It is a no-brainer that sustained and inclusive economic growth — one that creates jobs, avoids fuelling the current account deficit, and uplifts every segment of society — is Pakistan’s only viable path to eradicating poverty and improving living standards.

Yet, this goal remains elusive.

Time and again, Pakistan has seen fleeting spurts of high growth, averaging five per cent, only to be derailed by macroeconomic crises. The fear of the economy “overheating” has often dictated policy, sidelining ambitions for higher and enduring growth. Instead, stabilising the economy at modest growth rates has become the default approach, leaving the country stuck in a cycle of missed potential.

But things look different this time. Pakistan stands at a promising crossroads to target growth 2.0. The year 2025, marking the second quarter of the incumbent International Monetary Fund (IMF) programme, begins on a stronger footing: a stabilised economy, a current account surplus, inflation falling below 5pc in November, plummeting oil prices, and a monetary policy pivot with the interest rate dropping from a historical 22.5pc to 13pc by December 2024. Even the exchange rate shows newfound stability, steady at Rs278 to the dollar.

This creates a rare opportunity to reimagine economic policy — one where growth and the well-being of the people move in tandem. Achieving this vision will require a decisive shift from mere stabilisation to growth that is inclusive, sustainable, and environment-friendly.

To do this, the government must align monetary, fiscal, and other regulatory policies that would build strong economic foundations for growth 2.0, generating employment opportunities. Finally, the federal and provincial governments must invest in people through public sector initiatives in education, health, and skill development, along with an improved social protection system.

Compared to its neighbours, Pakistan’s economy suffers from poor and slow economic growth. Once a country with the highest GDP per capita in South Asia, Pakistan now lags significantly behind peer economies such as India and Bangladesh. In 2023, the average income of a Pakistani stood at $1,664 — benefiting somewhat from the exchange rate stabilising at Rs278 per dollar, down from Rs330 earlier that year. However, this still represented a 74pc lower annual income compared to an Indian, whose average income was $2,240.

This is a tale of a steep economic decline. In 1990, an average Pakistani earned $957 — nearly double the $534 earned by an Indian. However, India began catching up in the early 2000s, eventually surpassing Pakistan in 2012. Since then, the gap has only widened.

Bangladesh followed a similar trajectory, overtaking Pakistan more recently in 2020. In 1990, the average Bangladeshi income was $443, almost half of Pakistan’s $957. Over the next 25 years, Bangladesh’s per capita income nearly tripled, reaching $1,236, due to sustained economic growth. In contrast, Pakistan’s GDP per capita rose........

© Dawn Prism