Now for the country, please

PAKISTAN has earned international appreciation and respect for its role in mediating between the US and Iran and helping them achieve a ceasefire and a memorandum of understanding that aims to pave the way for a lasting settlement. This kind of mediatory role finds no precedent in Pakistan’s diplomatic history. It has raised Pakistan’s global standing and boosted its international image.

The diplomatic achievement has sparked discussion in the country about the economic benefits Pakistan might gain. Certainly, economic opportunities that could open from these developments merit serious thinking and exploring. Also, if the war had not come to a negotiated end there would have been enormous pressure on Pakistan’s fragile economy from higher oil prices, disruption in energy supplies and uncertain remittances. This could have derailed its economic stabilisation efforts.

But there has also been a fair amount of wishful thinking about the economic dividends from Pakistan’s diplomacy. Some even compared the present moment to the situation after 9/11, when Pakistan became a front-line state in the war on terror and recipient of significant US financial and military assistance. This is a false parallel. There is no economic largesse on its way from Washington. Nor is there a rationale for one.

Yet old habits die hard. There is a long history of the country’s ruling elites seeking and earning geopolitical rents from its international alignments. This helped them keep the economy afloat while avoiding domestic economic reform and taxing themselves and their political base. It also encouraged an attitude that looked outside rather than within to address the country’s economic weaknesses. And it created an official mindset of relying on pay-offs, bailouts and other people’s money. This persists.

Pakistan’s destiny will be shaped by choices made at home, not by its external engagements.

Among exuberant statements from government officials, one that exemplifies unrealistic expectations is this. An official claimed “advancing stability abroad” had made Pakistan a “credible destination” for foreign investment. He didn’t explain why this was so when conditions in the country hadn’t changed. Another top minister declared that with diplomatic success the “sun of progress and prosperity” will soon rise over Pakistan. Trying to talk up confidence is one thing. But such hyperbolic statements are misplaced and misleading.

Instead of wishful talk about economic windfalls from diplomacy, energy is best spent on addressing the country’s political, economic and security challenges and fixing its structural problems. If the government can be a peacemaker abroad it should also make peace at home.

A peaceful political environment requires a truce between the government and opposition. Stability is not possible in a divided and polarised country. The principal opposition party represents a large section of society, governs a strategically important province and remains the most popular party in the country. Given Pakistan’s federal structure, inclusive governance is necessary. That means working with and not against opposition-run provinces. Repression, jailing opponents and handing down long prison sentences can neither eliminate the opposition nor create stability. Authoritarianism as a model for the hybrid government undermines democracy and impedes the country’s progress.

The internal security situation poses a serious threat despite sustained efforts by the army and law-enforcement personnel. The rise in militant violence across KP and Balochistan has not been contained. Last year was the deadliest in a decade for security forces. This demands a review of the government’s counter-insurgency strategy which still relies primarily on kinetic actions.

Balochistan presents a special case as the underlying sources of long-standing public disaffection have yet to be tackled. Insurgents must be isolated and the trust of the local community won. But in conflating terrorists with Baloch nationalists, branding every dissident group and leader as traitors and handing life sentences to dissidents, state policy contradicts the core principle of fighting militancy. That is not to multiply the number of adversaries. Law enforcement must be accompanied by efforts to win hearts and minds, not lose them. Seeking foreign investment becomes a fool’s errand when two provinces are insurgency-afflicted and the border with Afghanistan remains perpetually hot.

The most urgent task is the country’s economic recovery and revival. Without this, all else is in vain. IMF-backed stabilisation remains fragile. Stabilisation has also not transitioned to growth and investment. The country remains mired in a low-growth, low-investment, high-debt equilibrium trap. There is no escape from this unless structural issues are addressed. This means bold, wide-ranging reforms to deal with the sources of chronic internal and external financial imbalances, which trigger recurrent balance-of-payments crises and force Pakistan to become a serial borrower from the Fund. This is Pakistan’s 24th IMF programme.

Yet reforms to address the economy’s structural problems in the taxation system, expenditure outlays and energy sector are still not in place. Instead, the government continues to rely on bailouts and loan rollovers for economic management. That only meets debt liabilities. There are no net capital inflows.

Investment, including FDI, remains stagnant. The investment-to-GDP ratio is now lower than in previous years. Economic growth is stalled. Pakistan’s growth model isn’t working. Even the State Bank governor acknowledged this not long ago. The various stakeholders need to put their heads together to frame an economic plan to tackle, not postpone structural problems and evolve a new growth model.

What remains officially ignored are critical dimensions of human development and human welfare, whose indicators have deteriorated in recent years. The dismal state of literacy, education and healthcare as well as the rising level of poverty present a grim picture. That over 23 million school-age children have no access to school is a national scandal. The learning poverty rate is staggering at almost 80 per cent. This means children in school cannot read a simple sentence at age 10.

The prime minister has twice declared an education emergency but then done nothing. Literacy is stagnant with 37pc of our population still illiterate. No country can predicate economic progress on an illiterate base. The level of poverty at 30pc remains troubling. As do economic disparities, with real incomes of the bottom 70pc of people in steady decline since 2018.

Pakistan’s future hinges on fixing these econo­m­­ic and social issues. As well as its politics. The do­­­­m­estic agenda must take priority. The country’s destiny will be determined by choices made at home, not external factors or praise from abroad.

The writer is a former ambassador to the US, UK and UN.

Published in Dawn, July 6th, 2026 ...