Pakistan’s stock market is flying high, yet the broader economy is barely moving. While the KSE-100 index surged over 85% in 2024 and has already risen another 60% in 2025, key real economy indicators—like manufacturing output, unemployment, and poverty—have either worsened or plateaued.
This disconnect is not accidental. It is a reflection of deep structural imbalances, where policy distortions, fiscal dependency, and selective incentives have rewarded a few sectors while undermining broad-based industrial development.
Banking, Fertiliser & Energy: Profits on Policy, Not Productivity
Roughly two-thirds of the recent market gains have come from just three sectors: banking, fertiliser, and oil & gas. Their profitability, however, has more to do with government policies than innovation or competitiveness.
Banking: Profits from Government Lending
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Over 95% of bank deposits (Rs26 trillion) are parked in government securities.
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High interest rates and excessive government borrowing mean guaranteed returns, leaving little incentive for banks to finance private sector growth, especially SMEs.
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Result: Easy profits but no credit deepening.
- Finance Act 2025: Pakistan’s Tax Burden Deepens for Compliant Businesses
Fertiliser: Cartels and Subsidies
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4 companies control 95% of the market.
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Benefit from subsidised feedstock gas, despite subsidy cuts under the IMF program.
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Urea prices have jumped 70% in 4 years—Rs4,400 per 50kg bag in Pakistan vs Rs1,200 in India.
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Farmers suffer, productivity drops, but corporate profits soar.
Oil & Gas: Price Hikes Boost Profits
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Circular debt reduction and early privatisation are positive.
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But biggest driver: energy price increases under IMF-backed reforms.
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Households face rising bills while listed companies enjoy higher margins.
Neglected Sectors: The Missed Opportunity
Sectors with real growth potential—auto parts, engineering, synthetic textiles—remain neglected.
Take auto parts:
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Pakistan exports just $22 million, while:
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India, Turkey, Thailand each export over $7 billion.
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Indonesia, Malaysia, Morocco do $1.5–2 billion.
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Why the gap? Micromanagement by the Engineering Development Board (EDB) and input controls by FBR discourage scaling.
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High import tariffs on raw materials like steel raise costs and kill competitiveness.
Tariff Reforms: A Ray of Hope
Recent National Tariff Policy reforms provide a once-in-a-decade opportunity:
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Reduced customs duty slabs and phasing out of regulatory & additional customs duties.
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Aimed at making raw materials and intermediate goods cheaper, especially for value-added industries.
But unless private firms rise to the challenge and integrate into global value chains (GVCs)—which account for 70% of world trade—this opportunity could be lost.
Exporting Intermediate Goods: Pakistan’s Best Bet
Instead of competing with global giants in finished consumer goods, Pakistan should:
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Focus on intermediate goods like auto parts, synthetic components, textile accessories.
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Position itself as a reliable low-cost supplier to industrial hubs like Germany, the US, Japan, and South Korea.
Reforms Must Go Deeper: From Policy-Driven Profits to Real Productivity
To sustain growth:
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Policymakers must reduce bureaucratic overreach.
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Encourage private sector investment in competitive exports.
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Remove distortions that artificially protect uncompetitive firms.
Unless this strategic shift occurs, today’s stock market rally may remain a mirage—rewarding a few while ignoring the economic majority.
Conclusion: Real Growth Lies Beyond the Stock Index
The KSE-100 hitting 134,000 is a headline. But jobs, exports, and industrial output are the real scorecard.
Pakistan’s long-term prosperity depends on shifting from a model that rewards rent-seeking and policy lobbying to one that prizes innovation, exports, and productivity.
It’s time to ask: Can Pakistan turn this stock market momentum into sustainable economic transformation?
