Pakistan’s window of opportunity

The world is at a pivotal juncture in global economic history. The international trade landscape is undergoing a significant upheaval, marked by the United States’ recent imposition of sweeping tariffs. These measures have escalated trade tensions, prompted retaliatory actions, and raised concerns about a potential global recession.

The ripple effects are being felt worldwide. In Europe, fears of market flooding with redirected Chinese goods have intensified, sparking discussions on protective measures.

Financial markets have turned volatile, and global supply chains are experiencing unprecedented disruptions. Many fear this marks the end of multilateralism, with bilateral economic and political relations set to drive trade and integration in the future.

These developments present both challenges and opportunities for Pakistan. As traditional trade routes and partnerships are re-evaluated, we must urgently reassess our economic strategies. Our geographic location and emerging market status could position us as a strategic alternative in evolving global supply chains.

Pakistan remains mired in a perpetual economic crisis, having missed the globalization wave that helped other emerging economies ascend. As others made strides to integrate into global value chains, the race became harder for Pakistan. Now, as the world undergoes a reset, lagging nations like ours have an opportunity to unleash their potential.

To capitalize on this, we must commit to comprehensive reforms, enhance trade facilitation, and foster an investment-friendly environment. Only then can Pakistan navigate current uncertainties and emerge as a resilient, dynamic player in the global economy.

There are tentative signs of macroeconomic stabilization. Inflation has plummeted, external vulnerabilities have eased, and fiscal primary surpluses are beginning to tame the debt burden. Yet, Pakistan remains dependent on IMF programmes, unable to operate with full autonomy. The real challenge is finding a sustainable growth trajectory.

Looking ahead, Pakistan must prepare for a future where reliance on multilateral lenders such as the IMF and World Bank is no longer viable. This should serve as a wake-up call toward greater self-reliance. Encouragingly, there are silver linings to build upon.

Home remittances — Pakistan’s key source of external inflows — crossed the $4 billion monthly mark for the first time and are likely to surpass the combined value of goods and services exports this year. In a post-tariff world where global exports are facing headwinds, especially with the US turning inward, Pakistan’s remittance resilience offers a competitive edge in the short to medium term.

This is the time for strategic thinking. We must aim to revive the glory of Pakistan’s economy, reminiscent of the 1960s to 1980s — an era when PIA was among the top global airlines and Karachi was a vibrant commercial hub. Pakistan’s economic planning in the 1960s was a model for others. We must now reclaim that legacy in a changing world order.

To do so, the country needs investment — foreign and domestic, public and private. But let’s be clear: investment will not come without clarity, confidence, and competitive returns. FDI cannot be treated as an afterthought — it must be at the heart of our growth strategy, with sectoral plans backed by credible incentives and infrastructure.

The Special Investment Facilitation Council (SIFC) is a step in the right direction, but it must deliver results. Investors are seeking execution, not just engagement. For years, we’ve acknowledged the fiscal burden of loss-making SOEs. Now, the needle is finally moving.

The privatization of PIA is more than a transaction — it is a symbol. It shows that Pakistan is finally willing to confront inefficiency and move toward rational governance. But this must only be the beginning. Pakistan Railways, DISCOs, and other SOEs need a similar reform mindset. Whether through privatization or public-private partnerships, the focus must be on transparency, service delivery, and fiscal prudence.

Pakistan cannot grow on consumption and borrowing alone. Exports must lead. As countries like Bangladesh and Vietnam — heavily reliant on US markets — struggle, industries may begin relocating from China. Pakistan can seize this moment — but only with preparation.

That preparation begins with confronting the elephant in the room: a persistently high fiscal deficit. Our tax model is broken. With a tax-to-GDP ratio hovering around 9.5%, the formal sector is taxed at near-Scandinavian levels.

Banks now face an effective tax rate exceeding 55%. Leading companies pay nearly 50%, and top-tier salaried individuals are taxed at 38.5%. Meanwhile, agriculture, real estate, and informal retail — sectors contributing over 45% to GDP — remain grossly undertaxed. Broadening the base must be the core objective of Budget FY26. That means ending exemptions, digitizing enforcement, and protecting compliant taxpayers.

In recent years, Pakistan has witnessed a mass exodus of talent. Over 800,000 people — many highly educated professionals — left the country in 2023 alone. The message is clear: when opportunity doesn’t knock at home, our youth look elsewhere. Brain drain is not just the loss of people — it’s the loss of innovation, productivity, and national confidence. To reverse this trend, we must rationalize the tax burden on salaried professionals, improve public services, and create credible career paths within the country.

It’s time to regroup and bring our talent back — to make Pakistan great again.

Copyright Business Recorder, 2025