Beyond bailouts

The Asian Development Bank's announcement of a $10 billion financing strategy for Pakistan over five years arrives as welcome news for an economy showing tentative signs of recovery. With inflation dropping to 4.5% in FY25 and foreign reserves exceeding $21 billion, the government deserves credit for hard-won stabilisation.

But this latest infusion of multilateral support — provided under Country Partnership Strategy featuring $20 billion funding over 10 years — also underscores Pakistan's dependence on external funding, with total external debt now exceeding $130 billion, nearly one-third of which is owed to multilateral institutions. The country has entered 23 IMF programmes since independence — more than any other Asian economy. We also currently owe the Fund almost $9 billion — the fourth-highest current debt and almost half of the IMF's current outstanding loans to all of Asia.

This is why, despite generally positive economic indicators, serious questions remain over our ability to break the cycle of dependency. Experts have noted that countries once considered Pakistan's peers are now able to self-finance growth, while we need to borrow to pay for basic infrastructure development. Though we are on the right track, the pace of growth, both overall and across diverse sectors, remains far too low to put us in a position where sustainable long-term growth projections can realistically be plotted on a timeline.

Even achievements in the taxation arena — tax revenue crossed a tax-to-GDP ratio of 10% for the first time in 25 years — are abysmal when compared to other similarly placed countries. As such, self-financing is almost impossible, and the government is forced to borrow or pursue public-private partnerships in areas that may offer less-than-ideal terms for taxpayers. That is why some economists are calling for a new economic model in which external support and financing complement, rather than substitute for, domestic resource mobilisation, using a path carved by long-term decision-making that outlasts electoral cycles and focuses on consistency and increasing productivity, rather than consumption.