Pakistan’s masses have little to hope from polls

“How high is gold?” is how a financial analyst in Dubai once recalled his first reaction to 9/11. Gold rises in times of uncertainty, of course, as investors seek safe havens for their money (even when Wall Street itself is burning). Stock markets, on the other hand, drop at the first sign of ambiguity — the only thing markets hate even more than bad news is, after all, uncertainty.

Pakistan’s financial markets are not too well developed, but the local bourse did a good enough job in 2016 (it was the best performing Asian market of the year) to win a crucial MSCI upgrade to emerging market status the following year. The Pakistan Muslim League-Nawaz (PML-N) government was firmly entrenched. And the China Pakistan Economic Corridor (CPEC) bonanza brought all the right benefits — huge investments, infrastructure, jobs, you name it.

But fast forward a little to over a year and the Karachi Stock Exchange has lost, in dollar adjusted terms, in excess of 40 per cent. Some stocks have naturally underperformed the broader benchmark index and ended somewhere near 60 per cent in the red. Part of this was driven by the insecurity of the real economy — deficit is threatening a default. But most of it was what financial journalists call ‘political overlap’, when politics dictate the direction of the market, affecting everything from prices, dividends, to individual incomes and spending capacities.

Therefore, Nawaz Sharif ’s corruption case, which revolved around suspect money of one family, not only ran the market through the floor and triggered a foreign portfolio investment exodus, but also pinched the common man’s pocket. And everybody, including Mr Market, breathed a sigh of relief on July 6, when the accountability court finally sealed Nawaz’s fate. It moved a little, but did not flinch when the court delayed the verdict or even after it was announced before the closing time of the stock exchange.

With political uncertainty diminished, and a return to fundamentals expected, perhaps offshore investors would consider parking their money in Pakistan again to ride the much anticipated market turnaround. But the accountability bureau sprang into action once again over the weekend and picked up a close aide of Peoples Party supremo

Asif Zardari. It also initiated inquires into 29 accounts at a particular bank belonging to associates of the former president, leading to speculation about a PML-N style resistance by Zardari’s party.

By Monday Zardari’s name was on the Exit Control List (ECL) and Pakistan’s market fell another thousand points. But it’s not as if the return to fundamentals implies, immediately, a merry ride back to 2017 highs; not with inflation, reserves, deficit, all out of control.

The next day was even more confusing, even though the market finally turned. But first it fell 700 more points breaching a crucial long-term support line in the process. Then, quite mysteriously, the index turned just as the army spokesman was denying any involvement in politics, and didn’t stop until the benchmark index was up 150 in positive. It even led a few commentators to joke (of course!) that the army can even provide buoyancy to the stock market. While most Pakistanis will welcome expanding the accountability drive to Zardari, they are a becoming aware of the high price they eventually pay for such uncertainty. Market routes don’t just affect companies, but also working class incomes. Plus the politicians do not help. Even with the election so close and all parties waving their manifestos at press conferences, nobody has said a word about the real economic crisis. No party, therefore, has a plan about dealing with the deficit or who to approach for the $10-15 billion needed urgently. Such stresses eventually mandate more austerity, hitting the common man far worse than feudal lords and industrial barons running for parliament.

Poor voters will find little relief, no matter who they vote for, unless substantial sums of money can be brought, or begged, into Pakistan. But a former prime minister convicted for corruption, a former president likely headed the same road, a stock market in nosedive and an economy on the brink of default is not really music to the ears of foreign investors and donors whose money we so desperately need just to stay solvent.

Poor voters will find little relief, no matter who they vote for, unless substantial sums of money can be brought, or begged, into Pakistan