PRIME Minister Shehbaz Sharif on Wednesday launched the government’s Economic Governance Reforms, saying Pakistan had moved out of “economic firefighting” after two years of politically difficult decisions that, he stated, restored macroeconomic stability, pushed inflation down to 4.5 per cent and lifted foreign exchange reserves to over $21 billion.
The reforms comprised 142 actions — including 59 priority reforms and 83 complementary measures — to be implemented by 58 institutions within defined timelines. The key areas included taxation, energy, privatization, state-owned enterprises, pensions, tariff rationalization, regulatory simplification, rightsizing of the federal government and digital governance.
No doubt, most of the decisions implemented by the coalition government were politically difficult but these were surely necessary to mobilize the domestic resource base and minimize crippling dependence on foreign loans that come at a cost. Though growth still remains an elusive dream, the process of structural reforms initiated by the government has led to stabilization and created a conducive environment for economic growth. The Prime Minister rightly referred to what the government inherited to give an idea of what it achieved due to hard and tough measures. The government inherited an economy in early 2024 marked by nearly 30pc inflation, critically low reserves, weakened state institutions and Pakistan’s marginalization from global economic engagement. The gains can be judged by the fact that inflation fell from 29.2% to 4.5%, while foreign exchange reserves increased from $9.2 billion to over $21 billion. The current account position improved from a $3.3 billion deficit to a $1.9 billion surplus, and Pakistan moved from a primary deficit to a primary surplus while narrowing the overall fiscal deficit. Tax-to-GDP ratio increased from 8% to 10% and tax collection improved by 26% in 2025, which is not a mean achievement. However, the strategy adopted to increase the tax collection is not fair as major burden was placed on existing tax-payers while sacred cows are still out of the tax net as they have successfully undermined efforts of the government to expand the net. It is a matter of concern that those minting money through fair and unfair trade and professional practices are not contributing their due share to the national kitty and instead continue to pressure the authorities concerned for continuous but illegitimate relief. There is greater realization at the experts level that sustained growth can be achieved through industrialization but the process of wholesale reduction in import duty is going to kill domestic industry. Energy sector is another front where the government could not deliver as per expectations of the people, rather there is compelling evidence that the policy-makers are toeing the IMF lines without any valid reason. Electricity tariff has been pushed to a level where grid power is not considered a preferred option in the face of technological revolution brought about by roof-top generation. Under pressure from the public opinion, the government provided some relief but it is unwilling to rectify the exploitative slab system, which is used to squeeze undue money from consumers. Regrettably, instead of taking steps to bring the cost of generation down, plug losses and thefts and penalize corrupt officials, the government has adopted a clearly biased policy towards solar power. Surely, the privatization of Pakistan International Airlines (PIA) and First Women Bank marked a break from decades of inaction but the PIA deal was not ideal and the country might not gain much if the same pattern is followed in the case of privatization of important entities on the chopping list. Pension reforms will, hopefully, reduce long term liabilities of the state but the government has started faltering as evident from the withdrawal of the decision about double pension or its adjustment in case of re-employment. There is extreme uncertainty and confusion among the government machinery over the issue of right-sizing, which should be brought to an end at the earliest.
