Negative Findings (1997–2017)
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GARCH-based models show statistically significant negative effects
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Investors priced in:
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Tax hikes
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Spending cuts
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Growth suppression
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Positive Findings (2015–2022)
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Strong announcement-driven rallies
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Confidence effects dominated fundamentals
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Outcomes depended on:
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Political stability
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Global liquidity
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Implementation credibility
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Macro Cost
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Average GDP growth reduced by ~1–2 percentage points
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Industrial growth reduced by ~2.3 points
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Equity impact came indirectly via slower activity
👉 This confirms IMF programs stabilize markets, not expand them.
5️⃣ Why IMF Is Bullish for PSX — But Only Temporarily
IMF programs are bullish because they:
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Avert sovereign default
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Anchor FX expectations
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Restore banking confidence
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Improve visibility for institutions
But they cap upside because they:
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Suppress consumption
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Raise input costs
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Limit credit expansion
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Delay capex cycles
This is why IMF-led rallies are often sharp, fast, and narrow. Pakistan may exit the IMF programme within six months due to defence-related export inflows. Is PSX cheap or just stuck?
