By Mian Muhammad Shaheryar
The world is once again entering an era where war, geopolitics, energy security and economic interests are deeply intertwined. Rising tensions between Iran and the United States have added another layer of uncertainty to an already fragile Middle East.
For Pakistan, this is not a distant conflict.
Any prolonged instability in the region can affect oil prices, shipping costs, energy supplies, inflation, trade routes and foreign exchange pressures. For a country already struggling to achieve sustainable economic growth, these external shocks can have serious consequences.
According to Pakistan’s Economic Survey, the country’s real GDP growth in FY2025 was 2.68 percent.
At first glance, 2.68 percent growth is positive. The economy is growing rather than contracting.
But the more important question is:
Is 2.68 percent growth enough for Pakistan?
The answer is clearly no.
Pakistan needs not merely economic growth, but faster, sustainable, productive and inclusive growth.
2.68% Growth — But Where Are We Going?
Pakistan has achieved some degree of macroeconomic stabilization. Inflation has come down from extremely high levels, external pressures have eased somewhat, and the economy has avoided another immediate balance-of-payments crisis.
But stabilization is not the same as prosperity.
A country of more than 240 million people cannot afford to celebrate a growth rate that barely keeps pace with its enormous economic and social needs.
Our real challenge is not simply increasing GDP.
The real challenge is increasing per-capita income, productivity, exports, investment, employment and human capital.
Pakistan needs an economy that creates wealth rather than repeatedly borrowing money to finance consumption.
For decades, we have struggled with a familiar cycle:
Borrow → stabilize → consume → face an external deficit → seek assistance → stabilize again.
This cycle cannot create a prosperous nation.
Pollution: The Economic Enemy We Ignore
One of Pakistan’s most underestimated economic problems is environmental pollution.
We usually discuss air pollution as a health issue.
It is much more than that.
It is an economic issue.
The World Bank has estimated that air pollution alone can impose an economic cost equivalent to around 6.5 percent of Pakistan’s GDP annually.
This creates a remarkable contradiction.
Pakistan’s economy grows by around 2.68 percent, while the potential economic damage associated with air pollution alone can be several times larger.
In simple terms:
We are trying to grow the economy with one hand while losing economic productivity with the other.
A worker who becomes sick because of polluted air loses productive days.
A child suffering from pollution-related illness may lose educational opportunities.
Families spend more of their income on healthcare.
Hospitals face additional pressure.
Businesses lose working hours.
Transport and productivity suffer.
The cost eventually reaches the entire economy.
Air pollution in Lahore, Karachi and other major cities is therefore not merely an environmental problem. It is a threat to Pakistan’s productivity and human capital.
Why Has Pakistan Fallen Behind?
This is perhaps the most important question.
Pakistan has enormous potential.
We have a strategic geographic location, a large domestic market, agricultural resources, mineral potential, a coastline, a large overseas workforce and millions of young people.
So why have countries that were economically comparable to Pakistan decades ago moved much further ahead?
The answer is not one government, one political party or one institution.
It is a combination of structural weaknesses accumulated over decades.
We have not invested enough in human capital.
We have struggled to expand our tax base.
We have depended heavily on imported energy.
Our exports remain insufficiently diversified.
We have not developed enough high-value manufacturing.
Research and development remain weak.
Policy uncertainty discourages long-term investment.
And perhaps most importantly, Pakistan has repeatedly failed to maintain a consistent economic direction over the long term.
We Consume More Than We Produce
One of Pakistan’s fundamental economic weaknesses is the imbalance between consumption and production.
Successful economies produce goods and services that the world wants to buy.
Pakistan must ask a different question:
What can Pakistan sell to the world?
Textiles will remain important, but they cannot be our only major export engine.
Pakistan has enormous potential in:
* Information technology
* Software and digital services
* Pharmaceuticals
* Engineering goods
* Processed food
* Minerals
* Chemicals
* Renewable-energy technology
* High-value agriculture
* Professional and financial services
Our objective should not simply be to increase exports.
It should be to move from low-value exports to high-value exports.
The Youth: Pakistan’s Greatest Opportunity
Pakistan’s young population can either become the country’s greatest economic advantage or its greatest challenge.
Everything depends on what we do with it.
A young population without education, skills and employment becomes a burden.
A skilled young population becomes an economic engine.
Pakistan needs to radically expand investment in technical education, digital skills, artificial intelligence, software development, engineering and entrepreneurship.
A young Pakistani sitting in Karachi, Lahore, Islamabad or any smaller city should be able to provide services to customers in London, Dubai, New York, Singapore or Tokyo.
The digital economy has made this possible.
But it requires reliable electricity, affordable internet, digital infrastructure, modern education and a business-friendly regulatory environment.
Iran, America and Pakistan’s Economic Vulnerability
The tensions involving Iran and the United States also expose Pakistan’s economic vulnerability.
Pakistan remains heavily dependent on imported energy.
If geopolitical tensions cause international oil prices to rise sharply, the impact will eventually reach every Pakistani household.
Higher fuel prices increase transportation costs.
Higher transportation costs increase food prices.
Higher energy costs increase industrial production costs.
Higher production costs reduce competitiveness.
Reduced competitiveness can hurt exports.
And weaker exports create additional pressure on foreign exchange.
This is why Pakistan must pursue a foreign policy based on peace, national interest, regional stability and economic security.
Pakistan cannot afford to become an economic casualty of conflicts beyond its borders.
The Missing Ingredient: Policy Continuity
Perhaps Pakistan’s greatest economic weakness is not a shortage of resources.
It is a shortage of continuity.
Investors need confidence.
Businesses need predictable regulations.
Industries need reliable energy.
Farmers need stable agricultural policies.
Exporters need competitive financing and infrastructure.
Young entrepreneurs need access to capital and technology.
And all of them need to know that the rules will not fundamentally change every few years.
Economic development is not a five-month project.
It is not even a five-year project.
It requires 15 to 20 years of consistent national economic policy.
Governments may change.
Political parties may change.
But the fundamental economic direction should remain stable.
We Need Quality Growth, Not Just GDP Growth
Pakistan should stop measuring success only through GDP.
A better definition of economic success would include:
Higher per-capita income.
More exports.
More private investment.
More skilled jobs.
Lower energy costs.
Better education.
Better healthcare.
Cleaner air and water.
Higher productivity.
Greater economic participation by women and young people.
This is what real development looks like.
If GDP rises by 2.68 percent but pollution, population pressures, debt servicing, unemployment and productivity losses rise faster, then the headline growth number tells only a small part of the story.
Pakistan Still Has Time
Pakistan should not surrender to pessimism.
The country still possesses enormous potential.
Our geography can make us a bridge between South Asia, Central Asia, China and the Middle East.
Our youth can become a global digital workforce.
Our agricultural sector can become more productive through technology.
Our mineral resources can support industrial development.
Our coastline can support trade and logistics.
Our overseas Pakistanis can become a source of investment rather than merely remittances.
But potential alone does not create prosperity.
Potential becomes prosperity only when institutions, policies and people work in the same direction.
The Real Choice Before Pakistan
Pakistan today stands at a critical crossroads.
On one side are geopolitical tensions, energy insecurity, climate change, pollution, debt and slow economic growth.
On the other side is an opportunity to fundamentally transform the country’s economic model.
We can continue managing one crisis after another.
Or we can build an economy that prevents crises from becoming permanent.
We can continue borrowing to survive.
Or we can produce and export to grow.
We can continue treating pollution as an environmental problem.
Or we can recognize it as an economic threat.
We can continue allowing our young people to leave because they cannot find opportunities at home.
Or we can make Pakistan a place where talent creates wealth.
The Final Question
Pakistan’s 2.68 percent growth is not a failure.
But it is certainly not enough.
It should be viewed as a starting point—not a destination.
Pakistan does not need another temporary economic recovery.
It needs a long-term economic transformation.
We need an economy that exports more than it imports, produces more than it consumes, invests more than it borrows, educates more than it argues, and plans further ahead than the next election cycle.
The country has the resources.
It has the people.
It has the geography.
It has the talent.
What Pakistan needs now is continuity, discipline, institutional reform and a national economic vision.
Because the real question is not whether Pakistan can survive another economic crisis.
The real question is:
When will Pakistan finally build an economy strong enough that it no longer has to?
2.68 percent growth may keep the economy moving.
Only structural reform, human capital, exports, environmental responsibility and long-term vision can make Pakistan move ahead.
