Pakistan’s economy is in search of growth. However, policymakers lack a coherent economic model to climb the growth ladder.
The current model cannot sustain growth beyond 3 percent — a rate insufficient to create jobs or reduce poverty. As a result, the government continues to run tight fiscal and monetary policies; without them, another crisis would be imminent.
The World Bank has acknowledged that with such anaemic growth, poverty cannot be reduced. Yet, its recent assessments appear contradictory — one report stated that poverty has been rising since FY22, while another now suggests it may be declining. Despite the inconsistency, both reports agree on one thing: Pakistan’s current growth model is inadequate.
Earlier, the Bank said that the country’s growth framework has failed to sustain progress; now it emphasizes that it is not enough to raise living standards or reduce poverty.
The government must start thinking differently because prolonged stability without growth is unsustainable. Even with growth hovering around 3 percent, imports are rising to alarming levels — despite relatively low oil prices and the absence of a global commodity supercycle. The problem is that while the economy’s size is expanding, exports remain stagnant and, as a share of GDP, are actually declining.
Excessive reliance on remittances is part of the problem — a classic case of the Dutch disease. It gives the illusion of external stability, but in reality, these inflows fuel import-based consumption. The real solution lies in boosting exports and attracting investment — both domestic and foreign — into productive sectors. That remains missing.
There is much talk of multi-billion-dollar investments from the Middle East. The government appears active, with frequent visits and engagements from both public and private sectors. The optics are good, but much of it feels like playing to the gallery. Islamabad seems focused on headlines and MoUs, while Middle Eastern counterparts appear equally noncommittal.
The lack of seriousness is evident. At best, the recent “deal” involves a $240 billion UAE conglomerate buying a $14 million bank — a symbolic rather than strategic move. If there were genuine interest in Pakistan’s banking sector, they would have acquired a major running bank. Instead, the headline achievement is the first privatization deal in two decades — one that carries more optics than substance.
Pakistan’s private sector initially showed excitement over the Saudi delegation’s visit, but those working closely with them now express serious doubts about these soft commitments turning into concrete deals. Meanwhile, local investors continue to look for opportunities abroad.
The missing link is reform. Regardless of who is in power, Pakistan seems unwilling to reform. The truth is simple: you cannot fix a broken system with the same people who created the problems — particularly in energy and taxation.
In this scenario, a low-growth equilibrium is likely to persist. Employment will remain weak, living standards will keep declining, and poverty reduction will remain a distant dream.
Comments
Comments are closed for this article.