Product Research and Reviews

Unmasking 5 Basic Factors: Pakistan’s Economy Challenges

I. Preface

Traditionally, we analyze the economy, emphasizing more economic indicators such as GDP, inflation, unemployment, foreign trade, and other conventional indicators. The problem with such analysis is that these indicators measure the outcome of factors of production, especially human efforts behind the outcome; however, it does not entail the study of collective mindsets that make them possible. My perspective on Pakistan’s economy is quite different, and I will focus on those factors and elements that are normally not taken seriously in studying Pakistan’s economy.

In this study, I will discuss the characters, factors, and mindsets that are the main contributing elements in shaping the landscape of Pakistan’s economy and imposing poor-to-worst conditions.

II. Nation-building and Pakistan’s economy

The concept of a nation or nation-state is not fully understood in Pakistan. The concept of nation is derived from preparing the political slogan “Indian Muslim” At the time of partition, our founding fathers thought that we were different from Hindus as we were Muslims, and there was a need for a separate state for those Muslims who were living at that time within the boundaries of undivided India.

However, after independence, it was vague to call them a Muslim nation, as there was almost no other nation other than Muslims in Pakistan. Unfortunately, since independence, the concept of a Pakistani nation hasn’t had its roots or reality. Though all who are living in Pakistan are Muslims, they are not Pakistanis but Punjabis, Sindhis, Balochis, and Pakthoons.

To shed more light on the issue of nationhood and Pakistan’s economy, we have to concentrate on how the concept of a nation contributes to the economic progress of the nation. The most important elements that promote and harmonize quick and efficient decision-making are:

  • Trust
  • Sense of common benefit
  • Urge to help each other.

1- Trust

Without having trust in fellow citizens, you cannot accomplish your desired and common objective, which is economic prosperity. For example, Pakistan has two most vital issues: energy and shrinking water resources. For a long time, no consensus has been developed to construct the Kalabagh dam due to mistrust between the Punjab, Sindh, and KPK provincial governments and their respective political parties. So much so that even some vital economic decisions kept pending due to differences between and among different state institutions. Delay of PIA, Pakistan steel mills, and some other state-owned enterprises have not been privatized to due some vested interest at the cost of national interest.

2- Sense of common benefit

There is a dearth of sense of common benefits, again not only due to mistrust among federal units but sometimes a negative approach to curtail or minimize others’ benefits. Had this been converted to the impression that one’s benefit is the same as all’s benefit? The situation would have been entirely different.

3- Urge to help each other.

In this regard, the situation is not as bad as the above-mentioned instances. Generally, the people of Pakistan are quite generous in helping each other, especially in cases of emergencies, natural calamities, or other devastating situations.

III. Political instability and investors’ confidence

One definition of political stability is that whenever some emergency or exigency arises, the system responds to bring back the economy and politics to normalcy. Pakistan’s economy and politics faced time to time interference by the military in political affairs which took over at least four times directly and ruled Pakistan for about forty years.

Resultantly, there was always great uncertainty about the break-up system by the military and this phenomenon shook investor’s confidence in Pakistan’s economy. Ayub Khan era mostly adopted free economy policies, then Z.A. Bhutto adopted mixed economy policies by nationalization of industry and banks. Later on, Zia-ul-Haq tried to convert Pakistan’s economy and politics according to his version of Islam. Then we experienced a lost decade of democracy which was shared by Benazir Bhutto and Nawaz Sharif. However, Nawaz Sharif’s policies were pro-business and initiated a program of denationalization.

In 1999, General Pervez Musharraf took over the government from Nawaz Sharif and boosted it to speed up the denationalization of banks and other industries. His policies were too pro-business, and Pakistan’s economy prospered under his regime.

However, here we are not discussing who was successful in putting Pakistan on the right path or not, but our main focus is that due to the discontinuity of the system (in the case of Pakistan, which has a parliamentary form of government), Pakistan suffered a lot because of political instability. Investors, especially foreign investors, want continuity and policies that only be guaranteed by political stability.

IV. Shadows of quality education on Pakistan’s economy

In Pakistan, education is a provincial matter, and the federal government regulates higher education through the Higher Education Commission. Primary, secondary, and higher secondary education are regulated by respective provincial governments, and even chartered universities are granted charters by their provincial governments.

The standards in private schools are somehow better than in public schools. The quality of education in government institutions is very bad.

Since private schools are too expensive, poor parents are forced to rely on madrassahs and religious institutions.

As far as the quality of education is concerned, we have one reliable source, i.e., the World Bank’s “Harmonized Test Scores.” The Harmonized Test Scores are a significant international program for measuring student performance. The TIMMS-equivalent units were used to measure minimum scores of 300 and advanced attainment of 625.

The following testing programs were used to measure Harmonized Test Scores.

  • TIMSS/PIRLS: Refers to the average of test scores from TIMSS (Trends in International Maths and Science Study)
  • and PIRLS (Progress in International Reading Literacy Study),

The International Association for the Evaluation of Educational Achievement conducted these tests. In South Asia, Pakistan’s Harmonized Test Scores are the lowest, as depicted in the following table.

The average of test scores from TIMSS and PIRLS
YearCountry NameHarmonized Test Scores
2020United States                                 511.80
2020Israel                                 480.75
2020Turkiye                                 477.96
2020United Arab Emirates                                 448.04
2020Malaysia                                 445.68
2020China                                 441.00
2020Iran, Islamic Rep.                                 432.11
2020Qatar                                 427.48
2020Myanmar                                 424.63
2020Oman                                 423.51
2020Azerbaijan                                 415.95
2020Sri Lanka                                 400.00
2020India                                 399.00
2020Saudi Arabia                                 398.97
2020Kuwait                                 383.40
2020Nepal                                 368.56
2020Bangladesh                                 368.32
2020Iraq                                 363.43
2020Egypt, Arab Rep.                                 355.99
2020Afghanistan                                 354.76
2020Pakistan                                 338.66
2020Yemen, Rep.                                 321.33

Roughly speaking, three out of every four students in Pakistan failed to achieve the necessary proficiency in mathematics and the natural sciences. It seems that fourth-grade students lack basic mathematical knowledge and skills, in addition to a lack of understanding and proficiency with basic scientific concepts and facts.

They seemed to be at the bottom of the mountain, on a massive plateau. We cannot expect that these students will break the cycle of poverty. They bear the risk of not acquiring the knowledge and skills necessary to complete their education, obtain a respectable job, and contribute to the social and economic development of their local communities and the country at large.

In those institutions where the required qualifications for teaching students is graduate, even in such institutions more than two-thirds of Pakistani students were taught by teachers without a bachelor’s degree.

How can you expect better or higher productive labor while playing with standard measurement of economic indicators and ignoring the main factor of production quality? We have to give more attention and priority if want Pakistan’s economy to grow.

V. Giving more importance to non-productive factors.

In Pakistan, there are two major players of Pakistan’s economy and politics i.e., military and mullahs or religious leaders. Unfortunately, both are non-productive factors of the economy. Every policy or even day-to-day decision is taken or influenced by these major players.

No doubt Pakistan faces many security challenges that can only be handled and prevented by the military. So, in this respective pivotal role importance cannot be ignored or minimized. However, instead of building efficient and effective civilian institutions Pakistan heavily relies on the best among the worst institutions i.e., the Pakistan Army.

In a Muslim country maulanas, mullahs, or religious scholars have their place for guidance as per the principles of Islam. However, these are used to promote extremist and radical teaching according to their whims.

Giving due respect and an appropriate place is one thing but giving a few institutions unlimited and non-constitutional powers brings dire consequences for society and the economy. There is a double-edge loss to the economy,

  • One you are diverting resources from productive factors to non-productive factors that will yield nothing.
  • Second, you waste your productive factors due to non-utilization of these factors.



Since its inception, Pakistan’s economy and politics have faced numerous issues and challenges. Economists in particular and policymakers in general tried to explain these issues purely from an economic point of view or within the legal framework. Pakistan’s constitution guarantees a parliamentary form of government; however, we witnessed several occasions when some extra-constitutional things happened.

Such intervention and the direct role of the military shake the confidence of investors as no one knows when and why basic rights would be suspended. Businesses flourish and hence the economy if the system is stable when you break the system again & again trust in the system trembles which brings bad effects on the economy.

To ensure the prosperity and well-being of the nation, it is necessary to create an atmosphere of trust among different segments of society. Everyone should do their primary work and assign tasks instead of unnecessary interference.

There is a dire need for the correction of education, especially at the grassroots, and to prepare nations to have the ability to compete internationally and become more productive.

There is an utmost need to use Pakistan’s economy’s limited resources prudently so that they can yield maximum returns.

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