Pakistan’s economic debate is entering a new phase as policymakers and experts increasingly question the sustainability of foreign borrowing. The growing consensus is that loans should be restricted to projects with demonstrable development impact and aligned with areas of comparative advantage.
A former senior IMF official from Pakistan emphasised that the “approach of accepting whatever comes in, on whatever terms, must end.” Instead, he urged a pivot towards demand-driven projects with measurable outcomes, supported by concessional financing from multilateral partners.
Ehsan Malik, former CEO of the Pakistan Business Council, argues that Pakistan must focus on sectors where it holds clear comparative advantages — such as value-added agriculture, mineral development, tourism, and globally demanded services like IT, medical tourism and professional expertise.
Between 2000 and 2022, Pakistan received an estimated $50 billion in official development assistance, yet continues to lag behind in human, social, and economic indicators. Despite this massive inflow, the country’s dependence on external aid has deepened, leading to the gradual erosion of economic sovereignty.
According to economist Saeed Ahmed, author of The Shady Economics of International Aid, Pakistan’s budgets are now effectively pre-approved by the IMF, while its monetary policy follows Fund advice, leaving little room for independent decision-making.
Recent data reflects this reliance: foreign assistance inflows nearly doubled to $1.37 billion during the first two months of the current fiscal year, a 93 percent increase from last year. But this surge has done little to improve development outcomes.
The nation’s per capita debt has soared to Rs318,252 in 2024, compared to Rs90,047 in 2014, marking an average annual rise of 13 percent. Economists warn that this trajectory is unsustainable and risks further entrenching dependency.
Over the past decade, Pakistan’s foreign direct investment has averaged $2–3 billion annually, with roughly 35 percent directed toward the power sector. The Pakistan Industrial and Traders Association Front (PIAF) has cautioned that overreliance on energy-centric investment has stifled broader economic growth. Patron-in-Chief Mian Sohail Nisar urged policymakers to “expand investment opportunities in mining, IT, and value-added manufacturing.”
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Despite recent financial adjustments, such as Rs1.23 trillion in commercial bank financing to address circular debt, the power sector remains exposed to exchange rate volatility for up to eight years — particularly due to dollar-indexed contracts with Chinese firms.
However, positive signs are emerging in agriculture. Pakistan enters the Rabi season with record carryover water storage — over 13.217 million acre-feet, or 99.3 percent of total capacity. This could help offset crop losses from recent floods.
In Sindh, a Rs55.9 billion wheat growers’ support initiative has been launched to aid over 400,000 farmers cultivating between one and 25 acres. Meanwhile, Deputy Prime Minister Ishaq Dar is finalising the Pakistan Cotton Plan 2026, aimed at revitalising cotton yields and reducing import dependency on cotton and edible oils.
Experts stress the importance of smaller, high-impact initiatives — like constructing small dams, rainwater reservoirs, and ponds — to improve water efficiency in both Barani and canal-fed regions. Officials have, however, cautioned that heavy sand deposits from prolonged floods have damaged soil fertility in Punjab’s plains, and recovery will take time.
The consensus is clear: Pakistan must redefine its development model by tying foreign assistance to productivity, not dependence. Only then can the country build resilience, preserve sovereignty, and unlock long-term sustainable growth.