Pakistan’s Low-Growth Trap: Why Debt, Taxes, And Reform Narratives Keep Failing |
Pakistan’s perpetual economic dilemma is not merely insufficient tax collection or an excessive debt burden, but a prolonged low-growth trap, courtesy of the unchallenged imprudent policies of incompetent, predatory, and parasitic ruling elites, and the existence of an extractive state that has hollowed out fiscal capacity and magnified every imbalance.
An elitist economy growing at around 2.6–2.8 per cent in fiscal year (FY) 2024–25, with an average population growth of about 2.5 per cent, cannot sustainably service debt, finance development, or meet the social needs of citizens, no matter how aggressive the revenue efforts.
Debt distress is thus a symptom, not the disease. If Pakistan were to double its GDP over a reasonable horizon through sustained, productivity-led growth, the debt-to-GDP ratio would decline automatically, fiscal space would expand, and revenue mobilisation would follow organically. Without escaping the low-growth equilibrium through strategic investment, however, higher taxes and repeated borrowing merely redistribute stress rather than resolve it.
Pakistan’s persistently low economic growth is no longer a cyclical aberration; it has hardened into a structural condition. Over the past decade and a half, average real GDP growth has hovered around 3–4 per cent, barely enough to keep pace with population growth, let alone generate meaningful employment or reduce inequality.
In recent years, growth has fallen even lower, exposing an economy that expands briefly under favourable conditions and contracts sharply once those conditions fade. This pattern is not explained by a single shock or external disruption. It reflects a deeper governance failure: the repeated substitution of assertion for substance, of policy labels for structural reform, and of short-term extraction for long-term productivity.
Why Pakistan’s Population Policies Stalled: Weak Incentives, Low Agency, And Lost Momentum
Structural diagnosis of low growth
The first and most visible constraint is weak productivity growth. Pakistan has failed to undergo a sustained structural transformation. Labour remains trapped in low-productivity sectors, industrial upgrading is sporadic, and value-added exports remain limited. Investment rates remain persistently and pathetically low, reflecting uncertainty, policy volatility, and weak institutional credibility. Without productivity gains, growth cannot be inclusive or durable.
Second, fiscal stress crowds out development. Provisional fiscal operations data for FY 2024–25 indicate that total revenue reached approximately 15.7 per cent of GDP, comprising tax revenue of around 11.1 per cent and non-tax revenue of about 4.6 per cent. In contrast, total expenditure stood at roughly 21.1 per cent of GDP, resulting in an overall........