NEARLY 45 per cent of Pakistan’s population is living in poverty amid a deepening governance and institutional crisis that continues to undermine the country’s economic potential, a report has said. A report published in ‘The Dawn’ said Pakistan’s recurring economic crises are not solely the result of IMF programmes or economic policy failures but stem from a broader leadership deficit and weakening institutions. The country has repeatedly entered IMF-supported programmes, achieving temporary macroeconomic stability but failing to address underlying economic weaknesses, it added. In addition, it pointed to a sharp decline in financial support for businesses, noting that Pakistan’s private sector credit-to-GDP ratio has fallen from 27 per cent in 2008 to just 8.7 per cent in 2025, among the lowest levels across emerging economies.

 

Small and medium enterprises (SMEs) have witnessed a significant decline in financing. SME lending has dropped from around 17 per cent in the mid-2000s to just 6 per cent. Meanwhile, exports came at 10 per cent of GDP, down from 17 per cent two decades ago, reflecting the country’s inability to diversify and strengthen its industrial base. Patronage networks and political interference have weakened the civil service and public institutions, discouraging merit-based decision-making and reducing administrative efficiency, it said.