Lack of fiscal, legal certainty shackling Pakistan’s economy: Report

New Delhi, Jan 9 (LatestNewsX) The lack of certainty in Pakistan’s fiscal, legal, strategic, and administrative framework has emerged as a key factor in the current economic stagnation of the country, according to an article in the Pakistani media.

The News International article underlines that Pakistan’s banking system is liquid, its factories are full of potential, and foreign exchange is stable, supported by remittances and external programmes.

From July to December 2025, the currency in circulation increased by Rs 432 billion, a remarkable turnaround from the Rs 184 billion contraction documented in the same period last year. Liquidity has returned to the system, but credit has not followed, it pointed out.

From July to December 2025, private sector lending dropped from Rs 1,470 billion to Rs 135 billion year-on-year, a collapse of 90.8 per cent. Deposits expanded more than six times faster than credit uptake, surpassing a 6:1 ratio. Therefore, money is available but needs an enabling environment, it further stated.

The article highlights that Pakistan is facing a “capital flight” as the country’s net foreign direct investment (FDI) fell 25.4 per cent year on year. In July–November FY2026, it declined from $1,242 million to a provisional $927 million. Total net foreign investment contracted even more sharply, down from 77.5 per cent from $1,391 million to just $314 million, thus reflecting a $1.07 billion evaporation from the system.

Pakistan’s current account position over the same period deteriorated by $1.315 billion, fluctuating from a $503 million surplus to an $812 million deficit.

“The policy of reserve accumulation through borrowed or swapped liquidity while investment exits accentuates fragility, not competitiveness. Borrowed reserves are like extending the runway, but they definitely will not attract more passengers,” the article stated.

Pakistan’s debt dynamics also demonstrate the cost of delay and complacency. The Central government debt reached Rs 76,980 billion in October 2025, up 11.4 per cent from Rs 69,115 billion last year. While nominal GDP grew 9.08 per cent, the debt-to-GDP ratio worsened from 65.73 per cent to 67.12 per cent. The country’s domestic debt servicing burden now consumes 13.7 per cent of federal expenditure, the article lamented.

sps/vd