Pakistan's Economic Crisis Deepens as Growth Model Fails
The State Bank of Pakistan governor Jameel Ahmad has issued a stark warning that the country's existing economic growth model can no longer support its population of 250 million people. The alarming declaration came during the Pakistan Business Council's Dialogue on the Economy held on Wednesday.
Our business cycles are shortening and as such, our current growth model simply cannot sustain a country of over 250 million people, Ahmad stated, according to The Express Tribune. The central bank chief emphasized that Pakistan has reached a critical inflection point requiring immediate and substantial policy changes.
Decades of Weakening Growth
Ahmad, who has led the State Bank of Pakistan since August 2022, revealed disturbing data showing the country's growth trajectory has been steadily weakening for decades. The numbers paint a concerning picture of economic decline over time.
The average growth rate has slipped from 3.9 percent over the past thirty years to 3.5 percent in the last two decades, and further down to just 3.4 percent over the past five years. This persistent decline highlights the structural weaknesses in Pakistan's economic framework that have accumulated over time.
Pakistan has been caught in a prolonged phase of stabilization, Ahmad noted, explaining that during this period, both citizens and businesses have struggled under the weight of steep taxes, high energy costs, and unchecked government spending.
Urgent Call for Structural Reforms
The central bank governor urged policymakers and private-sector leaders to abandon short-term fixes and instead adopt a comprehensive long-term outlook. He advocated for a fundamental shift toward inclusive and sustainable growth through meaningful structural reforms.
Ahmad specifically recommended that Pakistani businesses should focus on expanding their competitiveness by integrating into global value chains, modernizing production systems, and avoiding shortcuts aimed at quick profits. This approach, he argued, would create more sustainable economic foundations.
The governor also highlighted concerning debt trends, revealing that Pakistan's external debt nearly doubled from $55 billion to $100 billion between 2015 and 2022 without a corresponding increase in reserves. However, he noted some recent improvement, with public external debt remaining broadly unchanged since 2022 while the State Bank's reserves have climbed from $2.9 billion to $14.5 billion.
Broader Economic Challenges
Ahmad's warning comes amid other troubling economic indicators for Pakistan. The country is currently facing its highest unemployment rate in 21 years, which has risen to 7.1 percent according to recent data.
Even more alarming, the World Bank estimates that 44.7 percent of Pakistanis now live below the poverty line, indicating widespread economic hardship affecting nearly half the population.
The timing of these revelations is particularly significant as they came just one day after Planning Minister Ahsan Iqbal blamed the International Monetary Fund for Pakistan's employment crisis. This suggests ongoing tensions between government officials and international financial institutions regarding responsibility for the country's economic challenges.
The combination of rising unemployment, increasing poverty, and unsustainable debt levels creates a perfect storm that threatens Pakistan's economic stability, the governor's remarks implied, though he maintained that with proper reforms and strategic planning, recovery remains possible.
