By Commerce Reporter
LAHORE: Pakistan’s economic outlook may become increasingly challenging in the coming months due to global energy disruptions, rising debt and structural economic weaknesses, warns Khadim Hussain, Vice Chairman of the Founders Group, member of the Board of Directors of the Pakistan Stone Development Company, Senior Vice President of the Ferozepur Road Board and former member of the Lahore Chamber of Commerce and Industry.
In a detailed conversation, Hussain spoke about the potential impact of global geopolitical tensions on Pakistan’s energy security, the growing debt burden, taxation challenges, declining exports and the urgent need for economic reforms.
Q: How do you assess the current global situation and its impact on Pakistan’s energy sector?
Khadim Hussain:
The current global situation remains highly uncertain. Although there are indications of ceasefire efforts in certain conflict zones, it will take considerable time before the global energy supply chain returns to normal conditions.
Pakistan is particularly vulnerable because it relies heavily on imported energy resources. If the situation around the Strait of Hormuz, one of the most critical oil transit routes in the world, does not stabilise within the next three to four weeks, Pakistan could face severe energy challenges.
In such a scenario, we may witness shortages not only of petrol and diesel but also disruptions in electricity supply. This could lead to renewed load-shedding, which would place immense pressure on industries that are already struggling with high production costs and economic uncertainty.
The industrial sector is still recovering from previous economic shocks, and any disruption in energy supply would further weaken manufacturing output and export potential.
Q: What impact could rising petroleum prices have on inflation and the general public?
Khadim Hussain:
If petroleum prices increase by around Rs55 per litre, the overall cost of fuel could rise by approximately 20 per cent. Such an increase will inevitably trigger inflationary pressures across the economy.
Transportation costs would increase immediately, which would then raise the prices of essential goods, including food items and industrial inputs. In my estimation, inflation could rise by one to one-and-a-half per cent in the near term.
The worrying aspect is that the general public is already facing significant economic stress due to rising living costs, stagnant wages and high utility bills. Therefore, any further increase in fuel prices will directly affect household budgets and purchasing power.
Unfortunately, the coming weeks do not appear very encouraging for ordinary citizens unless immediate policy interventions are implemented.
Q: What measures should the government take to reduce the burden on citizens and businesses?
Khadim Hussain:
The government must take proactive measures to protect the public from sudden price shocks. One of the most immediate steps would be to temporarily reduce the petroleum levy on fuel products.
At present, a significant portion of fuel prices consists of taxes and levies. By reducing the levy, the government could absorb part of the increase and provide relief to consumers.
Passing the entire burden to the public in one go would be extremely harsh and economically damaging. In addition, the government should consider introducing fuel rationing measures if the crisis intensifies.
The state should also develop contingency plans to ensure uninterrupted supply of essential energy resources. Without such planning, both the economy and the public could face severe hardship.
Q: Do you believe Pakistan needs a long-term energy security strategy?
Khadim Hussain:
Absolutely. The current situation highlights the urgent need for Pakistan to adopt a long-term energy security strategy.
Pakistan must reduce its dependence on a limited number of energy supply routes. This can be achieved by building new energy pipelines, expanding strategic petroleum reserves and diversifying energy sources.
Furthermore, investment in renewable energy sources such as solar, wind and hydropower should be accelerated. These resources not only reduce reliance on imported fuels but also contribute to environmental sustainability.
If Pakistan fails to develop a comprehensive energy strategy now, similar crises will continue to emerge in the future.
Q: You have also expressed concern about Pakistan’s growing debt burden. Why is this such a serious issue?
Khadim Hussain:
Pakistan’s public debt has reached alarming levels. On average, the country’s debt is increasing by approximately Rs7 trillion annually, which is a deeply troubling trend.
When debt grows at such a rapid pace, a large portion of government revenue is consumed by interest payments. This leaves very little fiscal space for development projects, social welfare programmes or economic reforms.
What is even more concerning is that the country often borrows new loans simply to repay existing ones. This cycle of borrowing creates a financial trap that becomes increasingly difficult to escape.
Q: What kind of reforms are required to address the debt problem?
Khadim Hussain:
The first step must be strict fiscal discipline. The government should reduce its expenditures by at least 40 per cent where possible, particularly in non-essential areas.
Secondly, the process of privatising loss-making state-owned enterprises should be accelerated. Many public sector entities incur massive financial losses each year, which are ultimately borne by taxpayers.
Privatisation, if conducted transparently and efficiently, can reduce the fiscal burden and improve the performance of these organisations.
Additionally, Parliament should formulate a comprehensive national policy for debt management to ensure long-term fiscal stability.
Q: What is your view on the current investment climate in Pakistan?
Khadim Hussain:
The investment climate remains weak. Foreign direct investment (FDI) is at a very low level, and domestic investors are also hesitant due to policy uncertainty and economic instability.
High taxation, expensive energy and regulatory hurdles have created an environment where many businesses find it difficult to operate profitably. As a result, some entrepreneurs are relocating their investments to other countries.
This trend is extremely worrying because investment is the backbone of economic growth. Without investment, there will be fewer jobs, reduced industrial production and slower economic expansion.
Q: What reforms are needed in Pakistan’s taxation system?
Khadim Hussain:
Pakistan’s taxation system requires serious reforms. The current structure imposes multiple layers of taxation on formal businesses, particularly in the industrial sector.
Instead of increasing tax rates repeatedly, the government should focus on expanding the tax base so that more individuals and businesses contribute to national revenue.
Measures such as eliminating super tax, ensuring consistency in corporate tax rates and simplifying tax procedures would greatly improve the business environment.
When businesses feel confident about tax policies, they are more likely to invest and expand their operations.
Q: How important are exports for Pakistan’s economic stability?
Khadim Hussain:
Exports are absolutely crucial for Pakistan’s economic stability. Unfortunately, the country’s export performance has not been very encouraging in recent years.
A major problem is that most of Pakistan’s exports consist of raw or semi-processed materials, which generate limited revenue compared to value-added products.
To improve export earnings, Pakistan must focus on value addition, technological innovation and diversification of export markets.
By producing higher-value goods and expanding into new international markets, Pakistan can increase foreign exchange earnings and strengthen its economy.
Q: What role can policy planning and think tanks play in improving economic outcomes?
Khadim Hussain:
Pakistan needs to establish a high-level think tank composed of experts in trade, foreign policy and economic strategy. This body should analyse global trends and develop strategic policies to help Pakistan adapt to changing international conditions.
The global economic landscape is evolving rapidly due to geopolitical shifts, technological advancements and new trade alliances. Countries that anticipate these changes and prepare in advance benefit the most.
Unfortunately, Pakistan’s economic system currently lacks the capacity to respond quickly to global opportunities. Establishing a specialised think tank would help policymakers make informed and timely decisions.
Q: Finally, what message would you like to convey to policymakers and the public?
Khadim Hussain:
Pakistan has tremendous economic potential, but real progress requires bold decisions and consistent policies.
Energy security, export growth, fiscal discipline and investment-friendly reforms must become the central pillars of national economic policy.
If policymakers listen to the concerns of businesses and implement meaningful reforms, Pakistan can overcome its current challenges and move towards sustainable growth.
However, delaying these reforms will only make the situation more difficult in the future. The time for decisive action is now.
