Pakistan’s Economy: Challenges and Opportuni…

When Henrik Ibsen wrote A Doll’s House in 1879, Europe was not prepared for Nora Helmer’s final act, where she left her husband. The sound of a woman shutting the door on her husband and children became one of the most controversial moments in literary history. To nineteenth-century society, the idea that a wife could leave an unhappy marriage was not merely immoral; it was considered an attack on the very foundation of civilization itself: the marriage. The reaction was so intense that German theatre managers forced Ibsen to change the ending. In the revised version, Nora looks at her sleeping children, collapses emotionally, and stays in the marriage. Society wanted the family preserved at all costs. Marriage was sacred. Separation was shameful. A woman’s identity was expected to remain tied to sacrifice, endurance, and silence. More than a century later, something similar is unfolding in Pakistan, particularly in Islamabad. According to recent reports, family courts in Islamabad are facing an unprecedented rise in khula and maintenance cases. More than 45,000 khula-related cases have reportedly already been filed this year, with over 300 new cases emerging daily. The number of family disputes continues to rise, reaching 100,000 cases in 2025. Alongside this trend, court marriages have also increased significantly, many ending in disputes soon after marriage. This phenomenon is often discussed only through statistics or social criticism. Yet beneath these numbers lies a deeper sociological transformation, one that history has witnessed before: a doll’s house. The most striking aspect is not the increase in divorce. It is the change in social attitudes toward marriage itself. Pakistan today appears to be experiencing debates that Europe confronted more than one hundred years ago. In traditional Pakistani society, much like Victorian Europe, marriage has long been treated as sacred, permanent, and socially untouchable. Previous generations often viewed separation as failure, dishonour, or rebellion against family values. Women were expected to tolerate emotional hardship, neglect, incompatibility, and sometimes even abuse for the sake of preserving the household structure. This is precisely the social environment that Nora challenged in A Doll’s House. At the time, audiences were horrified not because Nora committed a crime, but because she chose herself over an unhappy domestic life. Society could forgive a flawed husband more easily than it could accept a woman leaving the marriage altogether. Her departure symbolized individual dignity over social expectation. Today, in Islamabad’s family courts, one can observe echoes of the same historical transformation. Increasingly, people, particularly women, are refusing to remain in marriages they perceive as emotionally unbearable, unequal, or destructive. Whether one agrees with this shift or not, it represents a visible social reality. This does not necessarily mean that society has abandoned the institution of marriage. Rather, it may indicate that expectations from marriage are changing. Earlier generations often prioritized endurance and collective family reputation. Modern generations increasingly prioritize emotional compatibility, respect, mental peace, and personal autonomy. The pace of this transition, however, varies across societies. Europe underwent these debates gradually through industrialization, feminism, legal reform, and changing gender roles over decades. Pakistan, by contrast, is witnessing social change at a much faster pace due to urbanization, education, digital connectivity, economic pressures, and shifting cultural narratives. Ideas that once took generations to spread now travel instantly through social media, television, and global interaction. This is why the comparison with Ibsen’s drama becomes deeply relevant. History does not repeat itself in identical forms, but human societies often move through similar psychological and cultural stages. The same fears once expressed in nineteenth-century Europe, that family systems would collapse, morality would disappear, and social order would weaken, are now frequently heard in discussions within Pakistan. Yet it is important to approach this issue carefully and honestly. Recognizing this social transformation does not automatically mean celebrating divorce, nor does it mean condemning marriage. It simply means acknowledging that societies evolve, and that concepts once considered absolute eventually become contested. The sanctity of marriage remains deeply important for millions of families in Pakistan. At the same time, increasing numbers of individuals no longer believe that preserving a marriage at any cost is always the highest social virtue. Perhaps the real lesson from A Doll’s House is not about encouraging separation, but about understanding how societies react when individuals begin demanding dignity, identity and personal autonomy within family life. More than a century ago, Europe feared Nora’s door slam. Today, Pakistan is hearing similar sounds, not from theatre stages, but from courtrooms and homes. Whether this transformation strengthens or weakens society remains a question for future generations. But one thing is undeniable: social change, once it begins, rarely moves backward.

These days, one phrase echoes throughout our country: “Pakistan’s system has collapsed.” If we translate the word collapse into plain, colloquial language, it means that our so-called system has completely broken down, gone to ruin, or become utterly dysfunctional. Therefore, the argument goes, the country now needs a new system. This, they claim, can only happen if, instead of the existing four provinces, Pakistan is reorganized into thirty or thirty-two new provinces. Such a restructuring, they believe, would push aside the traditional politicians and allow a new generation of political leaders to emerge. Otherwise, they warn, just as in India, there will be an uprising of the “cockroaches”—that is, the youth—which will force this collapsed, rotten system to surrender. At first glance, these words appear attractive and appealing. They express not only frustration and disgust with our current political situation but also offer hope to the younger generation, particularly Generation Z. It is as if they are saying: “Dear frustrated young people! We are opening the doors to your future. You will rise, dominate the scene, and sweep away all the debris of the past—that is, the traditional politicians—with the force of your determination and enthusiasm.” However, this humble writer sees, behind these beautiful words, not a bright future but the same worn-out and ugly mirage of the past. In reality, those who are truly responsible—the real culprits—cleverly distance themselves from blame, divert the attention of the youth toward others, and then present themselves as the young people’s sympathizers and supporters. In our poetry, it is through such tricks that the beloved murderer becomes an innocent beloved, and the criminal appears as the trusted confidant. But this humble writer calls it what it really is: “the thief making the loudest outcry.” Our national poet, Iqbal, once wrote: There is an outcry that Muslims have vanished from the world; We ask: Were true Muslims ever really present? In appearance you resemble Christians, in civilization the Hindus; These are the Muslims before whom even the Jews would feel ashamed. If, in today’s circumstances, you replace the word “Muslims” with “system,” the verses take on a striking new meaning: There is an outcry that the system has vanished from the country; We ask: Was there ever really a system to begin with? If we were to parody the remaining verses, they might be difficult for some to digest. Suffice it to say that those in power never truly allowed a genuine system to develop here. And whenever, after much struggle, some semblance of a system did emerge, there were always certain “respectable gentlemen” who seemed to have taken an invisible oath—or perhaps a vow of deliberate silence—that it must never be allowed to function. In the eyes of this humble writer, our system truly collapsed on 16 August 1946, when, under the guidance of the British establishment, the Direct Action Day was observed, reducing the foundations of any future system to rubble. From that point onward, the struggle was no longer for a functioning system but for personal rule. That struggle strangled democracy, human rights, liberty, and freedom, and instead built a grand highway of coercion and dictatorship. Anyone who dared to step off that path or disagree with it was labeled a traitor, an enemy of the nation, an Indian agent, or part of the so-called “Fitna-e-Hind” (the Indian conspiracy). These labels were then applied to whomever those in power wished. The first victim was Dr. Khan Sahib’s democratically elected provincial government in the North-West Frontier Province (now Khyber Pakhtunkhwa), which was dismissed within the very first week. Soon afterward, the same authoritarian mentality struck the government of Ayub Khuhro in Sindh. It was also decided that any cabinet member who failed to say “Yes, Sir” to the Governor-General would be considered dispensable. Once the founding generation established such principles of governance, why would later generations lag behind in following them? Thereafter, the race for personal power was inevitable. In the end, victory was bound to go to whoever possessed the greater force—whether the power of the stick or the gun. How could it be otherwise? If, instead of making the Constitution and the rule of law your source of authority, you rely on personal superiority, intimidation, prestige, and the power of office, then someone carrying a gun will inevitably dominate the throne of personal power. And once that happens, the cycle simply continues. It is a law of nature that the bigger fish eats the smaller fish. Muhammad Ali Jinnah, Liaquat Ali Khan, Ghulam Muhammad, and Iskander Mirza all played their respective roles. Later, when greater power confronted lesser power, the result was the rise of powerful military rulers such as Ayub Khan, Agha Yahya Khan, Zia-ul-Haq, Pervez Musharraf, Ashfaq Parvez Kayani, and Qamar Javed Bajwa. (To be continued)

Pakistan presents a distinct demographic profile in the 21st century. According to the Pakistan Bureau of Statistics and UNFPA, 64% of the population is under the age of 30, with a median age of 20.8 years. This structure situates Pakistan within the category of youth-majority states. Consequently, an analysis of contemporary Pakistan is inseparable from an analysis of Generation Z, defined as individuals born approximately between 1997 and 2012. This cohort is not a prospective entity. It constitutes the current labor force, consumer base, and increasingly, the primary agents of cultural and economic production. The characteristics of Pakistani Gen Z can be understood through three interrelated dimensions: adaptability, initiative, and connectivity. The first dimension is adaptability coupled with digital fluency. This generation represents the first cohort in Pakistan to mature entirely within a digital ecosystem. DataReportal’s 2026 report indicates 111 million internet users and 71.1 million social media users in Pakistan, with internet penetration at 48.5%. The primary mode of access remains mobile broadband, which has effectively decentralized information and opportunity. This environment has cultivated rapid skill acquisition. The ability to learn and deploy new tools is reflected in economic outcomes. Pakistan currently ranks 4th globally in freelance earnings on platforms such as Upwork and Fiverr. Estimated annual freelance exports exceed $400 million. This phenomenon, often termed “digital remittances,” enables participation in the global economy without physical migration. The geographic implications are significant: a software developer in Peshawar, a content creator in Multan, and a designer in Lahore operate within the same digital marketplace, competing on skill rather than location. The second dimension is initiative and entrepreneurial orientation. In response to structural constraints in traditional employment, Gen Z has demonstrated a marked propensity toward self-directed economic activity. Data from the State Bank of Pakistan indicates a rising proportion of SME financing directed to individuals under 35. This is manifested in the proliferation of micro-enterprises, including e-commerce ventures, content creation channels, and home-based businesses. The underlying logic is one of experimentation and iteration: initiate at a small scale, acquire feedback, and scale operations. Importantly, this trend is not confined to metropolitan areas. Digital platforms have reduced barriers to market entry for individuals in Gilgit, Quetta, and rural Sindh, enabling access to national and international consumers. A craftswoman in interior Sindh can, through social commerce, reach buyers in Karachi and Dubai. This represents a structural shift in how economic value is created and distributed. The third dimension is connectivity and civic awareness. Pakistani Gen Z is the most interconnected generation in the nation’s history. Multilingualism is normative, with Urdu, English, and regional languages such as Punjabi, Sindhi, Pashto, and Balochi used fluidly. This linguistic dexterity mirrors a broader cultural orientation that is simultaneously local and global. This connectivity correlates with heightened awareness of social and global issues. During the 2022 floods, youth networks coordinated relief, fundraising, and volunteer mobilization within hours, utilizing WhatsApp, Facebook, and other platforms. The same infrastructure is used for peer-to-peer learning, dissemination of job opportunities, and advocacy around public health and education. Surveys by Gallup Pakistan and various youth organizations indicate participation rates in volunteerism among 18-30 year olds are substantially higher than in previous cohorts. Beyond present attributes, it is critical to articulate the vision of Pakistan held by this generation. Based on available survey data, academic research, and observable behavior, three core elements emerge. The first element is a vision of inclusive economic participation. Gen Z conceptualizes economic contribution beyond formal employment. The priority is productivity, skill utilization, and value creation. Key sectors of engagement include information technology, freelancing, e-commerce, EdTech, AgriTech, and creative industries. There is also a measurable increase in female participation. PBS data indicates that women constitute approximately 30% of registered freelancers, reflecting both economic necessity and changing social norms. The overarching goal is to convert Pakistan’s demographic dividend into tangible economic output. The second element is a vision of competency-based development. This cohort places primacy on skills, portfolios, and demonstrable output over credentials alone. There is growing demand for vocational training, digital literacy, artificial intelligence tools, and communication competencies. The emerging model is decentralized: one individual acquires a skill and disseminates it within their network. This peer-learning architecture has the potential to address gaps in formal education through non-formal channels. The third element is a vision of contributory citizenship. Gen Z associates nation-building with direct action. This includes environmental initiatives such as tree plantation, public health campaigns such as blood donation, and educational outreach in underserved areas. The conception of patriotism is thus operationalized. It is expressed not only through symbolic observance on 14th August, but through sustained engagement in community development. The narrative of 1947 is understood as securing independence. The narrative of 2026, from this perspective, is about deploying that independence toward institutional and social strengthening. Pakistan’s strategic advantage lies in this human capital. The generation is characterized by adaptability, enterprise, and networked awareness. The realization of this potential is contingent on the alignment of opportunities in skills development, digital infrastructure, and platforms for civic engagement. The trajectory of Pakistan will be determined in classrooms, in digital workspaces, in small enterprises, and in the aggregate of individual decisions made by over 110 million young citizens. With continued emphasis on learning, collaboration, and productive engagement, Gen Z possesses the capacity to advance national development objectives. This is their Pakistan, and the process of building it is already underway.

The second part of this series explained why public finance and Constitutional Political Economy (CPE) ask different questions. Public finance ordinarily examines what taxes governments should impose and how revenue should be spent. CPE asks who makes those choices, under what rules, for whose benefit and subject to what restraints. That distinction leads to an important conclusion: there is no politically neutral tax system. Tax policy is often presented as a technical exercise. Economists compare direct and indirect taxes, estimate elasticity, calculate effective rates and recommend reforms intended to improve efficiency. Governments describe exemptions as incentives, withholding provisions as enforcement mechanisms and consumption taxes as instruments of broad-based revenue mobilisation. Such terminology creates the impression that taxation operates independently of political power. It does not. Every tax decision identifies those who will pay, those who will collect, those who will receive concessions and those whose activities will remain beyond effective enforcement. A tax may be neutral between two products in an economic model, but the process through which it is enacted and administered can rarely be neutral between organised interests, social classes or political constituencies. The Organisation of Economic Cooperation and Development (OECD) itself recognises that taxes affect taxpayers differently according to their income and other socio-economic characteristics. They alter behaviour and influence the distribution of income both directly and through the public expenditure they finance. Taxation is, thus, not merely a device for transferring money to the treasury. It changes economic opportunities and affects the relationship between citizen and state. The celebrated Mirrlees Review sought to design a coherent tax system in which similar activities were treated consistently, and economic choices were not distorted without good reason. This is a valuable objective. Neutrality can reduce arbitrary discrimination and prevent tax considerations from dominating productive decisions. Nevertheless, even the most carefully designed system must decide which activities are alike, which differences justify special treatment and how equity should be balanced against efficiency. Those choices necessarily embody judgments about society. The idea of neutrality becomes more problematic when it is transferred from theory to a state characterised by unequal political influence. Consider a general sales tax (GST). In theory, a broad-based value added tax (VAT) imposed at a uniform rate minimises distortions and preserves the chain of documentation. In practice, exemptions, reduced rates, special schedules, fixed taxes, withholding taxes (unique in Pakistan even for VAT/GST!) and sector-specific arrangements are introduced during the political process. The final statute may bear little resemblance to the neutral instrument initially proposed. The same is true of income tax. Horizontal equity requires persons with similar ability to pay to bear comparable burdens. Vertical equity requires those possessing greater capacity to contribute more. In Pakistan, however, the legal character assigned to income often determines the burden more decisively than the taxpayer’s actual economic capacity. Salary, business income, capital gains, dividends, property income and agricultural income may all be subjected to different regimes, rates or jurisdictions. These distinctions are not always indefensible. Different types of income may require different collection methods. The constitutional distribution of taxing powers must also be respected. However, a CPE analysis asks why particular differences survive, who benefits from them and whether their stated rationale corresponds to their actual effect. Tax exemptions provide the clearest illustration. Governments describe them as instruments for attracting investment, supporting industries, protecting vulnerable groups or promoting exports. Some concessions may serve legitimate public purposes. Others constitute expenditure conducted through the tax system without the scrutiny ordinarily applied to direct spending. Pakistan’s official Tax Expenditure Report 2026 estimated revenue forgone during fiscal year 2024–25 through income tax, sales tax and customs concessions at approximately Rs. 2.353 trillion (excluding sales tax on POL products to deprive provinces of their constitutional right, replacing it with petroleum levy). Of this amount, sales tax concessions accounted for about Rs. 1.274 trillion, income tax concessions for Rs. 579.70 billion and customs concessions for Rs. 499.14 billion. These are not accounting curiosities. They represent choices about which persons, sectors and transactions receive preferential treatment, and which taxpayers must bear the resulting revenue burden. A concession granted through the tax law is economically similar to public expenditure. If the state collects Rs. 100 from a citizen and transfers it to an industry, the transaction appears in the budget. If the state allows that industry to retain Rs. 100 that would otherwise have been payable, the distributive effect may be comparable, but the benefit is less visible. This opacity is politically useful. Direct subsidies attract public attention and legislative scrutiny. Tax concessions are buried in schedules, exemptions and statutory notifications. Their beneficiaries are often concentrated and organised, while the cost is dispersed across millions of taxpayers and consumers. Constitutional Political Economy explains why such arrangements persist. A concentrated group has a strong incentive to lobby for a benefit worth billions of rupees. Each member of the general public, bearing only a fraction of the cost, has little incentive or capacity to oppose it. What appears to be an anomaly in tax design may be the predictable result of unequal political organisation. Withholding taxation presents another example. It is defended as an efficient method of collecting revenue from an economy with weak compliance. In limited circumstances, deduction/collection at source is entirely justified. Salary taxation (pay roll taxes) and payments to non-residents commonly require withholding systems in many jurisdictions. Pakistan, however, has transformed withholding from a collection technique into a parallel tax regime. According to the Revenue Division Year Book 2024–25, withholding taxes contributed 60 percent of total income tax collection in that year. Collection through withholding reached approximately Rs. 3.382 trillion. This reliance changes the institutional character of income taxation. The tax administration increasingly obtains revenue from transactions rather than determining taxpayers’ actual net income and ability to pay. Banks, employers, utilities, property registrars, businesses and other intermediaries become unpaid tax collectors. Persons already operating within the documented economy bear recurring deductions/collections in advance, compliance costs and the burden of seeking adjustments or refunds (hardly allowed automatically in

Bio: Hamza Tareen is a student at LUMS majoring in Political Science, with a keen interest in philosophy and theology. ‘I am utterly overwhelmed; the deluge of quizzes is beyond my capacity,’ my friend slowly sighed as his head drooped in exhaustion. Students across the country nurse dreams of pursuing higher education in premier institutes such as the likes of LUMS or IBA. They navigate the rigorous selection process, pay exorbitant fees and, when they finally clinch admission, little do they anticipate the stringently demanding atmosphere that would exact a heavy toll on their mental health. Those who get into these prestigious universities are students who have already demonstrated exceptional academic excellence, and, unsurprisingly, they formulate a highly ambitious criterion for defining success, i.e., consistently acing their courses. However, since the assessment follows a bell-curve distribution which evaluates performance relative to peers, the grading is highly competitive and only a small proportion land in the A/A- categories. This not only fails their expectations but plunges them into depression as they call into question their academic capabilities and self-worth. And, to top it off, peer pressure, which is ever pervasive in the culture, further complicates the problem. It would be tempting to label setting unrealistic expectations as the sole culprit; but the elephant in the room is something else. It is the culture that continuously pushes students to the brink of burnout and brands it as ‘academic rigor.’ From having interminable quizzes, assignments and mid/final exams to being expected to excel in four/five different courses simultaneously, the pressure is intense. And students are expected to somehow manage it all—along with carving out time for extracurriculars and social life. University is not all about academics, and there are a multitude of other problems that students steer through during the semester. But, to their dismay, they are assumed to carry through it all. Justified it would be to say that by the end of the term, they are sapped of all strength, teetering on the precipice of collapse. It is a well-researched—and unfortunate—fact that depression and mental health problems abound in elite universities. The aforementioned factors, coupled with other personal and social challenges that characterize this phase of students’ academic journeys, become a crucible of pressure for them. They stumble, totter, and fall into a shroud of uncertainty. And, lamentably, the stigma associated with seeking help or counselling multiplies the problem. Mental health is stigmatized as something alien, suited for the ‘feeble.’ Amidst these circumstances, the onus falls upon the administration. Supportive counselling sessions which help students in threading their way through university life and academics are crucial; dedicated mental wellness centers need to be introduced, encouraged and endorsed; and students should be empowered to zoom in more on learning than deriving their self-worth from grades alone. This does not mean exhibiting apathy towards academic performance, but a reorientation of priorities which do not impede their growth and self-esteem. Finally, a reconsideration and reassessment of balancing academic rigor with students’ well-being is indispensable on the part of the administration. Mental well-being will naturally translate into more productivity.

In the space of a single year, Pakistan has moved from the periphery of Middle Eastern diplomacy to its center. Prime Minister Shehbaz Sharif and army chief Field Marshal Syed Asim Munir have positioned the country as both a mediator between Washington and Tehran and, more recently, a formal treaty partner of Saudi Arabia and Turkey. The result  the Makkah Joint Defence Agreement, signed on August 7 in Islam’s holiest city  marks one of the most consequential shifts in South Asian foreign policy in decades. Yet it also raises hard questions about who is really steering Pakistan’s course, and at what long-term cost.   A war that reshaped the region   The backdrop is a war between the United States and Iran that erupted on February 28, drawing in Saudi Arabia, the Gulf states, Iraqi militias and Yemen’s Houthi movement, and disrupting roughly a fifth of the world’s seaborne energy supplies through the Strait of Hormuz. Missile and drone exchanges reached Saudi cities, unsettling a region that had spent years trying to de-escalate after the 2015 nuclear deal’s collapse.   Pakistan, one of the few states with working channels to both Washington and Tehran, stepped into the gap. Sharif’s government hosted preliminary contacts that produced the so-called Islamabad Memorandum, under which Iran signalled it would not pursue nuclear weapons  a pledge it had already made under the Nuclear Non-Proliferation Treaty and the 2015 accord  in exchange for a mechanism allowing it to dilute stockpiles of highly enriched uranium. Iranian President Masoud Pezeshkian later thanked Islamabad for its “constructive engagement” in securing a ceasefire and agreed to send negotiators to further talks in the Pakistani capital. Analysts at the Washington-based Stimson Center have noted that Munir personally staked considerable political capital on the diplomacy, given how easily it could have collapsed.       The Makkah pact   That mediating role fed directly into last week’s agreement. Saudi Arabia, repeatedly struck during the war by Iranian missiles and by Tehran-aligned forces in Yemen and Iraq, had already signed a bilateral defence pact with Pakistan in September 2025  struck, notably, just over a week after an Israeli strike on Hamas negotiators in Doha rattled Gulf capitals’ confidence in American security guarantees. The Makkah agreement extends that arrangement into a trilateral pact with Turkey, declaring that an armed attack on any one of the three signatories will be treated as an attack on all.   Pakistani officials describe the pact as purely defensive. Foreign Minister Ishaq Dar said this week it was “not directed against any country” and remained open to other regional states. President Asif Ali Zardari called it a reflection of “shared resolve for peace and security,” while Sharif credited Munir’s “tireless efforts” in securing an arrangement he said had been years in the making. For Riyadh and Ankara, the pact offers a hedge against dependence on any single outside power at a moment when American commitments to the region look less certain than they once did. For Pakistan, it offers closer ties with two wealthy allies, a symbolic role as guardian of Islam’s holiest sites, and outsized influence for a country whose economy remains fragile.   Praise, and pointed scepticism   The agreement has been celebrated in much of Pakistan’s domestic media as evidence that the country’s leadership  civilian and military alike  is finally translating decades of geopolitical positioning into tangible strategic weight. Supporters point to a similar dynamic in May, when a brief but intense military confrontation with India ended within days, after which the government promoted Munir to the rare, largely ceremonial rank of Field Marshal, only the second officer in Pakistan’s history to hold it.   But that same promotion has drawn sharp criticism from analysts who see it as part of a broader consolidation of power by the military at the expense of elected institutions. Munir, appointed army chief in November 2022, has presided over a period in which  according to critics including jailed former prime minister Imran Khan’s supporters  courts, the media and Sharif’s own coalition have operated increasingly under military direction, a system some commentators have dubbed a “hybrid regime.” The Middle East Institute has described Munir’s elevation as “a thunderous declaration of the military’s unassailable supremacy,” while other analysts note that his growing role in foreign and economic policy  well beyond the traditional remit of an army chief  blurs the line between civilian governance and military command in a country with a long history of that line collapsing altogether.   What comes next   None of this diminishes the immediate diplomatic achievement: a ceasefire process that, however fragile, has held; a new pact that binds three influential Muslim-majority states more closely together; and a Pakistan that finds itself, for now, indispensable to great-power diplomacy in a region convulsed by war. Whether that translates into durable stability  for the Gulf, for the broader Middle East, or for Pakistan’s own democratic institutions  remains an open question. The coming months, as the Islamabad talks resume and the Makkah pact’s practical implications become clearer, will test whether this new era represents a genuine diplomatic breakthrough or a further tightening of military control dressed in the language of strategic necessity.