PAKISTAN’S policymakers are in agreement that stability is not the destination; growth is. Many argue that now is the time the economy moved from stabilisation to growth. Others have advocated restraint. The finance minister stresses the need to make macroeconomic stability permanent before pursuing growth. There is no real contradiction here. Pakistan needs both stability and growth. But the more important question is whether the stability achieved so far is strong enough to support a sustainable expansion. It is not. The current stability has been secured largely through fiscal compression, monetary restraint and external financing. These measures can contain demand and reduce immediate pressures. They cannot by themselves raise productivity, exports or investment. The economy grew by 3.7pc last year, only modestly above population growth. This is hardly a foundation for reducing poverty and creating jobs. The improvement in foreign exchange reserves illustrates the problem. It has come through borrowings and remains vulnerable. The latest oil shock makes the vulnerability clearer. A stable economy should be able to absorb an external energy shock without immediately having to confront renewed balance-of-payments risks.

Pakistan’s stability is not yet supported by sufficiently strong exports, domestic energy security, productivity or foreign investment. FDI remains particularly weak. Investors do not commit capital merely because inflation or the current account has temporarily improved. They need predictable policies, effective regulation, contract enforcement, reliable infrastructure and competent public institutions. This brings governance to the centre of the growth debate. The argument that governance cannot improve until the economy grows gets the sequence wrong. Better governance is itself an economic input. Governments that make credible policies, enforce contracts, reduce regulatory uncertainty and hold public institutions accountable create the conditions in which investment and productivity can rise. Indeed, growth must be the destination. But macroeconomic stability cannot be abandoned. Stability must be judged by its capacity to support growth, not by the temporary absence of crisis. The real test, therefore, is whether Pakistan can convert today’s fragile stability into higher productivity, stronger exports, greater investment and better governance.

Published in Dawn, September 23rd, 2026