Clueless on economy
2025 WAS the year of tall claims by our inept hybrid set-up based on actions it said would aid progress, but that, in fact, aided its own survival. Courts were defanged, risky deals struck with old patrons of autocracies and political foes jailed, all in the name of national progress.
Since the claims are tall and mass misery great, public hopes are high about delivery, which is crucial for the government, too, to help mask its dubious mandate. So, 2026 must be the year of growth. But herein lies the rub. This set of rulers has more autocratic powers than all set-ups after Gen Musharraf’s, but they only help it to survive; its ability to use them to usher progress is weak. Painful IMF medicine was unleashed as well. It lowered inflation, but undercut growth. A recent national household survey shows that to recover from the cost of past inflation, strong growth is needed, which the IMF says may remain elusive even next year.
To spur growth, while also cutting our ever-rising external deficit, the set-up must raise investment and exports. Its best idea on exports so far seems to have been to set up committees of clueless people, while the best one on investments is to dash to Gulf states. But despite dozens of meetings, Saudi Arabia and others have given few inflows. We need industrialisation; instead, we seem to be chasing avenues such as crypto, corporate farming, mining and defence exports that may even impede major industry. What is on display is crony capitalism, autocratic excesses and a lack of ability to ignite sustainable and equitable progress.
Sadly, the main alternative to our crony capitalism is the free-market neoliberalism pushed by the IMF and like-minded national economists. While crony capitalism can’t provide even the first two elements of progress — stability and growth — neoliberalism fails on equity and sustainability. It is naïvely said that to have progress, we need reforms to cut taxes, reduce state size and deregulate across the board. But no major state has progressed based on this mix alone. The world’s fastest growing state for decades, China, ranks in the lowest category ‘repressed’ on the Index of Economic Freedom.
What is on display is crony capitalism.
Cosmologically, the debate rages on among adherents of natural evolution and intelligent design. But economically, global evidence shows that only an intelligent design developed by the visible hands of an able state delivers progress rather than natural evolution spurred only by the invisible hand of markets.
A state-led intelligent design for us must include strategies for ensuring industrial and export upgradation and expansion, cutting regional and class inequities, ensuring sustainability and lessening the twin deficits.
To pursue such a design, the state must not cut its size blindly — it must shed its fat, but develop muscles. Reforms on taxes, tariffs, subsidies, etc, under such a design are not open-ended, but sequenced to support all its elements, as done by China. People who talk of reforms without invoking such an intelligent design are as clueless as our hybrid set-up and the IMF.
But the minds who could lead such a progressive developmental design are nowhere to be seen in our economic and political arena. So, for the near future, we will continue to pursue an odd mix: pretending to implement neoliberalism but actually pursuing crony capitalism. None of our governments ever had the capacity to implement export-led growth, and all pursued import-led growth.
The telltale sign of that was that in all our brief growth spurts in recent decades, foreign reserves fell despite growth, as it came from rising imports rather than exports. This raises the current deficit, depletes foreign reserves and takes us back to the IMF.
Unfortunately, this set-up faces a double jeopardy. It lacks the ability to provide export-led growth and also foreign reserves for import-led growth. Already, even with just two to three per cent growth, the external deficit is rising despite high remittances, as exports are stagnant while imports are increasing.
The big dreams of the civilians in the set-up are centred on being able to churn up growth before elections and thus shun the economic-political crutches and shackles of the IMF and hidden forces. But given the inability to crank up our foreign reserves despite the three-pronged strategy of ‘beg, borrow and squeeze’ from the local market, they may have to continue serving both for long. Meanwhile, the chances of salvation for the masses will remain distant until democracy and civilian sway prevail.
The writer has a PhD degree in political economy from the University of California, Berkeley, and 25 years of grassroots to senior-level experience across 50 countries.
Published in Dawn, January 20th, 2026
