LAHORE: Experts have said that urbanisation should be seen as a driver of economic growth and urged Pakistani policymakers to shift focus from crisis management to leveraging cities for productivity, industrialisation, and export growth.
They were speaking at a two-day conference at the Lahore School of Economics (LSE) structured around two broad themes, those of economic growth and trade.
Economic growth has revived to 2.5% in 2025 against stagnant growth across the previous two years. Pakistan has long imported more than it exports, requiring continued reliance on the vagaries of incoming worker remittances and frequent recourse to IMF lending. The conference occurs against a backdrop of an economic recession, debt crisis, and a three-year economic stabilization program recently agreed with the IMF.
Day two of the conference continued, focused on institutional changes to better manage growth and stabilization.
Dr Kaleem Hyder, Sabina Khurram Jafri and Omar Farooq Saqib, from the State Bank of Pakistan, examined the critical issue of the double-digit inflation that hit Pakistan with the advent of the COVID-19 pandemic. They highlighted that even though the monetary tightening introduced by the SBP reduced aggregate demand and GDP during this time, it was not sufficiently dis-inflationary. Their research explained that inflationary expectations had become locked in, shoring up the persistent high inflation rate. Moreover, the rapid depreciation of the exchange rate over this period also contributed to inflation.
Dr Mathew McCartney, from the African School of Economics (Zanzibar), highlighted the absence in much economic discussion of the macroeconomic role of urbanisation. Urbanisation managed well provides the benefits of agglomeration externalities, connecting firms, workers, and markets, so benefiting productivity, exports, and industrialization. Pakistan is observed to have a lower rate of urbanisation relative to its middle-income status, contributing to its lower level of industrialisation and technical change.
Dr. McCartney emphasised that urbanisation should be seen as a driver of economic growth and urged Pakistani policymakers to shift focus from crisis management to leveraging cities for productivity, industrialisation, and export growth.
Dr Mujtaba Piracha, from the Government of Pakistan, and Usman Khan, from REMIT Revenue Mobilisation, Investment and Trade), examined the Pakistan’s Export Development Fund (EDF). Despite its initial promise, the EDF has yet to evolve into an effective instrument for overcoming the barriers that impede Pakistan’s export growth. The paper proposed a comprehensive strategy to reposition the EDF as a proactive and efficient facilitator of export-led growth.
Shamyla Chaudry, Dr Moazam Mahmood and Muzzna Maqsood, from the Lahore School of Economics confronted the puzzle of low savings in Pakistan. They estimated savings through a conceptual framework that distinguishes between private and public savings and also capital outflows, which are savings lost to domestic investment. These, empirical estimates of savings prove a better method than the residual-based method currently in wide use, which assumes away many of empirical problems. The authors found that Pakistan’s nominal capital outflows for FY 2022 were PKR 1,651 billion, or approximately 2.3% of GDP. Including these outflows in national savings helps close the savings-investment.
The last session of research presentations honed in on sectoral challenges.
Dr Arshad Hassan, from the Lahore School of Economics, examined the impact of financial inclusion on tax revenue mobilization. The cross-country analysis showed a strong positive correlation, with ATMs, mobile banking transactions, and bank density and footprints boosting tax revenues. The results contribute to a clear policy agenda, for Pakistan to promote financial and banking transactions to enhance its tax revenues. Dr. Hassan found that Pakistan’s tax-to-GDP ratio remains low at approximately 9.2%, far below the average for emerging economies. With over 100 million adults un-banked, Dr. Arshad proposed that expanding financial access presents a significant opportunity to broaden the tax base and enhance revenue mobilization through formalization and digital financial services.
Two papers focused on the Pakistani energy sector, which is of critical importance. Dr Rabia Ikram and Muzzna Maqsood, from the Lahore School of Economics, demonstrated that Pakistan’s private-sector energy producers (the IPPs) were not meeting efficiency targets related to production costs and were accumulating mounting levels of circular debt. High capacity charges paid to these IPPs accounted for a large part of this circular debt.
Dr Jamshed Uppal’s paper investigates the role of governance and regulatory quality in shaping the performance of Independent Power Producers (IPPs) across 50 countries. The study finds that stronger governance—particularly in regulatory quality and rule of law—is associated with improved power sector outcomes. The findings are especially relevant for Pakistan, where IPPs form a significant part of the energy mix and have faced increased scrutiny regarding transparency and sectoral impact.
Dr Zunia Saif, from the Lahore School of Economics, concluded the research presentations examining whether access to information in Pakistan (Punjab in particular) can help job search behaviour.
Dr Zunia’s study surveyed 2,034 undergraduate students from 24 institutions in Lahore, and found that priming student with high-demand job information significantly increased applications and match rates. She also found that in the case of women applicants in particular, improved access to information on occupational attributes increased the occupational diversity of their job applications leading to a higher probability of their placements. The results of the study can be used by policy makers to encourage increased labour force participation.
The two-day conference concluded with a round table conducted by Dr Matthew McCartney.
Dr Ishrat Hussain, former governor of the State Bank of Pakistan, spoke on the need for structural reform to bring about structural change in the economy.
Ali Khilji, from the World Trade Organization, addressed Pakistan’s trade vulnerabilities and the considerable potential for expansion of trade in services.
Dr Naseem Faraz, from the Ministry of Finance, outlined Pakistan’s Medium Term Expenditure Framework, particularly in reference to estimates that have been used in recent deliberations with the IMF.
Ahmed Fasih, from the Ministry of Commerce, turned to the theme of trade and highlighted the growing uncertainties in Pakistan’s global trade environment and directions for a trading strategy.
Dr Rajah Rasiah, from the University of Malaya, concluded the round-table looking at the relationship between trade and economic growth and explored how recent global events may have impacted that link.
Dr Mathew McCartney, as the rapporteur, summed up with a conference report.
Copyright Business Recorder, 2025
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