Pakistan is going through a severe economic crisis. The citizens always blame the government for their policies that result in financial challenges for the country. However, economists define a different story. The investing policy tools adopted by the everyday investors of the country contribute to Pakistan’s economic problems. How? Let’s find out.
THE CURRENT INVESTMENT PORTFOLIO
The majority of Pakistan’s investing community allocate their wealth to real estate. Real estate is one of the safest investments and yields high returns. But the problem with real estate is its liquidity. It is a type of investment that sucks the money and depletes it from the market. You must hold your money in any fixed asset trading, and since real estate is very un-liquid, it puts an effect. Economists call it a dead asset. Since this type of investment chokes the flow of capital in the market, the economy suffers as a whole.
Apart from real estate, many investors invest in metals (gold, silver, etc.), foreign currency (dollars), and prize bonds. Despite being liquid, these investments hurt Pakistan’s economy. The reason is that investors hold on to these investments, as the prices of gold keep increasing due to increasing inflation. Now here’s the thing, Pakistan’s economy (GDP etc.) works on US$. The gold reserves and price of US$ have an inverse relation. When Pakistanis buy gold, they decrease gold reserves, increasing the cost of dollars and devaluation of PKR. This devaluation results in inflation. It may seem that rising prices of gold are giving you profits, but the inflation and rising costs of other commodities are harmful to that effect. On the other hand, those who buy US$ aim to sell them at higher prices, decrease the quantity from the market, and raise inflation. Thus, we can say that the struggling economy of Pakistan is due to the Pakistanis.
Pakistan Stock Exchange! That’s it, that’s the solution. Pakistan needs more investors in its stock market to support businesses and entrepreneurial startups. The increasing interest in stocks would regulate the flow of money in the market more often. Moreover, Pakistan lies in the list of growing countries in the long run, and thus increases the chances of ROI (Return on Investment).
Furthermore, the stock investment will help in fighting inflation. The increase in prices of company stocks would benefit the investor, as he gets ownership in the business. The dividends received by the shareholders will also increase due to increasing costs. If the investors in Pakistan prioritize their focus towards the stock exchange, Pakistan’s economy will not require to rely on debt, as the capital will keep flowing.
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