The World Bank’s latest report underscores Pakistan’s structural development crisis, but the deeper issue is political: a country that has never agreed on what the state is for cannot build lasting institutions or economic progress.
The World Bank’s recent report, Reclaiming Momentum Towards Prosperity, offers us a diagnosis instead of a singular, technocratic fix: Pakistan’s economic stagnation is not the result of a single bad decade, but of a political economy that repeatedly trades structural reform for short-term political survival. Low productivity, shrinking fiscal space, and minimal investment in human development are symptoms, not causes, of a deeper institutional problem. Pakistan has never settled on what development is supposed to mean, or whom it is supposed to serve.
This ambiguity, intentional or otherwise, stems from Pakistan’s history. As a country, we did not develop through broad-based national consensus or structured state-building, but through personalised statecraft intertwined with global geopolitics. As Ayesha Jalal argues in The State of Martial Rule, the state was shaped through a logic of crisis and negotiation among elite actors rather than through a coherent constitutional settlement. The Cold War only intensified this pattern. Each military regime arrived with its own ideology of progress, its own international alliances, and its own vision of what Pakistan should be.
Under Ayub Khan, development meant modernisation: technocratic planning, heavy investment in infrastructure, and close alignment with U.S. strategic interests. The model generated exemplary growth at the time, at least in comparison with some of the other newly emerged nations. However, it also entrenched regional inequality and centralised power among industrial elites, sowing the seeds of discontent that would later fracture the state. Bhutto’s promise of a socialist Islam could not be realised either. His "Nationalisation and Economic Reforms Order (NERO)" was brought down by, in the simplest terms, inefficiency, bureaucracy, and corruption.
Under Zia-ul-Haq, the project seemingly shifted. The political economy became entrenched with Islamisation, supported by U.S. and Saudi backing during the Afghan war. State institutions, education, and legal frameworks were reshaped to support religious legitimacy at the expense of democratic inclusion, while benefiting the same economic elite and landowners. Under Pervez Musharraf, the state pivoted again, this time to liberalisation and service-sector expansion, fuelled by post-9/11 security rents and donor-backed reform programmes, and aggressive privatisation.
Each period left institutional residues, but none built a stable foundation. Each was interrupted, reversed, or abandoned before institutionalisation could occur. Pakistan’s governance landscape today remains a patchwork of these half-completed experiments, layered atop colonial administrative structures that were never dismantled. The result is not ideological confusion. It is ideological instability.
So, What System Do We Have?
Describing Pakistan’s political economy is essentially a task of tracing, difficult because no single mode of organisation dominates. Pakistan is not fully capitalist, because markets operate through rents, patronage networks, and state protection, not competitive productivity. It is not strictly feudal, though landed elites continue to shape local political authority, electoral outcomes, and resource allocation. Not Islamic in economic governance, even if Islam is rhetorically and politically instrumentalised to shape identity and legitimise state authority. And decidedly post-colonial, though the colonial administrative ethos—rule for control rather than representation—remains embedded in bureaucratic design.
Pakistan does not lack plans. It does not lack ideas. It does not lack talent. What it lacks is a collective agreement about what the state is supposed to do and what citizens should expect in return
The economy mirrors this hybridity. Pakistan is frequently described as an agrarian country, and indeed, agriculture still employs a large share of the labour force. Yet the services sector contributes roughly as much to GDP as agriculture, despite the country never having gone through a sustained phase of industrial deepening. The Pakistan Economic Survey 2023–24 shows that Pakistan transitioned straight from agriculture into services without developing competitive manufacturing capabilities. In development economics, this is not a path, but a detour: a structural shift without capacity-building.
In other words, Pakistan did not grow into its services sector. It escaped into them.
A Frankenstein State
The metaphor that best describes Pakistan’s governance architecture is Frankenstein’s monster: a body stitched together from pieces that were never meant to fit, animated not by unity of purpose but by necessity of movement. Parliament exists, but political authority is repeatedly shaped by extra-parliamentary power centres. Local governments are constitutionalised, but dissolved or weakened whenever they threaten provincial interests. The bureaucratic machinery retains a colonial ethos of command, yet lacks the autonomy and professional insulation that once enabled it to function. The market exists, but is dominated by cartels, subsidies, and elite brokerage personalities rather than firms competing on innovation. Every institution is partial. Every reform is temporary. Every economic cycle is reversible.
Development Without a Social Contract
This is not just a state-capacity problem. It is a social contract problem.
States develop when there is a shared agreement on what the state owes its citizens and what citizens owe the state—taxes, compliance, legitimacy, participation. Pakistan has never finalised such an agreement. At independence, the national identity was framed around Muslim nationalism, not secular nationalism as sometimes mischaracterised. But this identity was never translated into a civic or economic principle. The result was an identity powerful enough to justify the state’s existence, but not cohesive enough to define its obligations.
So the national narrative shifted to modernisation under Ayub, Islamisation under Zia, globalised liberalism under Musharraf, security nationalism in the war on terror era, and religious populist revivalism in the past decade. The project changed. The institutions did not stabilise. No developmental philosophy was given the time, continuity, or public deliberation required to form a nationwide political settlement.
Without a political settlement, policymaking becomes reactive. Economic decisions prioritise survival rather than strategy. Development becomes episodic; growth occurs in short bursts tied to geopolitical alignment, aid flows, or temporary financial inflows, followed by a crisis when those inflows recede.
This is why reforms don’t stick. Pakistan has had countless reform agendas, from early Five-Year Plans to IMF programmes to donor-backed governance reforms. Some have worked temporarily. None has endured. Because reforms require institutional continuity, and institutional continuity requires a stable consensus about the purpose of the state.
Until that is resolved, Pakistan will remain in a low-level equilibrium trap: not collapsing, but not developing either.
The question is not which economic policy Pakistan should pursue—export-led growth, industrial upgrading, green development, digital services, or something else. The question is: Who is Pakistan building development for? And on what basis does the state claim authority to lead that project? The current answers only show the interests of the economic and political elites. Until the answer caters to its citizens, all of them equally, every future development push will meet the same fate as those before it: brief, uneven, and reversible.
Pakistan does not lack plans. It does not lack ideas. It does not lack talent. What it lacks is a collective agreement about what the state is supposed to do and what citizens should expect in return.
Without a stable social contract, every institution is provisional, every gain is temporary, and every reform is vulnerable to reversal. Development is not just an economic project; it is a political decision about identity, authority, and obligation. Nearly eight decades in, Pakistan has still not made that decision. Until it does, progress will remain momentary, contingent, and forever incomplete.