Pakistan’s comeback story

For years, the world has watched Pakistan’s economy teeter on the edge of crisis, as political turmoil and economic mismanagement pushed the country from one financial emergency to the next.

Each time, there were moments of hope -- IMF bailouts, new government pledges, ambitious development plans -- but they always seemed to fade into the same cycle of instability. Businesses hesitated, investors fled, and ordinary Pakistanis braced for yet another period of economic uncertainty.

Yet, in recent months, something has changed. The conversations in Islamabad’s government offices, Karachi’s financial districts, and even in the rural heartlands feel different. There is a cautious optimism in the air. Pakistan, despite its history of economic missteps, appears to be finding its footing. But the question remains: is this a genuine turning point, or just another brief reprieve before the next storm?

One of the biggest drivers of this shift has been a rare moment of political stability. For a country where governments often fall before their term is up, continuity in leadership -- even if imperfect -- has a significant impact on investor confidence. The back-and-forth power struggles that have defined Pakistan’s politics for decades have for now been replaced by a semblance of order. This alone doesn’t solve the deep-rooted economic problems, but it does remove a major source of unpredictability.

At the same time, the country’s military has taken a more hands-on approach to economic matters. The scale of its involvement in economic policymaking today is unprecedented. The establishment of the Special Investment Facilitation Council (SIFC), a military-backed initiative designed to fast-track investment, is a clear signal that the security establishment understands the link between economic stability and national security. There is an urgent push to attract foreign investors, cut through bureaucratic red tape, and restore confidence in Pakistan as a place to do business.

For now, the numbers suggest that these efforts are having an impact. Inflation, which at one point seemed uncontrollable, has started to ease. The Pakistani rupee, after months of freefall, is stabilising. Foreign reserves, once critically low, have been bolstered by renewed IMF agreements and improved remittances. There is still a long way to go, but the initial indicators are promising.

However, there remains a looming political threat that could disrupt this fragile stability. The Imran Khan factor continues to cast a long shadow over Pakistan’s political and economic landscape. Khan’s dramatic exit from office in 2022 through a no-confidence vote, followed by his relentless efforts to destabilise the government from the outside, has kept the country’s politics on edge. His populist rhetoric, amplified by a fiercely loyal support base, has fueled conspiracy theories, undermined state institutions, and created an environment of perpetual unrest.

Beyond Pakistan’s borders, the damage is arguably even greater. In world capitals, PTI supporters -- many of whom are ill-informed about the nuances of governance and economic policy -- have taken to embarrassing themselves with misguided protests and baseless claims of political victimisation. These actions, far from garnering international sympathy, have only reinforced perceptions of Pakistan as a country struggling with political immaturity.

Western policymakers and investors who were already hesitant to engage with Pakistan see this chaos and hesitate even more. At a time when the country desperately needs credibility and stability to attract foreign investment, these protests serve as an unhelpful distraction at best and a direct impediment at worst.

The impact is clear. Investment decisions are not made in a vacuum -- perceptions matter. When foreign stakeholders see a country where political exiles claim to be the rightful leaders while their supporters march in foreign capitals chanting slogans that misrepresent reality, confidence erodes. No investor wants to commit to a country where political instability could escalate into economic crisis overnight. The economic revival Pakistan is trying to engineer depends on an image of stability, rational policymaking, and governance that prioritises national interests over political vendettas. Khan and his followers, whether intentionally or not, are making that difficult.

One of the biggest challenges remains attracting long-term foreign investment. While Pakistan has seen renewed interest from the Gulf States and China, the broader investment community remains wary. Years of inconsistent policies, abrupt contract renegotiations, and regulatory uncertainty have left Pakistan with a reputation as a difficult place to do business. The government’s ability to create an investor-friendly environment -- one that is transparent, stable, and legally sound -- will be key in determining whether this recovery is more than just a short-term fix.

Security also remains a major concern. While economic stability and security go hand in hand, ongoing militant activity in certain regions threatens investor confidence. The military has demonstrated its continued focus on national security by ensuring stability in key economic zones, trade corridors, and industrial hubs. This commitment is critical in maintaining investor confidence and safeguarding long-term economic growth, particularly as Pakistan seeks to expand its role in regional trade and infrastructure development. This is especially crucial for projects linked to the China-Pakistan Economic Corridor (CPEC), which, despite its potential, has faced delays due to security risks.

For ordinary Pakistanis, however, the biggest question is not about investor confidence or macroeconomic indicators—it’s about whether their daily lives will actually improve. The impact of inflation over the past year has been devastating, with basic necessities becoming unaffordable for many. A recovering economy on paper means little if it does not translate into real relief for the people struggling to make ends meet. Job creation, wage growth, and better public services must be at the center of any sustainable recovery strategy.

Pakistan is at a crossroads. The foundations of a potential turnaround are being laid, but they remain fragile. If the government and military leadership can maintain discipline, foster investor trust and ensure security, this could be a defining moment for the country’s economic future. But if history repeats itself -- if political infighting resumes, economic policies remain inconsistent or security concerns escalate -- Pakistan could find itself once again trapped in the cycle of crisis and recovery.

The world is watching. This time, Pakistan must get it right.

The writer is a non-resident fellow at the CISS. He posts/tweets @umarwrites