Thirst for objectivity has led economists to ignore naked social reality while focusing on number crunching and deductive reasoning. With Pakistan entering in its 13th IMF program since 1988, mainstream policy discourse is permeated by figures loaded with heavy economic jargon. Yet, the underlying causes for persistent Balance of Payments (BoP) crisis are not purely economic but rooted in political economy. According to Framework of Economic Growth (FEG) prepared by Planning Commission, Pakistan needs to grow at least 7% per annum to create enough jobs to employ newly entering youth in labor market. Pakistan has experienced brief episodes of higher growth rate but each time BoP constraint rendered it impossible to sustain this performance for long periods like China and India. The story is simple. In the beginning, governments shaved off aggregate demand, as required by IMF, to adjust inherited macroeconomic imbalances. However, entrenched forces of crony capitalism ensure that meaningful structural reforms are not implemented. Towards the end of term, political expediency results in expansionary policies to achieve higher growth rate and exposes economy to structural imbalances. Hence, the result is recurrent five-year political business cycle. The underlying causes of Pakistan’s perennial BoP problems are not ‘purely’ economic but rooted in political economy of class and patronage. Let us have a look at some obvious examples. First, distributive injustice is at the heart of Pakistan’s trade deficit. Michael Kalecki, an early development economist of polish origin, pointed out that concentration of resources has positive relation with imports – and hence, with trade deficit – while egalitarian distribution results in higher demand for domestic goods and provide conducive environment for mass production. Disparity of resources – at state levelas well asin society – explains both higher imports and low industrial capacity to increase exports. The natural outcome is skyrocketing trade deficit. Second, powerful lobbying groups and myopic political goals rather than economic fundamentals and long-term development strategy determine exchange rate. As opposed to undervaluation policy of China and East-Asian economies, Pakistan has maintained an overvalued exchange rate – even at the cost of incurring foreign debt – that encourages imports and penalizes exports. What is the rationale for this evidently irrational policy? Three main reasons come to mind. Firstly, with imports more than twice of exports, import lobby is in a better position to exert pressure and influence policy-makers to keep an overvalued currency. Secondly, with rupee to dollar parity becoming a matter of ‘national pride’ and barometer of economic performance, political expediency rather than economic reality guides policy. Thirdly, with their consumption basket dominated by imported goods, civil society and media have failed to push for rational exchange rate policy amid conflict of interest. Pakistan’s BoP crisis is not purely an economic phenomenon but emanates from its politics and society that is driven by forces of class-consciousness and culture of patronage. So far PTI government has shown no signs to break this cycle Third, politicians in Pakistan make two separate, and often contradictory, sets of promises. One with the public and other with the specific players in power corridors. Once in power, former are broken while later are kept. Therefore, we observe persistence of discretionary powers and SRO culture to subsidize favorite businesses. It promotes rent-seeking behavior and provides no incentive to innovate and compete in world markets. . The outcome is continuous erosion of Pakistan’s exports potential, and hence, trade deficit. Fourth, sugar mafia is a perfect example of crony capitalism. Pakistani consumers will benefit from low international sugar prices if cotton production replaces water-intensive sugarcane. Export of raw cotton or value-added textile exports will surely earn foreign exchange more than required to finance import of sugar. However, concentrated benefits prevail over widespread costs and add to BoP problems. Fifth, Pakistan has misaligned incentive structure that encourages import oriented activities while discourages export oriented businesses. Even traditional industrial houses are investing in real estate and building shopping malls because establishing an industrial unit is a herculean task compared to parking money in property sector. The resulting premature deindustrialization has become a major impediment to exports growth in Pakistan. Following is the summary of picture that emerges from analysis of above examples: Beneficiaries of status-quo are well placed to sabotage any serious attempt at structural reforms. Civil society and media – so called agents of change and protectors of public interest – are systemically complicit for bad economic policies. Elite capture of ‘autonomous’ institutions responsible for national economic management cost public exchequer billions of dollars each year. Finally, there are not incentive mechanisms to shift resources from rent-seeking sectors to export oriented industry based on efficiency, competition and innovation. Hence, Pakistan’s BoP crisis is not purely an economic phenomenon but emanates from its politics and society that is driven by forces of class-consciousness and culture of patronage. So far PTI government has shown no signs to break this cycle. The author is Assistant Director in research department at State Bank of Pakistan