Pakistanis to Face More Economic Pain Despite Recent Stability

Pakistan has spent nearly four years pursuing economic stabilization to avert sovereign default, but the country has yet to move beyond crisis management into meaningful growth.

Since 2022, several versions of the current coalition government have come and gone, implementing tough measures, higher taxes, elevated interest rates and neck-breaking electricity tariffs to restore stability and meet conditions attached to international financial support.

Pakistan avoided default, but the strategy also shifted much of the burden onto the public.

Despite improvements in key macroeconomic indicators, the underlying economy remains fragile. Pakistan’s trade deficit widened to a record $39.5 billion in FY26, while exports fell to $30.1 billion against imports of $69.6 billion.

Stability Without Reform

Macroeconomic stability should be the starting point for economic reform, not the end goal.

Nearly four years after Pakistan’s balance-of-payments crisis intensified, reforms aimed at boosting productivity, exports, tax, governance, competition and investment have progressed slowly. In this writer’s view, the economy remains dependent on politically motivated stabilization efforts instead of transitioning to a growth-focused model.

Previous IMF-supported stabilization programs provided temporary financial breathing space but failed to address weaknesses such as weak exports, low productivity and institutional inefficiencies. Even in FY26, imports were more than twice the value of exports.

Imported Inflation

Again, in this writer’s eyes, the next phase of reforms is expected to expose consumers to greater imported inflation as Pakistan moves further toward market-based pricing in several sectors.

Higher global commodity prices and exchange-rate adjustments can quickly push up domestic prices of fuel, electricity, food and other imported goods. While headline inflation has eased significantly from its 2023 peak, everyday essentials remain expensive, and household purchasing power has yet to recover.

Without productivity gains, stronger incomes and higher-value exports, ordinary Pakistanis are likely to continue bearing the adjustment costs.

We Need Strong Regulators

Deregulating decades-old market controls alone does not guarantee better outcomes.

A free-market economy requires independent, professional and well-resourced regulators capable of ensuring competition, preventing monopolistic practices and protecting consumers. Without credible regulators, risks benefit powerful market players more than consumers.

Breaking the Cycle

Pakistan needs to shift its focus from short-term stabilization toward reforms that expand exports, improve competitiveness, attract investment and strengthen institutions.

A senior politician recently predicted that Pakistan would become a $3 trillion economy by 2047. Long-term ambitions are welcome, but they must be backed by credible reforms rather than distant projections.

Otherwise, Pakistan risks remaining trapped in a recurring cycle of politically managed stabilization programs, with ordinary citizens continuing to shoulder the economic costs.

Views expressed here do not necessarily reflect ProPakistani and its owners.