KARACHI - The International Monetary Fund (IMF) has disapproved the government plan to inject the market support fund worth Rs20 billion into the Karachi Stock Market (KSE) before removal of floor mechanism aiming to salvage the crisis-ridden stock market from collapse, which had fallen down to around 42 per cent as compared to its highest ever position recorded on April 2008. Reliable sources told The Nation that representatives of finance ministry and Securities and Exchange Commission of Pakistan (SECP) on Wednesday had informed the KSE management that the government had failed to arrange the funds for the promised "market support fund" and given permission to the KSE management to remove the floor as soon as possible without availability of funds. SECP has warned the management of KSE to announce a date for floor removal immediately otherwise SECP would use its authority and remove floor very soon, source said. After getting directions from the SECP, the Board of Directors of three stock markets of the country called an emergency meeting in which SECP Chairman also participated but both regulators failed to take any decision regarding floor removal in haste on Wednesday and adjourned the meeting till Friday, Dec 05. SECP Chairman Razi-ur-Rehman strictly asked the market officials to remove floor very soon because IMF had not permitted the government to bail out share markets by involving funds of public institutions, sources said. The Ministry of Finance had sent a letter to both regulators, informing them that Pakistan's public institutions including EOBI, State Life Insurance, National Investment Trust and National Bank were no longer in the list of members of market support fund, sources said. What made the government to turn from its reiterated commitment to inject Rs20 billion funds before the removal of floor? An unimpeachable source had solved the mystery and said that Morgan Stanley Capital International (MSCI) and FTSE 100 index are common benchmark for world stocks funds: Both indices include a collection of stocks of all the developed markets in the world and are going to publish their reviews about the performance of several securities of different countries on December 15 and December 20 respectively. The source said the SECP is worried that the both indices will exclude around 15 Pakistani stock funds from their lists, which results in the massive outflow of foreign investments because exit opportunities for foreign investors and high volumes are the main points for both indices to upgrade the ratings of stock funds. Source added that it was four months since the floor rule was imposed in the KSE, resulting volumes hit the history's lowest level and foreigner were trapped in the market, thus the government and SECP have fear that both indices will exclude the Pakistani stock funds from their lists. He said that to halt both the indices from excluding the Pakistani stocks from their lists, SECP had asked the KSE to remove the floor and the government had used the IMF's disapproval of market support fund as a lame excuse for their failure to arrange the required funds. However, after getting the information from the SECP, KSE MD Adnan Afridi briefed the members and directors of the exchange in an urgent meeting of members, which was called here on a short notice on Wednesday. Ironically, in the meeting held on Monday, MD had officially announced that the government had assured to give Rs14.5 billion in account of market support fund. However, in an immediate response to the IMF condition that market will not be bailed out by using public money, the members of the exchange have proposed market authorities to hand over holdings on leverage counter that is Continuous Funding System (CFS) to the Fund financers and unfreeze market anytime. Members are of the view that the financers will have to bear no loss in case they own holding in CFS instead of asking for recovering their funds stuck-up in CFS market, as CFS financers had already received cash or collateral worth 25 per cent of total holding of Rs11 billion on CFS counter.