Karachi, August 16, 2021 (PPI-OT): Pakistan Strategy: Implications on Pakistan of Afghan regime change

In what was a rather swift, seamless and somewhat peaceful transition, the Taliban have exerted control on Afghanistan after a period of 20 years, following departure of US troops from the country. The development finally puts an end to the uncertainty over the political future of Afghanistan.

With Pakistan likely being the preferred partner for the West amongst the Russia-China-Pakistan-Iran quartet to keep its influence (in some form) in the region, strengthening of relationship could unlock some concessions in med-to-long run while improving prospects of Pakistan’s status with global agencies (IMF, FATF etc.).

Turning to tradeonomics, Pakistan’s net trade with Afghanistan stands at a miniscule US$804mn, mostly consisting of food-related items. More importantly, tight border controls in the near term, could subside the influx of smuggled products from the region, opening up prospects for local players (such as in autoparts (tyres etc.), and consumer items).

KSE-100 index is likely to remain range bound in the near term, potentially following global markets where any correction should be taken as an opportunity to accumulate, given the market currently trading at an unjustified P/E of 6.0x. Further, the potential positive idiosyncrasies related to lasting peace in the region may help expand market multiples in the medium and long term.