PTI-Government talks: A path to economic stability and business growth

Pakistan Tehreek-e-Insaaf (PTI) and the government have agreed to settle their rising tensions via negotiations instead of protests. This is great news for the economy, as the' long marches' cost the economy an estimated 190 billion rupees per day at the peak of political clashes.

If negotiations prove to be successful, businesses will benefit enormously from the resulting stable political landscape. This is because businesses will not fear constant road closures and blockades which strangle supply chains across the country.

This will be great news for businesses that rely heavily on the transportation of their goods from warehouses to in-store locations. This also includes businesses in the petroleum industry, as, during the height of the protests, motorways remained closed, leaving petroleum tankers stranded.

The greatest gain will arguably be for investors – both local and foreign. The mere mention of the peace talks has resulted in KSE-100, which is the benchmark index of the Pakistan Stock Exchange (PSX), to skyrocket by 4,200 points in intraday trading. This comes at a good time, as PSX recently recorded its largest fall in terms of points in the history of the exchange.

If the negotiations bear fruit, foreign investment is expected to rise. This is because foreign investors are not particularly comfortable investing in a country plagued by political uncertainty and violence. The beneficiaries will be local businessmen again, as they will be able to utilise foreign investment to expand the scope of their operations and rely on their international backers to capture a higher market share.

The greatest channel for business growth will most probably be the rise in domestic demand once political stability restores economic stability. Domestic demand will surge once citizens believe the economy is stable and that their livelihoods are not at stake.

As it stands, experts are claiming that protests resulted in lots of damage to local businesses either due to vandalism or, more commonly, because of road closures. When consumers are uncertain about their employment outcomes in the future, they tend to save funds to smooth consumption patterns once they lose their source of income.

Aside from domestic consumption rising due to certainty about employment, demand for local goods and services is also expected to increase due to lower interest rates. Interest rates were slashed last week and have settled at a two-year low of just 13 per cent, allowing consumers to purchase goods at a comparatively lower price tag as borrowing is cheaper now.

Political and employment certainty, along with interest rate cuts, are expected to allow businesses to reap the benefits of higher sales volumes, which might translate into higher profit margins.

Hospitality, tourism and travel companies will be the primary beneficiaries as they will not be forced to close down operations due to constant rallies and protests. This will be a welcome change for business owners in these sectors, as the protests have left many small companies teetering on the brink of bankruptcy.