Pakistan’s recurring dependence on International Monetary Fund programs reflects deep structural weaknesses in the economy rather than policy choice, former finance minister and political economist Miftah Ismail said during a discussion on economic growth at ThinkFest held Sunday at Alhamra Arts Council.
Answering questions on whether Pakistan should approach the IMF, Ismail said the lender of last resort becomes inevitable when bankruptcy looms and international banks stop lending. He pointed to Pakistan’s investment to GDP ratio of about 12 percent, the lowest in South Asia, and said persistent fiscal and current account deficits leave the country with few options.
Ismail said Pakistan’s budget deficit stands at around 7.5 percent of GDP, forcing the government into dissaving. He warned that financing deficits through excessive borrowing or money printing fuels inflation. Over the past 25 years, he said, the Pakistani rupee has depreciated at an average of about 7 percent annually, reflecting long standing macroeconomic imbalances.
He said Pakistan spends more dollars than it earns, leading to external financing gaps. When inflows dry up, IMF programs follow, often accompanied by expenditure cuts. He also criticized weaknesses in social security, saying households rely on having more children as a form of informal savings. He noted that around 8 million children are added to the population annually, while nearly 40 percent of children remain out of school.
Ismail called for five priority reforms to revive growth: ending terrorism, controlling population growth, ensuring school enrollment, revisiting the National Finance Commission award to rationalize resource distribution, and strengthening local governments or creating new provinces. He also described the 18th Amendment as insufficient in empowering provinces in practice.
Lahore University of Management Sciences Vice Chancellor Ali Cheema said Pakistan has remained stuck in a staggered growth trajectory for four decades. He noted that while India and Bangladesh accelerated growth from the 1980s onward, Pakistan remained largely in the 2 to 3 percent range for long periods.
He said that had Pakistan grown at the same pace as Bangladesh, average incomes would have been nearly double today. Cheema said investment is a key driver of growth, but Pakistan’s investment to gdp ratio is about 10 percentage points lower than regional peers. He added that the economy remains dominated by low skill agriculture and services, limiting productivity gains.
Cheema said policymakers have focused excessively on crisis management and foreign inflows rather than job creation, education and skills. He noted that Pakistani households spend among the highest shares on education, yet returns in terms of social mobility and employment have declined. Without improving basic schooling, he said, ambitions around artificial intelligence and advanced technologies will not deliver results.
Federal Minister for Climate Change Musadik Malik said the core issue is not just growth but whose growth is being discussed. He argued that Pakistan’s structural problem is elite capture, which he said restricts competition and limits returns on education. Malik said protectionist policies and subsidies for select industries have undermined productivity and innovation.
He said if investment rises to 15 percent of GDP, IMF financing of about $1.4 billion annually becomes marginal. Malik argued that directing resources toward youth and students would yield far greater long term returns than supporting protected industries. He said Pakistan’s economic geography extends beyond Islamabad and that development must be inclusive of all provinces.
Malik also criticized the lack of focus on exports, saying protection, not competition, has dominated policy. He said tariffs are not reliable predictors of import behavior and called for accountability driven reforms that prioritize education and skills.
Head of the Prime Minister’s Delivery Unit Bilal Azhar Kayani said Pakistan has historically pursued growth without quality, resulting in boom and bust cycles. He said IMF programs stabilize the economy but do not generate growth, adding that growth should be seen as an outcome of resolving deeper political economy issues.
Kayani said problems around devolution, taxation and resource distribution remain unresolved. He announced that under the National Tariff Policy, Pakistan aims to reduce customs duties to a maximum of 15 percent, with no additional customs duties over the next five years. He said privatization efforts, including Pakistan International Airlines, reflect a shift toward improving government performance.
Moderator Robina Akhter said development should be measured by improved living conditions, not just growth figures. She noted that while Pakistan’s neighbors have sustained higher growth rates, Pakistan continues to experience cycles of expansion and contraction, underscoring the need to address core structural challenges.
The session was part of ThinkFest discussions focused on Pakistan’s economic future and reform priorities.
