Dementia is not a singular disease, but a broad term for a syndrome characterized by a decline in memory, cognition, and reasoning. Over the past forty years, Pakistan’s economic history has mirrored these symptoms: a recurring failure to remember past lessons, analyse the causes of crises, and apply the reasoning skills needed to resolve persistent challenges. The stabilization and bailout episodes since 1988 are summarized below:
1988–1990: IMF program (IMF) triggered by exhausted foreign exchange buffers.
1993–1994: IMF following fiscal slippages during a political transition.
1995–1997: IMF aimed at managing mounting external debt stress.
2000–2001: IMF to address reserve depletion after 1998 nuclear sanctions.
2008–2011: USD 7.6 billion SBA to stabilize a balance-of-payments crisis.
2013–2016: USD 6.6 billion IMF to avert default and momentarily restored growth.
2019–2022: USD 6 billion IMF impacted by global shocks and domestic policy shifts.
2022–2026: Successive emergency programs and a USD 7 billion IMF to prevent sovereign default.
In simple terms, these repeated bailouts became necessary because Pakistan consistently spends more foreign exchange than it earns - a structural deficit that has worsened over the past four decades.
While these programs provide short-term breathing room, they follow a predictable and destructive cycle: (i) an immediate crisis marked by plunging reserves or spiralling inflation; (ii) a failure to resolve deep-seated issues such as a narrow tax base, loss-making, state-owned enterprises, and mounting energy sector debt; and (iii) the imposition of austerity measures that stifle medium-term growth, inevitably triggering a new economic emergency every three to four years.
Over the last four decades, Pakistan has accumulated a cumulative deficit of approximately USD 160 billion, defined as the shortfall between total imports and the combined value of exports and remittances. During this same period, the country received roughly USD 90 billion in aid, grants, and external support.
Average annual exports of goods and services from 1985 to 2025 were between USD 18.5 billion, climbing from less than USD 5 billion in the mid-1980s to a peak of approximately USD 40.67 billion by 2025. Conversely, average annual imports over the same forty-year period were approximately USD 28.5 billion, rising from about USD 6 billion in the mid-1980s to a high of USD 84.32 billion in 2022, before settling near USD 70.09 billion in 2025.
While historical averages suggest a manageable trade deficit of only USD 10 billion, the situation has deteriorated significantly in recent years. The average deficit over the past five years has surged to around USD 40 billion, which home remittances can barely cover.
Over the past forty years, Pakistan’s economic path has steadily declined, unmitigated by repeated bailout programs. The standard IMF approach, often misbranded as “stabilization” to garner public support, utilizes a conventional framework that prioritizes the developed world’s interests over genuine local reform. Historically, these bailouts, aimed at securing the IMF’s financial position and avoiding immediate default, have failed to catalyze sustainable growth globally. Viewing these temporary rescue packages as comprehensive solutions is a severe policy misstep.
Unfortunately, Pakistan lacks the independent economic leadership necessary to critically challenge this model. Consequently, the country remains trapped in a recurring four-to-five-year crisis cycle. Rather than relying solely on IMF support, Pakistan requires independent, pro-national economists who can honestly communicate the true costs of these programs - specifically, that each cycle leaves the nation increasingly impoverished and harder to govern. We do not need to reject these programs entirely; rather, we must focus on putting our own economic house in order.
Pakistan’s economic leadership remains compromised and ineffective, severely constrained by key systemic factors:
• Political instability: An insecure political structure where nearly every prime minister has been prematurely ousted before completing their designated term stifles operational capacity.
• Reluctance to face hard realities: Successive governments lack the resolve to communicate transparently with the public and the national security institution (hereinafter referred to as the “institution”) regarding the country’s severe economic realities and the painful adjustments required.
• Dual mandate of the security institution: The institution has assumed responsibility for national economic security alongside traditional defence, creating a bifurcated approach that complicates operations for both sides.
• Politicization of economic and national security: Economic stability is routinely sacrificed for political gain, with ruling factions casually labelling political opponents, state organs, or institutions as anti-state or anti-Pakistan.
A fundamental remedy requires decentralizing decision-making authority. Presently, power is concentrated at the highest level, split between the Prime Minister and the Chief of Defence Forces. From my perspective and practical experience, this setup lacks strategic prioritization and delegation. Top leadership remains entangled in routine administrative details, such as setting fuel prices. While it is widely believed that significant economic policies require the institution’s approval, no formal mechanism governs this involvement. Similarly, the Special Investment Facilitation Council (SIFC) struggled because the bureaucracy - the primary impediment - was shielded from tackling essential barriers facing prospective investors. Although the institution intervened with good intentions, the system was undermined by entrenched interests intent on preserving past inefficiencies. This experience offers an essential lesson.
We must first recognize that IMF programmes are not the solution; in fact, they have compounded existing issues. While they have successfully averted balance-of-payments defaults, the costs are substantial. Crucially, these programmes only postpone crises rather than resolving them, often increasing the likelihood of future defaults. This trend is exacerbated by eroding export competitiveness - stemming from a lack of government investment in infrastructure - and the declining quality of remittances due to insufficient investment in education and vocational training.
For the 2026-2027 fiscal year, India has allocated USD 180 billion for capital expenditure, translating to USD 123 per capita for its 1.46 billion population. In stark contrast, Pakistan’s allocation stands at just USD 7.95 billion, or USD 30 per capita for its 259 million people. This massive disparity underscores the erosion of Pakistan’s export competitiveness, explaining why its goods exports have remained largely stagnant.
The limited impact of CPEC, as previously explored, combined with the recurring failures of IMF programs, indicates that our primary channels of international support - namely China and the USA - have been exhausted without yielding substantive progress. This outcome exposes a deep-seated flaw in our approach to economic management. We might characterize this persistent inability to learn from our economic history as “National Economic Dementia”.
Whenever the Finance Minister presents the Federal Budget to the National Assembly - an event now met with routine skepticism - claims are made regarding significant achievements and policies aimed at placing the economy on a growth trajectory. These recurring statements have become so repetitive and unconvincing that they fail to engage the public.
While medical dementia currently has no known cure, symptoms can be managed through treatments, medications, and lifestyle adjustments to slow progression. Analogously, unless fundamental changes are made to the administrative and policy approach in Islamabad and Lahore, the nation’s economic condition risks becoming similarly irreversible.
Copyright Business Recorder, 2026
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