As a student and practitioner of finance and economics, and having briefly participated in economic management of the country. I have keenly observed the ups and downs of the economy over the past several decades. I am now genuinely convinced that we have reached a “dead end” with the current ecosystem of the country. Furthermore, if the system is not dismantled and reconstructed our very survival as an independent sovereign nation is in danger.
In the past like many others, I thought that the economy was in a perpetual “cul-de-sac” due to poor economic management, but with more prudent policies and slight adjustments, it could eventually pull out of its low growth equilibrium and achieve higher growth rates. High growth of course is urgently required for the needs of a demographically large country like Pakistan with a huge youth bulge and existential Security needs in a tough neighbourhood.
In layman’s terms an economic ‘dead-end’ can be defined as a terminal, structural failure: The economic managers of the day went the wrong way, there’s no exit, and they have to abandon the path entirely. It suggests the model is fundamentally broken and irredeemable without a complete overhaul. On the other hand, an economic ‘cul-de-sac’ implies they’ve circled back to the same spot repeatedly — they can keep going around, but they’re not getting anywhere. It captures cyclicality more than finality: the same IMF bailouts, the same fiscal crises, the same boom-bust pattern, and the same political disruptions resetting reform progress.
The cyclicality is the defining feature. Since 1958, Pakistan has been under 26 IMF programmes — and currently it is under an Extended Fund Facility of $7 billion negotiated in 2024. In 11 of the 14 years prior to 2025, Pakistan received funds from the IMF to avoid bankruptcy. Theoretically, that’s not a dead-end — that’s driving around the same roundabout through bailouts for six decades.
There are genuine, measurable improvements in the current programme — but they don’t compound into growth. Pakistan achieved a primary fiscal surplus of 1.3 percent of GDP in FY25, and gross reserves rose from $9.4 billion to $14.5 billion over the year. The public debt-to-GDP ratio, according to the government sources, has also declined from 75 percent in 2023 to around 68.5 percent in 2026. These are real numbers. Yet they alone are not sufficient to move us out of the “cul-de-sac” in our lifetime.
The system compatible economic growth can’t escape its own ceiling. The moment growth crosses around 3.5 percent of GDP, ‘Balance of Payments’ crisis raises its head, inflationary pressures swell rapidly, necessitating extreme monetary tightening. Under current policies, Pakistan limps forward at 3–3.5 percent growth — barely matching population expansion — delivering stability but not transformation. Living standards improve marginally, job creation remains weak, and brain drain continues.
The structural rot runs deep. According to the IMF’s Governance and Corruption Diagnostic Assessment, Pakistan’s economy loses an estimated 5–6.5 percent of GDP to corruption due to entrenched “elite capture,” where influential groups shape public policy for their own benefit. The Pakistani military maintains significant influence over the economy, with even currency matters reportedly being monitored by senior establishment officials.
The reform advice never changes — because it never gets implemented. The IMF, WB, ADB and other so-called donors regularly give policy advice on tax policy simplification, trade liberalization, deregulation, competitive markets, privatisation, procurement reforms, and asset declaration transparency. These are not new findings — such advice has been offered to Pakistan many times in the past as well.
Unfortunately, Pakistan borrows the money designed to facilitate reforms and, in return, the system sabotages the reform agenda. So where does that leave us? With almost half the population mired in extreme poverty, 40 percent of children subject to stunting, twenty five million children out of school, with one in five persons unemployed, having pathetic per capita income and bottom rank in human development and other development indices. The results are horrific. The current patronage state has incompetently installed an electricity grid, that is the most expensive in the world. Riddled with corruption and miss-governance, it is most unsuited for the country. Pakistan’s economy has emerged at the bottom of global productivity and competitiveness tables and it has relegated Pakistan to be amongst the lowest ranked ‘inward looking trading nations’ in the world. We have certainly hit rock bottom.
The real question the “cul-de-sac” metaphor raises is: who keeps driving us back into it? And the honest direct answer is that the incentive structures for Pakistan’s traditional political elite, bureaucracy, business groups, landed aristocracy and others are all perfectly aligned to keep doing exactly that. Clearly, it is the system driving the “cul-de-sac” economy that is stuck in a “dead-end” and not the economy itself. Therefore, it is critical to disaggregate the two:
• The economy itself → “cul-de-sac” (but still has vitality, assets, people, geography)
• The governance system → at a “dead-end” (structurally incapable of reform)
Why the governance system is at a “dead-end” → What fails is never the plan — it’s the will, resilience and capacity to implement. That points not to a policy problem but a systemic failure. The system has several self-sealing properties that make internal reform nearly impossible:
• ‘Elite capture’ is self-perpetuating. The same groups that benefit from the distorted system control the levers needed to fix it. And asking them to reform is asking them to reduce their own rents.
• The military’s corporate footprint has grown, not shrunk. Cement, fertiliser, real estate, logistics — the institution is now an indirect economic beneficiary of the status quo.
• Democratic accountability is too weak to generate reform pressure from below. Electoral cycles produce governments too fragile and too indebted to the powerful to push structural change.
• The IMF bailout mechanism itself becomes part of the system. It removes the ultimate consequence — collapse — that might otherwise force genuine change. The “cul-de-sac” remains the exit valve.
But how to “dismantle and replace” the system and by what, and by whom remains the big Question! The political elite-bureaucratic nexus over the last fifty years has demonstrated that it can gain and stay in power only through a system of patronage rather than any extraordinary skills in governance and development of the economy. The political elite including the so-called electables are a product of patronage. Their dominance in politics for many decades is dependent on a pliant and cooperative bureaucracy that ensures their grip on power and in the process they also politicize the bureaucracy. Ministries, Programmes, Subsidies, Jobs, Contracts, Permissions etc., are driven by patronage.
Excessive regulatory burden enriches the bureaucracy and promotes cronyism. “Ministerial sprawl” creates “bureaucratic sprawl”, leading to “regulatory sprawl”. This creates the need for higher taxes for funding the bureaucratic structures. Exorbitant taxes on a narrow base weaken the productive sectors and depress investment and growth. As the patronage state enlarges and increases its footprint in all economic activities its appetite for more resources grows rapidly. Power without restraints creates strong incentives for morphing the patronage state into a patronage-cum-predatory state.
How will this change? Who will be the agent of change? The military’s core function of national security trumps all other interests and considerations. The “cul-de-sac” economy with a low growth equilibrium is an existential threat for the military’s modernisation plans in the new geopolitical environment emerging in West Asia and beyond. Pakistan’s role as a pivot state and a net security provider in the region requires huge funds that only a large, vibrant and high growth economy can provide, an economy that can attract and absorb large dollops of investments and technological modernisation. Thus, the biggest force for transforming from a low growth patronage-cum-predatory state to a dynamic and high growth “development state” remains the military.
Copyright Business Recorder, 2026
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