The Monetary Policy statement dated 26 January 2025 left the discount rate unchanged though its reduced the Cash Reserve Requirement (CRR) for banks by one percentage point - from 6 to 5 percent and the daily CRR from 4 to 3 percent - citing a growth rate of 3.7 percent for the first quarter of the current year against 1.6 percent in the same period of the year before, and noted the failure of the Federal Board of Revenue (FBR) to match 2025 growth of 26 percent against only 9.5 percent in the comparable period of the current year.
The question is whether these implicit policy decisions, to reduce the CRR which indicates quantitative easing and the acknowledgement of the failure of the FBR to match its revenue growth to last year’s, are sufficiently “expansionary” with the potential to increase the government’s leverage with the International Monetary Fund (IMF) to phase out some of the politically extremely harsh up front conditions? The most recent interaction between the country’s top decision-making stakeholders was at Davos at the World Economic Forum (19 to 23 January), a forum where the world’s political and business leadership congregates each year.
A press release issued by Prime Minister Shehbaz Sharif’s office stated that the PM met Kristalina Georgieva, Managing Director (MD) of the IMF, on the sidelines of the 56th Annual Meeting of the WEF and apprised her of the “improving macroeconomic indicators, stabilisation efforts and progress on structural reforms. He underscored Pakistan’s commitment to fiscal discipline, revenue mobilisation and sustainable growth. The MD acknowledged and appreciated Pakistan reform efforts, emphasizing the importance of maintaining reform momentum to ensure long-term economic resilience.”
This meeting was unreported except in the Pakistani media and so far at least the IMF website has not updated any statement made by Georgieva at Davos, Switzerland. The stipulated theme of the WEF this year was as follows: “the programme will be structured around five key global challenges where public-private dialogue and cooperation, involving all stakeholders, is necessary for progress. In addressing these challenges’ growth, resilience, and innovation will serve as cross-cutting imperatives, guiding how leaders engage with today’s complexity and pursue tomorrow’s opportunities.” These are matters of interest to all countries, including Pakistan; however, the subject that gripped the world media, except those who accompanied Prime Minister Shehbaz Sharif, was artificial intelligence (AI) and Greenland – the former requiring an expertise that was not available to the high-powered Pakistani delegation to Davos as the IT Minister was not included.
Georgieva was extensively quoted on the impact of artificial intelligence (AI): “AI is a tsunami hitting the labour market and even in the best prepared countries I don’t think we are prepared enough;” she projected 40 percent of jobs will be transformed or eliminated by AI and in advanced countries that percentage jumps to 60 percent. A classic example of transition of jobs due to innovation is in transport – from horse drawn coaches and carriages to steam engines and later to automobiles – thereby creating new and greater job opportunities over time.
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The first AI Safety Summit was held in Bletchley Park, Milton Keynes, the UK, in November 2023 with 28 countries participating (including the US and China – acknowledged as the world leaders in AI) culminating in a Declaration affirming that AI must be developed, deployed and used in a manner that is safe, human-centric, trustworthy and responsible. Joe Biden, then President of the US, signed an executive order creating an AI Safety Institute and required all AI developers to share safety results with the government.
Reports suggest that there is a marked difference in the application of AI between the US and China. The former’s focus is on data gathering and security with major reliance on revenue from consumers. China, on the other hand, has used AI as a revenue source by focusing on businesses and industrial application and has successfully transitioned from speculative investment in AI into a high growth business for major tech companies (with some companies notably Alibaba and Bytedance cutting costs by 90 percent). This in turn led to almost tripling of AI influenced revenue and squeezing of the small players out of the market. Recent US led sanctions – 25 percent tariffs on advanced semiconductors and a “case-by-case” licence review policy for high-end AI chips (e.g. Nvidia H200, AMD MI325X) has reduced profits of Chinese companies though local alternatives are filling some gaps.
So where does Pakistan stand? An AI policy was approved by Pakistan about six months ago; however, Business Recorder received a rather sketchy response when the IT Ministry was approached for details including whether the model to be followed was to be the US or the Chinese model (Moonshot, Minimax, Zhipu, Baichian, Deepseek). One official, however, revealed that all projects under the umbrella of the China Pakistan Economic Corridor use the Chinese model while all the others in use follow the Western model. There was, however, a general consensus that so far there is nothing on ground.
Be that as it may, the AI policy, like all our policies, typically focused on projecting an over-ambitious revenue target: potential to raise GDP growth from 7 percent to 15 percent by 2030, with significant enhancements in agriculture (12 billion dollars), industry (5 billion dollars), and services (26 billion dollars). This was accompanied by an attempt to control AI content through establishing a regulatory body – AI Regulatory Body under the National Commission for Personal Data Protection – tasked to oversee ethics, data privacy, and ensure responsible AI use (defined by the government of the day) and developing a “Human-Centered AI” approach; additionally, for good measure, these salutary objectives were to be aligned with UN Sustainable Development Goals while incorporating AI for Good Initiatives. The policy envisaged training 200,000 every year with specific focus on marginalised communities and 50,000 AI-enabling projects.
Pakistani officialdom continues to parrot the same old mantra: buy our products, the five major export items have hardly varied for decades, invest in excavating, developing and refining our natural resources as well as invest in our industries – a plea that has yet to resonate with foreign investors as, in spite of the creation of an administrative tool empowered to bypass red-tapism, extend monetary and fiscal incentives, and deal with the serious prevailing security threats, FDI declined by 43.3 percent July-December 2025 year-on-year.
To conclude, Pakistani officialdom has the capacity to formulate excellent policies based on international best practices but poor implementation has marred progress time and again – a progress further compromised by challenges in start-up funding. The country launched its first locally hosted AI cloud to secure national data, but again progress is very slow. One can only hope that those who attended the WEF did absorb the global focus on AI and its relevance in achieving an economically strong Pakistan in times to come.
Copyright Business Recorder, 2026
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