Oil shock, falling investment threaten growth outlook
April 29, 2026
By Shahram Haq
Key findings presented at the two-day conference revealed that Pakistan's GDP growth for fiscal year 2026-27 could fall to 1.8%, significantly lower than the pre-conflict estimate of 3.2%, primarily due to surging global oil prices, which recently touched $120 per barrel. Inflation is projected to rise to 9.4%, further squeezing households already under pressure.
Experts noted that Pakistan's heavy reliance on imported energy – nearly 80% of total needs – amplified the economic shock by worsening the current account and increasing domestic costs.
In his opening address, Rector Shahid Amjad Chaudhry highlighted three major vulnerabilities: weak positioning in ongoing IMF negotiations due to accumulated debt, rising import costs driven by oil prices, and the urgent need for long-term structural reforms in taxation, regulation, and investment.
A panel chaired by former State Bank governor Ishrat Husain emphasised that while Pakistan's exchange rate had shown relative stability after sharp depreciations in 2018 and 2022, underlying pressures remained due to persistent external imbalances.
Researchers from the Lahore School of Economics' Modeling Lab warned that the country's sustainable growth rate had declined to 3.7%, limiting its ability to expand without triggering balance of payments crises. At the same time, the trend GDP growth has dropped sharply from 4% (1992-2018) to 2.5% (2018-2023), largely due to falling investment. Adding to concerns, the economists estimated annual capital outflows of $6-9 billion, attributing them to exchange rate depreciation and falling domestic profitability, which have weakened savings and investment.
On the external front, Graduate School of Development Studies Director Rashid Amjad pointed out that while remittances surged to around $40 billion in 2025, their impact on the domestic economy remained limited as a significant proportion was spent on imports. Structural weaknesses in Pakistan's economy also came under scrutiny. Speakers highlighted continued dominance of low-value textile exports, declining manufacturing capabilities, and shrinking global market share. Economists linked the slowdown in industrial growth to high borrowing costs and reduced private-sector investment.
Agriculture, traditionally a backbone of the economy, is also showing signs of stress. Researchers noted declining growth in key crops such as wheat and cotton, possibly due to falling support prices.
On policy, Professor of Economics at Asia-Europe Institute, University of Malaya Rajah Rasiah advocated for a proactive industrial strategy focused on export-led growth, suggesting that Pakistan could build on emerging strengths such as solar technology. The conference also highlighted worrying social indicators. Data showed that caloric poverty, which had declined steadily from 2000 to 2014, has reversed since 2018 and continued rising through 2025. Labour market challenges persist, with low female participation and high unemployment even among graduates, despite improvements in education.
Research on regulatory policy revealed untapped opportunities. A study, led by Theresa Thompson Chaudhry, found that firms significantly underestimated the benefits of solar energy, despite potential electricity savings of 40-60% and payback periods of less than two years. Meanwhile, financial inclusion remains a long-term challenge. According to Jamshed Uppal, Research Professor at Busch School of Business, it could take over five decades for 90% of Pakistan's population to gain access to formal banking services at the current pace.
Experts also stressed the importance of governance, with Matthew McCartney, a development economist, noting that stable political environments are more conducive to growth-oriented reforms and poverty reduction. In a broader assessment, conference participants warned that Pakistan was already facing a structural slowdown before the latest oil shock. Declining investment, exchange rate volatility since 2018, and rising capital outflows have collectively weakened economic fundamentals.
While the recent stabilisation of the exchange rate was acknowledged as a positive development attributed to government policy measures, economists cautioned against renewed calls for further depreciation, warning it could reignite inflationary pressures and deepen economic instability.
The conference concluded with a call for urgent, coordinated reforms to boost investment, enhance productivity, and strengthen export competitiveness.
Labels: Lahore School, Management of Pakistan Economy, Pakistan Economy, Research
posted by S A J Shirazi @ 4/29/2026 08:55:00 AM,
Macroeconomic Insights 2025
Both the full volume and individual chapters can be accessed directly through our website.
You are warmly invited to explore the published work and share the links within your professional and academic networks. You can find the 2025 edition here:
Book 2025: https://itc.lahoreschool.edu.pk/assets/uploads/books/Book%202025.pdf
ITC Website: https://itc.lahoreschool.edu.pk/
Labels: Lahore School, Microeconomics, Pakistan, Publications
posted by S A J Shirazi @ 4/29/2026 08:00:00 AM,
Lahore School of Economics Ninteenth Annual Conferene on Management of Pakistan Economy
April 27, 2026
8-9 April 2026
Moazam Mahmood, Azam Chaudhry, and Matthew McCartney
Themes of external vulnerability, energy dependence, and growth dominated the two-day conference at the Lahore School of Economics. The conference occurred against the backdrop of an ongoing programme with the IMF and oil prices rising to $120 a barrel, at a time when Pakistan imports 80% of its energy needs.
The opening address was given by the Rector Dr. Shahid Amjad Chaudhry, who framed the conference in terms of three vulnerabilities faced by Pakistan, ongoing negotiations with the IMF from a position of weakness owing to recurrent and accumulated foreign debt, the shock to domestic costs and the import bill resulting from increased oil prices, and a longer-term reform agenda related to regulation, taxation, and investment.
The first panel on day one chaired by Dr. Ishrat Hussain former Governor of the the State Bank, focused on External Vulnerabilities and Growth.
The Modeling Lab at the Lahore School, Dr. Moazam Mahmood, Dr. Azam Chaudhry, Amna Noor Fatima, Anoosha Liaqat, and Syeda Khadijah Batool, estimated that pre conflict GDP growth for FY 2025-2026 could have been 3.2%, but the oil price shock would lower it to 1.8%. Inflation was forecast to reach 9.4%. The exchange rate after the precipititous depreciations of 2018 and 2022, remained remarkably resilient, despite pressure from an oil shocked deficit in the Current Account.
Dr Rashid Amjad the Director of the Graduate Institute for Development Studies at the Lahore School, argued that the surge in remittance income to Pakistan to $40 billion in 2025, while gratifying support on the Current Account, risked being spent more on imports, with a lower impact on the domestic economy.
Dean of Economics, Dr Azam Chadhry and Gul Andaman estimated that the GDP growth rate consistent with a sustainable balance of payments had shrunk over recent decades to 3.7%. The faster economic growth needed to reduce poverty and create employment could risk sucking in excessive imports and leading to another debt crisis.
Dr. Naved Hamid the Director for the Centre for Research in Economics and Business at the Lahore School, and Murtaza Syed from the Asian Infrastructure Investment Bank, explored a narrative of policy failure, the unwinding of trade liberalisation in the 2000s towards greater protection and increased complexity of the trade regime.
Dr. Rajah Rasiah Dean at the University of Malaya argued that a proactive industrial policy could help Pakistan pursue a goal of export-led industrialisation, building on existing successes in solar technology.
The second session examined structural change in Pakistan.
Dr. Ishrat Hussain catalogued a growing litany of economic failures in large-scale manufacturing, declining capabilities, the continued dominance of low-value-added textile exports for three decades, and a declining share of global export markets.
Dr. Kalim Hyder from the State Bank of Pakistan and Mehak Ejaz from the Institute of Business Management, traced the slowdown in manufacturing growth to declining investment, in turn driven by the high cost of domestic loan capital.
Dr. Rabia Ikram and Amna Kashif from the Lahore School used rigorous statistical analysis to show a step down in trend GDP growth, from 4% over 1992-2018, to 2.5% from 2018-2023. Again, the authors highlighted the crucial role of declining investment.
Shamyla Chaudry, Muzzna Maqsood, and Dr. Moazam Mahmood from the Lahore School, estimated that low savings in Pakistan, (and therefore low investment), was contributed to by mounting capital outflows of $6 billion to $9 billion per year. Arguing that depreciation of the exchange rate triggered these outflows because of declining relative domestic profitability.
Finally, Anum Ellahi from the Lahore School, completed the sectoral overview showing that falling sectoral growth had even spread to the agricultural sector, where both food crops (wheat) and industrial inputs (cotton) had experienced sharp falls in annual growth rates over the two years, possibly correlated to falling support prices.
The first panel on day two focused on regulatory policy and welfare.
Dr. Theresa Thompson Chaudhry Co Chair of the Innovation and Technology Centre at the Lahore School, collected data from 657 manufacturing firms in the Punjab using a Randomised Control Trial (RCT). The study showed that firms drastically undervalued potential cost savings from using solar technology – payback periods of under two years and potential savings in electricity use of 40-60 per cent. This information failure creates the potential to drastically scale up the number of firms that had installed solar technology by 2024 to 13 per cent. The study also found that firms' pessimistic attitudes were hard to shift.
Dr. Matthew McCartney from the ZRCP in Zanzibar, explored the political economy of economic reform and showed that stable, durable governments in Pakistan were better incentivised to provide poverty-reducing public goods and to conduct growth-promoting macroeconomic management.
The Modelling Lab at the Lahore School showed a disturbing recent trend in caloric poverty in Pakistan, which had consistently declined declined between 2000 and 2014, plateaued to 2018, but then reversed, increasing through to 2025.
Dr. Waqar Wadho from the Lahore School, examined the labour market in Pakistan, showing the low impact of rising education and skills, on the low productivity informal economy, seen in women’s low levels of labour force participation, and high unemployment levels even among degree holders.
Dr. Rabia Ariff and Dr. Azam Chaudhry from the Lahore School, explored Pakistan's positioning in global value chains (GVCs). They found that limited local value added, and short local GVCs, could be improved through higher labour productivity and institutions to deepen integration.
Dr. Mujtaba Piracha from the Government of Pakistan, and Nadia Mukhtar from LUMS, examined Pakistan's Export Development Fund (EDF) as a case study of export-oriented industrial policy. The paper showed why industrial policy is crucial for Pakistan – addressing market failures, the complexity of industrial policy – the different needs of large and small firms, and the importance of financing constraints for firms that could enter export markets.
Dr. Jamshed Uppal from the Catholic University of America, noted the importance of financial inclusion for empowerment and poverty reduction, but estimated that it will be another 52 years before 90% of Pakistan's population even has access to a bank account.
Finally, Dr. Matthew McCartney gave the Rapporteurs' Report, highlighting the themes of vulnerability and resilience of Pakistan, the impressive 19-year history of the Lahore School’s Economics Conference, and the importance of transformative changes such as Artificial Intelligence (AI), Urbanisation, and Climate Change as suitable subjects for future conferences to engage with.
Dr Shahid Chaudhry gave the final vote of thanks to staff, students, and visitors to the conference.
In summary, a forest-not-the-trees analysis of the conference papers is disturbing. It shows that there was looming crisis of GDP growth, sectoral growth, and resulting welfare loss, prior to the current oil shock. From 2018 onwards, trend GDP growth falls to 2.5%, based on a trend drop in investment. The large depreciations from 2018 seem to have triggered a significant increase in capital outflows, on account of reduced relative domestic profitability, depleting domestic savings. Sectorally, the larger drop in investment has been in manufacturing. But with a policy warning also for agriculture.
This large depreciations from 2018 onwards fuelling inflation, and the fall in trend GDP growth, have reversed the ten decade long declining trend in poverty.
The good news is that the trigger for these declining macro trends, the falling exchange from 2018 onwards, appears to have stabilized. For which credit must go to GOP for getting it right. The worry is contra calls for further depreciation by various economic lobbies.
Labels: Economics, Management of Pakistan Economy, Pakistan Economy
posted by S A J Shirazi @ 4/27/2026 11:13:00 AM,
Pakistan’s Economic Evolution and Monetary Policy
April 26, 2026
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/26/2026 09:29:00 AM,
Organizational Behaviour and Human Resource Management
April 24, 2026
On 23 April 2026, Lahore School of Economics hosted a guest lecture for the undergraduate students enrolled in the course of Organizational Behaviour and Human Resource Management. The session was delivered by Ms. Daniah Ishtiaq, Co-founder and Strategy Lead at the advertising agency “And The Nerve.” The lecture provided students with practical insights into marketing strategy, entrepreneurship, and the evolving role of creativity in advertising.
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/24/2026 12:19:00 PM,
Organizational Behavior and Leadership
April 23, 2026
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/23/2026 03:32:00 PM,
Strategic Management
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On 22 April 2026, Lahore School of Economics organized a guest lecture for undergraduate students enrolled in the Strategic Management course. The session was delivered by Mr. Kamran Zuberi, Chief Operating Officer of Future Technologies, who adopted a conversational and engaging style that fostered active participation and meaningful discussion.
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/23/2026 03:24:00 PM,
USEFP Delegation Visits Lahore School of Economics
April 22, 2026
Labels: Education, Higher Education, Lahore School, USEFP
posted by S A J Shirazi @ 4/22/2026 04:14:00 PM,
Brand and Advertising
As part of the Distinguished Professional Lecture Series, Lahore School of Economics hosted Mr. Shehzad Ahmed, Chief Operating Officer at See Me Productions, on 21 April 2026, for a guest lecture to the MBA students enrolled in the Brand and Advertising course. The session examined Pakistan’s evolving media landscape, with a focus on digital disruption, shifting consumer behavior, and the rapid growth of digital advertising.
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/22/2026 04:04:00 PM,
Strategic Management
On 21 April 2026, Lahore School of Economics hosted Mr. Hasan Yousaf Shah, Chief Executive Officer of PAPRED, for a guest lecture titled Strategy in Action. Addressing undergraduate students enrolled in the Strategic Management course, he delivered a thought-provoking session that bridged theoretical concepts with their practical application in both organizational and individual contexts.
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/22/2026 03:59:00 PM,
Strategic Supply Chain Management
On 22 April 2026, Lahore School of Economics (Corporate Relations Office) hosted a guest lecture for the MBA students enrolled in the Strategic Supply Chain Management course. The session was conducted by Mr. Ahmad Salman, CEO of Sigma Distributors, who offered a comprehensive industry perspective on the evolving dynamics of FMCG distribution.
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/22/2026 03:54:00 PM,
Organizational Behavior and Human Resource Management
April 21, 2026
On 20 April 2026, Lahore School of Economics invited Mr. Faisal Sheikh, Chief Human Resources Officer at Fauji Foods, to deliver a guest lecture to the undergraduate students enrolled in the Organizational Behavior and Human Resource Management course. The session sought to reframe the role of Human Resources as a strategic driver of organizational success, rather than a purely administrative function.
Labels: Guest Speaker, Spring 2026
posted by S A J Shirazi @ 4/21/2026 04:07:00 PM,
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