Key takeaways
- Budget deficits have averaged about 7% of GDP with revenue near 12%.
- Public debt has risen to around 70% of GDP.
- Only about 1.3% of the population files tax returns.
- A UNDP estimate puts elite privileges at US$17.4 billion a year, about 6% of GDP.
- Investment below 13% of GDP is a 50-year low; FDI is under 0.5% of GDP.
In this Minute Mirror column (October 2025), Dr. Ghulam Mohey-ud-din argues that Pakistan’s economic crisis is largely self-inflicted. External shocks matter, but the core causes are domestic: elite capture and weak governance.
The argument
The fiscal numbers tell the story. Budget deficits have averaged around 7 percent of GDP while revenue has hovered near 12 percent, and borrowing to fill the gap has pushed public debt to about 70 percent of GDP. Only about 1.3 percent of the population files tax returns, and politically connected groups, including large landholders, largely escape their obligations.
The column cites a United Nations Development Programme estimate that elite privileges, through subsidies, tax breaks and favourable arrangements, cost about US$17.4 billion a year, roughly 6 percent of GDP. The energy sector adds further drain through losses, theft and circular debt of around PKR 4.6 trillion, about 4 percent of GDP, by mid-2025.
The result shows in investment. Investment has fallen below 13 percent of GDP, which the author describes as the lowest level in 50 years, and foreign direct investment averages less than 0.5 percent of GDP. Investors, domestic and foreign, have lost confidence that policy will stay stable.
What needs to change
- Genuine fiscal discipline and an end to chronic deficit spending.
- A wider tax base that brings wealthy groups in fairly.
- Removal of subsidies, monopolies and preferential arrangements that benefit elites.
- Stronger institutional checks on economic decision-making.
- Tackling corruption and inefficiency in the energy sector.
Because the causes are domestic, the author concludes, so are the remedies.