n today’s connected global landscape, national economies worldwide are intertwined. As the world becomes more connected, trust is more crucial than ever before. Building trust is essential for fostering economic growth, leading to sustainable economies. A lack of trust can lead to dire consequences.

Establishing international accords becomes a daunting challenge in the absence of a foundation of trust between various countries.

Governments, for their part, rely on the trust and support of the citizens. A lack of trust can therefore lead to social and political unrest. When businesses have faith in governments, investments and potential profits grow. Without trust, economic welfare and harmony can be severely undermined in economic, social and political spheres.

Despite the many challenges it faces, the government of Pakistan can unlock the potential of national economic growth. By attracting foreign direct investment and garnering international support, we can steer our economic trajectory towards a prosperous future. It should start with taking stock of the current situation and explore ways to enhance our capacity to attract investment, leveraging the Social Investment Facilitation Council platform.

The national economy is at a critical juncture. This demands urgent and decisive action from the government. Under the leadership of Prime Minister Shahbaz Sharif, the finance team is diligently working to secure a substantial, long-term loan from the International Monetary Fund by early July. This financial support can enable the implementation of vital structural reforms and reduce dependence on external lenders. However, the government needs additional fiscal space to enact these crucial changes.

It is imperative for the government to demonstrate clarity and unwavering commitment. Despite valuable suggestions coming from within the cabinet, the fear of losing political capital and some irrational concerns are hindering progress. Swift and resolute decisions are essential to address Pakistan’s economic challenges.

The power sector is not just facing an issue; it’s on the brink of a crisis. Deliberate manipulation of the system by various stakeholders to gain economic advantage has led to rampant corruption, greed, inefficiency and injustice. Despite this, the cost of electricity continues to rise, posing a significant threat to strategic industries.

A major problem in the power sector is the so-called circular debt. According to the Power Division of the Ministry of Energy, despite multiple tariff increases and adjustments, the circular debt has continued to grow. There has been a net increase of Rs 325 billion in the first seven months alone. If the price of electricity continues to rise at this rate, many industries will be forced to shut down as the industrialists will look for opportunities abroad on account of greater ease of doing business.

It is imperative for the government to demonstrate clarity and unwavering commitment. Despite valuable suggestions coming from within the cabinet, the fear of losing political capital and some irrational concerns are hindering progress. Swift and resolute decisions are essential to address the economic challenges. 

Prime Minister Shahbaz Sharif has set an ambitious goal of achieving a 15 percent tax-to-GDP ratio over the next five years. This is going to be a big challenges for the Federal Board of Revenue. A recent survey by Authentix Inc has found that the FBR is ‘unaware’ of a substantial portion (55 percent) of production in key sectors, such as cement, fertiliser, sugar and tobacco. This has resulted in widespread tax evasion, including income tax, sales tax and federal excise duty.

As a result, a sense of mistrust in the system has emerged. This is fuelled by economic uncertainty, misinformation, social divisions and leadership failures. This has resulted in a deep polarisation in the society. The Global Risks Report 2023 delves into the significant risks that may emerge in the next decade. In today’s global landscape, characterised by limited growth and cooperation, there is a growing concern that tough decisions may hinder efforts in climate action, human development and resilience building for the future.

There is also concern about the potential impact on social cohesion. This is a significant threat in the medium term: Pakistan is ranked 5^th in its severity over the next two years and 7^th over the next decade. Therefore, it is imperative to foster cooperation and collaboration amidst social division. To address the numerous challenges and crises, the political stakeholders must come together and engage in productive discussions.

Trust, the cornerstone of effective governance and the successful implementation of public policy, plays a pivotal role in influencing economic incentives and guiding the behaviour of businesses and citizens. A united society, built on trust, is the key to successfully addressing pressing socio-economic challenges. This is especially critical for issues relating to public good and constitutional reforms, both of which hinge on robust popular support.

The cultivation of trust is paramount. It is a shared responsibility, in establishing the credibility necessary to influence economic incentives and guide the behaviour of businesses and citizens. Mistrust can prove detrimental, even with well-intentioned policies.

Trust is a precious asset built over time. By uniting and prioritising the shared communal values, we can pave the way for our long-term strategic goals.

Pakistan is in urgent need of a transformative, bold and visionary leadership capable of uniting people from diverse backgrounds and fostering strong connections among them. This form of leadership, endorsed by institutions committed to excellence and continual improvement, has the potential to lead us towards a brighter future.

Strong leadership extends beyond economics; it is about steering a country. The government should adopt a forward-thinking approach to exploring unconventional avenues and devising solutions, especially for low-income households.

A failure to rebuild trust with domestic and diaspora investors will hinder the government’s ability to stabilise the economy and limit the impact of the SIFC on improving the investment climate.

The writer is a senior lecturer in finance and heads the Business Finance Programme at Birmingham City University, UK. His X handle is @HafizUsmanRana