EDITORIAL: Pakistan’s economy is failing to find a path to success. The underlying model remains the same; only the faces change. It has become a scramble to grab a chunk of a shrinking pie. The basic structure for social and economic upward mobility is being completely ignored. Inequality and poverty are rising, while the state’s fiscal position is deteriorating. It needs a reset.
A proven way forward is to uplift the masses by creating economic opportunities. Within a generation, many countries have achieved social mobility through economic gains driven primarily by export-led growth. That is what Pakistan should strive for, alongside a massive overhaul of governance in public service delivery, especially in education.
There is recognition—at least in slogans and public speeches—of the importance of economic and social uplift through export-based growth. However, the ground realities are starkly different. Fiscal power lies with the provinces, and the larger ones are on a lavish spending spree.
Political parties in power appear reluctant to exercise firm control at the centre, preferring instead to retain fiscal resources within their respective provinces. This explains their resistance to devolving power to the third tier of government. There is little incentive to broaden taxation within municipal and provincial domains. Instead, the burden falls on the federal government, which taxes formal income heavily. At the same time, inefficiencies in the energy sector are eroding competitiveness in export markets.
Tax collection on land is minimal—Punjab collects less in property-related taxes than a single major city in India. Agriculture income tax and sales tax on services remain far below potential, while manufacturing is burdened by high taxation and expensive energy.
The federal government is close to bankruptcy and requires burden-sharing from the provinces. The tax base must be broadened by bringing all stakeholders into the net. Municipalities should be empowered to collect taxes and provide amenities to make cities more liveable.
At the same time, the federal government must reduce its footprint in the energy sector. The sector’s debt burden should be shared with the provinces. State-owned enterprises must be cleaned up and privatised, as has been attempted in the case of the national carrier, PIA. The government must reduce its overall size. Greater fiscal prudence is especially needed at the provincial level, where new inductions into public employment are rampant. This trend must stop.
Even if all this is done, policy consistency remains imperative. It is currently the biggest impediment to investment, which is at a multi-decade low. Foreign direct investment has nearly dried up, and there is little sign of new local investment in export-oriented sectors.
Government rhetoric is not enough. Credibility must be restored. With every regime change, policies shift dramatically, often by 180 degrees, and the focus tends to shift toward weakening opposition and associated business groups rather than ensuring economic continuity.
Political suppression may create an illusion of stability, but it does not attract investment. Sustainable growth requires inclusiveness and institutional strength.
Over-reliance on workers’ remittances to finance the trade deficit will not allow the economy to progress structurally. Remittance inflows are largely used for consumption, which fuels imports. This creates an illusion of external stability while delaying necessary structural correction.
The structural reset is missing. Unless the fundamentals are addressed, the cycle will simply continue.
Copyright Business Recorder, 2026
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