Pakistan’s growth crisis continues to deepen with each passing day. The so-called policy of stabilization has promoted de-industrialization and resulted in mounting debt, rising poverty and unemployment. Poverty levels have reached over 42 percent in Pakistan as per the World Bank and the future projections are worse.

This state of affairs has been persisting for the last three years and there is no relief in sight. There is no alternative but to change course. The trade gap continues to widen with imports rising at a rapid pace and exports remaining stagnant. Imports crossed the USD 6 billion mark in October 2025 — the first time since August 2022. The trade deficit continues to widen, reaching USD 12.5 billion, up 38 percent from the same period last year. Without the crutch of home remittances, the economy cannot survive and the current account will be in deep red.

The energy sector is in a mess, while overdue structural reforms continue to gather dust on the shelves. High energy costs have crippled the industrial sector and upset the common household budget. All the time the government is contracting new loans to pay old debt. The economy is hamstrung by extremely low domestic product growth and industrial shutdowns resulting in massive layoffs. This is no way to run a government.

Public debt has crossed 70.2 percent of GDP which is above the 60 percent legislated limit. The total debt burden is now estimated to be over Rs80 trillion. No wonder, interest payments have risen sky high, accounting for nearly 89 percent of federal net revenues. Thus, no resources are available for health, education or infrastructure. To make matters worse, the government’s current expenditure is rising uncontrollably. The cabinet size is the largest ever in the country’s history, comprising 32 federal ministers, 12 ministers of state, 4 advisers to the prime minister, 9 special assistants to the prime minister, and 5 coordinators to the prime minister.

Most of these posts are sinecure with lavish perks and privileges and cost the nation dearly. According to an estimate, the public servants constituting 7 percent of the country’s total labour force are paid generously at the taxpayers’ expense with regular increments which are higher than the rate of inflation – a favour not available to the remaining 93 percent employed by the private sector. Recently, a notification was issued after approval by the cabinet that raised the government employees’ rental ceiling by a staggering 85 percent.

The economy is at a tipping point. We cannot survive for long on borrowed money. Debt is high, growth is low, and private credit is vanishing. Without in-depth structural reforms a collapse is imminent. There is an urgent need to cut current expenditure and reduce the huge size of the cabinet and freeze the salaries/allowances of the National Assembly members as well as of bureaucrats. A regime of austerity at all levels of government will obviate the need for seeking more loans to run the government machinery.

Without stimulating the private sector which runs the industrial engine, the economy cannot realise its full potential. But the painful truth is that the bulk of bank credit is hogged by the government and little is left for the private sector.

According to State Bank of Pakistan data, scheduled banks invested an additional Rs5.8 trillion in the government securities in the first nine months of 2025. Their total holdings have risen to Rs35.85 trillion, about half of all banking assets. At the same time, advances to the private sector fell by Rs1.27 trillion. When the government eats up the largest chunk of bank liquidity, the room for productive credit for the private sector shrinks. As a result, industry cannot function properly and expand, exports stagnate, and job creation slows down.

According to experts, unless GDP expands at the rate of 5-6 percent annually, borrowing costs fall, and the primary fiscal balance turns positive, the debt-to-GDP ratio will continue to worsen in the coming days. A massive reform effort is the need of the day, including  fiscal reforms, taxation system restructuring, more bank credit to the private sector, and a debt reduction strategy. Equally important is to revamp the taxation system which is tilted towards indirect taxes whose incidence on the poor is greater than on the rich. The wealthy must be made to pay more taxes and this can be done only by penalising conspicuous consumption so rampant in our society.

Without further delay the government should devise a new package of incentives for the industrial sector, especially for the units producing exportable items. Our long-term survival depends on initiating an industrial revolution and expanding exports. A policy which depends on IMF loans is self-defeating and doomed to fail. The signs are all there. We should not be blind to them.