It was a day of clashing economic headlines. One proudly announced that the Pakistan Stock Exchange (PSX) had scaled yet another record high. The benchmark index has indeed delivered over 50 per cent returns, outpacing markets in India, China, and others. At the same time, Pakistan’s merchandise exports for December were said to have plunged by over 20%. We do not need anything else to capture the widening disconnect in our economy.
The stock market’s surge is undeniable, yet it is largely a secondary-market phenomenon, not a sign of fresh productive investment. Money is mostly circulating among existing shares rather than financing new factories, capacity or jobs. New investor participation has jumped, but that still represents a tiny sliver of the population.
Analysts tout the stock boom as evidence of growing investor confidence amid improved stability. It is true that Pakistan averted default in 2023 and has seen some macroeconomic stabilisation with foreign exchange reserves doubling to around $21 billion and inflation sharply coming down from record highs. Still, these positive trends have not translated into a wave of new business formation. The euphoria, for now, reflects financial capital chasing quick gains rather than funding the long-term productive capacity that creates jobs.
The export crash is a direct signal from the real economy, and it is flashing red. Exports have been shrinking for five months in a row, and key industries are struggling. Textile exports, Pakistan’s flagship sector, slid 9% in December, and food exports plunged 35%. Manufacturers complain they cannot compete abroad due to the crippling cost of doing business, from expensive energy to high financing costs. The pain is already being felt on the streets. While the one percenters celebrate, ordinary Pakistanis are coping with still-high living costs and anaemic job growth.
Our policymakers have managed to stabilise the macroeconomy after a perilous period. Sadly, stability is not the same as prosperity. The challenge now is to turn the financial signal into real economic substance. That means tackling the structural barriers head-on. Recent moves such as advancing long-delayed privatisations and joint ventures hint at a willingness to draw investment into productive assets.
But much more is needed. The capital markets, flush with liquidity, must be encouraged to fund new enterprises. Banks need incentives to lend to SMEs and exporters rather than to the government or speculative ventures. Likewise, governance reforms and consistent trade policies are vital so that Pakistani firms can upgrade, innovate and regain footing in global markets.
Until the country channels its capital into building things that last and sells those things competitively to the world, any record high will remain a flashy headline, not a transformation of our economic reality. *