Sohail Shuja
Chief Minister (5k+ posts)
Perhaps you didn't get my point in its entirety, rather you are just focusing on one point of stock markets. A loan is evaluated against the terms of its repayment and your strategy. A loan from IMF is given on terms that the recovery will be made by increasing the price of base utilities like electricity and gas, as well as increasing the taxes. This in turn, raises the cost of production and more taxes means less disposable income for the people living inside Pakistan, therefore even the consumer spending decreases. People will buy less.Well I don't agree. People would be ok once its complete. Stock market reacts to local and international events not just Pakistan decision to go to IMF. Shangai stock market plunged same day also most of Asian's stock markets remained negative. I was looking at PSX index for last two days and it has recovered most of its Monday's loses. Still stock market is not any indicator of economy. Pakistan's real issue is budget and trade deficit. Things will be on track once these deficits come down. Specially once government will reduce import/export disparity in $ terms.
Furthermore, as it unfolds, Govt runs short of payments that are to be made to payoff the circular debt. In turn, the money supply has to be increased. This introduces inflation and your money is further devalued, means that at the end you will have less in terms of Greenbacks to return to IMF. Do you think any of the govts were really able to break off this vicious cycle of debt of IMF? Even UK and US are not able to break this cycle and have an 87% and 106% debt to GDP ratios (https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD/PAK).
It will be nothing but a daydream/wishful thinking that IMF loans will straighten up your economic outlook in the medium or long run. Investors know it, therefore they start shifting their capital elsewhere. Though, I agree to your point that stock market is not the only indicator of economy, but it is certainly one of them and is taken as an early warning sign by the economists around the globe (https://www.gobankingrates.com/making-money/economy/recession-warning-signs/#9).