Pakistan's Weak Production Base Threatens Economic Recovery: Report

(MENAFN- IANS) New Delhi, March 18 (IANS) Pakistan’s claims of economic stabilisation and recovery are facing growing scepticism, with experts warning that deep-rooted structural weaknesses – particularly a deteriorating production base – continue to undermine the country’s economic outlook, a report has said.

According to a report published by The Express Tribune, the government has highlighted its success in averting a default, while analysts say the broader economy remains fragile, with little evidence of a sustained recovery.

Key indicators point to persistent stress, including sluggish growth, high inflation, rising unemployment and an escalating debt burden.

However, experts identify weak production capacity as the most critical challenge, limiting the country’s ability to generate sustainable growth.

Pakistan’s production system has steadily deteriorated over the years due to policy neglect and weak governance.

Industrial and agricultural output, the backbone of economic activity, have either stagnated or declined. Data revisions in 2021 showed the industrial sector’s share in GDP falling from 20.9 per cent to 19.5 per cent, underscoring structural decline, according to the report.

The large-scale manufacturing sector continues to struggle, while agriculture faces mounting pressures from rising input costs, falling output prices and climate-related disruptions. Weak policy support has further strained farmers, contributing to rising poverty levels in key regions.

The fragile production base has also worsened external imbalances. Limited export capacity and increasing reliance on imports have eroded foreign exchange reserves, forcing the country into repeated borrowing cycles. Public debt has surged over the past two decades, raising concerns over sustainability.

Currency depreciation has compounded these challenges, fuelling inflation and eroding purchasing power, thereby intensifying economic hardship.

Experts warn that the economic crisis is now spilling over into the social fabric. Rising poverty, food insecurity and inequality are widening divisions within society and increasing the risk of instability, according to the report.

The report also highlighted that government-backed initiatives, such as the Special Investment Facilitation Council (SIFC), have so far failed to deliver meaningful outcomes, raising questions about their effectiveness.

Analysts argue that continued reliance on short-term measures-including subsidies, welfare spending and asset sales-has further weakened the economic structure rather than addressing underlying issues. They caution that without urgent and comprehensive reforms focused on rebuilding production capacity, improving governance and strengthening the business environment, Pakistan’s economic challenges could deepen further, delaying any meaningful recovery.

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