The perils and rewards of economies in rehab

A RECENT EDITION of “The Joe Rogan Experience”, a popular podcast, features the comedian Artie Lange. Mr Lange is an engaging personality who, as he candidly admits, has battled with drugs and gambling. Not long out of his umpteenth period in rehab, he is working in stand-up again. “This business keeps taking me back,” he says with something like amazement.

Forgiveness for recidivists is found outside show business, too. In July the IMF approved a $6bn bail-out for Pakistan. As the fund acknowledged at the time, with something like weariness, Pakistan is back in rehab less than three years after completing its previous programme. But the fund has not abandoned it. And nor have investors. Pakistan is enjoying a flood of foreign capital on the promise of reform. The Karachi stock index is up 25% since the start of October.

This may seem hard to fathom. The IMF regards the chance that its programme will fail as “particularly high”. Yet a band of investors are prepared to bet on success. A rehab economy such as Pakistan offers a rare opportunity. It is one of the few places where investors can find high interest rates, a devalued currency and cheap-looking stocks. True, things could go very wrong. Look at Argentina, which was embraced by investors after Mauricio Macri was elected in 2015 on a platform of orthodox economics...

via The Economist: Finance and economics Business Feeds

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