Pakistan is considering setting up a fund that would channel investments by expatriates into stocks on the Karachi Stock Exchange, a senior finance ministry official said yesterday.

The authorities hope that a successful fund would help the Securities and Exchange Commission of Pakistan – the KSE’s regulator – lift controversial curbs that have stopped share prices from falling below the levels hit in August, when the curbs were imposed.

As an incentive, expatriate Pakistanis may be offered shares in companies that were once much sought after – such as the Oil and Gas Development Company, Pakistan Petroleum and National Bank of Pakistan – said the finance ministry official. “It is possible we [could] offer special quotas for overseas Pakistanis to attract them. The details are being worked out,” he said.

News of the proposed fund, however, was greeted with scepticism by analysts, who warned it was only likely to bring modest gains.

“At a time when people around the world are suffering, global conditions are turbulent, why would people want to invest in Pakistan?” asked Muhammad Suhail, a director at Karachi’s Jehangir Siddiqui brokerage and investment company. “This initiative is very unrealistic”.

Previous governments have tried to reach out to expatriate Pakistanis for economic support during difficult times but the results have generally been modest.

Others warned that the scale of the challenge faced by Pakistan was so bad that new ideas had to be considered.

Businessmen said the country’s investment climate was likely to remain subdued until there was evidence of a significant improvement in the domestic security environment.

Many foreign business executives have avoided Pakistan since the September 20 suicide truck bombing at the Marriott hotel in Islamabad, which left 57 people dead and 266 injured.

“Pakistan is at the centre of the global war on terror. Unless security conditions improve radically, you cannot expect a rapid turnround in sentiment,” said the chief executive of a foreign company in Pakistan. “On top of Pakistan’s many problems, global market conditions are not helping.”

Pakistan’s new government, which took office in February’s parliamentary elections, has said it will seek up to $10bn in external support over the next 18 months to avoid defaulting on debt payments and other liabilities.

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