A new economic moment for Pakistan

A new era is dawning, marked by shifting global trade dynamics, rising protectionism, and an unraveling of long-standing multilateral frameworks. The United States’ recent imposition of sweeping tariffs has only intensified these tectonic shifts, triggering retaliatory moves, shaking financial markets, and straining global supply chains. The post-war economic order, long reliant on cooperation and open markets, is giving way to fragmented bilateralism. In this climate of uncertainty, opportunities emerge for those willing to act decisively, and Pakistan must be among them. As Europe braces for a surge of redirected Chinese goods and the US turns inward, the very architecture of globalization is being redefined. For Pakistan, this could be a rare chance to participate. Encouragingly, the macroeconomic situation is showing signs of tentative improvement. Inflation is falling. External pressures have eased. The fiscal primary balance is in surplus. However, these gains remain fragile, too dependent on IMF programs, short-term fixes, and borrowing. The real test is sustainability. Pakistan cannot rely indefinitely on multilateral lifelines. That dependence is a warning, not a comfort. One bright spot is remittances, which recently crossed $4 billion in monthly inflows, a historic high. In a world where goods trade is slowing and global demand is volatile, Pakistan’s resilient diaspora offers a lifeline. The focus must shift from survival to strategy. If Pakistan is to emerge as a credible player in tomorrow’s supply chains, it must get serious fast. This begins with structural reform. Our tax system is broken. The tax-to-GDP ratio lingers at a paltry 9.5%. Meanwhile, salaried professionals and formal businesses face some of the highest effective tax rates in the region. Banks pay over 55%, top corporates nearly 50%, and senior professionals 38.5%. At the same time, vast swathes of the economy, real estate, agriculture, and informal retail remain undertaxed and under-regulated. This duality is both unjust and unsustainable. Budget FY26 must prioritize broadening the base, ending arbitrary exemptions, digitizing enforcement, and shielding compliant taxpayers from further burden. Fairness breeds compliance; inequity breeds evasion. No country has grown on consumption and borrowing alone. We need investment, foreign and domestic, public and private, to drive growth, exports, and innovation. The Special Investment Facilitation Council (SIFC) is a promising platform. However, investors want results, not rhetoric. For decades, we have acknowledged the burden of loss-making state-owned enterprises (SOEs). Now, there are early signs of movement. The privatization of PIA, long considered politically impossible, is finally underway. This is more than a financial transaction; it is symbolic. A signal that Pakistan is willing to confront inefficiency and reimagine governance. However, PIA must not be the end, only the beginning. Pakistan Railways, DISCOs, and other SOEs must undergo similar reform, whether through privatization or public-private partnerships. Transparency, service delivery, and fiscal discipline must be the metrics that matter. Perhaps the greatest tragedy of our economic stagnation is the mass exodus of talent. Over 800,000 Pakistani highly skilled professionals left the country in 2023. Brain drain is about lost innovation and weakened productivity. Reversing this trend requires bold steps. Rationalize the tax burden on professionals. Reform public services. Create credible domestic career pathways. If opportunity does not knock at home, people will keep knocking elsewhere. This is not a moment for incrementalism. The global economy is being rewired. Pakistan, long on the margins, has a narrow window to leap forward. We must reclaim the ambition of the 1960s — a time when Pakistan’s economic planning was studied across the developing world, when Karachi was a vibrant trade hub, and PIA soared among the world’s top airlines. That legacy is not lost. It is waiting to be revived. To do so, we need clarity of vision, consistency of policy, and courage in execution.