Cracks in the edifice

Pakistan's hybrid political and economic system is showing significant cracks, a natural consequence of its current economic predicament. After achieving what was termed "peak stability" in early 2025, with stabilized deficits and extinguished inflation, the nation faces a critical juncture. The challenge now is to transition from stabilization to a growth model that avoids repeating past mistakes of ballooning deficits.

However, this transition has not materialized. The economy remains mired in low-growth stability, while the demand for revenues and foreign exchange is rising. This economic hunger has now permeated the political sphere, testing the coalition that underpins the government's parliamentary majority. The delays in convening the National Economic Council, crucial for finalizing the budget, underscore the strains on the system.

Adding to the concern is a perceived lack of innovative ideas within the political class. Unlike in the past, when various schemes like amnesty programs, exporter incentives, or tax measures were introduced, the current administration seems to be recycling old ideas or employing strong-arm tactics. The reversal of NFC allocations, forcing provinces to reduce development spending to increase central government resources for the military, is cited as an example of such a measure.

This situation suggests a political class that is out of ideas, struggling to navigate the complex economic limitations of the state. The reliance on stopgap measures and the visible strain on the governing coalition raise questions about Pakistan's future economic direction and political stability.