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Pakistan's Economy Stalled by Internal Issues, Report Finds

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  Published in Media and Entertainment on Wednesday, February 4th 2026 at 11:06 GMT by The Hans India
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Karachi, Pakistan - February 4th, 2026 - A new report released today by the Institute for Strategic Reform (ISR) paints a stark picture of Pakistan's economic future, arguing that the nation's persistent struggles aren't primarily driven by global headwinds like inflation or geopolitical conflicts, but by a deep-seated crisis of fiscal and legal certainty. The report, entitled 'Pakistan's Economic Paralysis: A Call for Urgent Reforms,' details how inconsistent policies, arbitrary taxation, and a notoriously slow judicial system are actively stifling both foreign and domestic investment, creating a self-perpetuating cycle of economic vulnerability.

For years, Pakistan has relied heavily on external financing from institutions like the IMF and friendly nations. While these bailouts provide temporary relief, the ISR report contends that they are merely treating the symptoms, not the disease. "The constant need for external support isn't a cause of Pakistan's economic woes, but a direct result of the lack of internal structural reforms," explains Dr. Ayesha Khan, lead author of the report. "Until the government addresses the fundamental issues surrounding fiscal predictability and legal enforceability, Pakistan will remain perpetually susceptible to global economic shocks."

The report highlights a concerning trend of frequent policy reversals, particularly in areas related to taxation and trade. Businesses operating in Pakistan face a constantly shifting landscape, making long-term planning and capital expenditure extremely risky. Arbitrary tax measures, often implemented without adequate consultation or transparency, further erode investor confidence. This creates a climate where businesses are reluctant to invest in expansion or innovation, choosing instead to adopt a short-term, reactive approach.

The problems within Pakistan's legal system are equally damaging. The report details how commercial disputes can drag on for years, even decades, due to bureaucratic inefficiencies and a significant backlog of cases. This not only ties up valuable capital but also discourages foreign investors who are accustomed to swift and impartial legal resolutions. A lack of effective contract enforcement further exacerbates the issue, making it difficult for businesses to operate with assurance.

"The cost of doing business in Pakistan is artificially inflated by these systemic issues," notes economist Samir Ahmed. "The lack of a predictable legal framework adds a significant 'risk premium' to any investment decision. Investors demand higher returns to compensate for the uncertainty, which ultimately hinders economic growth."

The ISR report doesn't offer simple solutions, but instead proposes a comprehensive package of reforms. Key recommendations include streamlining the tax system to reduce complexity and improve transparency, strengthening the rule of law by increasing judicial efficiency and independence, and - crucially - ensuring policy consistency. The report stresses the importance of government commitment to long-term stability, even in the face of short-term political pressures.

The concept of "policy consistency" is particularly emphasized. The report suggests implementing a system of independent economic assessments to ensure that policy decisions are based on sound data and long-term economic projections, rather than short-term political considerations. This would require establishing an independent body with the authority to challenge government policies that are deemed detrimental to economic stability.

Beyond these reforms, the report also advocates for greater accountability and transparency in government spending. Public procurement processes should be made more open and competitive to reduce corruption and ensure that resources are allocated efficiently. Furthermore, the report calls for greater investment in human capital, particularly in education and skills development, to create a more productive workforce.

The findings of the ISR report are echoed by a growing chorus of economists and business leaders. Many believe that a fundamental shift in mindset is required within the government - a recognition that long-term economic stability requires a commitment to structural reforms, even if those reforms are politically challenging. The current approach of relying on short-term fixes and external assistance is unsustainable and will only perpetuate Pakistan's economic stagnation. The time for urgent action, the report concludes, is now.