IMF Staff Country Reports

This Selected Issues paper focuses on economic performance and the road ahead in Pakistan. Pakistan’s economy and living standards have lagged behind its regional peers for well over a decade. This paper highlights several macroeconomic distortions and policy-related restrictions that have contributed to the country’s underperformance. These include protectionist interventions, a cumbersome regulatory and fiscal environment, and insufficient investment in human capital. In spite of these challenges, there are also many opportunities for Pakistan to achieve efficiency gains, reallocate resources toward more technologically advanced goods and services, and improve productivity and standards of living across the country. Placing Pakistan on a new economic trajectory requires addressing many distortions as well as improving the quality and level of public investment including in human capital. Key reforms centers on removing the remnants of the old growth strategy based around protection, preferences, and concessions. The modeling results in the accompanying Selected Issues suggest that significant macroeconomic gains come from the implementation of such a distortion-reducing reforms agenda.