Industrialists flag systemic flaws, Rs1.8tr round debt, GDP progress caught close to 2.5%
LAHORE:
After months of improved macroeconomic indicators and relative calm in forex and inflation markets, Pakistan’s enterprise group is elevating questions on whether or not the present part of financial stability can translate into long-term progress. Whereas headline numbers counsel enchancment, industrialists argue that deep structural weaknesses stay unaddressed and will resurface as soon as exterior help eases.
Pakistan Trade and Merchants Affiliation Entrance (PIAF) Chairman Syed Mehmood Ghaznavi mentioned that regardless of latest fiscal inflows and improved reserves, the nation continues to face excessive interest-related expenditures which are draining public funds. He famous that the obvious fiscal aid has largely been achieved by way of robust situations imposed beneath the Worldwide Financial Fund (IMF) programme fairly than by way of home-grown and sustainable financial reforms.
“Annual enchancment could look actual on paper, however it’s nonetheless unclear whether or not this stability will final,” Ghaznavi mentioned, including that Pakistan’s curiosity funds stay among the many largest pressures on the federal funds. Within the ongoing fiscal yr, curiosity funds are estimated to devour over 50% of federal revenues, leaving restricted house for growth spending and social safety.
He identified that during the last three years, Pakistan has repeatedly skilled a disconnect between stabilisation and progress. Whereas stabilisation measures helped management inflation, down from above 35% in mid-2023 to round 5.6% in December 2025, and stabilised overseas trade reserves at over $21 billion, financial progress has remained subdued. GDP progress for FY26 is estimated at round 2.5%, far under the extent required to soak up new entrants into the labour pressure.
In keeping with the PIAF chairman, the core problem lies in unresolved structural points. “General numbers could also be enhancing, however the true work stays the identical,” he mentioned. These embody broadening the tax base, reforming loss-making state-owned enterprises, rationalising untargeted subsidies, enhancing power sector effectivity, and streamlining regulatory techniques that discourage funding.
Pakistan’s tax-to-GDP ratio has proven enchancment, reaching 15.7% in FY25, surpassing India’s 11.7% and Bangladesh’s 7.5%. Nonetheless, round debt within the energy sector stays round Rs1.8 trillion, persevering with to strain public funds and industrial power tariffs. Ghaznavi warned that with out addressing these weaknesses, non-public funding and productive capability would proceed to endure.
One other industrialist, Waseem Malik, mentioned stabilisation achieved by way of austerity alone couldn’t maintain an economic system of Pakistan’s measurement. “We now have managed demand, however we’ve not created situations for growth,” he mentioned. Malik argued that though rates of interest have declined over time, they’ve nonetheless just about frozen industrial borrowing, whereas exporters face excessive power and logistics prices that undermine competitiveness.
He careworn that until policymakers shift focus from short-term stabilisation to medium-term progress planning, Pakistan dangers repeating the boom-and-bust cycle. “Each IMF programme buys us time, but it surely doesn’t purchase us progress until we repair governance and productiveness,” he mentioned.
Ghaznavi emphasised that the true check of present stabilisation would turn out to be clear by the top of the fiscal yr, when it may very well be assessed whether or not the economic system is transferring towards sustainable progress. He additionally referred to as for month-to-month national-level conferences involving all financial stakeholders to overview authorities measures, assess their affect, and form a coherent forward-looking financial technique. “With out such coordination and reform momentum, stability could stay fragile, providing short-term aid however no sturdy financial turnaround,” he added.
