In a surprising turn of events, Pakistan is emerging as a global investment hotspot, with U.S. financial publication Barron’s calling the country’s recent economic resurgence a “macroeconomic miracle.” The transformation has drawn considerable attention from international investors, especially amid geopolitical tensions with neighboring India. What was once seen as a high-risk economy plagued by inflation and fiscal instability is now being reassessed as a promising opportunity.
Just two years ago, Pakistan faced staggering inflation rates of nearly 40%. Today, inflation has dropped to near-zero levels, marking a dramatic shift in macroeconomic fundamentals. Eurobonds maturing in 2031, which were previously trading at just 40 cents on the dollar, have surged to 80 cents—doubling in value. Meanwhile, the benchmark KSE-100 index has tripled, underlining the renewed investor confidence and signaling a remarkable capital markets rally.
Central to this turnaround is Pakistan’s stabilization agreement with the International Monetary Fund (IMF), finalized in September last year. The deal, a $7 billion Extended Fund Facility (EFF), has already seen over $2 billion disbursed. The injection of these funds has been instrumental in restoring fiscal discipline and economic credibility. “Pakistan is a good story,” said Genna Lozovsky, Chief Investment Officer at Sandglass Capital Management, in comments to Barron’s. “So good it’s not risky enough for us anymore.”
Other financial experts are equally intrigued. Khaled Sellami, a sovereign debt manager at Barings, noted that while Pakistan has a history of boom-and-bust cycles, this time appears different. Sellami pointed out the country’s current account surplus and the presence of primary fiscal surpluses—achieved when interest payments are excluded from the fiscal equation. These are metrics seldom seen in Pakistan’s economic history. “When there is a rally, you need to be in early,” he advised, although he also emphasized the ongoing fragility of the recovery.
Alison Graham, CIO at Voltan Capital Management, offered historical perspective by recalling the crisis period of 2022–23, following the political fallout after Prime Minister Imran Khan’s removal. During that period, default fears ran high. However, the State Bank of Pakistan responded decisively, raising interest rates from 10% to an eye-watering 22%. While this triggered a deep recession, it successfully controlled inflation and restored macroeconomic stability. External financial support from China, Saudi Arabia, and the UAE further bolstered Pakistan’s foreign reserves and contributed to an estimated GDP growth rebound of 2.5%.
Despite these gains, structural vulnerabilities remain. Pakistan’s export economy is still heavily dependent on low-value commodities such as cotton, apparel, and cereals. In contrast, India’s exports are diversified across high-tech sectors like pharmaceuticals and IT. However, Pakistan is slowly gaining traction in tech-driven exports, with IT outsourcing revenues growing to approximately $3 billion annually—small compared to India’s $200 billion, but a meaningful step forward.
The market’s optimism was further validated when the Pakistan Stock Exchange (PSX) posted a record 9% gain on Monday. This spike followed the announcement of a ceasefire with India, interpreted by investors as a sign of geopolitical stability. “The market has reacted jubilantly to the ceasefire announcement after Pakistan established effective deterrence against India,” said Yousuf M. Farooq, Research Director at Chase Securities.
While challenges remain, the convergence of IMF-backed reforms, monetary tightening, external financing, and rising investor confidence suggests that Pakistan may be on a sustainable path to economic recovery. For now, the global financial community is watching closely, intrigued by what could be one of the most unexpected economic comebacks in the region.