Pakistan’s stock market has been crowned the world’s best performer, surging 98.7 percent year-on-year to 162,257 points; the rupee has strengthened to 281 against the dollar despite two consecutive months of current account deficits; and the government boasts its highest-ever primary surplus at 2.3 percent of GDP.

Officials showcase the “resolution” of Rs.1.225 trillion in circular debt through bank financing, sweeping plans for privatization of power distribution companies, and liberalization of the auto sector opening imports while pushing electric vehicle adoption.

Foreign reserves now stand just above USD 14.3 billion (as of Sept 19), headline inflation has fallen to 3.4 percent in August, and even devastating floods that destroyed 2.5 million acres of crops (nearly 8 percent of Pakistan’s farmland) are being positioned as manageable disruptions. On paper, Pakistan appears to have achieved the impossible: reform amid catastrophe.

Reading between the lines, the numbers reveal a starkly different picture. The stock market’s near-doubling masks a disturbing reality: foreign investors are fleeing. While the KSE-100 soars, foreign direct investment fell 22 percent to just USD 364 million in July-August, even as profit repatriation surged 115 percent to USD 593 million.

Chinese firms alone withdrew USD 205 million, ten times more than the previous year. In total, foreign investors pulled out USD 229 million more than they invested, suggesting that capital gains coincide with wealth transfer. Domestic commercial banks have faced withdrawals of almost Rs.1 trillion, partly due to lower interest rates, putting pressure on liquidity and fuelling speculative flows.

Valuations are now being sustained almost entirely by domestic investors. If this pattern of withdrawals continues, the rally risks collapsing into a mechanism of wealth transfer rather than genuine wealth........

© Business Recorder