In an age where economic narratives often shape public perception, a significant disconnect is emerging between official government statements and the lived realities of its citizens. While the government consistently paints an upbeat picture of economic prosperity, public discontent tells a different story. This chasm between official optimism and palpable frustration begs a crucial question: What exactly is the root cause of this widespread dissatisfaction?
The Government’s Rosy Outlook: Growth and Productivity
The government’s primary objective appears to be altering market perceptions to boost consumer confidence, hoping to stimulate consumption, productivity, and employment. Their narrative is anchored in statistics: an insistent claim of an upward trajectory in GDP growth, substantiated by a reported 3.09 percent GDP growth for 2024-25 and an estimated 3.71 percent in the first quarter (July-September) of the current fiscal year. Announced by the National Accounts Committee (NAC) on December 30, 2025, and available on the Pakistan Bureau of Statistics (PBS) website, these figures suggest robust growth.
The main driver, according to government data agencies, is higher industrial productivity, specifically a rising Large Scale Manufacturing (LSM) sector. The Finance Division’s December update and outlook estimated LSM growth at 5.02 percent for July-November 2025, a significant jump from a negative 0.62 percent in the same period last year. The very low base from the previous year is acknowledged as a major factor in this surge. PBS later updated this figure to an impressive 6.01 percent for July-November.
Private Sector’s Alarming Reality Check
However, the private sector’s chorus of complaints casts a long shadow over these optimistic figures, raising serious questions about data accuracy. Industrial bodies highlight several critical issues:
- Uncompetitive Exports: Electricity cross-subsidies imposed on industry inflate input costs, rendering Pakistani exports uncompetitive and inadvertently encouraging smuggling across the nation’s porous borders. A decline in exports supports this claim.
- Targeted Audits: Proactive audits, touted as enforcement, are disproportionately focused on sales tax and specific sub-sectors like sugar, cement, and now fertilizer. This indirect tax burden is ultimately passed on to consumers, with a greater incidence on the poor than on the rich.
- Delayed Refunds: Persistent delays in tax refunds continue to plague businesses, despite recent legal interventions like the Islamabad High Court fining a Commissioner Inland Revenue.
- Exorbitant Discount Rate: While the discount rate has more than halved from 22 percent in May 2024, it remains a prohibitive 10.5 percent – more than double the regional average.
- Punitive Account Freezing: The FBR’s practice of freezing accounts as a penalty for non-payment of assessed taxes, even prior to appeals, stifles operations and trust.
The consequences are stark. The All Pakistan Textile Mills Association reports 150 units closed in the past 18 months, while the Pakistan Readymade Garments Manufacturers and Exporters Association states over 100 spinning units have shut down, leading to yarn and fabric shortages. Even large-scale units are often forced to operate single shifts instead of two. The Pakistan Association of Large Steel Producers is now running at just 30 to 50 percent capacity, producing 3.8 million tons against an installed capacity of 9 million tons. Cement dispatches also saw a 3.47 percent year-on-year fall in November 2025, though total dispatches rose by 11.54 percent during the first five months of the current year.
These closures directly contradict the government’s claim of 6.01 percent LSM growth, posing a significant challenge to the official narrative.
Questionable Investment and Employment Trends
The Finance Minister, at a recent Pakistan Policy Dialogue, acknowledged multinational closures but suggested a need for a “new business model” rather than adhering to a 90-year-old one. He also claimed 20 new foreign investors in the last 18 months. However, government data tells a different story: Foreign Direct Investment (FDI) for July-June 2024-25 was USD 2,489.7 million, dwarfed by India’s USD 81 billion. More critically, inflows for July-November 2025 declined by 25 percent to USD 927.4 million, down from USD 1,242.4 million in the same period of 2024. Portfolio investment also plummeted from a positive USD 148.7 million to a negative USD 613 million.
The Employment Paradox: Rising Joblessness
Further challenging the government’s claims of job creation is the recently released Labour Force Survey (LFS) 2024-25. It reveals several disturbing trends when compared to LFS 2020-21:
- Overall Unemployment Surge: Pakistan’s unemployment rate has risen from 6.3 percent in LFS 2020-21 to 7.09 percent (nearly 8 percent) across all age groups.
- Gender Disparity: This increase is evident for both males (from 5.5% to 5.9%) and females (from 8.9% to 9.7%).
- Urban and Rural Impact: Both urban (7.3% to 8.0%) and rural (5.8% to 6.3%) areas have seen a rise in joblessness.
- Provincial Struggles: Khyber Pakhtunkhwa leads with 9.63 percent unemployment, followed by Punjab (7.27%) and Balochistan (5.54%). Sindh, while performing ‘best,’ still saw its rate increase from 3.9% to 5.28%.
Informal Sector Dominance and Wage Concerns
A mere 27.5 percent of employment falls within the formal sector in LFS 2024-25, virtually unchanged from 27.6 percent in LFS 2020-21. This means the vast majority – 72.5 percent – are in the informal sector, where minimum wage laws are often unenforceable. The PBS itself notes “notwithstanding complete observance of the requisite codes to ensure reliability of data coefficient variations and confidence intervals (were) computed in the backdrop of 5 percent margin of error,” a significant caveat that raises questions about data integrity.
While the LFS 2024-25 reports a significant average all-Pakistan wage increase to 39,042 rupees per month (up 62% from LFS 2020-21’s 24,028 rupees), this jump is largely concentrated in the formal sector (a 54.5% rise to 54,038 rupees). A substantial portion of this increase can be attributed to the 7 percent of civilian and military personnel whose salaries, paid by taxpayers, have seen massive increases well above inflation rates year after year. Informal sector wage increases (from 17,529 to 30,834 rupees) are at best estimates, subject to considerable survey bias.
The True Cost: Eroding Purchasing Power
The real measure of prosperity lies in purchasing power. While average inflation was a low 4.49 percent in 2024-25, this followed years of soaring rates: 8.9 percent in 2020-21, a staggering 29.18 percent in 2021-22, and 23.41 percent in 2023-24. These cumulative price hikes mean that even if wages increased, their real value has been significantly eroded for most citizens. The ongoing International Monetary Fund programme has also noted “important shortcomings in the source data” for government finance statistics.
Conclusion: A Disconnect Fueling Discontent
The evidence presented by the private Large Scale Manufacturing sector, the undeniable rise in unemployment, and the nuanced reality of wage increases (heavily skewed towards the formal sector and government employees) collectively challenge the government’s optimistic industrial growth and economic stability narrative. This significant disconnect between official claims and ground realities is not just a matter of statistics; it is the very root cause of the palpable public discontent that permeates the nation. Ignoring these foundational issues will only deepen the divide and further erode public trust.
Copyright Business Recorder, 2026
Source: Original Article
