Economy closes 2024 strong despite politcal unrest, terrorist activities

Like previous couple of years, 2024 also witnessed Pakistan’s economic woes as political uncertainty continued to grip the country. However, it also saw Pakistan beginning to escape the depths of the economic quagmire in which it was bogged down.

As the year comes to a close, we take a look at 2024’s most important events that shaped the country’s business landscape and the impact these events had on the economy.

Political Economy

Political clashes and marches from Pakistan Tehreek-e-Insaf (PTI) significantly damaged the economy. At the peak of political clashes, a colossal Rs190 billion were lost every day the protests continued. Businesses were forced to cease operations multiple times throughout the year as protesters choked vital roadways or forced the government to cut off access to certain cities, especially the federal capital.

The timing of some of the protests was especially insidious considering the fact that they were held on the same day as the start of the high-profile Shanghai Cooperation Organisation summit or when a Belarusian delegation led by its president reached Pakistan. While this was an attempt to highlight local issues on the global stage, the timing was damaging as international investors prefer to not invest in countries marred by political uncertainty.

Islamabad’s measures to crack down on the protests were equally damaging. The decision to close major highways such as M-1, M-4, M-11 and M-14 caused immense losses to businesses. For instance, fuel tankers remained stranded on highways while stations ran out of fuel to sell, resulting in pump owners remaining unable to realise revenues.

Furthermore, slowing internet speeds during protests hindered business activities at an unpresented level. Freelancers working for international clients faced communication issues, causing delays. These delays significantly strained customer-client relationships, which led to Pakistani freelancers losing out on contracts.

Internet slowdowns and VPNs being banned also disrupted the operations of IT exporters. Thus, Prime Minister Shehbaz Sharif’s announcement about aiming to achieve a $25 billion IT export target seemed counterintuitive amid policies hurting the very sector they aim to develop.

Economy unhinged by terrorism 

Pakistan has been beset by terrorism for far too long. Terrorism surged during the Soviet-Afghan war in 1979 and as it stands, terrorists still have a significant negative impact on Pakistan’s economy.

Terrorist attacks on foreign nationals continued in Pakistan in 2024. An attack outside Karachi airport on Chinese engineers aimed to sour Pak-China relations and reduce the inflow of foreign direct investments (FDI). However, terrorists have been unable to derail Pakistan from the path of economic prosperity as China poured an unprecedented amount as investments into Pakistan.

China’s FDI levels sat at $404 million in the first quarter of FY 2024-25. Despite the attack against its nationals, China’s FDI levels surged by 164% in comparison to the same quarter of the previous year and formed 44.8% of total FDI in Pakistan in this quarter.

Loans and Investments

Islamabad was able to successfully negotiate and oversee the release of $1.1 billion as part of the International Monetary Fund’s (IMF) $7 billion extended fund facility package. This marked the beginning of a surge in business activities as investor confidence in the economy was restored.

The KSE-100, which is the benchmark index of the Pakistan Stock Exchange (PSX), started the year at around 63,000 points which now hovers around 110,000 points. This represents a remarkable increase of approximately 75 percent in the index’s value.

Experts are predicting that the bull run of the PSX might run into the next year as political tensions between PTI and Islamabad might ease up due to ongoing negotiations.

Apart from local developments, international investments remained strong too. PM Shehbaz’s visits to the Kingdom of Saudi Arabia (KSA) and Qatar were able to bring in $600 million and $3 billion from both countries, respectively.

Pakistan also managed to sign eight Memorandums of Understanding (MOU) with Belarus to strengthen trade ties between the two countries. It is also to be noted that KSA and Pakistan managed to sign 27 MOUs valued at $2.2 billion, which were to be invested in various sectors of the economy. This was a significant step in the positive direction for cash-strapped Pakistan.