s Pakistan enters 2025, the economy is showing signs of improvement. The inflation was down to 4.1 percent in December—the lowest in over six years—due to a stable currency and lower global commodity prices. The State Bank of Pakistan lowered its key policy rate by 900 basis points through 2024, bringing it to 13 percent in December, to stimulate economic growth.

In the first quarter of the fiscal year 2024-25, the economy grew by 0.92 percent, driven by the agriculture and services sectors, despite a contraction in the industrial sector. A $7 billion loan from the International Monetary Fund approved in 2024 is supporting economic recovery. Pakistan is thus starting 2025 on a positive economic trajectory.

The biggest surprise on the last day of the preceding year was the unveiling of Uraan Pakistan plan by Prime Minister Shahbaz Sharif, a bold initiative designed to revamp the country’s economy. This ambitious five-year National Economic Transformation Plan 2024-29 focuses on a “Five Es” framework: enhancing exports to drive growth and increase foreign exchange; accelerating Pakistan’s digital transformation through E-Pakistan; implementing sustainable practices to address climate change and ensure food and water security; developing affordable and green energy solutions; and promoting social equity and empowerment. The plan aims to position Pakistan as a trillion-dollar economy by 2035, with the creation of the National Economic Transformation Unit to oversee its execution, ensuring transparency and accountability.

The initiative is commendable in that it identifies critical development priorities and offers a structured roadmap for short- to mid-term interventions. By targeting tangible areas, such as improving literacy rates, expanding job opportunities, addressing energy inefficiencies and fostering entrepreneurial growth, the 5Es framework aligns with the global economic paradigm, making it attractive to international donors and lending institutions.

The objective of the Uraan Pakistan plan is to transform Pakistan into a $1 trillion economy by 2035. This requires sustaining an annual growth rate of approximately 8.41 percent over the next 12 years, starting from the current GDP of $379.31 billion. Historically, Pakistan’s highest recorded GDP growth rate was 11.35 percent in 1970. A more recent peak of 6.51 percent occurred in 2021. This was followed by a contraction during the Covid-19 pandemic. Achieving the ambitious target is an uphill task. It significantly surpasses the growth rates achieved in recent decades.

Though the target is quite ambitious by any standards, let’s not forget the miracles that have occurred in various countries at different times. It shows that the government is optimistic and starting 2025 on a positive note. The key question is: will this momentum be sustained? More importantly, can Pakistan build on the achievements of the previous year?

The answer is familiarly conditional. The success of Uraan hinges on the type of challenges it faces and the strategies employed to overcome those. The authors of the plan have correctly diagnosed several long-standing issues. The objective of the plan is reproduced below, with clarifications added in brackets:

“Pakistan has faced numerous challenges since 1947, including a lack of political stability, [a lack of] continuity in policies, [a lack of] peace and repeated disruptions in the political process. These [challenges] have weakened institutions and hindered development. The Uraan initiative aims to address these challenges through the 5Es framework, providing short- to mid-term solutions for Pakistan’s economic stabilization and growth.”

The question of causality warrants attention. While it is evident that political instability and policy discontinuity lead to adverse economic outcomes, can we assume that positive economic outcomes will ensure political stability and policy continuity? Does economic progress have the potential to break the vicious cycle that has long gripped Pakistan? Furthermore, are the current circumstances conducive to such a transformation?

Political uncertainty has persisted despite the government’s apparent ability to perform most of its administrative functions. Court cases involving a former prime minister and a former ISI chief have the potential to cause ripples on the political landscape. Then there is PPP chairman Bilawal Bhutto’s open criticism of various government policies and his occasional hints at reconsidering the coalition partnership.

The 5Es framework faces its most significant challenges in addressing Pakistan’s deep structural issues. One of the most pressing problems is the country’s recurring boom-bust cycle, characterised by periods of high growth driven by short-term policy measures followed by stagnation or decline due to weak foundational reforms. This cycle weakens Pakistan’s long-term economic potential, increases public debt and makes the economy more vulnerable after each iteration. Standard economic or social “fixes” provided by the 5Es are insufficient to break this cycle because they do not address the underlying structural weaknesses.

Over-reliance on state interventions, such as subsidies and protectionist policies, distorts market mechanisms and hinders innovation and competitiveness. Domestic firms often depend on government support, which stifles private sector growth and limits its ability to compete in regional and global markets. Additionally, Pakistan’s narrow tax base, with large segments of the economy undertaxed, restricts public spending on essential services like health, education and infrastructure. This inefficiency in revenue generation undermines the effectiveness of economic reforms proposed under the 5Es framework.

Another critical issue is the inefficiency of state-owned enterprises (SOEs), which continue to drain fiscal resources and crowd out private sector investment. Without meaningful reforms, these loss-making entities remain a significant burden on the economy. The energy sector also poses substantial challenges, with high costs, inefficiencies and circular debt limiting the delivery of affordable energy to consumers and businesses. These structural bottlenecks require comprehensive institutional reforms that go beyond the scope of the 5Es framework.

Underinvestment in human capital exacerbates Pakistan’s economic struggles. Low investments in education and healthcare result in poor literacy rates, high infant mortality and widespread stunting, limiting the population’s ability to participate effectively in a modern labour market. Addressing these issues demands sustained and coordinated efforts across multiple government levels, which the 5Es framework alone cannot guarantee.

Corruption and weak institutions present additional obstacles. Entrenched corruption, bureaucratic inertia and lack of accountability undermine public trust and hinder the implementation of effective reforms. Without robust governance structures and political stability, initiatives under the 5Es framework risk being abandoned or inadequately executed when political alignments shift. This instability perpetuates the boom-bust cycle and prevents long-term economic stabilisation.

Furthermore, Pakistan’s export sector remains limited to low-value-added products, resulting in export stagnation and reduced competitiveness compared to regional peers. The lack of diversification and innovation in exports highlights the inadequacy of the 5Es framework in addressing complex economic challenges that require more than sector-specific interventions.

Achieving the Uraan objectives will require tackling structural constraints through comprehensive reforms and sustained political consensus. First, efforts must be made to break the persistent boom-bust cycle by prioritising long-term policy measures that strengthen institutions and encourage private sector growth. Streamlining subsidies, rationalising tariffs and reducing protectionist barriers can foster competition and innovation. Second, bold restructuring - privatisation where appropriate - coupled with transparent governance is necessary to address the inefficiencies in the state owned enterprises.

These reforms could free up resources for critical social investments in health and education, thereby enhancing the human capital. Expanding the tax base—through digitisation and improved compliance—would generate revenues to support infrastructure development and social safety nets. Meanwhile, robust anti-corruption frameworks and institutional strengthening can help ensure continuity in reforms, preventing frequent policy reversals that often undermine Pakistan’s developmental momentum.

The writer is the head of the Department of Economics, COMSATS University Islamabad, Lahore Campus