03-06-2025
- Business
- Business Recorder
Pakistan at a turning point
Pakistan stands at a critical juncture in its history, where the choices made today will shape its destiny for generations. The nation is entangled in a web of economic distress, political turbulence, and institutional fatigue that not only threaten its immediate recovery but jeopardize its long-term development.
Inflation is rampant, the rupee continues to weaken, and public debt has reached record highs. Investor confidence has eroded, and bureaucratic paralysis afflicts sectors that once held promise. Yet within this storm lies a current of hope—an untapped reservoir of human and natural capital that, if properly channelled, could transform Pakistan from a struggling economy into a regional powerhouse.
The economic crisis Pakistan faces is multi-layered. As of early 2025, the Consumer Price Index (CPI) shows a year-on-year inflation rate of 23.5%, while food inflation exceeds 30%. The rupee, which stood at PKR 160 to the US dollar in 2020, now trades at over PKR 305. External debt has climbed beyond $125 billion, up from $60 billion in 2013, and public debt has surpassed PKR 65 trillion, amounting to nearly 78% of GDP.
Foreign exchange reserves, which were once a comfortable cushion, have dipped below $4 billion, barely sufficient to cover one month of imports. Pakistan's tax-to-GDP ratio remains stubbornly low at 9.2%, and the fiscal deficit continues to balloon.
Comparisons with regional neighbours highlight the urgency of reform. Bangladesh maintains GDP growth rates above 6%, attracts $3–4 billion in FDI annually, and has increased its exports to over $50 billion, surpassing Pakistan. India continues to pull in more than $80 billion in annual FDI, bolstered by strong macroeconomic policies and digital infrastructure. In contrast, Pakistan's GDP growth hovers below 2%, while FDI inflows remain stagnant at around $1.5 billion. These figures reflect deep structural issues that quick fixes and foreign loans alone cannot resolve.
But the true strength of Pakistan is not buried in numbers—it lies in its people. With over 64% of the population under 30, Pakistan boasts one of the youngest populations globally. This demographic is digitally connected, politically aware, and increasingly entrepreneurial.
Pakistan ranks as the fourth-largest freelancing country in the world. Platforms like Digi Skills and eRozgaar have trained more than 2 million youth in digital trades. Yet, despite their drive, many young Pakistanis face a bleak job market. Over 700,000 graduates are produced each year, but a significant portion find themselves unemployed or underemployed.
The government spends just 2.5% of GDP on education, far below the UNESCO recommendation of 4-6%, and vocational training reaches less than 10% of youth.
This mismatch between talent and opportunity is perhaps Pakistan's most pressing challenge. Without focused investment in human capital and digital infrastructure, the demographic dividend will remain a ticking time bomb. It is not just about creating jobs but creating pathways—from education to employment, from ambition to actualization. Pakistan's youth do not want handouts; they want access, opportunity, and a system that rewards effort.
The political landscape, meanwhile, remains fractious. No Prime Minister in Pakistan's recent history has completed a full five-year term. The country has seen eight finance ministers since 2018 alone. Public trust in leadership is at historic lows. Surveys by Gallup Pakistan and PILDAT reveal that 67% of respondents identify corruption as the country's most severe issue.
Trust in institutions like the Parliament has dropped below 30%. Yet, there is a silver lining: the youth are increasingly rejecting traditional party allegiances in favor of transparency, meritocracy, and results. This shift in political consciousness offers a rare opportunity to reset the national narrative.
Pakistan's economic revitalization must begin at home. Small and Medium Enterprises (SMEs), which employ over 80% of the non-agricultural workforce and contribute 40% to GDP, are suffocating under overregulation, limited credit access, and complex taxation. Despite their importance, SMEs receive less than 8% of formal lending from banks. In the manufacturing sector, particularly textiles, which account for over 60% of exports, a 19% decline was recorded in 2023 due to high energy costs and import restrictions.
To revive industry, Pakistan needs to adopt a business-first approach. Simplified tax regimes, digital single-window operations, access to capital through venture funds, and regulatory stability are not luxuries—they are necessities.
The agriculture sector, employing 38% of the labor force, is similarly stagnant. Wheat yield remains at 2.9 tons per hectare, compared to 4.5 globally. Innovation in irrigation, seeds, and farm management is urgently required.
Pakistan's circular debt in the energy sector has ballooned to Rs. 2.3 trillion. Despite having over 6,000 MW in idle capacity, load shedding persists due to inefficiencies in distribution and recovery.
Natural resources, including the untapped mineral wealth in Balochistan and Khyber Pakhtunkhwa, represent a missed opportunity of massive proportions. The Reko Diq project alone, potentially worth over $450 billion, was delayed for more than a decade due to legal and political entanglements.
Forestry, covering less than 5% of land area, continues to shrink, while tourism—with the potential to generate $15 billion annually—remains neglected. After 2022, foreign tourist arrivals were below 1 million, constrained by lack of infrastructure, safety, and consistent policies.
Infrastructure must be redefined. Building highways is no longer enough. The future of infrastructure lies in digital networks, clean energy grids, public health systems, and education. Around 35% of Pakistan's population lacks reliable internet access, and in rural areas, that figure exceeds 50%.
Expanding broadband, investing in 5G, and digitizing government services can drive inclusion and innovation. The Punjab Education Foundation (PEF) model, which serves over 2.6 million students via public-private schools, should be replicated nationwide. Similarly, expanding vocational training through NAVTTC to reach one million youth annually can bridge the skills gap.
The Pakistani diaspora—over 8 million strong—sends home more than $30 billion annually. But their contribution can go beyond remittances. Many are professionals, entrepreneurs, and academics who, if engaged properly, could become strategic partners in national development.
Pakistan should emulate models like India's OCI scheme or the Philippines' Balik Scientist Program to harness diaspora expertise. Offering diaspora bonds, dual citizenship benefits, and tax incentives can channel their investment into long-term growth sectors.
Yet, all of this hinges on one critical factor: political stability. No amount of economic planning can succeed if the governance framework is in flux. Investors—domestic and international— demand policy continuity.
Reforms in civil service, judiciary, and regulatory institutions must ensure autonomy, capacity building, and protection from political interference. Parliamentary committees need real oversight powers, and election reforms must restore public confidence.
The example of countries like Rwanda, Malaysia, and Vietnam show that institutional stability can drive rapid development even in challenging environments.
Pakistan is not lacking in potential. It is lacking in alignment. Alignment between policy and potential, between leadership and youth, between institutions and the people they are meant to serve. This moment is more than a crisis—it is a choice. The choice to shift from reactive governance to proactive nation-building. The business community is ready.
The youth are restless but motivated. The world is watching.
The time for platitudes has passed. Pakistan must choose bold, realistic, and inclusive strategies that put people first. It must reward innovation, punish corruption, and empower its most valuable asset—its people. The question is no longer whether Pakistan can change. The question is: will it choose to?
History will not remember the excuses. It will remember the actions taken when the nation stood at turning point
The article does not necessarily reflect the opinion of Business Recorder or its owners
