Zafar Iqbal
Numbers have a way of flattering the present at the expense of the future. When the Asian Development Bank revised its growth projection for Pakistan upward from three percent to three and a half percent for the current fiscal year, the government was quick to read it as validation. And in a narrow sense, it is. After years of lurching from one balance-of-payments crisis to the next, Pakistan has stabilised. Inflation has eased. Investor confidence has nudged upward. Manufacturing has shown signs of life. The IMF programme, painful as its conditions have been, has provided the framework within which these modest gains became possible. There is something real in the ADB’s upgraded forecast, and it would be churlish to dismiss it entirely.
But the bank itself is not dismissing the risks. The same report that carries the upgraded projection also carries a warning, and the warning deserves at least as much attention as the headline number. Stability and resilience are not the same thing. A patient who has been pulled back from the edge of a crisis is not the same as a patient who is well. Pakistan has been pulled back. It is not yet well. The distinction matters enormously for how policymakers read this moment and what they choose to do with it.
The ADB’s diagnosis of Pakistan’s structural condition is not new, but it bears repeating because the country has a habit of forgetting it as soon as conditions improve marginally. The recovery, the bank notes, is externally driven. It rests on remittances flowing in from the Gulf, on import compression that temporarily improved the current account, and on consumption demand that has picked up without a corresponding expansion in productive capacity. Industrial productivity remains low. Agricultural productivity has stagnated for years despite the sector employing a large share of the workforce. Export performance, which is the single most reliable indicator of an economy’s competitive health, remains weak. Pakistan is not selling more to the world. It is spending more on itself, and much of what it is spending is imported.
This pattern is familiar. It is, in fact, the pattern that has preceded every major economic crisis Pakistan has experienced over the past three decades. The economy grows, consumption rises, imports surge, the current account widens, foreign exchange reserves come under pressure, and then the country goes back to the IMF. The cycle has repeated itself with depressing regularity, and there is nothing in the current recovery that structurally breaks that cycle. The growth being recorded today is, in the ADB’s own framing, the kind of growth that sets up the next crisis rather than prevents it. Consuming more without producing more, importing more without exporting more, is not development. It is a deferred reckoning.
The external environment adds another layer of vulnerability that Pakistan has very limited ability to control. The Middle East remains in turmoil, and for a country that depends heavily on Gulf remittances, any prolonged instability in that region carries direct consequences for household incomes and foreign exchange inflows. Energy prices remain volatile, and Pakistan’s heavy dependence on imported fuel means that every uptick in global oil prices translates immediately into inflationary and fiscal pressure at home. Geopolitical shocks, which are increasingly frequent in the current global order, hit Pakistan harder than they hit more structurally sound economies precisely because the buffers are thin and the structural vulnerabilities are deep.
What the country needs is not a debate about whether three and a half percent growth is better than three percent. It is. But the more urgent question is whether the conditions for sustained, self-reinforcing growth are being built. Energy sector reform remains stalled, held hostage to a combination of circular debt, pricing distortions, and political reluctance to impose the costs of rationalisation on consumers who are already stretched. Taxation remains narrowly based, with a handful of sectors and salaried workers bearing a disproportionate share of the burden while large portions of economic activity, particularly in real estate, retail, and agriculture, remain either exempt or undertaxed. State-owned enterprises continue to drain public resources while delivering poor services. Trade policy has not been reformed in ways that would make Pakistani exports more competitive in global markets.
These are not new problems. They have been on every reform agenda for the better part of two decades. What changes with the ADB’s latest report is not the diagnosis but the context. Pakistan is in a window, brief and contingent, in which the stabilisation achieved under the IMF programme creates room to pursue deeper structural change without the immediate pressure of a looming crisis. That window will not stay open indefinitely. Global uncertainty is rising. The external environment is worsening. The Middle East crisis has not resolved. If Pakistan waits for perfect conditions before pursuing reform, perfect conditions will not come.
The government should resist the temptation that a slightly improved growth number invariably produces, which is the temptation of complacency. The ADB’s upgraded projection is not a certificate of health. It is a conditional assessment in a context of serious downside risks. The reform agenda on energy, taxation, state enterprises, and trade is not optional. It is the price of making this recovery mean something.
Pakistan has stabilised before and then undone its progress. The question this time is whether the political will exists to do something different. The numbers suggest a modest recovery. The structure of the economy suggests the recovery is fragile. Only sustained reform can close that gap.
