By Muhammad Umair Zeb
Pakistan’s economy may be stabilising on paper, but for millions of citizens, daily life tells a very different story. Inflation may have slowed, reserves may have improved, and fiscal discipline may be praised in official briefings, yet economic hardship continues to define the lived experience of households and businesses. The disconnect between policy claims and public reality is growing wider and more dangerous.
Over the past two years, Pakistan has endured one of its most testing economic phases, marked by high inflation, currency depreciation, rising energy prices, and mounting debt obligations that have placed immense pressure on both households and businesses. Although recent data suggests moderation in inflation and some easing of external account pressures, these gains remain largely invisible to the public. Real incomes have declined sharply, while the cost of food, utilities, education, and healthcare continues to rise, quietly eroding living standards across the country.
Political instability and economic uncertainty
Compounding these challenges is prolonged political instability, which has emerged as a major obstacle to economic recovery. Policy inconsistency, weak political consensus, and governance uncertainty have discouraged long-term planning and undermined investor confidence. Businesses hesitate to expand, foreign investors delay commitments, and economic decision-making becomes reactive rather than strategic, leaving the foundation of growth fragile.
Security concerns in Khyber Pakhtunkhwa
The consequences are particularly visible in Khyber Pakhtunkhwa, where renewed security concerns and incidents of terrorism have severely damaged the investment climate. Once viewed as a province with growing potential in tourism, mining, and small industry, KP has witnessed a steady decline in new investment. Industrial activity has slowed, commercial confidence has weakened, and capital has gradually shifted to safer regions or moved offshore altogether. The economic cost of insecurity extends far beyond headlines, affecting employment, revenue generation, and long-term development prospects.
Tax burden on the salaried class
At the same time, the tax burden on compliant citizens continues to intensify. The salaried class and documented businesses have become the backbone of revenue collection, facing rising income tax rates, multiple withholding taxes, and an expanding web of indirect levies. Each fiscal year brings additional measures that further squeeze the same segment, while large portions of the informal economy remain outside the tax net. This imbalance has deepened frustration and weakened trust in the fiscal system.
Indirect taxation and public resentment
Indirect taxation has compounded the pressure, as sales tax, fuel levies, and utility surcharges affect all citizens equally, making the system increasingly regressive. For salaried individuals, taxation does not end with income tax; it extends to every electricity bill, fuel purchase, and essential commodity. When citizens are repeatedly asked to pay more without visible improvements in public services, compliance slowly turns into resentment.
Signs of resilience and hope
Despite these challenges, Pakistan’s economic story is not without hope. The economy has shown resilience under pressure, businesses continue to operate despite severe constraints, exports display periodic recovery, and remittances remain a crucial lifeline. More importantly, there is growing recognition that sustainable recovery cannot be achieved by repeatedly burdening those already paying taxes.
Structural imbalance and the way forward
Pakistan’s core challenge is not a lack of potential, but structural imbalance. A fairer tax system that broadens the base, documents the informal economy, and reduces reliance on indirect taxation can restore confidence. Equally critical is political stability and improved law and order, particularly in regions like Khyber Pakhtunkhwa, where peace and predictability are essential for attracting investment.
The road ahead will not be smooth, but it does not have to remain broken. Economic recovery requires consistency, fairness, and trust. Pakistan’s greatest strength lies in its people, the workers, entrepreneurs, and taxpayers who continue to contribute despite mounting pressure. Recognising their role and easing their burden is not only sound economics; it is essential for restoring confidence and steering the country toward sustainable and inclusive growth.
About the Author
Muhammad Umair Zeb is a Financial Analyst specialist in macroeconomic policy, taxation, and socio-economic reform in South Asia.
