Economic ills

DESPITE an oversold stabilisation, many of our economy’s vital signs continue to falter. The economy resembles a patient out of the ICU but still in hospital.

Since 2024, our per capita GDP growth has been near zero — sadly, South Asia’s slowest recorded pace. Even our recent growth spurts, brief and import-led, have given way to longer busts, draining reserves and sending us back to the IMF’s tough terms that extend low growth.

Once near the region’s top performers in per capita GDP, we now risk falling to the bottom. As incomes stall, poverty rises. Our extreme poverty rate (23 per cent) is near the bottom regionally. It’s about 10 times India’s, against near parity in 2011.

Our GDP’s composition tells a bleak tale too. It’s consumption-heavy (82pc) but investment-light (14pc) — on both counts among the region’s worst. India and China invest over 30pc of GDP, creating jobs and capacity for today and later — much better than our consumption binges. Limiting job, technology, and export growth, industry’s share has been nearly a fifth for over 50 years versus a quarter in India and Sri Lanka and a third in Bangladesh.

Low investment causes low growth, but its origins and destinations matter too. We court foreign capital while ignoring local capital. Foreign capital must earn and save more dollars than it repatriates and create jobs and local capacity. But we get it mostly in domestic sectors, which later depletes reserves.

Unlike our peers, we chase a few rich states for capital rather than prioritising diversified private capital. We shun creative ways to boost local savings and capital. So, we remain capital-starved — yet we quickly drain reserves and risk the haughty whims of rich states.

Capital droughts in export sectors cause dollar and job droughts. From a peak of 17pc in 1992, exports now barely reach a tenth of our GDP — South Asia’s second-lowest share, below even Afghanistan’s. Low-quality compounds low quantity. Harvard’s Economic Complexity Index ranks us 89th among 145 states. So our exports face intense competition but return little. Exports rarely cover imports, creating large trade gaps.

Dreary metrics mirror a sinking economy.

Remittances partly plug the gap. But exports keep workers at home and families intact, create jobs, earn dollars, and pay taxes.

Remittances separate families and often don’t create jobs or pay taxes directly. They frequently fuel consumption, while exports are fuelled by investment. Remittances now almost equal our exports, as it is easier to send workers abroad than goods (India earns six times as much from exports as from remittances). Even so, we often run large external deficits that lead to a crisis as booms turn into busts.

Low growth and weak efforts leave our coffers lean. Tax revenues barely reach 11pc of GDP — which is among South Asia’s lowest. Indirect anti-poor taxes provide about half our tax target, down from about two-thirds in 2021-22. New direct taxes further burden the wallets of salaried persons and formal industry, while favoured sectors pay low taxes. Spending prioritises upkeep over uplift. Expenditure hogs over 90 paisas out of every federal budget rupee; development consoles itself with just five.

These twin deficits force us to keep our borrowing bowl out. Our public debt-to-GDP ratio of 73pc is lower than the Japanese and Singaporean levels of over 150pc. But our repayment muscle better depicts our debt overhang.

On the share of federal outlays spent on interest alone, we rank among the worst globally. We use debt not only to invest or meet recurrent expenses but also to beef up rese­rves. IMF debt and deposits by rich states, which impose odious economic and political conditions on us, now exceed even our highest-ever reserves. These dre­ary metrics mirror a sinking economy. Low investment and import-led growth widen the twin deficits to swell debt. Interest outlays then leave little money for growth, creating a vicious circle.

A weak economy reflects perverse politics. Poor countries need both a developmental and a welfare state. Ours is a parasitic and apathetic state run by rapacious rulers. This isn’t a tragedy of ineptitude alone: willing rulers can easily hire merit. It’s a deliberate design by kleptocrats who may lose their wealth and power if there is real progress.

Nor is this the tale of a few eras. Our autocracies, too, delivered short-term growth, leading to conflict and undercutting future progress. Ideas abound on how to pursue sound progress, but minds that will champion and implement them well do not. Only democracy and civilian sway will bring such minds to the helm of affairs.

The writer has a PhD degree in political economy from the University of California, Berkeley, and 30 years of grassroots to senior-level experience across 50 countries.

murtazaniaz@yahoo.com

X: @NiazMurtaza2

Published in Dawn, November 10th, 2026