Learning Point

  1. Introduction The economy does not operate in a vacuum: political factors such as policy-continuity, governance, institutional strength, civil-military relations, corruption, and external relations play a critical role. In Pakistan’s case these political issues are deeply intertwined with economic performance. This lecture explores how political issues constrain economic progress, what examples we see today, and how the future might unfold. 2. Key Political Issues and Their Economic Impacts 2.1 Political instability & policy-continuity Frequent changes of government, shifting coalitions, and unpredictable policy directions create uncertainty for investors, businesses and reforms. For instance: the State Bank of Pakistan noted that political uncertainty “exacerbates … inconsistent economic policies” and weak governance. ( Dawn ) The lack of long-term consistent policy limits reforms from taking root. Example: A minister in 2023...

  1. Introduction The economy of Pakistan is currently navigating a highly challenging environment, marked by structural vulnerabilities, macro-economic stabilization efforts, external pressures, and significant reform imperatives. These lecture notes aim to provide an overview of the current economic conditions, highlight key sectors and indicators, identify driving forces and constraints, and project possible future pathways. Examples, data and context are drawn from the latest available information to make this relevant for your students.   2. Key Economic Indicators & Current Status 2.1 Growth & Output Pakistan’s gross domestic product (GDP) in current US$ is around US$ 373 billion (2024 estimate). ( World Bank Open Data ) For the fiscal year 2024-25 the economy’s growth rate is reported at 2.7%, missing the government target of 3.6%. ( Business Recorder ) The previous year growth was ~2.5%. ( Reuters ) The agric...

  Relationship between politics and economy: Relationship Between Politics and Economy (With Examples) The relationship between politics and the economy is deeply interconnected and interdependent . Politics influences economic decisions, while economic conditions shape political stability and power. Understanding this relationship helps explain why some nations prosper while others struggle with development and inequality. 1. Politics Influences the Economy Political decisions directly affect a country’s economic growth, stability, and distribution of wealth . Governments create policies that influence how businesses operate, how people are taxed, and how resources are used. Examples: Fiscal Policy: When a government reduces taxes or increases public spending , it can stimulate economic growth. Example: During the COVID-19 pandemic, many countries (including Pakistan and the U.S.) increased government spending to protect jobs and ...

  1. Fiscal Deficit and Debt Burden Pakistan faces a chronic budget deficit due to low tax revenue and high government spending. Reliance on domestic and international borrowing has led to a mounting debt crisis . IMF programs and conditional loans often influence Pakistan’s political and economic policies. 2. Taxation System and Revenue Generation Tax-to-GDP ratio remains one of the lowest in South Asia . Widespread tax evasion, exemptions for elites, and weak enforcement undermine revenue collection. Heavy reliance on indirect taxes increases the burden on the poor and middle class. 3. Energy Crisis and Circular Debt Power shortages and circular debt in the energy sector remain persistent. Dependence on imported fuels increases economic vulnerability. Political interference and poor management weaken reforms in the power sector. 4. Dependence on Agriculture ...

  1. Understanding the Link between Politics and Economics Politics in Pakistan cannot be separated from economics. Decisions about taxation, subsidies, defense spending, or foreign aid are deeply political. Students learn how governments use economic tools to gain legitimacy or maintain power. 2. Analyzing State and Policy Formation The subject helps students understand why Pakistan adopts certain policies (e.g., IMF loans, CPEC projects, subsidies on wheat). They learn how ruling elites, bureaucracy, military, and business groups influence economic decision-making.     3. Explaining Development and Governance Challenges Poverty, unemployment, energy crises, and inflation are not only economic issues—they are political questions. Students can critically analyze how weak institutions, corruption, and governance failures shape economic outcomes. 4. Link to I...