Pakistan’s current economic strategy, which has prioritised stabilisation over growth, is exacting a heavy toll on ordinary citizens. Businesses and consumers across the board are feeling the brunt of constrained activity, high living costs and limited opportunities. Government spokesmen continue to talk about the advantages of economic stabilisation. However, maintaining stabilisation by strangulating the economy for five straight years has proved counterproductive. The core issue is that fiscal reforms are missing—both in broadening the tax base and in curtailing the government’s running expenditure.
There is no doubt that the government has achieved primary fiscal surplus, while the consolidated fiscal deficit stands at its lowest level in over two decades. These are notable achievements but they do not help alleviate poverty. According to World Bank data, extreme poverty—people living below $3 per day—was at 23 percent in Pakistan in 2024. That rate is more than four times higher than in Bangladesh (5.9 percent) and India (5.3 percent). Almost half of Pakistan’s population struggles to afford adequate food, housing, education, healthcare and other essentials, as 48 percent of the population lives below $4.2 per day. This proportion is more than double that recorded in the other two countries. Pakistan remains far behind its regional peers in human development outcomes, a gap that continues to widen under the current policy mix. The debt burden is also rising, further constraining the room for manoeuvre and placing additional pressure on future budgets.
The current stabilisation policies are making the situation even worse. Vulnerable people need employment opportunities, and these can only be generated through higher growth. Stabilisation is only giving comfort to the elite while making life miserable for most. Growth requires fiscal spending on development and rationalising taxation in the formal sector. Both are missing.
There is no decline in the government’s running expenditure. Foreign trips and private jet travel are increasing. The number of ministers and advisers continues to grow, and there is no end to the rewards for the ruling elite. To meet the fiscal targets, the axe only falls on development spending. The federal Public Sector Development Programme averaged 0.6 percent of GDP over the last five years, compared with 1.3 percent in the preceding five years. This is inexcusable in a country where 25 million children—35 percent of the total aged 5 to 16—are out of school and 40 percent of children under five are stunted. There should be a health and education emergency in the country. On the contrary, the government is cutting this expenditure to meet the International Monetary Fund’s targets while doing nothing meaningful to reduce its own slack.
Experts instead recommend a thorough overhaul of the present failed economic strategy. The focus must shift from stabilisation to growth. A central pillar of that shift is reforming a taxation system that remains heavily dependent on indirect taxes, which punish the poor. Indirect taxes raise the cost of essential goods and services and fall disproportionately on lower-income households that have little ability to absorb additional burdens. Growth-oriented policy requires generating additional revenues by broadening the tax base and bringing retailers, traders and other currently undertaxed groups into the net. There should be no discrimination. The culture of untouchability for powerful segments must end before it is too late. The government needs to confront this problem head-on.
At the same time, the government is required to curtail its wasteful expenditure. Space for development and social-sector spending can only be created by lowering all other types of outlays. Without doing so, the country may keep falling into the abyss, and the disconnect between the masses and the ruling elite may continue to widen. There is a limit to how long things can be allowed to slip like this. Eventually, this could explode and wash away everything.
Stabilisation has delivered short-term fiscal metrics—primary surpluses and a lower deficit—but at the cost of suppressed growth, rising poverty and deteriorating human development indicators. Debt continues to accumulate under the weight of high financing needs and limited economic expansion. Businesses face constrained demand and an uncertain outlook. Consumers confront higher prices for essentials while employment opportunities remain scarce. Political parties that once expected economic stabilisation to translate into public goodwill are discovering that the human cost is becoming politically visible.
A decisive change of course is required. The government must create genuine fiscal space by restraining non-essential current spending, ending the pattern of elite privileges, and reforming taxation so that the burden is shared more equitably. Only then can resources be directed toward development projects, education and health—areas that have been starved for years.
Higher growth is the only sustainable path out of the current trap of low growth, high poverty and rising indebtedness. Without that shift, the stabilisation that has been pursued so single-mindedly risks becoming a long-term liability rather than a foundation for recovery. The warning signs are already clear: stagnant human development, a large share of the population unable to meet basic needs and children out of school and stunted. The time for cosmetic adjustments has passed. An overhaul that places growth, fair taxation and disciplined public spending at the centre of policy is the only realistic way forward.