PROSPECTS OF STRONG PAKISTAN ECONOMY

Hira Tahir

Pakistan’s economy is currently witnessing a period of promising expansion and
stability, characterized by a range of encouraging developments. These positive factors
comprise the Pakistan Stock Exchange (PSX) reaching record highs, the strengthening of the
Pakistani Rupee against the Dollar, and a notable increase in investments from international
financial institutions and other channels. Consequently, Pakistan’s economic outlook appears
to be increasingly optimistic, paving the way for a prosperous future. It is crucial to
acknowledge the significant role played by the SIFC in contributing to this positive trajectory.
Pakistan Stock Exchange has been experiencing a remarkable surge, recently
surpassing the milestone of 59,000 points and reaching an all-time high. This impressive
performance can be attributed to the prevailing economic optimism in the country. Over the
past three weeks, the index has seen a cumulative increase of 12.5% or 6,626 points
since surpassing the previous six-year record high of 52,876 points on November 3,
2023.
The market’s continued upward momentum can be attributed to two main factors.
Firstly, investors are optimistic about the economic revival following the International Monetary
Fund’s (IMF) staff-level approval for the next loan tranche of $700 million to Pakistan.
A prominent brokerage house has projected that the benchmark index will reach 75,000
points within the next 13 months, specifically in December 2024. This forecast is based
on major developments expected in the near future. One of these developments is the
potential reduction of the interest rate by seven percentage points to 15% by the end of
December 2024. This decrease would be significant, considering the current record high rate
of 22%.
Another positive indicator for Pakistan’s economy is the strengthening of the
Pakistani Rupee against the US Dollar. In the latest session on November 21, 2023, the
Rupee appreciated by 0.06%, settling at 285.79 against the Dollar, marking the fourth
successive session of gains.
The Pakistani Rupee has gained recognition as the world’s best-performing currency
in September 2023, as stated by Tahir Abbas, head of research at Arif Habib Limited, a
securities brokerage firm. He also expressed optimism that the PKR currency will continue
to strengthen due to the government’s crackdown on illicit dollar trading and the
enforcement of state policies. The Federal Investigation Agency has conducted nationwide
raids on exchange companies involved in informal channels of trading without proper
documentation. The SIFC initiative has been implemented to address the issue of dollar
hoarding and smuggling, which has resulted in the continuous appreciation of Pakistan’s
national currency. Since the crackdown on black market operators commenced on
September 6, tens of millions of dollars have flowed back into Pakistan’s interbank and
open markets. This crackdown has played a significant role in the positive turnaround of the
currency.The strengthening of thePakistani Rupee against the US Dollar signifies a more robust
economy. It enhances the purchasing power of the local currency, leading to reduced import
costs, controlled inflation, and increased encouragement for domestic production. These
factors ultimately contribute to the overall economic growth and stability of the country.
One of the primary objectives of the SIFC is to attract investment from friendly
nations. Pakistan has successfully attracted significant investments from international financial
institutions and other sources, demonstrating confidence in the country’s economic potential due
to SIFC efforts. Institutions such as the International Monetary Fund (IMF), World Bank and
Asian Development Bank (ADB), have provided crucial capital for infrastructure development,
job creation, and poverty alleviation programs. These investments will further strengthen
Pakistan’s economy and contribute to sustainable growth. Notably, Pakistan andthe IMF have
reached a preliminary deal for the release of $700 million from a $3 billionbailout package.
Additionally, the ADB has approved a $250 million loan to enhance the power transmission
network in Punjab and Khyber Pakhtunkhwa provinces, which will stabilize the national grid
and reduce transmission losses. The Asian Infrastructure Investment Bank (AIIB) and the World
Bank will co-finance Pakistan’s second Resilient Institutions for Sustainable Economy (Rise-II)
program with a $600 million loan, aiming to improve fiscalmanagement and regulatory
conditions that support growth and competitiveness. Thefinancing plan includes $250
million from AIIB and $350 million from the World Bank’sInternational Development
Association
Prospects for a strong Pakistani economy are highly promising. The record highs in
the Pakistan Stock Exchange (PSX) reflect increasing investor confidence and a positive
market sentiment. Additionally, the strengthening of the Pakistani Rupee against the Dollar
signifies improved economic stability and competitiveness. Furthermore, the future
investments from international financial institutions and other sources demonstrate the trust
and belief in Pakistan’s economic potential. With these positive developments, Pakistan is
well-positioned for sustained growth and prosperity in the coming year.