Pakistan’s economy can be described as directionless for several reasons. One major reason is the lack of a clear and consistent economic policy over the years. Pakistan has undergone numerous economic reforms and changes in policy, but these have often been ad hoc and lacking a coherent long-term strategy. Political instability has also been a major factor contributing to the directionless nature of Pakistan’s economy. The country has experienced frequent changes in government, which has led to a lack of continuity in economic policies and uncertainty among investors. In Pakistan politics and the economy are closely intertwined, with political decisions influencing economic policies and outcomes, and economic conditions shaping political priorities and decision-making. It wouldn’t be wrong to say that Pakistan’s politics shape Pakistan’s economic landscape.
The distinction between the Private and public sectors is also very problematic. There seems no vision to follow when it comes to developing a structure for Pakistan’s economy. There is also no clear path or strategy for growth or development. There is a lack of focus on specific industries or sectors, and there is little investment in research and development. In the absence of a clear direction or strategy, the governments in Pakistan struggle to implement policies that effectively stimulate economic growth and development. As a result, there is a lack of coordination and cooperation among different sectors of the economy, which hinder progress and lead to further economic stagnation.
Currently, the government’s economic structure is a mix of private enterprise and state interventionism, with a focus on promoting economic growth, reducing poverty, and creating jobs. The private sector is further divided into formal and informal. According to the world bank report”Creating Markets in Pakistan,” The major hurdle to private sector growth in Pakistan, is the absence of an effective, credible, and long-lasting institutional framework. Pakistan has been unable to create or implement policies in a way that would result in the desired outcomes. Pakistan has not been able to maintain or diversify its industrial production structure. On one hand, the absence of adequate employment opportunities, child labor, forced labor, social protection, working poverty, and gender-based discrimination are some of the issues that define Pakistan’s informal private sector. On the other hand, having a high-cost structure and limited profitability, the overstaffing and noncommercial pricing practices have brought most public sector dangerously close to going bankrupt. Due to this, the public sector has increased the financial load on the already underfunded national exchequer because political pressures rather than economic considerations drive most decisions in the public sector.
Political instability seems to be one of the biggest reasons which have led to a lack of continuity in economic policies and uncertainty among businesses and investors. This has made it difficult for the country to attract investment and stimulate economic growth.
In addition, Pakistan’s economy has been heavily reliant on agriculture and textiles, which has made it vulnerable to external shocks such as fluctuations in commodity prices and changes in trade policies. The lack of diversification in the economy has limited opportunities for growth and development in other sectors. Debt servicing consumes an increasing share of public resources, leaving little money for much-needed physical infrastructure, education and health system growth, and climate change mitigation. Little efforts had been made to deal with the balance of payment crisis. The Pakistani rupee dropped from 52 to 220 to the US dollar between 2000 and 2022, manufacturing and exports remained stagnant, investment declined, real wages remained unchanged, and debt increased.
The media seems complacent with the wealthy beneficiaries of the existing economic structure. Popular television anchors, for instance, present energy subsidy removal as harming the poor and corruption on part of political leaders. Targeting subsidies to safeguard low-income people and export businesses is rarely discussed. As a result, neither political party has decided to invest resources in pursuing more extensive structural transformation because each will shortly be up for election following IMF-assisted stabilization.
To combat the strong lobbies invested in outdated systems, structural reform calls for persistent efforts and laser-focused policy formulation. India underwent reforms despite of unstable coalition government which implicitly vowed that the 1991 IMF program would be the last one since, without economic security, India would not have any international standing. About 31 years later, India’s 1991 IMF program continues to stand as its final IMF loan. The national security policy (2022-2026) acknowledges that putting the economy on a path of sustainable growth is crucial. Pakistan’s standing in the world has been damaged by its repeated balance of payments crises, making it more difficult to defend its foreign policy interests. As a result, Pakistan should establish a formal review mechanism as part of the national security framework to make sure that important reform milestones are being fulfilled and that progress on them would be a fundamental condition to judge the performance of the government.