The story of Pakistan’s economy, from the beginning, has been almost influenced by the boom and bust cycle which is the result of over-dependence on foreign aid, political chaos, and intrinsic weaknesses. Such persistent difficulties have made it impossible for the country to sustain growth. The recently announced ‘Uraan Pakistan’ initiative, National Economic Transformation Plan from 2024-2029 actually boasts of being a cure for all such systemic maladies.
Pakistan’s export-to-GDP ratio stagnates at 10%, highlighting the need for structural reforms and diversification into high-value sectors.
Aimed at achieving the “5Es” – Exports, E-Pakistan, Environment, Energy, Equity, and Empowerment – the plan seeks to put Pakistan along the path of export-led growth and to create a trillion-dollar economy for reaching the G-20 status. But such grand plans cannot become reality merely through policy pronouncements but need solid evidence of outstanding strategy, political will in terms of governance, stability in the realm of politics, and so forth.
A key aspect of the initiative is its focus on exports, a sector that is often described as under-performed, yet has been instrumental in sustaining the country’s economy. A comparison of this ratio with the regional competitors, Vietnam and Bangladesh, shows that Pakistan’s export-to-GDP ratio which has stagnated around 10% is quite dismal. In a situation where the plan in question rightly talks of venturing into high-value sectors such as Information technology, engineering goods, and pharmaceuticals the reality is a different story.
The lack of competitiveness in supply chains, poor marketing and commercial infrastructure, and heavy dependence on well-established markets in themselves serve to foreclose the hoped-for expansion of the export base. Expanding trade agreements with non-traditional markets such as Africa and Central Asia could potentially work.
Absent these factors, there will not be any response from the markets despite the attempts being made to facilitate the process. The persistent trade gap creates an environment for the export policy to be coherent and long-term, however, policies of this nature are prone to failed implementation and discontinuation.
The digital economy, touted as a game changer growth opportunity and business model under the E-Pakistan pillar, is a kind of double-edged sword. The IT exports of Pakistan, reaching $2.6 billion in FY2023 and hitting $1.5 billion in the first five months, look encouraging but in the context of the budding global digital economy, there is still a lot to achieve. What makes the matter worse is the broad-based digital divide with remote areas lacking even the most basic internet connectivity which deepens the disparities.
The increase of broadband coverage and the establishment of data centers are important but they call for enormous funding and institutional capacity. In addition, the lack of effective cyber security measures puts the digital backbones at risk, thus, jeopardizing the prospects of an IT led economy. Moreover, the emphasis on supporting the establishment of a start-up ecosystem is a good strategy, however, if structural issues such as coherent regulation and scarce financial resources are not addressed, this sector’s development will be thwarted.
Pakistan’s climate crisis overrides the opportunity for the country to develop sustainably. The country is among the top ten countries that are vulnerable, and it is experiencing devastating climate disasters. Although the focus of this plan is keen environmental strategies that use renewable energy, conserve water, and promote urban development, a yawning gap exists between the policies and how they are implemented.
Pakistan’s reliance on renewable energy sources remains extremely low at approximately 6.8% in 2024. This is in stark contrast with the rest of the world and illustrates the lack of urgency in moving to cleaner energy sources. Furthermore, urban greening and afforestation programs are generally few and far between and tend to be highly politicized with little on-the-ground effect.
Digital divide and lack of cybersecurity measures threaten the potential of the E-Pakistan digital economy strategy.
It means that climate resilience must be seen as an active endeavor rather than one that is entirely reactionary and that it is necessary to ensure sustainability considering the economy as a whole. Unfortunately, environmental policies remain secondary due to budgetary constraints and other priorities, leaving the country poorly positioned to address the acute environmental challenges it faces.
Energy reform, another critical pillar of this campaign, reiterates the contradiction in the Pakistan power sector. The astounding circular debt of over $8.6 billion and institutional inefficiencies add to the exacerbation of the energy sector which is already weak. There is a need to focus on renewable energy generation and decreasing transmission losses but it does not suffice by itself.
Diversified renewable energy systems, especially in remote rural areas, could be tremendous in solving temporary challenges, however, achieving a viable long-term solution would require policy evolution and private funding. Development of energy sufficiency and efficiency is elusive if governance failure and financial management problems are not resolved in the energy sector.
Previous failures in this sector demonstrate that it is of top priority to create and strictly implement efficient and comprehensive policies but the existing policies are still thwarting meaningful progress.
There is an overlay of exclusion and marginalization that has always existed, that the Uraan Pakistan criteria purports to rectify through promoting equity and empowerment within the framework. However, the economic participation of women and other ‘disadvantaged’ groups still remains disconcertingly low due to structural and cultural impediments.
Women’s labor force participation at 21% is a glaring indicator of untapped harnessed opportunities and indeed, the plan puts forward initiatives to fill in these gaps but the lack of thorough transformation hinders the success of these initiatives.
Social safety nets as well as skills development initiatives are indeed important but they are not enough, this serves to showcase the depth of the journey that lies ahead. There is always a bit of misplaced rhetoric of inclusiveness that clouds the practical vacuum in many words which creates skepticism about whether these pronouncements or measures can really deliver the sometimes needed.
Energy reforms face obstacles like $8.6 billion in circular debt, requiring private investment and policy evolution for long-term solutions.
Widespread support is critical for overcoming the various structural and systemic constraints/issues that may hinder Uraan Pakistan’s realization. Unfortunately, a great regularity of political unrest has been an impediment to policy coherence as well as governance. Tending to be on the priorities of populism rather than seeking growth of the economy in the post-independence era has been the attitude of governments, which should not encourage the expectations of the initiative achieving its scheduled time frame.
An absence of political consensus across major parties, together with a lack of legal clauses that would guarantee policy semblance, makes the project a likely candidate for adding to the long list of non-completed reforms. Additionally, relatively unstable economic zones and terrorism and regional politics/other reasons hinder foreign investment. A continuous force without a definite strategic thought to assist security depreciation adds to a lack of ludic effect on the economy.
One of the main challenges is perhaps Uraan Pakistan’s initiation to attract adequate financing. Importantly, Pakistan’s overall external debt has climbed above the 133.5 US dollar billion mark, and with the payment of debt consuming a large part of the federal budget, the potential for further development of the country is very restrictive. Well, reliance on IMF Re-lending cannot take us far rather it is temporary relief, while on the other side, importantly and irritatingly the tax to GDP ratio is among the lowest regionally.
Diaspora bonds, Public-private partnerships can provide the solutions, but these need institutional capacity and transparency which is in short supply. Additionally, the infrastructure deficits along with the ineffective outdated systems cross inflation costs and affect the effectiveness across sectors.
While Uraan Pakistan is perceived to be a roadmap for economic transformation, in its current form it contains systemic weaknesses which inhibit its practical implementation. In order to address these deficiencies, it calls for strong, honest and participatory policy as well as strong political will for governance and institutional development. The expectations, of course, are great.
Without political stability and institutional capacity, Uraan Pakistan risks joining the list of unrealized aspirations in Pakistan’s history.
Understanding Uraan Pakistan as an initiative to get out of the perpetual stagnation cycle sounds very interesting, however, for its successful implementation, the political will to come out of self-serving inefficiencies and allow an environment for inclusive and long-lasting growth is what matters. Uraan Pakistan might soon find itself on the list of unrealized aspirations in the political and economic history of Pakistan – if action is not taken on an immediate basis.
Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.
