Business Recorder Highlights Lahore School's Strategic Economic Blueprint

Pakistan’s economic recovery is running into a wall of global energy pressures, according to the latest quarterly report from the Lahore School of Economics’ Modelling Lab. Grounded in research by economists Dr. Moazam Mahmood, Dr. Azam Amjad Chaudhry, and their team, the study reveals that GDP growth has slowed to 3.1% for fiscal year 2025-26. This trailing figure misses government and international forecasts, with the authors warning that final data could drag growth down to a "force majeure" low of 2.8%. The culprit is a steep global oil spike intersecting with a 9% inflation rate, creating a tight squeeze on both the national ledger and ordinary citizens.

The report underscores how deeply vulnerable the country remains to the international oil market, where a $13 billion annual import bill is currently inflated by prices running up to $30 above long-term trends. This imbalance has widening consequences, pushing the current account back into deficit as expensive energy imports consistently outpace export earnings. Meanwhile, domestic consumers are bearing the brunt; the past year saw petrol jump 54% and natural gas skyrocket by 126%. In a striking finding, the researchers note that two-thirds of these consumer price hikes were actually driven by state taxation rather than structural supplier costs, making public policy directly responsible for a third of the country's inflation.

This mix of sluggish growth and persistent inflation has extracted a devastating human toll, effectively wiping out nearly twenty years of social progress. Driven by the lingering effects of massive past currency devaluations, extreme caloric poverty has climbed from 16.5% to 21.1% in just over five years. While the report gives the government hard-earned credit for breaking the cycle of rupee depreciation and halting runaway inflation, it warns that defending the currency is no longer a sufficient strategy. Even with recent bright spots like a 3% bounce in agriculture and a 6% automotive-led surge in manufacturing, the authors conclude that temporary relief is no substitute for structural repair, urging an immediate strategic pivot toward domestic energy substitution and proactive growth.