Pakistan will outgrow its government, not fix it

A bull case the government cannot ruin

The episode opens with Muzamil welcoming Farooq Tirmizi back to the show. Farooq is the CEO of Elphinstone, a firm that helps Pakistanis around the world invest in the US stock market and other vehicles. But the conversation is not about that company. It is about a four-part series Farooq recently wrote for Profit magazine — where he was once managing editor — covering Pakistan’s power sector, population, education, and a final piece titled, simply, “A bull case for Pakistan.”

Muzamil opens with the obvious question: what is the bull case, and what is Farooq seeing that most people are not? Farooq’s answer reframes the entire conversation. The optimism, he says, does not depend on a perfect leader, a reform agenda, a Saudi cheque or a Chinese loan. “We don’t need somebody, some perfect leader to come in and have this huge reform agenda and implement it for there to be progress. No, we don’t need any of that. We can continue with the government of Pakistan being the way it is, as incompetent, as corrupt as it is, and it will still work.”

The point is sharper than it first sounds. Farooq is not saying the government does not matter. He is saying the indicators that drive Pakistan’s next thirty years are ones the government cannot meaningfully break. “The government of Pakistan can make it better. It can’t make it worse.” Whatever damage was available to do, he argues, has already been done.

The money that will fund Pakistan’s growth, he adds, is not coming from abroad either. It will come from Pakistanis’ own savings. The series is, in effect, an argument about where that capacity comes from.

The 1997 mirror — and why this crash is not a death sentence

Muzamil pushes the comparison Farooq draws in his writing — to Indonesia, Turkey and other middle-income economies that crashed and recovered. Farooq is precise: Pakistan’s 2022 crash is closely analogous to the 1997 Asian financial crisis, and for the same reason. “Too much foreign debt was taken on in order to stabilise the currency and subsidise imports. You can’t hold these things forever.”

When the artificial hold breaks, the economy contracts hard. Indonesia lost roughly ten to fifteen percent of GDP when its crisis hit. Pakistan’s contraction, Farooq notes, has the same structural cause. The silver lining he draws is small but real: at least some of the foreign borrowing of the last decade was spent on power plants. The capacity is built. When demand recovers, it can be used. That is not a defence of how the money was borrowed — it is a recognition that the country is not starting from zero on the other side of the crash.

Capacity payments and the bill that will shrink without anyone fixing it

Muzamil presses on what feels, to most viewers, like the most immediate horror story: electricity at sixty-five rupees a unit, industry priced out of competitiveness, ordinary consumers defaulting, and a death spiral as the recovery base shrinks. He compares it to Dubai, where furnace-oil-generated power costs roughly a quarter of what it does in Pakistan. He floats the standard interventions — radical government downsizing, absorbing capacity payments off the consumer bill, restructuring the sovereign guarantees that lock the country in.

Farooq’s response is not that the policy fixes are impossible. It is that they will not happen, and the base case has to be built without them. “Mathematically, there are lots of solutions. But what is your expectation from Pakistan? If you have to keep hope, you have to keep the assumption that the government of Pakistan will not do anything to save the country.”

What he does see is the economy adjusting on its own. Depressions, he notes, do not last forever. As economic activity recovers — even slightly — electricity consumption rises. As consumption rises, the offline capacity that everyone is paying for starts being used. The capacity payment, as a share of each bill, falls. In rupee terms the price may not drop, but as a percentage of purchasing power, “this is the maximum we will ever pay.” From here, the burden shrinks. Inflation finishes the work.

Muzamil is not fully convinced — he raises the “lost decade” risk, where the breathing space goes to debt restructuring rather than growth. Farooq acknowledges the policy lever exists; he just declines to count on it. “Prepare for the worst, hope for the best.”

Population — twenty-five years out of date

The conversation moves to the second piece of the series. Muzamil opens with the standard horror story: too many mouths to feed, an exhausted agrarian base, climate stress on the Indus system. Farooq cuts in directly. “This picture of Pakistan’s population is about twenty-five years out of date.”

He makes three moves at once. Agricultural productivity in Pakistan, he points out, is at half to one-third of what comparable countries achieve — the constraint is not land or people, it is yield. Water stress will mean more floods and more droughts, but no one is seriously claiming the rivers will run dry. And the demographic numbers themselves have shifted in a way that almost no one in the public debate has registered.

The pivot year, Farooq says, was 1995 — the worst year Pakistan ever had in terms of earners per dependant. Since then it has steadily improved. The mechanism is the one development economists have watched in every country that has gone through this transition. Infant and maternal mortality were facts of life for centuries — families had six or seven children expecting three to die. As mortality fell, the births did not adjust immediately. Eventually they did. Pakistan’s fertility rate is now at 3.3 children per woman.

That number, he stresses, is not a problem. It is close to ideal. “The sweet spot is somewhere between 2.1 and three. Your population keeps growing, it will not decline, but you don’t have so many dependants that you are crushed by them.” And — the load-bearing part of the argument — “this is something that changes over decades. The government can do nothing to mess it up.”

When Muzamil presses on whether GDP growth has actually outpaced population growth, Farooq concedes the last two or three years have gone the wrong way. But any longer window — ten, twenty, thirty years — has GDP per capita rising. The 2023 census, he notes, showed population growth actually coming in below what was projected from the 1998–2017 trend. The inflection is real and visible in the data.

He then closes the loop with the most pointed observation in this section. The world’s commentators love South Korea and Singapore for going from third world to first in a single generation. “That generation’s grandchildren don’t exist.” Pakistan, he argues, is not heading down that road — and that matters more than the standard narrative gives it credit for.

Literacy — what 13-year-olds in cities can already do

The third piece of the series is education. Farooq’s argument here is direct, even blunt. With fewer children, families can afford to put more into each one. The aggregate consequence is a sharp generational shift in literacy.

Pakistan’s overall literacy rate sits at around sixty percent, urban literacy at seventy-two. But youth literacy is the number that matters. “Urban youth literacy is closing in on ninety percent. Thirteen and fourteen-year-olds are above ninety percent literate in the urban areas in Pakistan.” The full effect of even a mediocre schooling system shows up at thirteen or fourteen, because it takes years for a child to read fluently.

Muzamil pushes back — what is the definition of literate? “Signature able” used to be the official bar. Farooq says the bar has moved. The current definition is being able to read a newspaper headline. And that, he argues, is sufficient for the kind of industrialisation Pakistan is about to attempt. If a worker can read the warning on a machine, follow a written instruction, and absorb information from a phone, the basic threshold for mass employment is met.

Muzamil extends the point. In an information economy, the schooling system is no longer the only education channel. The phone is the schooling system. Every interaction with a feed, a video, a comment thread is a reading exercise. Farooq agrees: pace of learning accelerates when consumption of written information becomes constant. The next generation is, on the data, already more literate than the one before it — every Pakistani cohort born after 1985 is over fifty percent literate, every cohort born after 1999 is closer to seventy.

The mechanism — fewer children, more deposits, fewer crises

By the middle of the conversation, Farooq pulls the four threads into a single mechanism. It is the most concentrated argument in the episode and worth following carefully.

Smaller families mean more savings per household. More savings means more bank deposits in aggregate. And bank deposits as a share of GDP, in country after country, double from roughly thirty to roughly sixty percent at exactly the point Pakistan is approaching — when fertility crosses below three children per woman.

That number is not cosmetic. It changes what is possible for the government. Pakistan’s fiscal deficit averages around six percent of GDP over a decade. With bank deposits at thirty percent of GDP, the banking system can only finance about two to three percent of GDP in domestic borrowing — the rest has to be printed or borrowed abroad. Printing causes inflation. Borrowing abroad causes the foreign currency crises Pakistan now lives through on a three-year cycle. At sixty percent of GDP in bank deposits, the same six percent deficit can be financed entirely from domestic borrowing. The government no longer has to print. It no longer has to go abroad.

The consequence is stability rather than dramatic growth. Inflation does not drop to single digits permanently, but its range narrows — from a four-to-thirty percent swing down to something closer to four-to-eight. Cost of capital falls. The industrial groups that already have plans on the books — plans that do not pencil out at current rates — start putting them into effect. Electricity is available. Workers are literate. Financing is reasonable. “When all four of these factors come together, you see a boom that lasts thirty, forty years.” His estimated inflection point: somewhere between 2030 and 2033.

Foreign debt — refinancing the panic into rupees

Muzamil notes a data point most viewers have missed — Pakistan currently has the lowest debt-to-GDP ratio in six years, and at around seventy percent is in better shape than many large economies, including the United States and Japan. Farooq agrees, and extends the argument.

The path out of the foreign-debt cycle, he says, is mechanical, not political. As bank deposits grow, new government borrowing shifts from foreign to domestic. The government issues PIBs and the banks have the capacity to buy them. Old foreign loans get refinanced in rupees. Over time the foreign-debt stock shrinks — not because anyone made a clever decision, but because the local capacity to finance the deficit grew past the point where going abroad was necessary.

“This is a fifteen-year game. It is not going to finish until the late 2030s. But what happens at the end of it is that the government’s fiscal crisis no longer turns into a foreign currency crisis. It stays rupee-denominated, and that is just easier to deal with.”

Emigration is not the disaster the headlines suggest

Muzamil raises the 1.2 to 1.3 million net emigration figure that put Pakistan above India and China in 2023. The standard reading is brain drain. Farooq pushes back with several layered observations.

First, the phrase “brain drain” itself originated with British engineers moving to the United States after World War Two. Every country goes through this. Second — and this is where Farooq’s framing inverts the doom narrative — Pakistan is now the largest country in the world with an above-replacement fertility rate. “We are the only country with a population that is still likely to keep growing because we are having enough children. No country larger than us has the capacity to send people out in the numbers that we do.”

Third, where Pakistanis are going matters. The Gulf states will not grant citizenship. That keeps the connection alive. Workers go, build capital and networks, and most will come back. Post-COVID, the same dynamic now extends to remote work — Pakistanis in Pakistan earning in dollars, which Farooq notes is exactly the use case his own company was built to serve. Muzamil summarises the upside cleanly: “Exposure, connections, capital. Those things combined will eventually become available to Pakistan.”

Europe’s mirror, and the limits of robots replacing people

Towards the end, Muzamil turns the camera outward. Europe, he argues, is stuck — a finance-capitalist system that taught people to multiply or feel unhappy, an ageing population, and a productivity replacement that has to come from culturally distant immigration, which then produces the right-wing backlash visible in England and across the continent.

Farooq takes the long view. The country furthest down this road is Japan — wealthy on paper but unable to grow for thirty years. “You can rent a luxury three-bedroom apartment in central Tokyo for two thousand dollars. Japan is no longer rich relative to the rest of the world.” Korea and Taiwan, he predicts, will be in worse shape within fifteen years.

Muzamil floats the techno-optimist counter: AI and robotics will close the productivity gap. Why does demographics still matter if the work can be automated? Farooq’s response is the most-quotable line of the episode. “These are great technologies. They are going to transform the world. They are not a replacement for people. The robot will produce — and sell to whom? You need consumers. You need that balance. Robots and AI are enablers of people, not replacements for them.”

He distinguishes Europe from the United States — Europe is “getting comfortable with decline,” even offering degrees in degrowth, while America still has hunger to grow and the ability to attract the best talent in the world. “The average American is now twice as rich as the average European in income, and three times richer in wealth.” He expects China to be a major threat for one more decade, then to enter its own managed decline. The country he is most interested in, alongside Pakistan, is India — which still has thirty or forty years of growth left.

What this episode is really arguing

By the end of the conversation, the structure of Farooq’s case is clear. Pakistan does not grow because the government fixes anything. Pakistan grows because Pakistanis build the capacity to absorb the government’s incompetence. Fewer children per family. More savings per household. More literate workers per generation. More bank deposits per rupee of GDP. The fiscal deficit financed at home. The foreign debt refinanced in rupees. The industrial plans, already drafted, finally pencilling out when rates fall.

Muzamil closes with a request to viewers that is in the same register as Farooq’s argument — channel the immediate anger about today, set it aside for a moment, and look at the longer arc. “You just have to wait it out.” The episode does not pretend Pakistan’s present is anything other than hard. It argues, with data, that the hardest part is already behind, and that the mechanism for the next thirty years is one no government in Islamabad has the power to break.