Economic dilemma

Pakistan's central bank governor could not have been more unequivocal: the country's current growth model simply cannot sustain a population of over 250 million. With unemployment at a 21-year high and nearly half the population slipping into poverty, the governor has called for a tectonic shift in economic thinking.

For too long, Pakistan has survived on stop-gap policies, treating economic crises like recurring fevers instead of chronic illnesses. The result is that the country has long been stuck in the economic stabilisation phase, with growth falling from an average of 3.9% over 30 years to 3.4% in the last five. Business cycles grow shorter, shocks hit harder and the economy remains trapped between IMF-prescribed austerity and political bandaids.

For years, this stabilisation model has been treated as both the remedy and the destination, even as it extracts a heavy toll from households and industries to the wider economy. What was meant to be a temporary corrective mechanism has morphed into a painful status quo. High taxation and crippling energy prices have suffocated productive sectors in the name of macroeconomic discipline, which have limited consumption and investment while doing little to address the inefficiencies that cause crisis after crisis.

Pakistan cannot rely on crisis management as a development strategy and needs to chart a plan to transition towards a growth model. However, this shift cannot be left to market optimism alone. Growth must be anchored in sectors where value can be scaled. The missing ingredient perhaps is ambition as the private sector continues to demand incentives while clinging to low-value industries and domestic monopolies.

Pakistan today stands at an inflection point, with policymakers suddenly realising that the stabilisation model has reached its natural dead-end. Are they then going to focus on growth? Well, so long as structural weaknesses persist, the country cannot even afford to tread this path. Such is the dilemma.