Pakistan’s Debt Crisis Is About Expenditure, Not Taxes — And PSX Knows It

Why IMF Programs Move PSX — But Don’t Fix the Problem

Pakistan has entered 23+ IMF programs since 1958. Only about nine were completed fully.

Short-Term Market Effect

IMF announcements usually:

• Stabilize reserves

• Reduce default probability

• Anchor FX expectations

Markets rally because tail risk collapses.

A notable example:

• June 2023 SBA → KSE-100 surged ~5.9% in one day, the biggest in 15 years, followed by ~20% gains over the quarter.

Long-Term Reality

Over time:

• Austerity suppresses growth

• Higher taxes meet rigid spending

• Earnings struggle to compound

Empirical findings you cited show mixed to negative long-term equity effects, depending on global conditions and political execution.

Key insight: IMF programs buy time, not governance.

As you framed it bluntly:

IMF programs end only when governance begins.

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