EVERY economic slowdown in Pakistan revives the expectation within the business community that some incentives will quickly restore growth. This expectation is understandable, but it is misplaced. Pakistan’s growth challenge is not cyclical; it is structural. And structural weaknesses do not yield to quick fixes.

The growth record offers a sobering ben­ch­­mark. Over the past 15 years, Pakistan’s average real GDP growth has remained around 3.5-4 per cent — barely enough to absorb population and labour-force growth, let alone raise productivity or incomes. Cur­rent growth is therefore not an aberration caused solely by recent shocks. It reflects a long-standing failure to escape a low-growth equilibrium. For businesses, this means weak demand and recurring instability are not temporary disruptions; they are symptoms of a flawed economic model.

The IMF programmes are often seen as turning points for economic revival. In reality, their primary function is to stabilise the macroeconomic environment by restoring external balance, enforcing fiscal discipline, and anchoring inflation expectations. These measures are important for maintaining confidence but do not directly generate growth. Stabilisation measures prevent economic collapse, but they do not create competitiveness. Expecting rapid improvements such as lower interest rates, tax relief, or reduced energy prices is unrealistic and leads to disappointment.

Structural reforms — the kind that raise productivity and expand markets — cannot be delivered within the short lifespan of an IMF programme. Designing them, implementing them, and allowing firms to adjust takes years. When expectations are compressed into months, disappointment is inevitable and reform credibility suffers.

Pakistan’s persistent export underperformance illustrates the depth of the problem. Exports remain low and narrowly concentrated, hovering around 10 per cent of GDP, far below regional peers. For the business community, this points to a deeper issue: capital has overwhelmingly been deployed towards protected domestic markets rather than competitive global ones. Profits have often been secured through regulatory shelter, and preferential treatment instead of scale, innovation, efficiency and fair but robust competition.

Firms must become externally focused, productivity-driven, and globally competitive.

Government policy has played a role. A complex and unpredictable tax regime penalises documented, export-oriented firms while leaving large parts of the economy undertaxed. Uncertainty around rates, refunds, and compliance has been as damaging as the tax burden itself. Export competitiveness requires predictability, not periodic concessions extracted through lobbying.

The energy sector has further eroded competitiveness. High and volatile tariffs, driven by inefficiencies, losses, and weak governance, act as a direct tax on industry. While recent tariff increases may be fiscally unavoidable, they reinforce an uncomfortable reality for firms: export revival cannot be achieved through short-term relief. Energy reform is a multi-year process involving loss reduction, better governance, rational pricing and demand generation.

Yet it would be incomplete to place the burden of adjustment solely on the state. Business behaviour must also change. For decades, many firms have operated within a model that prioritises protection, subsidies, and assured returns. On the one hand, it has misdirected investment into sectors where Pakistan lacks comparative advantage, on the other, it has weakened incentives to innovate, upgrade technology, or compete internationally in both cost and quality. In such an environment, risk-taking is discouraged and productivity stagnates.

Sustainable gro­­­­-wth demands a dif-ferent orientation. Firms must bec­o­­me externally foc­used, productivity-driven, and global-

ly competitive. This means accepting exposure to competition, investing in skills and technology, and reallocating capital towards tradable sectors. Countries that have achieved sustained growth did so by disciplining domestic firms through competition, not insulating them indefinitely.

This transition will not be quick or painless. It requires a new alignment between the state and business. A ‘Charter for Business’ would call for predictable policy, fair taxation, and functional infrastructure from government, while businesses commit to investment, innovation, export orientation and input indigenisation. Such a transformation cannot be achieved within the narrow horizon of an IMF programme.

For Pakistan’s business community, the message is clear. There will be no economic miracle produced by short-term fixes. Sus­tainable growth is a long game — and those who adapt early to a competitive, export-led future will be best placed for success.

The writer, a former CEO of Unilever Pakistan and the Pakistan Business Council, serves on the boards of several public companies.

Published in Dawn, December 24th, 2025