2024’s economy: default scare, PSX’s takeoff & PIA’s missed flight

When 2024 rolled up in Pakistan, the following words appeared on front pages of most newspapers: “political uncertainty”, “balance of payment crisis”, “depleted foreign exchange reserves”, “external financing unlikely” etc. etc. Not to forget the word “default”.

However, as 2024 progressed, these headlines begin to include phrases like “investor sentiment improves”, “IMF okays funding agreement”, “ADB approves loan”, “inflation lowest in months”, “SBP reduces policy rate” and so on.

As we reach the end of the calendar year 2024, all is far from well, but we are also a long way ahead of where our economy stood at the start of this year. The quarterly growth for July to September clocked in at less than 1 per cent, throwing a wrench in much touted “economic revival” spirit. But we do have higher forex reserves and a resilient capital market offering some solace.

Here are some of the more pronounced highs and lows of 2024 for Pakistan’s economy, that made us let out a sigh – at times in relief, at others in desperation…

IMF Extended Fund Facility: extending funds and frowns once again!

First things first, the International Monetary Fund (IMF) approved the $7 billion loan in Extended Fund Facility (EFF) for Pakistan. While it seemed like a ventilator for an economy, which was being labeled as ‘on the verge of default’, it also brought a ton of difficult decisions for the economy. The subsidies on petrol and electricity were slashed, kept at bare minimum for some segments. The taxes were revised up in the annual budget, and the pension reforms were also issued during the year. In short, on one hand the EFF provided Pakistan’s economy with a much needed stronghold, but on the other hand it came with stringent conditions that jacked up inflation and severely impaired the purchasing power of common citizens.

Debt rollovers: ignore your problems and they’ll go away!

Before the IMF loan could be secured, Pakistan had to make sure that it did not need to pay an arm and a leg of the whole economy in debt repayments this year. By August 2024, Pakistan had secured debt rollovers, for one year, from China, Saudi Arabia and the United Arab Emirates. This was facilitated through SIFC (more on this later), but nevertheless it became crucial in paving the way for IMF’s financing.

The bill is due in 2025 now! We’ll see…

Stock market reached ‘never-before’ heights!

Pakistan’s capital market operates independently of the rest of the economic environment – sometimes shooting up in times of drastic political turmoil and sometimes sinking right after the SBP adjusts policy rate. Nevertheless, a yearly wrap will not be complete without talking about the benchmark KSE-100 index. In 2024, the market grew by overall 80 per cent as compared to the last year. Many times during the year, PSX touched historic highs. On one day, PSX grew by over 4,000 points in a single day. Despite highs and lows, and recoveries and corrections, the stock market has shown notable improvement in the investor confidence in the market.

This year also saw five new listings – Initial Public Offers (IPOs) – on the stock market, with another one in progress and planned for the first month of the next year. Secure Logistics, TPL REIT Fund-I [real estate fund], International Packaging, Fast Cables, and BF Biosciences got listed on the PSX main board this year, along with Mughal Energy and Burj Clean Energy joining the GEM board – Growth Enterprise Market.

According to a Bloomberg report, “Pakistan’s largest egg products manufacturer Barkat Frisian Agro Ltd.” will go for an initial public offering next month as well.

SIFC paving the way for… everything!

The Special Investment Finance Council (SIFC) proved to be a really useful tool throughout 2024 through negotiations and consultations with local and international stakeholders. One of the most significant achievements of the SIFC was to secure rollover facility for loans, to ensure IMF’s approval for EFF. The SIFC also negotiated funding for the rehabilitation of the 2022 flood victims which reduced the pressure on government funds.

The SIFC also enabled better coordination among provinces and the federal government, removing bottlenecks in the release and expenditure of development funds. On an international front, Saudi Arabia, the UAE, Kuwait, and Azerbaijan pledged investment through SIFC. The Council also hosted the Columbia Conference on Logistics in Karachi to focus on the utilisation of maritime resources for the economy.

The government also brought in the SIFC to lay the groundwork for the privatisation of multiple state-owned enterprises (SOEs) – as promised under IMF’s program.

PIA was almost privatised – almost!

One of the most memorable economic event in the country in 2024 came when the government sought bids for privatisation of the national carrier – Pakistan International Airlines!

The PIA, along with Pakistan Steel Mills (PSM), has been one of the more popular debates among the privatisation advocates. It has also garnered a lot of local and international attention due to multiple groundings, bans and other fiascos. The airline service itself keeps the news readers entertained with flights that reach the wrong destination, or sometimes forget to bring passengers’ luggage along.

On the business side of it though, 2024 saw a hilarious debacle, when out of the six potential bidders only one remained by the end of the bid submission deadline. And even that – Blue World City – bid Rs10 billion for a 60 per cent stake in the national flag carrier, against the minimum Rs85.3 billion reserve price set by the government. Eventually, this sole bid was formally rejected by the government, grounding PIA’s privatisation once again. Looks like we will try to board this flight again next year now!

So now here we are, at the end of 2024, back from the brink of a default, running on expensive petroleum, and carefully counting what’s left after paying taxes according to the revised brackets. It hasn’t been easy. And it won’t get easy any time soon. But we made it this far, we will find a way to keep pushing forward in 2025 too!