The recently improved employment trend in the United States is noteworthy. Hiring for roles in the federal government, professional services, and manufacturing declined in June. However, roles in state and local government education rose, with around 63,500 positions added, while healthcare and social assistance gained another 58,600 jobs.

Despite the unemployment rate declining, the number of long-term unemployed in the US increased by 190,000 to a total of 1.6 million people.

In Pakistan, the National Assembly Standing Committee on Poverty Alleviation and Social Safety recently expressed alarm over the escalating poverty rate, now stated to be nearing 50 per cent, and stressed the need for steps to reverse the trend. Like the United States, it may be pointed out that Pakistan is struggling to generate additional jobs due to a stagnant manufacturing sector and the federal government.

While many countries were focused on financial globalisation, China emerged as a world factory by focusing on an industrial policy that led growth in all sectors of the economy.

Pakistan is struggling to generate additional jobs due to a stagnant manufacturing sector and the federal government

Pakistan has now finalised a new industrial policy aimed at reviving the country’s declining manufacturing sector. Relevant officials note with concern that the industrial sector’s share in GDP has fallen consistently from 26pc in 1996 to just 18pc in 2025.

Chaired by Haroon Akhtar Khan, Special Assistant to the Prime Minister on Industries and Production, a meeting of the Prime Minister’s Committee on Industrial Policy underscored the urgency of reforms to halt the sector’s ongoing contraction.

The committee stressed the need for immediate measures to boost exports, develop import substitutes, and stabilise the economy. To support manufacturing, the policy proposes reducing corporate tax from 29pc to 26pc over three years. Moreover, special amendments will also be made in various laws to create a business-friendly environment and ensure the investors’ security as well as promote localisation; failing industrial units will be restored and banks will be encouraged to provide them loans; and improved credit to the small and medium enterprises and distressed segments will be ensured.

The government, along with stakeholders, will review progress on the 10-year policy after every 18 months. The final recommendations have been submitted to Prime Minister Shehbaz Sharif for approval.

The Pakistan Business Council (PBC) has however expressed surprise over the federal government’s approval of the new industrial policy without prior consultation with the country’s leading industrial stakeholders.

The former CEO of PBC, Ehsan Malik, recalled that during a recent visit by Mr Khan to PBC’s office, the two sides had discussed the need for such a policy in considerable detail, and the council had offered its support in terms of formulation. However, he said, the PBC has not yet seen the approved policy and he requested Mr Khan to share it with the Council.

A key issue is how effectively the industrial policy will be implemented in the current economic environment. To quote analysts at Dawn, the macroeconomic targets are unrealistic, and we are likely to see all or most of them being missed at the end of the next fiscal year. The country cannot progress, they say, unless our ruling elites admit their part in its consistent economic decline.

On July 8, a meeting Cabinet Committee on Rightsizing (CCR), chaired by Finance Minister Muhammad Aurangzeb, reviewed the status of various ministries and divisions. Earlier in January, he had announced that the rightsizing of all 42 federal ministries and their attached entities would be completed before the end of FY25 to improve efficiency and reduce expenditures. The CCR is now focused in reforming the Federal Board of Revenue describing it as “at the core of Pakistan’s fiscal architecture”.

Meanwhile, the Federal Government debt has swelled by 12pc compared to the past year now reaching nearly Rs76.05 trillion at the end of May. According to State Bank data, the domestic debt stood at Rs53.46tr, posting a year-on-year growth of 15.9pc. The external debt was recorded at nearly Rs22.59tr, 4.52pc higher than the same month last year.

The State Bank of Pakistan’s (SBP) data released on July 8 showed the federal government’s borrowing for budgetary support had dropped sharply by 30pc during July 1, 2024 to June 27, 2025. The borrowing for budgetary support (from SBP and scheduled banks) had decreased to Rs5.55tr during FY25 compared to Rs7.89tr during the same period last year (FY24).

“The status quo is, in fact, becoming more entrenched,” says analyst Aasim Sajjjad Akhtar. But one can also witness growing opposite trends. For the first time, the parliament has been empowered to engage in budget deliberations at a micro level, says Naveed Qamar, Chairman of the National Assembly on Finance. He was referring to a softening in tone of the government’s original hardline ap--proach to financial transparency and tax compliance.

Furthermore, the Balochistan Assembly passed its budget unanimously and the Sindh budget was passed amid remarkable government-opposition bonhomie as earlier coalition partners PML-N and PPP amicably settled the canal water sharing dispute; politicians are apparently seeking unity in diversity.

In yet another move, the Islamabad High Court recently ordered the government to dissolve the Capital Development Authority and transfer its powers to the municipal authority- Islamabad Metropolitan Corporation. Such events, as mentioned above, are not so effective and have yet to gather critical mass.

Published in Dawn, The Business and Finance Weekly, July 14th, 2025