the agriculture sector accounts for a quarter of Pakistan's economy and employs about 40% of its people. Apart from this, Pakistan's electricity system from hydropower could be impacted.

A shock to Pakistan's agriculture system could further impact its economy, which is already grappling with loose threads.

At the latest, IMF has slashed its GDP forecast for Pakistan to 2.6%, as it believes that a US tariff of 100-year high and rising trade tensions could slow down growth. The estimate is down by 4 basis points from the earlier forecast of 3%.

Not just that the Asian Development Bank (ADB) has also cut its forecast for Pakistan's economic growth to 2.5% for FY26, compared to an earlier 3% projection.

The Indus system of rivers comprises three western rivers - the Indus, the Jhelum and Chenab - and three eastern rivers - the Sutlej, the Beas and the Ravi. Per Article I of IWT, any river/ tributary and its catchment area of the Indus system of rivers that are not part of the other five rivers, is part of the Indus River including its creeks, delta channels, connecting lakes, etc. According to this treaty, the eastern rivers are allocated for exclusive water use by India after the expressly permitted water uses per Article II (1) in Pakistan. Similarly, Pakistan has an exclusive water use of the western rivers after the permitted water uses in India. Article IV (14) of IWT states that any water use developed out of the underutilized waters of another country, will not acquire water use rights due to a lapse of time. Mostly, the treaty resulted in the partitioning of the rivers rather than sharing of their waters, as per Wikipedia.