Pakistani stocks, o/n rates end down; rupee flat

KARACHI Dec 28 (Reuters) - Pakistani stocks ended lower on Tuesday, jolted by political uncertainty after another member of the country's governing coalition said its two ministers in the federal cabinet would resign.

The Muttahida Qaumi Movement, the dominant political party in Karachi, said in a statement that the ministers' resignations were a first step and a decision on whether to stay part of the federal as well as the provincial Sindh government would be taken soon. [ID:nLDE6BQ13M]

The Karachi Stock Exchange's benchmark 100-share index .KSE ended 0.52 percent, or 61.68 points, lower at 11,848.05.

Volume was 110 million shares compared with 85.15 million shares traded on Monday.

"Bearish activity was witnessed on rising political uncertainty and investors are also still concerned over a rising fiscal deficit after extension approval of the IMF loan programme," said Ahsan Mehanti, director at Arif Habib Investments Ltd.

The IMF on Monday approved a nine-month extension of Pakistan's $11 billion loan, which was scheduled to end this year.

The standby loan programme with two tranches remaining was scheduled to end Dec. 31, but will now run through Sept. 30, 2011, with the two tranches broken up and spread out over that time. Pakistan applied for the extension because it was unable to implement fiscal reforms such as a reformed general sales tax (RGST) on schedule.

The extension likely will worsen Pakistan's fiscal deficit because its fiscal year ends on June 30 and part of the money originally scheduled for 2010/11 will now fall in 2011/12, creating a larger shortfall for the current fiscal year.

In the currency market, the rupee PKR= ended flat at 85.79/84 to the dollar -- because of lack of import payments -- compared with Monday's close of 85.79/85 to the dollar. Dealers said the local unit could come under pressure because of an increase in international oil prices.

In the money market, overnight rates ended lower at between 13.00 percent and 13.50 percent, compared with the previous day's close of 13.90 percent after the State Bank of Pakistan bought back government paper worth 27.9 billion rupees in six-day reverse repo contracts. (Reporting by Sahar Ahmed; Editing by Chris Allbritton) (For more Reuters coverage of Pakistan, see: here)