George Osborne has postponed the sale of the final Government stake in Lloyds Bank.
Osborne confirmed on Twitter that he would not give the go-ahead for the sale of the final stake until markets had calmed.
The sale of £2 billion worth of Lloyds shares was announced in October. It was supposed to take place around the time of the March budget.
But a difficult trading environment has seen Lloyds' share price dip from 78p in October to 64p by 2016. A share sale at this time would result in a loss.
Osborne told the BBC on Thursday: "Now is the not the right time."
The Government bailout of Lloyds in 2009 cost the UK taxpayer £20 billion. At its peak, the Treasury owned 43 per cent of the bank.
The UK stock market has suffered from jitters over economic growth in China and the falling oil price.
The FTSE 100 sunk into a "bear market" in mid-January after the value of the UK's 100 biggest companies fell 20 per cent from its peak in mid-April.
