Pakistan has been confronted by immense economic and political instability over the recent period. In April 2022, Imran Khan’s government was removed through a no-confidence vote. The current government, led by PML-N’s Shahbaz Sharif, is expected to hold a general election in August 2023. This political turbulence within Pakistan has been intertwined with deep-rooted economic issues. Pakistan’s economy has spiraled over the last period; the value of the rupee has fallen drastically, the stock market has collapsed and the level of debt is amongst the worst of any emerging market countries. The global surge in energy and food prices, alongside Russia’s invasion of Ukraine, has only served to compound these issues; Pakistan’s trade deficit has widened and foreign exchange reserves have dwindled, meaning a liquidity crisis is a realistic prospect. Despite this overwhelmingly adverse situation, there is potential that this economic issue may soon be eased, as the IMF board is set to meet in August 2022 to decide whether to approve a $1.2bn disbursement for Pakistan.
Naturally, the impact from these crises has been felt within the legal market. There has been a relative pause in the introduction of new public projects due to a lack of available financing. Moreover, there is also evidence of a decrease in investment within the capital markets and real estate and construction spaces. However, while the outlook amongst the majority of firms has generally been negative, some firms remain optimistic regarding Pakistan’s chances of recovery in 2023. Firstly, numerous firms were keen to note that some sectors, such as ‘water projects’ and the fintech market, have continued to grow despite the damaging economic context. Furthermore, should the IMF approve the disbursement, the level of capital market transactions and IPOs is expected to rise. Likewise, once the elections have been completed in the summer of 2023, a degree of political and economic stability may return.
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