BIPL spotlights Pakistan’s economic crossroads with Ali Hasanain

August 02, 2026 (MLN): Pakistan is not poor for want of resources or talent, she is because of its own rules that make unproductive activity more profitable than productive activity.

Dr. Ali Hasanain, Associate Professor at Lahore University of Management Sciences (LUMS), highlighted this while speaking at a seminar titled "Pakistan Economic Outlook: FY2027 and Beyond," organized by BankIslami Pakistan Limited (BIPL) at Karachi.

The seminar was also addressed by President and CEO BIPL Rizwan Ata, Deputy Governor SBP Muhammad Amin Lodhi, Ali Khizer of Business Recorder, Dr. Faisal Mushtaq of MiTE Karachi, Khurram Husain, and Advisor to the Finance Minister Khurram Schehzad. Attendees included senior bankers, investors, and representatives of the business community.

Dr. Hasanain took aim at what he called a persistent myth that Pakistan imports too much.

In reality, it is exports that are dramatically and unusually low: the country is simply not producing what the world wants to buy.

The real question, he argued, is why other low-to-middle income countries like India and Bangladesh export successfully while Pakistan does not, noting that Pakistan's imports have also recently fallen below regional peers.

Both imports and exports matter for economic efficiency, and the country cannot grow without either; if a neighboring country can produce something more cheaply, he said, Pakistan should be buying from them rather than producing it domestically.

Exports have stayed near 10% of GDP for 25 years, he noted, with workers' remittances now exceeding total exports and the current account's reported "surplus" actually reflects a $40bn trade and income gap bridged by remittances rather than genuine trade competitiveness; i.e., the country has failed to direct remittances into building reserves, rather it uses remittances for imports.

The real exchange rate has appreciated about 20% since 2023 despite the nominal rate holding steady, he added, and a cheap dollar works against building exports: the currency needs to be adjusted in a controlled way, since building exports ultimately means earning dollars.

His prescription included automatic tax refunds for exporters, sunset clauses on protections, and an end to spending reserves to prop up an overvalued rupee.

An estimate a decade ago suggested Pakistan needed to grow at 8% a year to absorb the population entering it’s the labor force; the country instead grew at around 3.7% that decade.

The result, Dr. Hasanain said, is that of more than 180m Pakistanis of working age (18-60), only 77m are employed, leaving 103m unemployed, many of them women leaving the central question of how much Pakistan actually needs to grow to become a genuinely productive economy.

Real GDP growth has averaged 3.5% through the 2020s, below the 66-year average of 4.9%, with the growth rate declining steadily decade after decade and GDP per capita growing slower than comparable economies, he said.

Pakistan led the region in per-capita income for decades in the 1960s through the 1980s, there was no question it would outshine all regional peers; however, every regional peer in fact outshone it eventually.

Twenty-two more children per 1,000 die in Pakistan than its income level would suggest, Dr. Hasanain noted, and the country's factories operate at roughly two-thirds of their capacity, the lowest utilization among regional peers’ factories that, he added, will not get Pakistan to the government's own export targets, because the country has not invested in the right businesses in the first place.

Both of Pakistan's reform-era growth booms, he said, ended once growth pushed the current account deficit past the same threshold, i.e., 4% of GDP, forcing a humble knock at the IMF’s door.

He noted that inflation has been brought under control, calling it one of the country's genuine positives, but noted that while inflation has eased to around 7%, the price level has doubled in five years warning that if Pakistan fails to convert this stabilization into actual growth, it will slide back into what he called a failing grade.

Pakistan, he said, keeps hearing about "structural reforms" without ever being told clearly what they are, and even when they are understood, they are underdelivered, if at all.

Interest payments alone consumed nine of every Rs10 in net revenue the federal government retained in FY25, an extraordinarily high number by international comparison, even as the debt-to-GDP ratio itself remains comparatively sustainable, he said.

This, he argued, brings the discussion back to a central point: Pakistan is not poor to service its debt, rather Pakistani government is poor enough to just barely service its debt; because of a taxation system that fails to raise enough revenue, and unless the government moves to raise the tax-to-GDP ratio, there will never be enough money to spend on development.

Tax revenue has stayed stuck at 10-11% of GDP, lower than virtually every other comparator, except Bangladesh, with agriculture, retail, and real estate lightly taxed on income, he said.

Defence spending is not unusual as a share of GDP, he added, but is extraordinarily high as a share of tax revenue, calling it the same underlying problem as the debt-servicing burden, and arguing that the hardest-to-tax parts of the economy are precisely where Pakistan must extend taxation if it wants to grow.

His prescriptions here included sunsetting statutory tax exemptions with a public register of beneficiaries, abolishing the inter-corporate dividend tax, and broadening the base without new exemptions.

Private sector credit has fallen back to its 1960s share of GDP, roughly a third of regional peers, with savings and investment running at about half the regional rate and only 27% of adults and 12% of women hold a bank account.

State-owned enterprises lose over Rs800bn a year even after subsidies are counted as their revenue, he said, calling for hard budget constraints, professional boards, and eventual privatization.

On reserves, he said that every crisis since 1998 has bottomed out below three months of import cover, with Pakistan under an IMF program 55% of the time since 1958 across 26 arrangements.

He proposed a legislated ceiling on inflation-adjusted spending along with automatic fuel-price pass-through.

Policy uncertainty, meanwhile, has more than doubled since the 2022 crisis and functions as a tax in itself, he said, calling for commercial courts with time standards, one-window licensing, and digital procurement.

On the two larger structural choices, Dr. Hasanain said that agriculture makes up roughly a quarter of the economy but contributes a negligible share of income tax collections, and that the petroleum import bill alone absorbs more than half of Pakistan's goods-export earnings.

He pointed to the scale-up of the Benazir Income Support Programme; its coverage has grown nearly six-fold since 2009 to over 10m households, as an evidence that Pakistan already knows how to run large-scale programs.

He said that what remains is fiscal space and political will to implement reforms through large scale delivery systems.

Concluding his talk, Dr. Hasanain appreciated BankIslami and its treasury team for providing a well-organized, high profile platform for such critical dialogs. Rizwan Malik, Zahid Khan, and Sajjad Qureshi, from BankIslami, organized the event.

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