Elevated fiscal spending and investment from the China-Pakistan Economic Corridor (CPEC) delivered growth in excess 5% p.a. over the last two years. But Pakistan’s heavy reliance on increasingly expensive oil imports; insufficient tax collections (only one million out of the 208 million population paid tax in 2017); and narrow export base have exacerbated internal and external deficits that will necessitate tough economic reforms. The growing likelihood of a Balance of Payments crisis has forced Pakistan’s new government, led by Imran Khan, to approach the IMF for assistance. Growth is forecast to average 3% p.a. over the coming years.
Pakistan’s favourable population dynamics will buttress the long-term outlook, but this will require adequate infrastructure, stable governance and productive investments to create employment opportunities.