Should Pakistan Create More Provinces? | Asad Umar | Fatima Attarwala | All Things Money

The Episode’s Core Theme

The episode debates whether Pakistan should create more provinces and, more broadly, what structural changes are needed for economic recovery and sustained growth.

Should Pakistan Create More Provinces?

Main claim (Asad Umar)

• Creating additional provinces is not a solution to Pakistan’s economic problems.
• The common argument—“more population/regions leads to poor governance”—is rejected as “rubbish.”
• Umar points to examples such as:
  • California and New York: large, populous, yet relatively rich.
  • Punjab vs. Maharashtra: similar population scale, but Maharashtra has much higher per-capita income.

Constitutional/legal position

• Umar argues there is “no harm” in creating new provinces because it is allowed by the constitution.
• Affected people should have a voice, but changes must:
  • follow constitutional procedures
  • not be made arbitrarily, “with a white sheet of paper.”

Core governance critique

• The bottleneck is not provincial count, but the weak (or missing) third tier of government: local governments.
• He argues Pakistan’s constitution references local government empowerment (via Article 140A), yet local government in practice lacks real:
  • political power
  • administrative authority
  • financial resources

Why the Economy Isn’t Improving (Umar’s Diagnosis)

Stabilization without meaningful progress

• Even if the economy is said to be stable short-term (e.g., reduced default risk and improved credit ratings), Umar emphasizes:
  • no growth
  • jobs not created at the pace needed for new entrants

Affordability, poverty, and inequality

• Affordability is described as a major crisis.
• Poverty is rising, and inequality is increasing, with strong capital/asset returns and weak labor returns.

Long-term decline

• Umar highlights a multi-decade downward trend in growth performance.
• Pakistan, in his framing, has shifted from stronger comparators (Bangladesh/Vietnam/India) to falling behind in areas such as:
  • FDI
  • per-capita income growth

Structural governance problem

• The deeper cause is structural dysfunction in governance and political institutions, not provincial boundaries.

Local Government vs. Provincial Restructuring

Umar’s alternative reform package

Umar’s proposed reforms focus on strengthening local governments through constitutional clarity:

• Clearly define:
  1. Which powers belong to provinces vs. the center (he suggests adding a schedule to the constitutional framework).
  2. Which powers belong to local governments (a third schedule).
  3. Revenue/tax assignment, including formula-based funding across districts.

Why services fail (his vertical-power argument)

• Service delivery problems come from vertical power and bureaucracy:
  • Even with provinces, real control remains centralized through bureaucratic structures.
  • Implementation depends heavily on the provincial chief minister acting through the civil service.
• Adding provinces, he argues, tends to duplicate bureaucracy (more “chief secretaries”) rather than make services more responsive to citizens.

Politics, Institutions, and Continuity

A recurring theme is that Pakistan’s political/economic system lacks continuity and credible commitment, which weakens investment and reform.

• Umar contrasts earlier periods (when leaders appeared to have clearer control) with later periods where:
  • governments face uncertainty about survival
  • policy reversals become more likely
  • long-term investment is discouraged
• He argues democracy must function effectively and that:
  • there is “no shortcut” to recovery
  • institutional weakness is the binding constraint

Regarding the army

• Umar suggests the army may help positively on some national matters.
• But he argues “leading the economy is not one of them”, citing:
  • lack of continuity (leaders stay only briefly)
  • a mismatch between the army’s role and the design of the economic policymaking system

IMF Outlook and the Export Constraint

Why IMF support remains recurring

• Umar argues Pakistan repeatedly needs IMF support because the current account deficit (including debt servicing) leaves little alternative.

Exports as the binding constraint

• He presents export growth as the key limitation:
  • stabilization without exports leads to repeating crises
• He claims Pakistan has often had negative or insufficient export performance over long periods.
• Even when GDP grows, he argues growth has frequently come from consumption, not export-led activity.

Durable fix: build competitiveness

• When growth resumes, imports likely rise (including for energy), so the only lasting solution is building a competitive export sector.

Credit and criticism of recent measures

Umar credits some recent steps:

• Tariff reforms: “a step in the right direction”
• Interest-rate policy: described as more sensible than before

But he criticizes:

• exchange-rate management, which he suggests may lead to appreciation and damage export competitiveness

The missing piece

• Umar insists the missing requirement is deliberate export/industrial policy (in spirit similar to how other countries used industrial incentives), not merely:
  • “pushing paper”
  • procedural speed

What Reforms Are Required (Umar’s Priorities)

Umar repeatedly returns to governance/system reforms, emphasizing:

1. Stop military “meddling” in politics, and avoid asking the army to solve political problems.
2. Judicial independence to improve contract enforcement and reduce state-intervention risk for investors.
3. A political “charter of democracy” / “rules of the game” to support continuity.
4. Empower local governments via constitutional clarification of powers and revenues.

He argues that without these changes, economic managers (including finance ministers) face a structurally impossible task.

Comment on Incentives and “Powers That Be”

• Umar argues Pakistan’s policy elite often behaves to maximize short-term power/benefit, resulting in:
  • underinvestment in institutions
  • weaker long-term growth prospects
• Even if many leaders are patriotic, he suggests they may still lack the institutional continuity and economic framework needed for durable reform.

Presenters / Contributors

• Satam Matala (host)
• Asad Umar (guest, main contributor)
• Fatima Attarwala (named in the video title; not directly speaking in the provided subtitles)