The Development and Regulation of the Capital Market in Pakistan

This reflective note, drawing on the author’s 40+ years relevant global and local experience, highlights the crucial role of regulation in economic governance. It emphasizes the challenging environment for regulation and capital market development in most emerging economies; including Pakistan. Specific shortcomings in Pakistan’s capital market are identified: the regulator’s lack of independence and ineffectiveness, the monopolistic structure of the capital market, burdensome regulations, inadequate securities financing, and the absence of robust investment banking. To address these issues, the paper proposes the following corrective measures: ensuring the SECP is appropriately led and staffed, licensing at least one additional, stock exchange and competing support institutions, rationalizing the capital market regulatory framework, re-introducing workable “Badla” financing, and promoting broad-based investment banking in Pakistan.