The recent downgrading of Pakistan’s growth forecast by the International Monetary Fund (IMF) from 3% to 2.6% is cause for deep concern. While such marginal revisions may appear insignificant on paper, their implications are profound in a country where over 42% of the population already lives below the poverty line. The World Bank’s warning that an additional 1.9 million people could fall into poverty this year only adds to the urgency of the situation. Clearly, stabilisation and modest economic growth are not enough to pull millions out of poverty or to absorb the influx of young workers entering the job market each year.
Economists have long argued that Pakistan needs consistent annual growth of 6% to 8% in order to create sufficient employment and reduce poverty meaningfully. Yet, the IMF’s latest World Economic Outlook paints a picture of sluggish progress. Despite some signs of easing inflation and fiscal stabilisation, the economy remains vulnerable to external shocks—most notably the escalating global trade tensions triggered by the United States.
The IMF’s downgraded projections stem largely from the uncertainties created by U.S. President Donald Trump’s imposition of reciprocal tariffs on trade partners, including countries like Pakistan that maintain a trade surplus with the U.S. These measures have not only strained bilateral trade relations but also contributed to a wider climate of unpredictability that deters investment and economic planning.
In the face of this uncertainty, Pakistan’s policymakers must engage diplomatically with the U.S. to preserve access to its vast consumer market. There are reports suggesting that Islamabad might offer American firms increased access to rare earth minerals and reduce barriers to U.S. imports. While pragmatic engagement is necessary, it must not come at the cost of compromising national interests or long-term economic independence.
What’s more urgent, however, is the need to overhaul the country’s economic strategy. For far too long, successive governments have opted for short-term, politically safe economic fixes. These temporary solutions might stave off crises in the moment, but they do little to build sustainable growth or resilience.
It is time Pakistan musters the political courage to implement bold structural reforms. These include overhauling the tax system, improving governance, liberalising the business environment, and investing in human capital. Most critically, the country needs to focus on industrial and agricultural productivity, powered by technology transfer and foreign direct investment (FDI). Without these foundational shifts, even a stabilised economy will remain stagnant for the masses.
Pakistan stands at a critical economic juncture. The choice is stark: pursue reform with resolve or remain stuck in a cycle of slow growth and deepening poverty. Growth, without structural change, will never be enough.
