EDITORIAL: Pakistan’s economy remains mired in stagnation, weighed down by structural inefficiencies and policy inertia.
The recent remarks by the Planning Minister Ahsan Iqbal, identifying major impediments to economic progress, resonate with a long-standing truth: without reform and a strategic focus on exports, the country’s economic trajectory will remain perilous.
The diagnosis is not new. High fiscal deficits, a narrow tax base, and energy shortages have long been chronic issues. The minister’s acknowledgment of these factors is welcome, but it merely scratches the surface. What Pakistan now requires is not just any acknowledgment but a resolute action.
One of the primary impediments is the country’s dismal export performance. Over the past decade, Pakistan’s export-to-GDP ratio has dwindled to alarming levels. Reliance on low-value textiles and limited diversification has left the economy vulnerable to external shocks and currency fluctuations. To reverse this trend, policymakers must incentivise value-added manufacturing and technology-driven sectors. Countries like Vietnam and Bangladesh have successfully capitalised on global supply chain dynamics. Pakistan must follow suit by enhancing ease of doing business, streamlining customs procedures, and offering targeted subsidies to exporters.
Moreover, the energy crisis continues to throttle industrial productivity. High energy tariffs and inconsistent supply deter investment and drive up production costs. Addressing this requires not only infrastructural investment in renewable energy but also reforming the distribution companies plagued by inefficiency and corruption. The long-promised circular debt resolution must be expedited to restore confidence in the power sector.
The government’s fixation on foreign loans and IMF bailouts is a band-aid solution at best. Sustainable growth hinges on expanding the tax net and reducing reliance on indirect taxation. The planning minister correctly identified the need for documentation of the informal economy, yet implementation remains elusive. Leveraging technology to track transactions and incentivising digital payments can help broaden the tax base without burdening existing taxpayers.
Agricultural productivity, often overlooked in policy circles, remains another vital cog in the economic machine. Modernising farming techniques, investing in irrigation infrastructure, and offering low-interest credit facilities to small farmers can enhance output and boost rural incomes. This, in turn, can reduce urban migration and ease pressure on urban infrastructure.
Furthermore, political stability is an indispensable prerequisite for economic reform. Frequent political turmoil and inconsistent policies have discouraged both foreign and domestic investment. The government must foster a consensus-driven approach to economic policymaking, insulating key reforms from political cycles.
Deficits and dwindling foreign reserves are symptoms of deeper structural issues. Export-led growth, driven by innovation and competitiveness, is the only viable path forward. The planning minister’s identification of the main problems is a step in the right direction, but the government must now pivot from rhetoric to action. The clock is ticking, and Pakistan cannot afford further economic drift.
In the words of economist Paul Romer, “A crisis is a terrible thing to waste.” Pakistan’s economic predicament presents an opportunity for bold reform. The question remains: will the political will match the urgency of the moment? So far policymakers, regardless of any particular party in power at any moment in time, have left a lot to be desired. Now, with time running out to turn around the economy and save the country from default, will they change their ways?
Copyright Business Recorder, 2025
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