LAST week on these pages, Khurram Husain wrote about the rapidly diminishing viability of Pakistan’s bailout-dependent economic strategy. Global political realignments under the new Trump administration may very well usher in the end, or at least administer a hard squeeze, of multilateral lending. In its absence, the status quo will prove to be untenable.

The economy’s lack of viability is already sharply apparent since 2022. Dollar liquidity in the shape of geostrategic rents are not forthcoming since the US withdrawal from Afghanistan. Neither are any major investment or aid dollars from Saudi Arabia, the UAE, and China. The IMF programme, while still partly dictated by US foreign policy, is handing out extremely tough targets. Short of a major event that changes Pakistan’s position in global politics, these lean times are going to continue. Fixing the economy to make it grow sustainably without external assistance is the only option left.

The list of fixes has been proposed many times in the last three decades. Reducing wasteful government expenditure through untargeted subsidies and the PSDP, deregulating key prices, offloading state-owned enterprises, expanding the tax base to cover real estate and retail/wholesale trade, and removing government involvement in various markets such as agriculture and electricity are all listed as desirable reforms.

Some of these proposals are essential if for no other reason but to reduce the frequency with which the economy goes bust. But these are frequently put forward in a detached and highly technocratic manner. Rarely do we see reform conversations accompanied by any consideration of what the economy is supposed to do for millions of ordinary Pakistanis.

The absence of an economic vision linked to the people is a real gap in public discourse. However, it is one that can be filled by putting forward a progressive agenda for the economy.

The absence of an economic vision linked to the people is a real gap in public discourse.

Arguably, such an agenda has been missing for the past several decades. With the failure of nationalisation and state-directed development models, progressive and left-wing views on the economy have mostly remained confined to questions of redistribution and welfare policy.

These have yielded some success through federal interventions such as the BISP cash transfer programme, and provincial programmes such as health service delivery and insurance, education scholarships, public transport, and post-disaster housing provision.

However, redistribution can only take place if there is something to distribute. A stagnating economy produces smaller pools of surplus for the state to collect via taxation and then spend as welfare. In its absence, there is no option but to borrow. The consequences of that strategy are already visible through the large burden of debt servicing, much of it in service of wasteful expenditure.

Anyone committed to greater equity, social mobility, and improved life chances for Pakistani citizens must then think not just about redistribution, but also about growth and productivity in the economy. In other words, how do we get economic growth that allows the needs of people to be met.

One way to tackle this problem is to put the issue of human capital front and centre. A progressive vision for the economy is one that seeks to unlock growth by raising productivity of the workforce. Meaning that health and education can no longer be seen as belated welfare concerns, but rather as essential for growth.

The pursuit of human capital as a central policy would mean a significant shift in government policy. It would naturally involve greater attention to and spending on health and education. This can only be achieved by removing elite-biased exemptions and curbing rampant tax evasion by big actors in several sectors such as real estate and commerce. But equally, it would also involve finding ways to reduce the tax burden on salaried and working-class households, which is currently harming their chances for social mobility and growth.

In the domain of production, a progressive agenda should focus on sectors where most Pakistanis actually work. Meaning that it would involve policymaking that improves the surplus generating capacity of small and medium-sized producers in industry and agriculture, which are currently responsible for hosting the vast majority of the labour force.

This means undoing policy instruments that favour inefficient large enterprises (blanket subsidies, preferential credit, trade protections) in the industrial sector. In agriculture, it means a rethink of initiatives such as Green Pakistan, which is expected to divert water resources away from producers in other parts of the country.

Alongside these and other such interventions, it is also important to revise some conventional left-wing wisdom based on the local context. What will definitely not work is giving the Pakistani state more control of economic processes. There are public sector bureaucracies in the world that are efficient and accountable and which can be entrusted with production and distribution of economic goods. The Pakistani public sector in its current incarnation has neither of those characteristics.

It is essentially unaccountable to citizens. And it has evolved into being highly and rigidly inefficient. Giving it more direct control is simply another way of allowing state officials to distribute benefits to themselves or their clients, as demonstrated by the last several decades. Having PIA on government books, for example, has served no growth or welfare purpose for the last two decades. The same is true for many other entities, especially in the electricity sector. Divestment (privatisation, offloading management control) but with basic welfare protections to reduce livelihood shocks is the only viable path forward for the time being.

Ultimately, understanding and prioritising the needs of the citizenry should be the starting point for any conversation around economic reform. Pakistanis today require both access to basic welfare services and the opportunity to earn a decent living. Acknowledging this combination will lead to a reform agenda that may actually move the country out of its multi-decade-long development stagnation.

The writer teaches sociology at Lums.

X: @umairjav

Published in Dawn, March 3rd, 2025