Mujtaba Arshad
Every time Pakistan signs another agreement with the International Monetary Fund, you can practically predict the conversation that follows. Critics call it proof the economy has failed again. Supporters insist the money is necessary just to keep things stable in the face of relentless external pressure. Both Camps, however, tend to talk past the real issue. The problem was never the IMF. It’s the structural weaknesses that keep dragging Pakistan back to the Fund’s door in the first place.
The pattern by now is almost mechanical. Growth picks up, imports climb, reserves start thinning out, and eventually the country has to go looking for external financing just to avoid a full-blown balance-of-payments crisis. Things stabilize for a while. But the underlying weaknesses never really get fixed, so a few years later the cycle starts all over again.
Strip it down, and Pakistan’s recurring vulnerability is not really about money. It’s about what the country makes.
Economic resilience is not something you borrow your way into. It comes from building productive capacity by exporting more, attracting real investment, and earning the foreign exchange needed to grow without constantly having to ask someone else for a bridge loan. The gap between countries that keep landing in balance-of-payments trouble and those that don’t usually comes down to one thing: how much they can produce and sell competitive products on the world stage.
The numbers make the point better than any argument could. Pakistan’s merchandise exports hovered around $32 billion in fiscal year 2024-2025. Vietnam, meanwhile, exported more than $405 billion worth of goods in 2024, pulled in over $25 billion in foreign direct investment, and still managed growth above seven percent. That’s not just a gap between two economies; it’s two completely different paths taken over the same three decades.
Vietnam turned itself into a manufacturing and export machine through sustained industrialisation and deep integration into global supply chains. Every dollar of export earnings fed back into reserves, industrial expansion, and resilience. Pakistan, by contrast, is still leaning heavily on a narrow band of low-value textile exports. Manufacturing productivity trails its regional peers, technology adoption remains patchy, and the country’s foothold in global value chains is thin. The result is predictable: not enough foreign exchange coming in from actual production, which leaves the economy exposed the moment external financing gets harder to come by.
Most of the public conversation around CPEC gets stuck on roads, power plants, and infrastructure. Fair enough — those projects genuinely improved connectivity and eased the energy shortages that used to cripple industry. But their real significance is not the concrete and steel. It’s what they were supposed to make possible next: industrial transformation.
That’s really the story of the shift from CPEC’s first phase into CPEC Phase II. The early years were about closing infrastructure gaps. This next Phase is supposed to be about industrial cooperation, Special Economic Zones, technology transfer, agricultural modernization, and export-oriented manufacturing. Put simply: phase one laid the foundation. Phase two is where the economy’s actual productive capacity is meant to grow.
Infrastructure by itself doesn’t generate sustainable growth. Roads don’t export anything. Highways don’t earn foreign exchange. Ports don’t build resilience unless they are plugged into industries that can compete, at home and abroad. Gwadar will only become the growth engine it’s billed as if it’s tied into export-oriented industry, logistics, and regional supply chains. Not sitting there as a monument to what could be.
This is where Special Economic Zones under Phase-II matter. Well-run economic zones have a long track record of pulling in investment, clustering industries together, moving technology across borders, and building export capacity. China’s own rise started with zones like Shenzhen — a fishing town that became one of the world’s manufacturing and tech capitals. Vietnam used the same playbook to plug itself into global production networks.
Perhaps the biggest opening for Pakistan right now comes from China itself. As Chinese wages rise and the economy shifts toward higher value manufacturing, a wave of labor-intensive industry is looking for somewhere else to go. Pakistan has a real chance to catch part of that wave and with it, investment, jobs, technology, and exports.
The raw ingredients are there: a population past 240 million, a large labor force, improving infrastructure, and direct connectivity through CPEC. None of that guarantees anything, but it does make Pakistan a plausible destination for relocating Chinese manufacturing. Even a modest slice of that shift could meaningfully move the needle on jobs, industrial output, and export earnings.
More than anything, this is what would address the root problem: not enough foreign exchange being generated at home. Every factory that exports strengthens the external account. Every manufacturing investment adds to productive capacity. Every technology partnership makes the country a bit more competitive. Add it all up, and dependence on external borrowing starts to shrink on its own.
So much of the national conversation about Pakistan’s economic future revolves around loans, reserves, exchange rates, and the terms of the next stabilization package. Those things matter, but they are symptoms, not causes. You can’t borrow your way to resilience. You have to build it.
Countries break out of the bottom-and-bust, borrow and repeat cycle when they produce more, export more, and compete harder in international markets not when they get better at lining up financing. For Pakistan, that means the policy conversation needs to shift from crisis management toward actual structural change.
Judged that way, CPEC Phase-II should not be scored by how many ribbon-cuttings or MOUs it produces. The real scorecard should track things like how many factories are actually up and running in the Special Economic Zones, how much manufacturing investment has landed, how fast non-traditional exports are growing, how many industrial jobs have been created, and how deeply Pakistani firms are woven into regional and global supply chains.
None of this should be framed as IMF versus CPEC. They are not competing for the same job. The IMF exists to stabilize the economy during a crisis. CPEC, if it works as intended, is meant to fix the structural weaknesses that keep creating the crisis in the first place.
One patches the leak. The other is supposed to fix the pipe.
Pakistan’s long-term future won’t be decided by how big the next bailout package is. It will be decided by whether the country can actually produce more, export more, and hold its own in global markets. Resilience gets built through production, investment and exports not through another round of borrowing.
The real exit from IMF, in other words, is not a financing strategy at all; It is a production strategy. If CPEC Phase II succeeds actually in expanding Pakistan’s industrial base, attracting productive investment, and strengthening export competitiveness, it could achieve what repeated stabilization programmes have not: making the next bailout unnecessary before the country has to seek one.
The author is a Research Associate at the Centre of Excellence for CPEC, at the Pakistan Institute of Development Economics (PIDE). He can be reached by Email at: [email protected]
