Seven reasons why Pakistan may remain an economic basket case

It all has to do with the type of state it is

The different narratives surrounding Pakistan often paint it either as a failing state or a picture of a nation brimming with potential, perpetually on the cusp of greatness. Yet, this potential seems forever out of reach, a mirage shimmering in the desert. Pakistan’s current system, characterized by an unyielding status quo, is the primary culprit behind its economic woes. Pakistan is currently beset with what has been termed a polycrisis by many analysts. For over seven decades, Pakistan has been often described as a “security-cum-rentier state”. Not sure if there is a better description than this. This also means that the Pakistan you see today is a Pakistan created in the image of its security forces and other elite and not the one envisioned by its founding father or one in line with aspirations of the ordinary citizens. This model of a security-cum-rentier state is no longer sustainable.

Pakistan is now on track for its 24thIMF programme since independence in 1947. While this may bring some semblance of macroeconomic stability in the short term, the serious issue of long-term sustainable economic growth that can lift Pakistan from a low-income to a middle-income country continues to remain unaddressed. Since inception Pakistan has been an economy that is primarily consumption-oriented with debt-fuelled growth.

As such, here we explore seven key reasons why Pakistan may remain a “basketcase” for the foreseeable future unless it undergoes a drastic system overhaul and the irrelevant and disastrous security-cum-rentier state model is completely dismantled.

 The Overarching Shadow: Military Interference in Politics

Pakistan’s political landscape has been indelibly marked by the military’s persistent interference. Since its inception, the armed forces have held an outsized role, often dictating the course of politics through coups and covert influence. This has had a debilitating effect on civilian institutions. The judiciary, for instance, has struggled to assert its independence, creating a system where the military’s word often carries more weight than the law. This weakens the entire democratic framework and discourages investment and progress as well as a level playing field for all.

A Hollow Promise: The Rule of Law 

The rule of law, the cornerstone of any functioning democracy, is a luxury Pakistan struggles to afford. Justice is a fickle commodity, often dispensed based on wealth or connections rather than merit. Weak law enforcement and a culture of impunity creates an environment where the powerful can flout regulations without any consequences, while the average citizen faces an uphill battle seeking redress. This erodes trust in the system and discourages entrepreneurship and innovation, hindering economic growth. This also allows corruption to permeate every level of society, eroding trust in public institutions. Nepotism and favoritism hinder merit-based appointments, stifling innovation and efficiency. A corrupt system perpetuates inequality and undermines social justice. The selective application of justice, rampant corruption, and arbitrary use of power have eroded public trust in the state and undermined the foundations of a functional democracy.

A System Unfit for Education: A Flawed Educational Landscape

Pakistan’s education system fails to equip its youth with the skills and knowledge needed to compete in the globalized world. Rote learning takes precedence over critical thinking and problem-solving skills. This stifles innovation and hinders the development of a skilled workforce crucial for a thriving economy. Additionally, religious extremism often finds fertile ground in poorly educated minds, further jeopardizing social stability. Pakistan’s youth bulge presents an opportunity, but only if it invests in education and skill development. A large segment lacks access to quality education, perpetuating unemployment and underemployment. No nation cannot progress without an educated and skilled workforce.

A Crumbling Infrastructure: Decaying Systems and Public Services

Chronic energy shortages cripple industries and hinder economic growth. Decades of neglect have left the country’s infrastructure crumbling including the debacle of IPPs. Without reliable energy and modern infrastructure, Pakistan cannot compete globally or provide a decent standard of living for its citizens. Pakistan’s infrastructure, from its power grid to its transportation network, is in dire need of an upgrade. This translates into frequent power outages, a dilapidated road network, and a lack of access to basic amenities like clean water and sanitation. Such deficiencies not only create hardships for the populace but also hamper economic activity. Investment in infrastructure is essential for creating a conducive environment for businesses to flourish.

The Great Game: Security Challenges and International Relations

Pakistan’s security landscape is fraught with internal and external threats, including terrorism, insurgency, sectarian violence, religious fundamentalism and geopolitical tensions. The recent tensions with neighboring Iran and Afghanistan, as well as tensions with India, pose significant challenges to Pakistan’s stability and security. Addressing these security challenges requires a comprehensive approach that addresses the root causes of conflict and promotes regional cooperation. Pakistan’s relations with the West, and in particular with the USA as well as China, pose a different set of challenges that cannot be addressed while the country continues to be a security-cum-rentier state.

Impending Disaster: Population and Environmental Degradation

Pakistan faces serious population and environmental challenges, including water scarcity, air pollution, and deforestation. Climate change exacerbates these challenges, posing a significant threat to public health, food security, and economic stability. Without effective measures to mitigate environmental degradation and adapt to changing climate conditions, Pakistan’s future prosperity is at risk.

Bad Governance: Lack of Political Will and Leadership

Lack of political will, effective leadership and bad governance poses a significant barrier to Pakistan’s economic progress. There is and always has been a huge trust deficit between rulers and the ruled. This issue is closely interconnected with military interference and lack of rule of law. Pakistan continues to fail to implement a serious reforms agenda that cuts through all the areas including military, judiciary, bureaucracy and economy. Short-term political considerations often take precedence over long-term planning and reform, perpetuating a cycle of dysfunction and stagnation. Without visionary leadership that is mandated by its citizens and a genuine commitment to addressing the country’s challenges, Pakistan will struggle to break free from its state of inertia

Pakistan’s current system, riddled with the flaws mentioned above, is unsustainable. A nation built on a foundation of military dominance and interference, weak rule of law, and a struggling economy cannot hope to prosper in the long run. Only by completely dismantling the status quo and building a system based on democracy, constitution and rule of law can Pakistan unlock its true potential and emerge as a vibrant, prosperous nation. It all starts with a collective awakening— a realization that silence perpetuates injustice and collective action. Citizens must demand transparency, accountability, fairness and good governance. Our leaders must be held to the highest standards, regardless of their position or influence. Ultimately, the choice really lies with the people and not the country’s elites– perpetuate the cycle of stagnation or break free and build a brighter future for generations to come.

Azhar Dogar
Azhar Dogar
The author is a senior international banker, with degrees in economics and political science from University of Pennsylvania and Brown University

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