THE ADB’s new five-year country partnership strategy comes at a moment when Pakistan’s economy, though showing signs of fragile stabilisation, is still vulnerable to internal and external shocks. The pledge of $10bn in financing through 2030 signals continued multilateral confidence while underscoring Pakistan’s heavy reliance on external support to sustain even modest growth. The strategy is well aligned with Pakistan’s long-standing economic challenges as the programme sets out “a roadmap to support the country’s transition to sustainable and inclusive growth”. Its emphasis on sustainable private sector-led development, inclusive growth, export competitiveness and sustainability, and climate resilience reflects a recognition that macroeconomic stabilisation is necessary but not sufficient. Financing priorities will be reinforced by cross-cutting themes of good governance and institutional strengthening, gender equ­ality and social inclusion, digital transformation and regional cooperation and integration. The focus on integrated solutions by combining policy reforms with financing and technical support shows that Pakistan’s challenges are institutional and cannot be addressed through capital inflows alone.

For decades, our growth model has been skewed towards consumption, underpinned by periodic external inflows thanks to our geostrategic location rather than productivity gains. That advantage appears to have been eroded for quite some time. By prioritising governance and productivity reforms, Pakistan can transition towards sustainable investment- and export-driven growth. Nothing has underscored the urgency of these reforms more sharply than the crisis in the Gulf following the US-Israel war on Iran, which has exposed just how vulnerable Pakistan remains to external shocks. With the conflict showing no sign of resolution as yet, Islamabad is confronting a far graver crisis than the one triggered by energy market volatility following Russia’s invasion of Ukraine. Risks now extend beyond price shocks to potential supply disruptions and prolonged external sector stress. That said, the long-term sustainability of economic recovery now hinges less on the availability of financing and more on policymakers’ willingness to dismantle structural distortions. Without deep structural reforms to diversify the production base, enhance competitiveness and move up the value chain, the external sector will remain a source of instability, leaving any recovery vulnerable to even minor shocks.

Published in Dawn, March 23rd, 2026

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