Pakistani equities lose 83% foreign investment since 2016 on economic, political turmoil 

A stockbroker speaks on the phone during a trading session at the Pakistan Stock Exchange in Karachi, Pakistan, on April 4, 2022. (AFP)
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Updated 23 August 2022
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Pakistani equities lose 83% foreign investment since 2016 on economic, political turmoil 

  • Pakistan attracted highest-ever foreign investment of $8.2 billion in 2016, which has declined to $1.4 billion 
  • Financial experts say investment in Pakistani equities is expected to improve after $1 billion inflows from UAE 

KARACHI: Foreign investment in Pakistan’s equities has declined by 83 percent to an estimated $1.4 billion since 2016, a recent study by a leading Pakistani brokerage house suggested on Monday, with financial experts attributing it to persistent economic and political instability and a US interest rate hike. 

Foreign investment in equities through the Pakistan Stock Exchange (PSX) peaked to $8.2 billion in 2016 as the South Asian country displayed robust economic growth and currency stability. 

However, political instability, triggered by the Panama Papers leak in 2016 that led to the ouster of former prime minister Nawaz Sharif, forced foreign investors to offload their positions in Pakistan. 

The investment fell to $6.7 billion in 2017, $4.4 billion in 2018, $4.1 billion in 2019, $3 billion in 2020, $2.1 billion 2021, and $1.4 billion in 2022, according to a research report shared by the Karachi-based the Topline Securities brokerage house on Monday. 

“Pakistan’s currency and market were stable and economy was growing back in 2016 which are one of the key considerations of the foreign investors to take investment decisions,” Umair Naseer, a Topline Securities research director, told Arab News on Tuesday. 

“The reasons of foreign investment fall among others include inconsistent economic policies and instabilities and political uncertainties which are negative for foreign investors and play bigger role in keeping them away.” 

Khurram Schehzad, chief executive officer at the Alpha Beta Core financial advisory firm, agreed with Naseer and said the country’s issues were largely related to macroeconomics. 

“Political uncertainty and policy inconsistency have been two key reasons for low foreign interest. We have been downgraded back to Frontier Markets too,” Schehzad told Arab News. 

“Low liquidity, IPOs (Initial Public Offerings), issues with investors getting their dividends out (and general inflow/outflow of foreign direct investors) have been additional issues associated with our investment climate. Higher taxes and most of all, extreme volatility in currency have kept foreign investors away. So our issues have largely been macro.” 

MSCI, a New York-based global index provider, downgraded Pakistan to a frontier market in 2021, four years after its status was elevated to an emerging market. 

Another key reason, analysts say, for the outflow of foreign investment from Pakistan was an interest rate hike by the Federal Reserve (FED) of the United States. 

“In recent years we have witnessed a global trend that the investment from emerging markets has flown out to other investment avenues due to the USA FED rate hike,” Naseer said. “International investors do not see any attraction in risky emerging markets.” 

In July, the US Federal Reserve increased the interest rate by 75 basis points that, coupled with earlier hikes in March, May and June, jacked up the central bank’s interest rate from near zero to 2.25-2.50 percent overnight. FED is expected to raise the rate by another 50 basis points next month. 

But while the South Asian country witnesses dwindling foreign equity investment, anticipated $1 billion inflows from the United Arab Emirates (UAE) are likely to rejuvenate the bourse, experts said. 

“The investment is at lower ebb but we don’t see it going further down keeping in view the expected upcoming investment from the UAE, which would improve the equity investment numbers in the coming days,” Naseer said. 

Pakistan has successfully secured $4 billion from friendly countries, including $2 billion from Qatar, $1 billion from Saudi Arabia for deferred oil payments, and $1 billion from the UAE through investment in equities. 

The South Asian country is also expected to receive $1.2 billion from the International Monetary Fund (IMF) after its board meeting on August 29 l, which could open the door to financing from other multilateral and bilateral lenders. 

PSX officials say they are in the process of coming up with new measures and products to improve the investment climate at the bourse and attract foreign investment. 

“We are constantly working on improving the investment climate by offering new products, digitization of services, and IPOs with enhance focus on the listing of IT companies to attract foreign investment,” Raeda Latif, PSX head of marketing and business development, told Arab News. 

“We have made an alliance with the Pakistan Software Export Board for listing of 40 IT companies that would be funded because the foreign investment also comes through IT companies and it also boosts countries exports.” 


Kashmiri chai, a winter staple, travels from Himalayan homes to city cafés across Pakistan

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Kashmiri chai, a winter staple, travels from Himalayan homes to city cafés across Pakistan

  • Once confined to Kashmiri households or consumed at winter weddings, the pink tea is now a seasonal fixture in Pakistan’s café culture
  • Slow, labor-intensive preparation, generous use of milk and dry fruits make Kashmiri chai costlier than other teas but demand continues to grow

ISLAMABAD: On a chilly winter evening in Pakistan’s capital this January, friends and families gathered around steaming mugs of a pale pink tea, its surface dotted with almonds and pistachios, as conversations stretched late into the night at a popular café.

The drink is Kashmiri chai: a slow-cooked tea known for its creamy texture, delicate saltiness or sweetness, and distinctive pink hue. Made from special tea leaves, milk and warming spices, and finished with dry fruits, it has long been prized as a winter beverage in colder regions of the Himalayas.

Once closely tied to homes in northern Kashmir and to ceremonial winter weddings, Kashmiri chai is now steadily becoming part of Pakistan’s urban café culture.

“Earlier, people used to drink Kashmiri chai at home, mostly in Kashmir,” said Muhammad Safeer, a Pakistani government employee from Azad Kashmir who works in Islamabad. “Now it’s common in big cafés too, and warm dry fruits are used in this. Its taste is very different and the toppings give you warmth naturally.”

Kashmir is a mountainous region in the northern Himalayas, disputed between Pakistan and India since the partition of British India in 1947. Known for its harsh winters, the region has developed food traditions centered on warmth and nourishment, with Kashmiri chai occupying a central place in daily life during colder months.

Traditionally consumed in winter, the tea has long been associated with hospitality and sustenance. Its preparation is time-consuming, and for decades it remained largely confined to Kashmiri households or served to guests on special occasions.

“This beverage is consumed in Kashmir during winters because it brings warmth,” Safeer said. “I also believe natural and traditional foods are better for us than artificial juices and colas.”

Beyond homes, winter weddings played a key role in introducing Kashmiri chai to wider audiences across Pakistan. Served in large quantities, its creamy texture and generous garnish of dry fruits made it a symbol of generosity and celebration.

“I have been working in wedding catering business since 1990 and Kashmiri chai has always been popular,” said Naeem Abbasi, a wedding caterer. “It is a staple winter beverage, especially in colder areas of Khyber Pakhtunkhwa and Punjab.”

VARIETY AND TRADITION

As Pakistan’s café culture expanded over the past decade, particularly in major cities such as Islamabad and Lahore, Kashmiri chai followed. Its unusual color, rich preparation and seasonal appeal helped it stand out on menus otherwise dominated by black tea, green tea and coffee.

The shift is noticeable even in regions with deeply rooted tea traditions. In Swabi, a district in northwestern Khyber Pakhtunkhwa historically known for green tea, Kashmiri chai has become increasingly available.

“If you look at Swabi’s history, we’ve always had a culture of drinking green tea,” said Syed Sadeeq, a doctor from the district who practices medicine in Islamabad.

“But now I’m observing changes, people are considering other beverages too, like Kashmiri chai. It wasn’t as readily available a few years ago, but now it’s easily available in Swabi too.”

Behind its growing popularity is a preparation process far more demanding than that of regular tea, café workers say.

“There’s a lot of difference between how you make black tea and Kashmiri chai,” said Mubashar, a barista at an Islamabad café who gave only one name.

“First, you prepare the qehwa by adding Kashmiri tea leaves, star anize, nutmeg, black cardamom, cinnamon and fennel. Then you cook it for at least three to four hours.”

Once the concentrated brew is ready, it is strained, milk is added, and the tea is topped with chopped dry fruits. Traditionally prepared with salt, many cafés now also offer sweetened versions to suit modern tastes.

“Earlier, it was popular only at weddings,” Mubashar said, adding that cafés in Islamabad began introducing Kashmiri chai to their menus about six to seven years ago as demand grew. “Now cafés have it because customers are actively asking for it.”

The labor and ingredients involved come at a cost. Compared to black or green tea, Kashmiri chai requires significantly more milk and dry fruits, making it noticeably more expensive.

“If you compare it with green tea, pink tea costs almost 50 percent more,” Abbasi said. “But despite being more expensive, people still prefer it in winters.”

For younger consumers, the appeal lies in variety as much as tradition.

“Pakistanis love tea but drinking the same kind every day can get a bit boring,” student Amna Abbasi said as she sipped a piping hot cup of pink tea at an Islamabad café.

“Kashmiri chai is different because it’s garnished with dry fruits, so people are moving toward it.”