Fix the system

Pakistan is running out of space to delay the reforms it has avoided for decades. Growth is projected at about 2.7 per cent this year, far below what a country of more than 240 million people needs. Meanwhile, according to an IMF governance analysis, leakage and capture of elite groups, and poor governance, pose an immediacy threat to growth, as they continue to undermine economic performance by 5 to 6.5 per cent of economic output annually. This difference lies between stagnation and growth. It also shows how much potential is being drained by a system that consistently favours a small network of the influential.

Elite capture is not an abstract term in Pakistan. It shapes everything from tax breaks to public spending to how state-owned enterprises are run. Such firms possess assets amounting to nearly half of Pakistan's GDP, although most of them operate in the red and require bailouts. The amount of losses incurred by the power sector is over a trillion rupees annually, which contributes to rising circular debts. When public companies bleed cash, the state borrows more, inflation climbs and private investment shrinks. The public pays for inefficiency created by the elite.

The tax system tells the same story. Powerful sectors enjoy exemptions that leave the burden on salaried workers and small businesses. Agriculture, retail and parts of real estate remain under taxed despite their size. The taxes collection is significantly lower than those collected by similar economies, and then it finds it difficult to spend money even on basic services. As long as it is controlled by the elite, taxes affect not only revenue, but also public perception.

Investors see these patterns clearly. They know that rules can shift based on influence and that decisions are not always made on economic merit. As a result, capital waits on the sidelines. Foreign investment remains low. Domestic firms hesitate to expand. The economy becomes trapped in low trust and low growth. The outcome of choices made to protect elite comfort rather than national progress.

Yet the potential for recovery is real. The IMF believes that if key reforms are undertaken, Pakistan could grow between 5 and 6.5 per cent annually over the next five years. Such is the degree of growth required if incomes are to be increased, jobs created and finances stabilised. This can only be achieved by making reforms, not cosmetic ones.

Reform must begin with transparency. Visible accountability restores confidence, especially when it reaches the powerful. Without trust, no reform agenda survives. We must also restructure state owned enterprises. Some can be privatised. Others need professional management insulated from political interference. The goal is simple: stop losing money on entities that should either function commercially or not at all.

The tax base must be widened so that every sector contributes fairly. When only a small share of the population pays direct taxes, the system becomes both weak and unjust. Eliminating selective exemptions would allow the state to reduce deficits without overburdening ordinary people.

Most importantly, we need a cultural shift. Economic privilege cannot keep shaping national policy. Transparency is key to reform. The government must ensure that public contracting, taxes and regulatory agencies operate with integrity and under transparency. The public must be able to monitor financial disbursements and recipients.

It has to be merit, competition and innovation that mean more than connections. The future is at stake, and it has only one choice left, and that is either suffer in the present or deteriorate in the coming years. The fact is that change is not an easy option, but not changing has consequences that are far steeper.