Asad Umar: Pakistan cannot grow without deep reform

What keeps a former finance minister busy

Muzamil opens by trying to understand what Asad Umar’s days actually look like now, and the answer is its own portrait of the moment. Three things consume his time, Asad Umar says. The first is the courts: the rounds of kachehri, the FIRs, the cyber and investigation cases, the contempt proceedings. The second is the run-up to elections, the ticket process, the work of getting a party ready to go to the polls. The third is strategy and execution inside Tehreek-e-Insaf itself. Those three broad areas take the most out of his calendar.

Muzamil notes that a few viewers have written to say something to the effect of, you are a good man, we respect you, but we did not expect you to stand your ground and stay this far on the front foot under cases like these. Asad Umar’s answer is unsentimental. What is at stake, he says, is the future of Pakistan and the existence of this country. He has always believed the nation holds enormous potential, and that to use it you have to fix some foundations. The fight is to fix those foundations.

”These ailments did not start ten months ago”

The conversation turns quickly to the economy, and Asad Umar refuses the framing that the crisis is a story of the last ten months. The ailments, he says, did not begin recently. They began much earlier. His own view is that the movement was in a positive direction while Imran Khan was Prime Minister, but the journey was far from finished and a great deal of work remained. What has happened in the last ten months is a regression that pushed Pakistan into visible distress, through current-account problems, an external-financing threat, and reserves running down.

He reaches for a single number that he keeps returning to: Pakistan’s import cover. Even after the 1998 nuclear-test sanctions, he says, the country’s import cover was better than it is now. The problems were already there. They have grown larger and more acute, and that is exactly why the urgency of reform has gone up. Pakistan cannot get out of where it is now without structural reform, and structural reform takes time you do not have once the debt itself needs restructuring. The nation, he argues, should be having an open conversation about the fact that it needs a debt restructuring, and an equally open conversation that no one will restructure your credit until you commit to deep structural reforms yourself.

Why he does not think the IMF alone fixes it

Muzamil flags that the episode will publish about ten days out, by which point an IMF agreement may or may not have landed, and asks whether an IMF programme could move Pakistan toward stability. Asad Umar is cautious. The IMF will have to feel a measure of pressure for an agreement to happen, he says, but the deeper structural reforms the country needs cannot, in his personal view, be delivered inside this IMF review. The reason is political, not technical: deep structural commitments have to come from a government that does not know whether it will last two months or, at most, six. The long-term programme and the structural reforms Pakistan needs will, in his reading, come from whichever government wins the election, because that is the first thing it will have to do. He still expects something to get done in the short window, because the risk of default has become acute enough that even a two-to-six-month period needs a belt.

Real estate as the black-money sink

Asked to name the structural problems in plain terms, Asad Umar starts with revenue. Pakistan does not collect the revenue it needs to, and the real battle is which taxes to create and in what form to collect them. The single largest drag he identifies is the real-estate sector, which pulls resources and capital out of the productive economy and has a net negative impact on productivity. He notes that Pakistan’s total factor productivity has had periods of being outright negative, and without productivity growth there can be no sustainable, non-inflationary growth. It is, he says, a basic principle.

Muzamil pushes back, because he has heard Imran Khan champion construction. Asad Umar draws a careful distinction between construction and the land market. Sky-high land prices are actually negative for construction: they hurt affordability and they hurt business productivity. He gives the example of buying dairy land in Australia, where the biggest cost of dairy is the cost of land, and notes that land two hours outside a major city there was cheaper than land deep in interior Sindh, near Ghotki, where his own group ran dairy and power projects and where he knows the prices first-hand. The reason land is so expensive, he says, is that the safest way to hide black money in Pakistan is real estate.

Then he names who that wealth belongs to. The net worth tied up in real estate is associated with Pakistan’s judiciary, its lawyers, its generals and senior officers, its senior bureaucrats. That, he says, is the example he has chosen to explain why reform does not happen. When you go to reform something he and Muzamil both feel strongly about, who gets hurt in the short term? The most powerful people in Pakistan. That is why reform is hard, why the pushback comes, and why the policy gets criticised the moment a government starts down that road. He is candid that his own party, like any, contains people connected to that interest, and that the answer comes down to intent.

The other structural problem: an import bill exports cannot retire

The second major structural problem, Asad Umar says, is the external one. Pakistan’s import retirement is permanently larger than what its exports earn, which creates a structural dollar gap. The moment growth ticks up, the gap widens and the country falls into a current-account crisis. He says a great deal of work went into this at the Planning Ministry, with a presentation and approval around February, on how to move Pakistan’s economy toward export competitiveness in a structural way, not the short-term question of what tax rate to set, which he is clear belonged to the Finance Ministry.

The approach he describes was built with Harvard. He worked with the Growth Lab there, which Ricardo Hausmann leads, and through Asim Ijaz Khwaja, a Pakistani who became one of Harvard’s youngest tenured professors and now sits over several centres including that one. The logic was to take Pakistan’s existing skill sets and ask which industries have a larger global size or higher valuation, and which the country could transition into using the same or similar skills, to move up into a higher-value-added economy. He is careful that he will not publicly name the specific sectors identified, because the document was never made public and was meant to be launched once, in his phrasing, Imran Khan was Prime Minister again.

Courting Chinese manufacturing on economics, not slogans

The China textile relocation effort is where the abstract argument becomes concrete. Asad Umar describes sitting with the SPD, which has developed considerable technology with civilian applications that Pakistan does not exploit commercially, and connecting their available capability sets to economists in the ministry. He then describes a meeting where Imran Khan told the Chinese, in effect, that Pakistan wanted trade, not aid, and the Chinese asked, reasonably, what Pakistan had to sell. The honest inventory was thin: sugar, rice, and not much else, with cotton now imported rather than exported.

So the team mapped China’s roughly two-trillion-dollar annual import bill against what Pakistan could plausibly produce, and looked for the overlap with the higher-value categories. With rising labour costs in China and across East Asia, and Vietnam, Cambodia and Bangladesh already absorbing relocating textile manufacturing, Asad Umar argues Pakistan’s young workforce and access to African markets gave it a window. He says they arranged Prime Minister meetings with top Chinese business during the Winter Olympics trip and followed up, with Khalid Mansoor on the CPEC side reporting to him, and a session with 80 to 90 large Chinese textile players including the biggest association. The pitch was hard economics: comparative labour cost, utilities cost and availability, sea-freight cost and time to Europe and the US versus shipping from China. The point, he says repeatedly, is that no one invests because of Pak-China-friendship slogans. He cites a Chinese operation near Multan Road outside Lahore that he says is now building its own small export-processing zone with its own money, as the kind of result the approach is meant to produce. None of it, he stresses, shows up in six months; the impact starts to appear in three years.

He uses this to draw a sharp contrast with the present. Between the no-confidence motion of 8 March and the vote on 3 April, he says, while Imran Khan’s government was fighting for survival, he was still working on Pakistan’s export pattern and meeting his counterparts, because that was the work. A government consumed by survival from day one, that does not know if it will last a month or three, cannot make these kinds of decisions.

Documentation follows growth, not coercion

On bringing the economy into the documented net, Asad Umar is firmly in the digital camp. He says a chart that struck him plotted the documented share of an economy against national income and showed an almost clean linear fit: documentation does not cause growth so much as growth, and digitisation, pull documentation along with them. He is blunt that the FBR has a reputation for harassment, recalling an event where he honoured the top 100 taxpayers and said in his speech that the questions the bureau asks are more than a family asks before agreeing to a daughter’s marriage, and theft still happens anyway. The answer, he argues, is economic incentive: when transactions move to QR codes and digital rails because it makes economic sense, documentation follows, and he points to State Bank policy work and to measures in his supplementary finance bills on renewable energy and digitisation as steps in that direction.

Spectrum is his case study in short-term thinking. He says he argued in cabinet that Pakistan sits on its spectrum like a hen on eggs, and that the economic benefits of broadband penetration dwarf the licence fees the government chases. Broadband spectrum, he says, is the digital motorway; auctioning it to whoever pays the most upfront is the wrong frame, because the cabinet finds itself negotiating with a Finance Ministry whose orientation is how many dollars it can get right now. Digitisation, he argues, is linked to revenue growth, documentation, job creation and foreign-exchange earnings all at once, which is why he kept telling the Prime Minister that if there is to be a revolution in Pakistan’s economy, it has to come from this sector.

He also flags the NADRA data point: Pakistan built a centralised identity system that was ahead of its time, ahead even of India in some respects, but used it overwhelmingly for security rather than economic purposes. He wanted to run data analytics against tax filings using NADRA’s rich data, found the law did not allow the sharing, and changed it through a supplementary finance bill, only to discover later that one piece had been changed and another had not, which he then fixed in a second bill.

Agriculture, property tax, and who actually gets hurt

When Muzamil asks about taxing real estate and agriculture, Asad Umar separates the two cleanly. Agriculture, he says, is a provincial subject and, more importantly, its revenue potential is very limited; he explored hard, before politics and in the party’s economic committee, ways to bring it into the tax net, and concluded agriculture’s problems are equity and fairness issues, not revenue ones. He himself, he notes, lives in a house on which he pays a trivial property tax, a fraction of a percent, where developed countries are far higher. The largest untapped potential is heavy property tax, and property tax falls on whoever owns property, which means the richest, most influential people in Pakistan.

He illustrates the politics with gas pricing. As a new Finance Minister facing winter, he looked at a tiny slice of household gas consumers, on the order of one or two percent, who were getting heavily subsidised gas, and linked the highest household consumption slabs to the import-linked price. The attack that followed came from every quarter, he says: anchors, editorial writers, op-ed columnists, the most powerful people, every judge being affected. That, he argues, is precisely why Pakistan’s politics needs a government standing on the strength of the public’s vote, with the capacity and the trust to make and hold an unpopular decision, rather than a technocratic or military-backed setup that reverses a tough call within 48 hours.

Cutting the state, and the Sarmaya idea

On civil-service and government-size reform, Asad Umar is honest about the limits. He says the harder problem is not the visibly idle thirty percent of staff, who in his experience really are doing perhaps thirty percent of a job, but that even those people cannot be fired, because the courts will reinstate them in minutes. He tells the story of a machine-tool factory under the Industries Ministry whose staff lined up to salute the minister at the airport because, he was told, refusing would cost them their jobs, and how that lodged in his mind. The single biggest cost item, he says, if you actually want to cut the cost of the civil government, is pension reform, which he wishes had gone further.

His marquee state-owned-enterprise reform was Sarmaya. The idea, he explains, was that SOEs will never reform or be privatised while they sit under joint secretaries, deputy secretaries and additional secretaries, capable officers who may have been excellent deputy commissioners but have never run an industry or a financial institution. Sarmaya would lift them out from under the bureaucracy, place the best names from Pakistan’s corporate and business world on a board, recruit top professionals to run vertical groups, energy, financial institutions, infrastructure, and decide what to keep, fix or sell. The structure was approved by the Prime Minister. And then, he says, it was misread, including inside his own party, as socialism, with a former boss telling him over dinner that Asad Umar had turned socialist. His answer was that if having empathy for a worker is socialism, then he is sorry, but it has to be done.

Privatisation, PIA, and the airline trap

Privatisation, Asad Umar says, has been the slogan of two fully committed governments, PML-N and PTI, across nine years, and the actual result has been almost nothing privatised. He is clear that this is not because anyone did the work badly; it is hard. He does think the discos and certain plants should be at the top of any privatisation list, and admits PTI did not push there hard enough. On PIA he is sober: it carries a huge accumulated deficit and large annual losses, the airline industry is brutally difficult globally, with one industry account he cites holding that the world’s commercial airlines put together lost money on net across their first 75 years, and Pakistani carriers are too small to attract serious investment. The honest path, he suggests, is the kind of operational turnaround he says the PPP-era management under Aijaz Haroon began, before privatisation.

Energy is where the real money is bleeding

Asad Umar is most animated, and most specific, on energy, which he calls where the real fiscal drain sits. Roughly 80 percent of the circular-debt drain on the fiscal deficit, he says, comes from the power sector, and most of that is not theft but the subsidy gap between the cost of producing electricity and what is charged. The numbers he gives are stark: capacity payments rose from about 450 billion rupees in 2017-18 to around 1,400 billion in 2022-23, while electricity consumption barely rose. The country is paying fixed charges on large new capacity it is not using, and then, he says, doing load-shedding in January and February amid massive excess capacity simply because the current government does not want to import fuel. He calls the energy-sector decision-making of the period an enormous injustice done to Pakistan.

Cutting workers and privatising plants, he argues, saves you perhaps two percent of the cost; the real reform is market-based. Until Pakistan moves to a genuine energy market, the problems cannot end. On gas, he describes the fundamental reform he negotiated personally with the relevant body and finally passed days before the government fell: a weighted-average cost of gas. The prior regime had ruled that LNG was a separate fuel from gas and priced them separately, which broke the logic when one consumer got gas near 800 and another near 1,800. He explains that once you weight the cost correctly, the gas market becomes ready to exploit: transmission systems and terminals get built privately because a real market exists, and the old arrangement where the taxpayer absorbs LNG-terminal costs disappears. Market-based electricity and market-based gas, he concludes, are the two biggest reforms required right now, and they should already have happened.

He adds a smaller but telling example of bureaucratic resistance: a long-running effort, which Dr Nadeem ul Haque championed, to deregulate licensing so that, as with sugar, you do not need a government licence for everything. Imran Khan refused to back off it, he says, even as the cabinet pushed back repeatedly, before it was eventually parked in a committee.

Public-private partnerships and the reforms no one televises

Asad Umar’s defence against the charge that PTI did not reform is a list of the quiet wins. Public-private partnership legislation, attempted from 2005 across roughly fifteen years without a single transaction closing, was moved to the Planning Ministry in December 2020, after which, he says, a pipeline of over half a trillion rupees was generated, with a structure built to shield the taxpayer, and roads including the Sialkot motorway section moving into execution. He cites the Roshan Digital Account bringing billions of dollars into the country, and what he calls one of the most difficult reforms ever, moving Pakistan to a market-determined exchange rate despite the national obsession with the rate. His larger point is that reform did happen, but it does not become part of the evening television talk-show, so no one talks about it. He is also generous about the constraints Imran Khan inherited: a year and a half consumed by the worst external crisis in Pakistan’s history, then the century’s largest global pandemic, both of which limited how far the reform agenda could run, less far even than Imran Khan himself wanted.

The future of PTI, and a youthful takeover

Muzamil closes on politics. Asad Umar says, plainly, that he will not take a cabinet position next time; the finance team is led by Shaukat Tarin, and while the decision is always the Prime Minister’s, there is no ambiguity there. On succession and leadership development, he rejects the idea that PTI runs on parachuted-in old hands. There was a phase, he concedes, where a more cynical “this is Pakistan, practical politics” voice grew dominant inside the party, but Imran Khan is now firmly back in the old “Naya Pakistan” mode. He defends the politicians who joined PTI from elsewhere: when their only earlier options were Zardari and Nawaz Sharif, choosing one of them does not damn them, and many of them stood ideologically with Imran Khan when given the chance, while some long-time loyalists did not live up to it.

The leadership development, he argues, is visible in the names PTI has produced, Hammad Azhar, Murad Saeed, and the younger MNAs and MPAs like Arslan Ghuman and Alamgir, with more to come. He frames it as a generational handover: the youth is now hungry for massive change, the party will provide it, and people like him, the older heads, will eventually fold back. Muzamil thanks him for the time and turns to camera, inviting viewers to say in the comments whether they agree with the policies, and noting there was far more to discuss than the clock allowed.