The two-day conference is structured around two broad themes, those of economic growth and trade. Economic growth has revived to 2.5% in 2025 against stagnation across the previous two years. Pakistan has long imported more than it exports, requiring continued reliance on the vagaries of incoming worker remittances and frequent recourse to IMF lending. The conference occurs against a backdrop of an economic slowdown, debt crisis, and a three-year economic stabilization program recently agreed with the IMF.
This year's conference has focused on two imperatives. First, GDP growth for FY 2025 is projected to make a very weak recovery at 2.2%, from being flatlined two years ago. Second, our tradeables sector runs repeated annual deficits, requiring repeated recourse to IMF lending programs, this being the 24th. Only remittances bail us out, an exogenous variable not in our control, while deficits in tradeables continue. Export-led growth has always been held out as the neoliberal solution, to such a dilemma. However, the prospect of this growth path is now threatened by a global trade environment fractured by a tariff war, which may result in the emergence of two trading blocs.
The primary question then is, what growth path does Pakistan take now? With potential losses to Pakistan’s exports in the US market—estimated by the Lahore School of Economics at around $0.6 billion—retaliatory tariffs in the EU, and a broader trend among developing countries toward tariff hopping, this uncertainty signals a greater need to rely on internal growth. The conference papers have accordingly focused on these two imperatives of growth and trade.
Dr. Ishrat Hussain, former governor of the State Bank of Pakistan, presided over the inaugural session and lauded the Lahore School of Economics on its unique macroeconomic model of the Pakistan economy, its high-quality, evidence-based research and its relevant and important policy recommendations.
The keynote address of the conference was given by the Dr. Shahid Amjad Chaudhry, Rector of the Lahore School of Economics. Dr Chaudhry provided a timely warning about important challenges faced by the Pakistani economy over the course of the IMF program (2024-2027). Key among which is Pakistan’s external debt which has reached $130 billion, or 23 percent of GDP. The Rector pointed out that the stabilization program has not placed sufficient attention to the fact that $12 billion of this debt is subject to annual roll overs. Dr Chaudhry strongly urged Pakistan’s policymakers to remove this source of vulnerability by utilizing the additional $3 billion of annual worker remittances expected over the next few years to retire an equivalent amount of debt each year until this short-term debt is fully retired over four years. Dr Chaudhry also questioned whether short-term stabilization, focused on reducing deficits, will have a negative medium-term impact on the productive sector. There are significant dangers that stabilization will undermine industrialization, particularly the light engineering sector, and also the key agricultural sectors of wheat and rice. Pakistan needs a transition strategy to promote potentially competitive infant industries and new agricultural crops.
Finally, Dr. Chaudhry emphasized that while the stabilization strategy emphasizes privatization (of all major publicly owned assets) there is a danger that this will lead to further wealth concentration in a country where 100 families already control 63% of companies listed on the Pakistan Stock Exchange. At the other extreme, Pakistan’s current social protection policy focuses on the bottom 10 percent of the population. Dr. Chaudhry strongly recommended that this should be doubled in size to target the bottom 20 percent of the population (an additional 8 million families), those who have suffered most from price inflation in basic necessities over the past few years.
Dr. Moazam Mahmood, Dr. Azam Chaudhry, and the Modelling Lab at the Lahore School of Economics, presented their estimates of growth for the Pakistani economy. The authors projected weak GDP growth for FY2025 of 2.2%. Inflation has been brought down to 10% by a curious policy mix, of soaring energy prices and halving wheat prices. Their trade model for Pakistan, shows GDP growth to be constrained primarily by investment while investment, in turn is constrained mainly by import of investment goods. With no scope to raise overall imports, they argue, not for further trade liberalization, but for cutting imports of consumer goods, to make more space to import investment goods.
Dr. Rashid Amjad, from the Lahore School of Economics, continued the focus on Pakistan’s GDP growth with its boom-bust cycles. While agreeing with the need for structural reforms under the IMF's current EFF lending program, he emphasized that these may be lacking an incentive structure to raise investment stuck at 9% of GDP and trapping the economy in a low-growth equilibrium. Dr. Amjad then detailed the structural reforms needed to create incentives for higher investment.
Dr. Azam Chaudhry and Dr. Gul Andaman, from the Lahore School of Economics, added statistical rigor to these sentiments, and their paper showed that economic growth above 3.7% of GDP, draws in imports enough to make the resulting trade deficit unsustainable. They found that the three main factors affecting this maximum rate of sustainable GDP growth are the income elasticity of demand of imports, growth of remittances, and the real effective exchange rate. They strongly advocated reducing the import intensity of economic growth through a program of targeted import substitution.
Dr. Naved Hamid, from the Lahore School of Economics, and Dr. Murtaza Syed, from the Asian Infrastructure Investment Bank, continued the conference's focus on the GDP growth rate sustainable by the current account. They found that low productivity growth has lowered this rate of sustainable GDP growth from 5% to 4%. Indeed, when approaching even 4% GDP growth, inflationary tendencies must be checked by the State Bank through monetary tightening. They complement the earlier papers on import restrictions by arguing that to break this growth trap Pakistan needs to improve productivity and competitiveness and drive its share of exports from its current 8%-10%, towards the 18%, a level last seen in the 1990s.
Dr. Rajah Rasiah, from the University of Malaya, presented recommendations on how to increase exports based on the findings from his latest book on industrial policy in Southeast Asia. Dr. Rasiah advocated a pro-active industrial policy to transform the manufacturing sector and argued that Pakistan can learn a lot from best practices throughout the ASEAN region. His concern for Pakistan was premature de-industrialization, and he discussed Malaysia’s experience in escaping this through leap-frogging investment, in higher value-added sectors, like aerospace.
From these overarching macro concerns, the conference then sought sectoral granularity and specific constraints on growth, beginning with trade.
Dr. Gul Andaman and Dr. Azam Chaudhry, from the Lahore School of Economics, raise concerns that the forthcoming EU Carbon Border Adjustment Mechanism (CBAM) could lower Pakistan’s exports by $0.6 billion, or 5% of total exports. Pakistan needs to pro-actively prepare, through renewable energy usage, enhanced recycling, and the eventual development of a domestic market for carbon in Pakistan.
Natasha Moeen, Dr. Mehreen Khan and Dr. Theresa Chaudhry, from the Lahore School of Economics, raised a critical problem of mitigating transport-caused air pollution in Punjab. The authors explored how Pakistan can mitigate air pollution and alleviate an on-going public health crisis. Changing travel behaviour, in particular shifting commuters from 3 wheelers and cars into improved public transport, will require a deliberate and long-term sustainable strategy. While acknowledging the government's program of vehicle certification, conversion, and phasing out of vintage models, they found that a broader program of public transport replacing some individual vehicular traffic could work better.
Dr. Rabia Arif, from the Lahore School of Economics, found that participation in Global Value Chains (GVC) has a higher impact on GDP than non-GVC exports. She recommended that Pakistan’s manufacturing sector move up the value chain, by embedding itself in existing GVCs, especially chemicals and metals.
Dr. Waqar Wadho, from the Lahore School of Economics, probed further into firms' export performance, finding a strong link to international certification, which is observed to enhance horizontal product diversification. Dr. Wadho found that certified firms in Pakistan were 44 percent more likely to export and boost export growth by 68 percent, which provides a pathway for new Pakistani firms to enter into export markets and existing exporters to increase their exports.
Day 2
The two-day conference at the Lahore School of Economics (LSE) is structured around two broad themes, those of economic growth and trade. Economic growth has revived to 2.5% in 2025 against stagnant growth across the previous two years. Pakistan has long imported more than it exports, requiring continued reliance on the vagaries of incoming worker remittances and frequent recourse to IMF lending. The conference occurs against a backdrop of an economic recession, debt crisis, and a three-year economic stabilization program recently agreed with the IMF.
Day two of the conference continued, focused on institutional changes to better manage growth and stabilization.
Dr. Kaleem Hyder, Sabina Khurram Jafri and Omar Farooq Saqib, from the State Bank of Pakistan, examined the critical issue of the double-digit inflation that hit Pakistan with the advent of the COVID-19 pandemic. They highlighted that even though the monetary tightening introduced by the SBP reduced aggregate demand and GDP during this time, it was not sufficiently disinflationary. Their research explained that inflationary expectations had become locked in, shoring up the persistent high inflation rate. Moreover, the rapid depreciation of the exchange rate over this period also contributed to inflation.
Dr. Mathew McCartney, from the African School of Economics (Zanzibar), highlighted the absence in much economic discission of the macroeconomic role of urbanization. Urbanization managed well provides the benefits of agglomeration externalities, connecting firms, workers, and markets, so benefiting productivity, exports, and industrialization. Pakistan is observed to have a lower rate of urbanization relative to its middle-income status, contributing to its lower level of industrialization and technical change. Dr. McCartney emphasized that urbanisation should be seen as a driver of economic growth and urged Pakistani policymakers to shift focus from crisis management to leveraging cities for productivity, industrialisation, and export growth.
Dr. Mujtaba Piracha, from the Government of Pakistan, and Usman Khan, from REMIT Revenue Mobilization, Investment and Trade), examined the Pakistan’s Export Development Fund (EDF). Despite its initial promise, the EDF has yet to evolve into an effective instrument for overcoming the barriers that impede Pakistan’s export growth. The paper proposed a comprehensive strategy to reposition the EDF as a proactive and efficient facilitator of export-led growth.
Shamyla Chaudry, Dr. Moazam Mahmood and Muzzna Maqsood, from the Lahore School of Economics, confronted the puzzle of low savings in Pakistan. They estimated savings through a conceptual framework that distinguishes between private and public savings and also capital outflows, which are savings lost to domestic investment. These, empirical estimates of savings prove a better method than the residual-based method currently in wide use, which assumes away many of empirical problems. The authors found that Pakistan’s nominal capital outflows for FY 2022 were PKR 1,651 billion, or approximately 2.3% of GDP. Including these outflows in national savings helps close the savings-investment.
The last session of research presentations honed in on sectoral challenges.
Dr. Arshad Hassan, from the Lahore School of Economics, examined the impact of financial inclusion on tax revenue mobilization. The cross-country analysis showed a strong positive correlation, with ATMs, mobile banking transactions, and bank density and footprints boosting tax revenues. The results contribute to a clear policy agenda, for Pakistan to promote financial and banking transactions to enhance its tax revenues. Dr. Hassan found that Pakistan’s tax-to-GDP ratio remains low at approximately 9.2%, far below the average for emerging economies. With over 100 million adults unbanked, Dr. Arshad proposed that expanding financial access presents a significant opportunity to broaden the tax base and enhance revenue mobilization through formalization and digital financial services.
Two papers focused on the Pakistani energy sector, which is of critical importance. Dr. Rabia Ikram and Muzzna Maqsood, from the Lahore School of Economics, demonstrated that Pakistan's private-sector energy producers (the IPPs) were not meeting efficiency targets related to production costs and were accumulating mounting levels of circular debt. High capacity charges paid to these IPPs accounted for a large part of this circular debt.
Dr. Jamshed Uppal's paper investigates the role of governance and regulatory quality in shaping the performance of Independent Power Producers (IPPs) across 50 countries. The study finds that stronger governance—particularly in regulatory quality and rule of law—is associated with improved power sector outcomes. The findings are especially relevant for Pakistan, where IPPs form a significant part of the energy mix and have faced increased scrutiny regarding transparency and sectoral impact.
Dr. Zunia Saif, from the Lahore School of Economics, concluded the research presentations examining whether access to information in Pakistan (Punjab in particular) can help job search behaviour. Dr. Zunia’s study surveyed 2,034 undergraduate students from 24 institutions in Lahore, and found that priming student with high-demand job information significantly increased applications and match rates. She also found that in the case of women applicants in particular, improved access to information on occupational attributes, increased the occupational diversity of their job applications leading to a higher probability of their placements. The results of the study can be used by policy makers to encourage increased labor force participation.
The two-day conference concluded with a round table conducted by Dr. Matthew McCartney.
Dr. Ishrat Hussain, former governor of the State Bank of Pakistan, spoke on the need for structural reform to bring about structural change in the economy.
Ali Khilji, from the World Trade Organization, addressed Pakistan's trade vulnerabilities and the considerable potential for expansion of trade in services.
Dr. Naseem Faraz, from the Ministry of Finance, outlined Pakistan's Medium Term Expenditure Framework, particularly in reference to estimates that have been used in recent deliberations with the IMF.
Ahmed Fasih, from the Ministry of Commerce, turned to the theme of trade and highlighted the growing uncertainties in Pakistan's global trade environment and directions for a trading strategy.
Dr Rajah Rasiah, from the University of Malaya, concluded the round-table looking at the relationship between trade and economic growth and explored how recent global events may have impacted that link.
Dr. Mathew McCartney, as the rapporteur, summed up with a conference report.
Labels: Management of Pakistan Economy
posted by S A J Shirazi @ 4/23/2025 11:55:00 AM,
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