Right And Wrong In Pakistan

Victor Lai, CFA profile picture
Victor Lai, CFA


  • The Pakistan stock market is one of the worst-performing in the world year-to-date.
  • A plummeting currency, spiking inflation, and a belt-tightening IMF bailout package are among the many reasons not to like Pakistan equities right now.
  • However, taking a step back and a good look at the big picture may put Pakistan and it's prospects in a different perspective.

The history of Pakistan dates back some 5,000 years, a storied past that has assimilated European, Asian, and Arab influences over millennia. Today, Pakistan has an equally interesting and promising future, but it also has a number of debilitating problems. In this article, we'll take a closer look at what's right and wrong with Pakistan.

What's wrong with Pakistan

Pakistan has been plagued by corruption for decades. A procession of government officials, including two prime ministers, have been accused or found guilty of bribery, misappropriation, and other malfeasance. The culture of corruption has led to woeful underinvestment in education, infrastructure, and even sanitation.

In August of 2018, there was a shift in government power favoring the Pakistan Tehreek-e-Insaf party (the PTI) led by prime minister Imran Khan. Though the party ran on promising social welfare, it ended up succumbing to austerity measures imposed by a $6 billion bailout package from the IMF, the 13th such package since 1980.

The package comes with terms, including allowing the Pakistan Rupee (PKR) to free-float, raising benchmark interest rates, implementing fiscal belt-tightening, and overhauling tax policy to increase tax revenue. Clearly, these changes are restrictive and likely to impede near-term economic growth.

As a result, both the IMF and the World Bank have been revising down growth forecasts, both institutions see growth slowing to a 2% handle. They also see inflation continuing to rise, it has already spiked into double digits following the devaluation of the PKR, shown below vs USD.

Pakistan Inflation Rate


In a worst-case scenario, these issues could boil over into an outright financial crisis and economic rout for Pakistan. Markets have responded accordingly, punishing Pakistani stocks. Pakistan has one of the worst-performing stock markets in the world year-to-date, down -27%. This is shown in the chart below, represented by exchange-traded fund PAK (which tracks the MSCI

This article was written by

Victor Lai, CFA profile picture
Managing Director at Bellwether Capital Management LLC • 20+ years industry experience • MBA • CFA charterholder • All opinions are my own and do not represent advice.

Disclosure: I am/we are long PAK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (13)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.