May 15, 2025 (MLN): In a world where markets often ignore smaller economies until the crisis strikes, Pakistan quietly proves that it deserves a second view.
The country, the home base of more than 255 million people, has undergone a remarkable economic change in the past two years, which is largely unnoticed on the world stage.
Inflation, once rising almost 40%, has now fallen to almost zero. The Eurobonds from Pakistan that mature in 2031 have doubled in value and jump from 40 cents on the dollar to 80 cents.
The Karachi Stock Exchange has tripled. All this happened under the leadership of Prime Minister Shehbaz Sharif, after a $ 7 billion stabilization program that had been agreed with the International Monetary Fund (IMF) in September 2023 – more than $ 2 billion of which has already been paid.
“Pakistan is a good story,” says Genna Lozovsky, Chief Investment Officer at Sandglass Capital Management, a company that is known for investing in necessitating emerging markets. “So good that it is no longer risky enough for us.”
Despite the current military tension with India, according to the Barron, the economic process of Pakistan seems to be largely intact.
The real threat, analysts say, is not across the border but inside.
Pakistan has received 24 IMF rescue operations since 1950, which emphasizes a persistent cycle of economic volatility. Yet there are signs that this time can be different.
The current reforms were activated by an almost-feite crisis in 2022–23, after catastrophic floods, rising energy prices after the infringement of Russian Ukraine and intense political unrest.
The expulsion and imprisonment of former Prime Minister Imran Khan made the way free for the disputed return of Sharif in February 2024.
His government has since reconciled with the powerful army of the country and has set the stage for a period of relative political stability at least until the next general elections in 2029.
To tame inflation, the State Bank of Pakistan has taken daring action and increased interest rates from 10% to 22% – a movement that pushed the economy into a recession but successfully stabilized prices.
The sovereign donors of the country China, Saudi Aarabia and the VAE chose to roll their loans without injecting fresh capital, to identify confidence, but also caution.
Nowadays the macro -economic indicators of Pakistan are surprisingly healthy.
The growth of GDP has returned to 2.5%, the current account is in excess and the country has a rare primary tax surplus (excluding interest payments).
At the moment, Pakistan’s GDP grew by 1.73% in the second quarter of FY25, despite a slight decrease of 0.18% in the industrial sector.
This growth was supported by positive performance in agriculture (1.10%) and services (2.57%), according to the National Accounts Committee.
In addition, the revisions increased the growth of the service sector from 1.43% to 2.21% and improved the industrial sector from -1.03% to -0.66%, resulting in an updated total growth rate of 1.34% for FY25 Q1, compared to the previously reported 0.92%.
The 112nd meeting of the National Accounts Committee (NAC) approved the updated GDP growth rates for Q1 and preliminary growth for the second quarter of FY25.
GDP growth for Q1 was revised to 1.34% compared to the earlier estimate of 0.92%.
The growth of agriculture was adjusted to 0.74% as a result of lower production in crops such as green food and forestry.
The contraction of the industrial sector had decreased from -1.03% to -0.66%, helped by better performance in electricity, gas, water supply and construction, although mining and quarries fell further.
Despite a decrease in finances and insurance, increased improvements in transport, public administration, education and health growth of services from 1.43% to 2.21%.
The total growth rates are 1.10% for agriculture, -0.18% for industry and 2.57% for services.
“That is something we have not seen in many years,” notes Khaled Sellami, who manages emerging markets sovereign debts at Barings.
But short -term stabilization is only one piece of the puzzle.
Long -term development remains elusive. The current IMF program requires politically sensitive reforms: increased tax revenues by 50% and reducing electricity subsidies.
These are difficult questions in a country where structural reforms have long been resisted by established interests and public pressure.
In contrast to the rapid climb of India in technology and medicines, Pakistan still strongly relies on traditional exports such as cotton, textiles and grains, which are good for two -thirds of his trade.
Although the IT -Outsourcing sector has shown a promise that it grows to $ 3 billion annually, it remains a fraction of the $ 200 billion digital export market from India.
“Pakistan remains extremely vulnerable to external shocks,” says Alison Graham, Chief Investment Officer at Voltan Capital Management. “If there is a meeting, you must come in early.”
Yet some investors remain hopeful. Sellami sees potential in the long term and remains a “constructive” look at the Eurobonds of Pakistan.
What has changed is that Pakistan no longer enjoys the strategic leverage that it once kept during the Cold War or the War on Terror. The current allies China and the Gulf States have made it clear: no more blank checks.
That pressure can simply be the stimulans that Pakistan needs.
“The government knows that if they wander from the path they follow, external financing will disappear,” says Sellami. And without room for missteps, that awareness can be the strongest motivator of all.
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Posted on: 2025-05-15T11: 14: 17+05: 00
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