As reported two weeks ago in The Economist, the Karachi Stock Exchange (KSE) has boomed for the past two years, with returns over 40 percent, albeit on rather low volume. The article cites a range of factors for the KSE’s strong performance, including investors’ appetites for risky markets, a new IMF loan for Pakistan, and general optimism after the country’s reasonably peaceful elections in May. Those elections marked the first time that a democratically-elected government served out its full term and handed over power to another civilian government.
On top of that, the new PML(N) government is considered largely pro-business, both by the local private sector and international observers. PML(N) came into office having made a wide range of assurances on needed economic reforms, and as CIPE’s Pakistan Country Director Moin Fudda has written, it was the business community that was instrumental in pushing the political parties to offer concrete policy platforms in the run-up to the May elections.
But digging deeper shows that caution is in order. The $5.3 billion IMF package still requires approval by the Fund’s board in September, and the government must show that it can deliver on a long list of preconditions. Among those are reforms to the crippled energy sector. But in a recent meeting of the Council of Common Interests, which brings together leaders of the four provinces with key federal ministers, agreement on the PML(N) national energy plan was deferred for further discussion.