Zafar Iqbal
Pakistan’s latest GDP figures arrive with cautious optimism attached, and cautious optimism is precisely what they deserve. A projected growth rate of 3.7 percent for the current fiscal year represents an improvement over last year’s 3.18 percent expansion, and in a country that came uncomfortably close to sovereign default not long ago, any upward movement is worth acknowledging. But improvement is not the same as progress, and the numbers, read carefully, tell a more unsettling story than the headline figure suggests.
The government had set a growth target of 4 percent. The economy fell short of it. Even the State Bank of Pakistan’s projected lower bound stood at 3.75 percent, and the final figure has come in beneath that threshold. The SBP does anticipate continued, if tepid, growth into the next fiscal year, provided that energy prices do not escalate further and the Gulf crisis does not deepen. These are meaningful conditions. Neither is within Pakistan’s control. The economy’s near-term trajectory is therefore hostage to external variables that Islamabad cannot manage from within its own borders.
Pakistan’s economy has now crossed the $452 billion mark in total size, and per capita income has edged upward from $1,824 to $1,901. Large-scale manufacturing has shown a rebound. Services remain the dominant engine of growth. These are the figures that tend to appear in official communications and government press releases, and they are not false. But they require context, and the context strips them of their reassuring quality.
Take the manufacturing rebound. Automobile production has risen by over 61 percent, a number that sounds transformative until one understands what it reflects. Pakistan’s auto sector collapsed in recent years under the combined weight of import restrictions, supply chain disruptions, and demand suppression caused by economic contraction. A 61 percent rise in production is not evidence of industrial strength. It is evidence of recovery from an abnormally depressed baseline. The sector has climbed back toward where it was, not beyond it. Celebrating this as industrial momentum would be a misreading of the data.
The services sector’s continued expansion tells a similar story. When services drive growth in a developing economy, the question that must be asked is what kind of services and driven by what. In Pakistan’s case, the answer is largely consumption and state expenditure. This is not the kind of services-led growth that builds long-term productive capacity. It does not generate the export revenues that Pakistan desperately needs. It does not create the high-skill employment base that transforms a developing economy into a competitive one. It expands the present without building the future.
Agriculture is the sector that deserves the most concern and has received the least attention in the official narrative. With growth of just 2.89 percent, agriculture has underperformed in a year when it could least afford to. This is the sector that employs the largest share of Pakistan’s workforce and sustains rural incomes across the country. When agriculture underperforms, the people who feel it most acutely are those who are already most economically vulnerable. A backbone sector growing at less than 3 percent is not a foundation. It is a fracture.
The disconnect between GDP figures and lived economic experience is perhaps the most politically significant problem that the numbers reveal. Per capita income has risen in dollar terms. But the Pakistani household has not felt a corresponding improvement in its circumstances. The cost of living remains crushing for a vast portion of the population. Wages have stagnated. Purchasing power has declined. The difference between $1,824 and $1,901 in annual per capita income is a statistical entry. It does not change what a family in Multan or Faisalabad or Quetta can afford to put on the table, or whether they can afford their children’s education, or whether the electricity bill at the end of the month is manageable. Aggregate growth that does not reach ordinary households is growth that does not fulfill its primary social purpose.
The structural picture is where Pakistan’s real challenge lives. The economy has stabilised. The IMF programme has restored a degree of fiscal discipline. The external financing crisis has been stepped back from the edge. These are genuine achievements and they should not be minimized. But stabilisation and structural transformation are entirely different things, and Pakistan has so far achieved the former without seriously beginning the latter. Investment levels remain low. Export performance remains weak. Tax mobilisation continues to fall below what the country’s development needs require. Human capital deficits, in education, health, and skills, persist and compound with each passing year.
What 3.7 percent growth actually means, in this context, is that Pakistan has managed a cyclical recovery. The economy contracted sharply, then partially recovered. That cycle has repeated itself more than once in Pakistan’s economic history. What has not happened, and what the current numbers do not suggest is happening, is the structural shift toward productivity-driven, export-oriented, investment-led growth that has allowed other developing economies to move decisively out of the low-income trap.
A country at Pakistan’s stage of development, with its population size, its demographic pressures, and its infrastructure needs, requires sustained growth well above 5 percent to make meaningful inroads into poverty and unemployment. At 3.7 percent, the economy is recovering. It is not transforming. And recovery without transformation is simply the preparation for the next crisis. Pakistan deserves better than that cycle, and its people have waited long enough for someone in authority to break it.
