As of late, macroeconomic conditions have improved with inflation falling and growth gradually recovering but structural challenges such as low domestic savings persist, with a savings rate of just 7.4 per cent of GDP, compared to 27pc in South Asia and 41pc in East Asian economies.

State Bank of Pakistan (SBP) Governor Jameel Ahmad says due to a low savings rate, Pakistan heavily relies on foreign inflows to meet its development needs.

`But this reliance has come at a cost,` he added. `It has contributed to repeated balance of payment crises, instability in the foreign exchange markets and inflationary pressures, which, over time, have weakened our growth momentum.` In order to avoid the boom-bust cycle, Pakistan needs to mobilise more domestic savings and channel them into productive investments. The country`s low savings rate, coupled with declining investment, he notes, has constrained long-term growth prospects.

According to the Pakistan Bureau of Statistics, private investment has declined from nearly 12pc of GDP in 2008-09 to just 9pc in 2024-25. Simultaneously, public investment has also fallen sharply, from 4pc to 2.9pc of GDP.

While observing that the revised Macro Profile score is underpinned by Pakistan`s improving external position, Moody`s Ratings notes: `Nonetheless, Pakistan`s external position remains fragile. Its foreign exchange reserves remain well below what is required to meet itsexternal debt obligations, underscoring the importance of steady progress with the IMF [International Monetary Fund] programme to continually unlock financing.` A positive development in this regard is that Pakistan`s exports to nine regional countries Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives as per the State Bank data, grew by 5.10pc to $357 million in July, up from $339m the same month last year, largely driven by shipments to China, Sri Lanka and Bangladesh.

That said, currently the external sector improvements depend on external and temporary support, such as debt rollbacks, limited multilateral financing, remittances, etc, as per a Dawn editorial, rather than durable fiscal and productivity reforms, leaving the economy only asmall shock away from crisis. There is a need to emphasise the large-scale manufacturing sector as a potential key source of faster economic growth. Big industry, which contributes around 8pc of the GDP, is stuck in a cycle of low growth or contraction.

Moreover, the import substitution of manufactured goods, informs Dr Hafiz A Pasha, is down from 70.2pc in FYO8 to 64.6pc in FY23, owing to increased imports, especially of consumer durables and machinery to meet domestic demand. During the last seven years the manufacturing sector has managed an average annual average growth rate of less than 1pc. In FY25, it was a negative growth rate of 0.7pc.

There is no evidence that the IMF would allow any phasing out of its harsh conditions, and hence this sector is likely to remain a hostage to the government`s dependency on external as well as domestic borrowing, say analysts at Business Recorder. Finance Minister Muhammad Aurangzeb recently reiterated that the government is finalising an industrial policy aimed at fostering a business-friendly environment and accelerating industrialisation.

Meanwhile, Pakistan ranks the lowest in the region in terms of total investment. World Bank data show its gross fixed capital formation at 12pc of GDP, compared to 20pc in Sri Lanka and over 31pc in Bangladesh.

Under a risk-sharing scheme rolled out by the government last week, effective from July 1, 2025, to June 30, 2028, all banks will be able to provide production loans for crops, as well as loans for dairy, livestock, and fisheries.

According to the SBP, the initiative is aimed at encouraging financial institutions to extend fresh financing to farmers by offering government-backed coverage against potential loan losses. Small and subsistence-holding farmers from Sindh and Punjab, and all types of landholding farmers from Khyber Pakhtunkhwa, Balochistan, Azad Jammu and Kashmir, and GilgitBaltistan can benefit from the scheme.

The future of Pakistan`s economy will be shaped not in boardrooms but in workshops, warehouses, and small offices across the country, argues President JS Bank Basir Shamsie. If we want truly inclusive and sustainable growth, empowering small and medium enterprises is not optional; it is essential.

Sakib Sherani says Pakistan is not organised as a polity for development, let alone inclusive development.

It is organised for elite extraction, appropriation, expropriation and enrichment. He elaborates: a society is organised for development when its laws, institutions, cultural norms and incentives are deliberately structured to expand opportunity, raise productivity and channel resources towards the most optimal use for the widest common good.

Nadeem Javaid, Vice-Chancellor of the Pakistan Institute of Development Economics, aptly points out that while the creation of the National Economic Transformation Unit is a crucial step towards coordinated implementation (of the Uraan Pakistan vision), it requires a collective national resolve from parliament to provinces and from civil service to citizens.m