- 77 years of resilience and lessons shaping Pakistan’s next economic chapter
- Economy has shown resilience, making progress in agriculture, textiles, services and human development
Since its inception in 1947, Pakistan has navigated a complex and dynamic economic landscape, marked by periods of rapid growth, stagnation, and crisis. From the early years of industrialization and agricultural development to the current era of globalization and technological advancement, Pakistan’s economy has undergone significant transformations. Despite facing numerous challenges, including political instability, corruption, and external shocks, the country has made notable progress in various sectors, including textiles, agriculture, and services. However, the economy still grapples with structural issues, such as a large fiscal deficit, low tax-to-GDP ratio, and inadequate investment in human capital.
By analyzing the country’s economic performance during different periods, we can gain valuable insights into the factors that have shaped its growth trajectory. The economic policies and strategies adopted by successive governments, the impact of external factors such as global economic trends and geopolitical developments, and the role of domestic institutions and stakeholders in shaping the country’s economic future are all crucial aspects to consider. By reflecting on the past and present, we can identify lessons for the future and propose potential pathways for sustainable and inclusive economic growth in Pakistan.
Decade of Economic Development:
Pakistan’s economy began to take shape in the early years after independence. The country faced significant challenges, including a lack of infrastructure, limited resources, and a large refugee population. Despite these challenges, the government implemented policies to promote industrialization and agricultural development. The establishment of the Pakistan Industrial Development Corporation (PIDC) in 1950 marked a significant milestone in the country’s industrialization drive. The government also invested heavily in infrastructure development, including the construction of roads, bridges, and irrigation systems. The Indus Basin Irrigation System, one of the largest irrigation systems in the world, was also developed during this period. During this period, Pakistan’s economy experienced rapid growth, with the GDP growth rate averaging around 5% per annum. The country also made significant progress in agriculture, with the introduction of new crops and farming techniques. The Green Revolution of the 1960s, which introduced high-yielding varieties of wheat and rice, further boosted agricultural production. However, the economy was also characterized by significant income inequality, and the benefits of growth were not evenly distributed across the population. The rural-urban divide widened, and the majority of the population remained poor.
Decade of Nationalization and Economic Liberalization:
The 1970s saw a significant shift in Pakistan’s economic policies, with the nationalization of key industries, including textiles, steel, and banking. While the nationalization policy aimed to promote social welfare and reduce income inequality, it ultimately led to inefficiencies and corruption. Many state-owned enterprises (SOEs) became loss-making, and the government’s fiscal deficit increased. In the 1990s, the government began to liberalize the economy, introducing policies to promote private sector growth and foreign investment. The establishment of the Securities and Exchange Commission of Pakistan (SECP) in 1997 marked a significant step towards regulating the capital market. Despite these policy changes, Pakistan’s economy continued to face significant challenges, including high inflation, large fiscal deficits, and a lack of competitiveness. The country’s economic growth was also affected by external factors, including the Soviet-Afghan War and the subsequent economic sanctions imposed by the international community. However, the period also saw significant progress in the IT sector, with the establishment of the first software technology park in Lahore. Many Pakistani companies began to export software and IT services, earning foreign exchange and creating new job opportunities. The government’s policies to promote entrepreneurship and innovation also led to the growth of small and medium-sized enterprises (SMEs).
Decade of Globalization and Economic Challenges:
In the past 25 years, Pakistan’s economy has become increasingly integrated into the global economy. The country has implemented policies to promote foreign investment, including the establishment of special economic zones and tax incentives. The IT sector has continued to grow, with many Pakistani companies becoming major players in the global outsourcing industry. The country has also become a significant player in the global textile industry, with many Pakistani garments and textiles being exported to countries around the world. However, the economy has also faced significant challenges, including high inflation, large fiscal deficits, and a lack of competitiveness. In recent years, Pakistan’s economy has faced significant external shocks, including the COVID-19 pandemic and the global economic slowdown. The country has also struggled with political instability and corruption, which have undermined investor confidence and hindered economic growth. Despite these challenges, Pakistan’s economy has shown resilience, and the country has made progress in areas such as poverty reduction and human development. The government has implemented policies to promote social welfare, including the Benazir Income Support Program (BISP) and the Ehsaas Program. However, sustaining economic growth and achieving long-term prosperity will require continued policy reforms and investments in human capital and infrastructure. The country needs to address its structural issues, including a large fiscal deficit, low tax-to-GDP ratio, and inadequate investment in human capital, to achieve sustainable economic growth.
Path forward
Over the course of Pakistan’s 77-year journey, the economic cost of poor governance and systemic neglect has been staggering. From missed opportunities to build a sustainable and inclusive economy to chronic underperformance across key sectors, the consequences have touched every facet of national life. Despite intermittent bursts of growth and progress in areas like agriculture, textiles, and services, the country continues to grapple with deep-rooted structural issues such as persistent fiscal deficits, a low tax-to-GDP ratio, and inadequate investment in human capital. These challenges have not only stunted long-term prosperity but also eroded investor confidence. One of the most significant economic setbacks occurred with the separation of East Pakistan in 1971, a turning point that led to the loss of major sources of foreign exchange earnings, including jute and tea production, and a vast consumer market for West Pakistani goods. The underlying causes of these losses are complex, but recurring themes emerge: weak policy-making, institutional inefficiencies, and governance failures have consistently undermined economic resilience. Political instability, corruption, and frequent shifts in economic policy have created an uncertain investment climate. Moreover, Pakistan has struggled to invest adequately in its people education and healthcare have long been underfunded, limiting the country’s ability to fully harness its youthful population and unlock its demographic dividend. This has contributed to a brain drain, with many skilled and ambitious individuals seeking better opportunities abroad. The economy has also suffered from a lack of competitiveness and innovation. Entrepreneurship has not been cultivated at scale, and risk-taking has been discouraged in a system that often rewards conformity over creativity. In parallel, environmental degradation including rising pollution levels, water scarcity, and biodiversity loss threatens to compound economic vulnerabilities in the decades to come.
Yet, despite the weight of these setbacks, Pakistan’s story is not one of hopelessness it is one of lessons waiting to be learned and opportunities still within reach. To shape a better economic future, Pakistan must confront its past and commit to a new path forward. This requires collective action not just from policymakers, but from all citizens. It starts with demanding better governance, transparency, and accountability at every level of leadership. It means prioritizing long-term investments in human capital ensuring quality education, accessible healthcare, and skills development for the youth who represent the country’s greatest asset. Innovation, entrepreneurship, and a competitive business climate must become national priorities. Supporting small and medium-sized enterprises (SMEs), embracing digital transformation, and creating enabling environments for start-ups are essential steps to unlock job creation and economic dynamism. A shift in mindset is required: from dependence on outdated economic models to embracing creativity, technology, and forward-thinking policies. At the same time, environmental sustainability can no longer be an afterthought. Combatting climate change, conserving natural resources, and integrating green practices into economic planning will be critical not only for the ecosystem but for human health and long-term growth. While the past 77 years have been marked by lost potential, they have also offered valuable insights. The future of Pakistan will be shaped not by the weight of its past, but by the actions of its people today. By learning from history, committing to inclusive development, and fostering a culture of responsibility and innovation, Pakistan can build a more stable, prosperous, and resilient future.
The time for change is now. Pakistanis must take ownership of their economic destiny championing reforms, nurturing talent, and embracing sustainable practices. In doing so, they can unlock the country’s true potential and ensure a brighter tomorrow for generations to come. Ultimately, the future of Pakistan lies in the hands of its citizens. It is they who will decide whether the next chapter is written in the language of progress, hope, and unity.
The Author is MD IRP/Faculty Department of H&SS-Bahria University Karachi