The Pivot Point: Pakistan’s Market Outlook Amidst Global Realignment

LAHORE – After years of navigating a polycrisis, Pakistan’s financial markets have entered 2026 on a footing of hard-won stability. However, as the domestic economy pivots from survival to a projected 3.75% to 4.75% GDP growth for FY26, the horizon is clouded by a volatile global "tug-of-war" that threatens to redefine trade and investment flows.

The State Bank of Pakistan’s February 2026 Monetary Policy Report confirms that the stabilization phase is largely complete. Headline inflation, which haunted the economy for years, was recorded at 5.8% in January, safely within the central bank's medium-term target of 5–7%.

This cooling has allowed the SBP to maintain a cumulative 1,150 basis-point cut in the policy rate since 2024, holding steady at 10.5% as of last month. This monetary easing has finally begun to trickle down into the private sector, with credit expansion reaching Rs. 578 billion in the first half of the fiscal year.

Speculations regarding Pakistan’s future market are increasingly centered on a fundamental shift in its export base. January 2026 saw the launch of the "Pak-China E-Mining Platform," signaling that Phase II of the China-Pakistan Economic Corridor (CPEC) is no longer just about roads and power, but value-added industrialization.

Government officials speculate that mineral exports could scale to $6–$8 billion annually by the end of the decade, anchored by the Reko Diq project. This "Green Mineral" strategy is a direct response to global demand for copper and rare earths, positioning Pakistan as a strategic node in the global energy transition.

Despite domestic gains, the black swan risks remain external. The global economic environment is currently marred by trade fragmentation and high-stakes tariff uncertainty. While oil has fluctuated between $60 and $73 per barrel, any escalation in Middle Eastern tensions remains a primary threat to Pakistan’s current account, which is projected to stay within a manageable 0–1% of GDP. As the US and EU re-evaluate their supply chains with China, Pakistan faces the delicate task of maintaining its GSP+ status with Europe while deepening industrial ties with Beijing.

The KSE-100 Index, which touched historic highs near 190,000 points in January, has recently seen a technical consolidation, trading around the 175,000–185,000 mark this week. Analysts suggest this is a "healthy correction" as the market digests the SBP's decision to pause rate cuts.

Karachi bases analysts observe that the 2026 market is no longer a 'buy-everything' rally. "It has become a stock-picker's market where energy, mining, and tech-driven mutual funds—which saw a 11.5% YoY increase in AUMs to Rs 4.48 trillion—are the clear winners."

In our view Pakistan’s market future is no longer a question of internal collapse, but of external navigation. If the stakeholders can successfully insulate its "Mineral Pivot" from global trade wars and maintain its primary fiscal surplus, 2026 may be remembered as the year the "Frontier Market" finally transitioned into an "Emerging Market" reality.