Pakistan's Economic Landscape: Interest Rate Cuts and Wider Trade Deficit

Pakistan's economic landscape is facing significant challenges, with the interest rate being reduced by 1,000 basis points since June 2024, yet failing to spur growth. The current account deficit is expected to widen due to imports-led growth, which is a major concern for the country's economy. The Pakistan Stock Exchange (PSX) turned bearish in January after five consecutive positive months, with the benchmark KSE-100 index closing at 114,256 points, posting a loss of 625 points or 0.54% week-on-week. Market participation dropped to a 15-week low, with average trading volume dipping 28.8% to 498 million shares, and value traded falling 20.6% to $98.5 million week-on-week. On a more positive note, a record 3,442 firms were enrolled in January, marking a 39% increase in the number of companies registered. These developments highlight the complexities of Pakistan's economic landscape and the need for careful policy decisions to address the challenges facing the country.