Pakistan is often termed as a ‘resilient nation.’ However, Henley & Partners’ recently published 2025 Global Investment Risk & Resilience Index (GIRRI) tells a different story by placing it in the “Least Resilient” category. With a rank of 222nd out of 226 states, Pakistan has been delivered an eye-opening diagnosis.
This data-driven ranking reflects the economy’s fundamental challenge to absorb shocks in times of economic strain. Pakistan’s score is an indication of structural vulnerability dependent upon cyclical interventions to address the provocations it faces.
To be clear, this fragility is not a single-point failure; the GIRRI index reveals systemic areas of improvement of national resilience driven by five core metrics: political instability, financial insolvency, climate vulnerability, human capital deficits, and poor infrastructure.
The first metric covers political and governance mechanisms for stable institutions. Investors have faced notable policy fluctuations over the last few decades in Pakistan. This manifests as sudden regulatory changes and inconsistent enforcement of contracts across political cycles, thus disrupting predictability and deterring long-term capital intensive investments.
On the financial and economic front, Pakistan faces a persistently modest tax to GDP ratio of 10.6%, due to its focused tax base. This forces the state to finance public expenditures through sovereign borrowing, causing an ongoing mismanagement of fiscal deficits. This accumulated debt burden then becomes a vicious trap, where over two-thirds of national revenue is consumed for debt servicing, leaving limited funds for necessary development expenditure.
To add to the context, the 2025 floods have left an estimated damage of $2.9 billion. Although the figure is much lower than the economic losses of approximately $40 billion left by the 2022 floods, it has reaffirmed climate risk as a persistent and material threat to GDP, infrastructure, and food security.
Underdeveloped social and human capital risk to turn Pakistan’s demographic dividend into a challenge. The increasing youth bulge, with an evolving education system, is facing a growing skills gap leading the new workforce towards low-output careers. Besides social strain, this phenomenon is accelerating the brain drain at notable rates.
Lastly, Pakistan lacks robust innovation and associated infrastructure. The ongoing digital divide and uncompetitive logistics mean that even the most capable exporters face significant competitive dares.
This “resilience deficit” has daily consequences for an already concerned populace, especially the middle class. Due to low FDI and stagnant exports, there is a persistent inflation tax and a perpetually weak rupee, making essential commodities expensive and eroding purchasing power. The state is so heavily committed that public service institutions lack basic resources. There is a serious employment crisis, narrowing the middle class and increasing social tension.
One may now point to the outcomes of recent stabilization efforts. But these are initial steps, not a foundation for progress. These efforts are inclined toward resolving immediate liquidity crises, not the core resilience gap. Pakistan needs to build structural resilience based on a national consensus, complemented by sustainable national strategy. A non-partisan plan to address priorities in all five metrics is required.
For political stability, we require a binding National Economic Charter, endorsed by all political stakeholders. This will ensure stable tax, trade, and investment policy over the successive political cycles, and will significantly boost the investor confidence and market certainty.
To achieve financial strength, the government needs to expand the tax net and reconcile the budget towards prudent expenditure. Another immediate goal must be the halting of budgetary drains from loss-making state owned enterprises (SOEs). This may be attained via deep restructuring and public-private partnerships. Resultantly, it will leave a significant room for enhancing the development budget for public essentials.
For developing robust social and human capital, there is a need for targeted and in-demand skill development programs to focus on high-value careers and increase the national economic output. Funds re-allocation towards vocational training and public health will transform the demographic bulge into a dividend.
The state apparatus must re-orient itself towards innovative productivity for three goals: export-led growth, increasing export destinations and diversified FDI portfolios. For this, producers require state-of-the-art logistics, 24/7 energy support, and reliable digital infrastructure.
Lastly, climate security has become an economic imperative. Renewables and water security are no more a “green luxury.” It is a fundamental de-risking plan to absorb climate shocks and substantial fuel import invoices.
Policy-makers in Pakistan have prioritized and traded short-term survival for long term stability for too long. Now, it is paramount to build an economic system that is durable and shock-resilient characterized by export-led growth and diversified investment portfolios with a skilled populace employed in high-value sectors.
Muhammad Saad is a Research Assistant at the Centre for Aerospace & Security Studies (CASS), Islamabad. He can be reached at [email protected]
