Pakistan’s economy today stands at a decisive moment in its history. It is neither collapsing nor comfortably stable. It is surviving — but survival alone is not a strategy for national progress. The real question is not whether Pakistan will default, but whether it will reform.

Recent official estimates show Pakistan’s economic growth hovering around 2–3 percent annually. For a developing country with a rapidly expanding population, this is not growth; it is stagnation. Such a pace is insufficient to generate employment for millions of young entrants into the labour market each year. The country is therefore not facing an immediate economic breakdown, but a far more dangerous condition — a slow economic suffocation.

For decades, Pakistan has operated a consumption-driven economic model rather than a production-led one. Unlike export-oriented economies, Pakistan relies heavily on imports, remittances, and borrowing. Repeated engagement with the International Monetary Fund (IMF) has ceased to be an emergency arrangement and has instead become a structural feature of the economy. Operating under multi-billion-dollar stabilization programs reflects not temporary shocks, but a persistent imbalance between national income and national expenditure.

Pakistan’s total public debt stands at roughly $286.8 billion, approximately 70 percent of GDP, with external debt around $138 billion (total external liabilities including government, public sector enterprises, and other obligations) and domestic debt about $150 billion (37% of GDP). A significant portion of government revenue — roughly PKR 5.8 trillion (~$27 billion) or 14% of GDP — goes to debt servicing alone. Borrowing comes from both internal sources (domestic banks, National Savings Schemes) and external lenders (IMF, World Bank, Asian Development Bank, China, Saudi Arabia). While external loans often carry conditionalities, internal borrowing frequently relies on high-interest instruments, leaving little fiscal space for productive investment. A large share of borrowing is therefore consumed simply to service previous debt rather than fund development.

Much of this debt accumulation and fiscal pressure is not merely a financial phenomenon; it is a direct consequence of weak governance, lack of transparency, and poor accountability. Billions of rupees of public money are consumed on wasteful spending and extravagant lifestyles of government functionaries, including costly official vehicles, lavish residences, and high-end travel — far beyond the imagination of ordinary taxpayers. This diversion of resources from education, healthcare, agriculture, and infrastructure, combined with poor oversight, forces Pakistan to borrow more, perpetuating the cycle of debt and economic stagnation.

Another major pillar supporting the economy is overseas remittances. According to the State Bank of Pakistan, the country received a record $38.3 billion in workers’ remittances during FY-2025, the highest annual inflow in its history.

These inflows often stabilize the external account more than exports themselves. Overseas Pakistanis have effectively become an informal economic safety net. However, reliance on remittances cannot substitute for domestic productivity or structural reform.

The structure of exports further highlights the problem. According to recent trade data, the textile and clothing sector contributes around 55–60 percent of Pakistan’s total exports. This heavy concentration reflects a narrow industrial base and limited value addition. The country exports mainly low-value goods while importing high-value machinery, technology, and fuel, creating persistent balance-of-payments pressure and recurring external financing needs.
Agriculture, despite vast natural potential, underperforms due to outdated practices and weak value chains. Pakistan produces over 70 million tons of milk annually, yet only a small portion enters formal commercial processing.

This is not a resource constraint; it is a policy and management failure. Industrial growth remains inconsistent due to energy shortages, regulatory uncertainty, and limited technological upgrading. The services sector — particularly banking and telecommunications — shows resilience, but it cannot alone sustain national economic transformation.

Macroeconomic indicators sometimes create an illusion of recovery. Inflation has moderated in recent months, but stabilization is not the same as reform. Meanwhile, nearly 29 percent of the population lives below the poverty line, turning economic stagnation into a social challenge. When opportunities decline, skilled professionals migrate, youth unemployment rises, and public confidence in institutions erodes.

Pakistan today is not an export-led economy, not an industrial economy, and not a welfare economy. It is increasingly becoming a remittance-supported consumption economy.
Looking forward, three possible paths exist. The first is continuation of the status quo — slow growth, periodic stabilization programs, and continued brain drain. The second is managed stabilization through moderate reforms such as broadening the tax base, restructuring the energy sector, strengthening institutions, and diversifying exports. This could produce stable growth within a decade. The third, and most difficult path, is structural transformation: education reform, industrial policy focused on value addition, agricultural modernization, bureaucratic accountability, and genuine merit-based governance. Such change requires policy continuity beyond political cycles.

Pakistan’s greatest economic threat is not immediate bankruptcy; it is prolonged stagnation accompanied by social frustration. Controlled survival without reform erodes national capacity gradually rather than suddenly. Nations rarely collapse overnight — they weaken slowly when institutions stop rewarding competence and start tolerating inefficiency.

The future of Pakistan will ultimately depend on governance quality, institutional integrity, and respect for professional competence. Economic recovery does not begin in financial markets; it begins in classrooms, research laboratories, farms, courts, and public offices. When merit is sidelined, and expertise ignored, policy failure becomes inevitable regardless of financial assistance or external support.

No country has achieved sustainable growth through loans alone. Borrowing can provide time, but only reform can provide direction. Pakistan must therefore shift from short-term stabilization to long-term productivity — investing in human capital, strengthening local industry, modernizing agriculture, and encouraging innovation instead of dependency.

Ending wasteful spending, curbing lavish lifestyles of public officials, and enforcing strict accountability are equally critical to free resources for genuine development.
Pakistan stands at a crossroads. One path leads to managed survival supported by remittances and periodic external assistance. The other leads to reform-driven progress based on production, exports, governance, and institutional credibility. The choice is not merely economic; it is generational. The coming decade will decide whether Pakistan becomes a country that merely endures difficulties — or a state that overcomes them through policy, competence, and national seriousness.

Dr. Alamdar Hussain Malik
Advisor Veterinary Sciences
University of Veterinary and Animal Sciences, Swat
Former Financial Adviser
Finance Division
Government of Pakistan