A bleak arena for internal reforms

Last week, the Shehbaz Sharif government launched its ‘homegrown’ National Economic Transformation Plan: Uraan Pakistan. The five-year 2024/29 initiative is long on ambition, heavy on rhetoric and short on strategy, which it plans to employ to pull off the broader goal of making Pakistan a trillion-dollar economy in the next 10 years and a $3tr economy by 2047.

At the core of Uraan Pakistan is the Five Es framework: Export, E-Pakistan, Environment and Climate Change, Energy and Infrastructure, and Equity and Empowerment.

The document uploaded on the planning ministry site says that the Uraan Pakistan initiative would serve as a unifying roadmap to transform Pakistan into an economic powerhouse as the country’s policymakers and planners seek to boost economic growth from 2.5 per cent last fiscal year to 6pc and double the exports to $60 billion a year over the next five years as they expect the private sector to invest $10bn each year. Yet it doesn’t offer any glimpse into that roadmap, barring abstract targets.

“Under this plan, we will focus on growing our industry, commerce, information technology, trade, investment and find new markets for our products across the world,” Prime Minister Shehbaz Sharif said at the launch of the initiative. He said the government would create a conducive environment for the private sector and give incentives to the investors to encourage investment in the export-oriented industry.

Efforts with Uraan Pakistan may prove futile given the lack of progress on key structural reforms, slow foreign inflows, and increasing militancy and political instability

The five-year plan was announced at a time when Pakistan was navigating a challenging economic recovery path under the oversight of the International Monetary Fund (IMF), with its economy expanding by less than 1pc during the first quarter of the current fiscal year to September.

The National Accounts Committee data reported in its quarterly estimates of expenditure of the economy that the growth rate was down from the 2.69pc expansion achieved in the same period during FY24.

Indeed, though the country has managed to stave off an economic catastrophe by averting default, the recovery remains fragile. The two back-to-back IMF programmes have been helpful in stabilising the economy as foreign currency reserves rose from just above $3bn in May 2023 to more than $12bn, inflation plunged from its peak of 38pc to 4.1pc, and interest rates fell from 22 to 13pc.

The plan is supposed to boost economic growth to 6pc and double the exports to $60bn a year but doesn’t offer a tangible roadmap

However, the nation’s economic managers continue to struggle to develop means for sustainable and fast growth because the economy still lacks the strength to grow at a faster pace amidst shrinking foreign official and private inflows.

Most analysts do not expect the economy to come out of the stabilisation phase over the next couple of years, let alone get on a rapid growth trajectory any time soon. The economic issues of the country are further compounded by growing militant violence across the country and unresolved political tensions.

The announcement of the initiative almost coincided with the release of a report by the Centre for Research and Security Studies, which termed 2024 the deadliest year for Pakistan’s civil and military security forces in a decade with at least 685 fatalities and 444 terror attacks suffered.

“Equally alarming were the cumulative losses of civilians and security personnel, that is, 1,612 fatalities, accounting for over 63pc of the total recorded this year and marking 73pc more losses compared to 934 outlaws eliminated,” it added.

The overall fatalities recorded this year were a record nine-year high and over 66pc more than in 2023. “The violence took the heaviest toll on Khyber Pakhtunkhwa which topped in human losses with 1,616 fatalities, followed by Balochistan with 782 fatalities,” says the Islamabad-based think tank in its annual security report.

According to Inter-Services Public Relations, the security forces conducted a total of 59,775 operations in 2024 in which “925 terrorists were killed, and 383 brave officers and soldiers embraced martyrdom”. As the number of terrorist attacks surged in the past year, the government and the army claimed that they were mostly led by Afghanistan-based militants who attacked targets in Pakistan and returned to the relative safety of sanctuaries just over the border.

In the meantime, the volatile Kurram region of Khyber Pakhtunkhwa saw sectarian conflicts erupt between Sunni and Shia tribes, resulting in the killing of more than 150 people as the government’s inability to intervene allowed the conflict to escalate. The continued militancy and violence remain a major risk to the country’s economic growth and investment. The Chinese company, for example, are reluctant to relocate here due to uncertain security conditions.

There’s a sort of consensus that a lack of political stability is a major risk to putting the economy on a sustainable growth path. This is highlighted by almost every top credit rating agency because it is stopping the government from making several tough decisions, such as the one on broadening the tax base.

As if these problems aren’t enough, the government’s actions to curb political dissent by controlling the Internet and restricting access to virtual private networks and social media are not only damaging IT-related exports but also scaring investors away from the country.

With its wings fettered by a lack of progress on key structural reforms, slow foreign inflows,

and increasing militancy and political instability, the chances of Uraan Pakistan taking off appear rather bleak.

Published in Dawn, The Business and Finance Weekly, January 6th, 2025