Pakistan’s current fiscal space is limiting its capacity to finance climate action. A big burden of debt servicing, social protection needs, energy sector pressures, especially under a recent war-like situation, and demands for economic recovery compete for scarce fiscal resources.

Climate-related investments usually need extensive upfront expenditures, while their benefits, which come in the form of improved ecosystems, avoided disaster losses, and collective resilience, may materialise over longer periods.

Another big challenge is that Pakistan has not yet estimated its financing needs for comprehensive climate action. According to our latest Nationally Determined Contributions 3.0, Pakistan must reduce 50 per cent of its projected emissions by 2035, which requires $565.7 billion. This estimate has been made by the World Bank.

One of the challenges is that Pakistan has not yet estimated its financing needs for comprehensive climate action

So far, Pakistan has accessed less than half a billion from all available international sources: the Global Environment Facility, Green Climate Fund, Adaptation Fund, and related forums. Imagine the needs and the amount, as this is not simply a small amount; rather, it indicates that Pakistan’s capacity to mobilise resources is constrained.

Financing within the system comes from public spending through annual budget allocations. Budget FY27 confirmed a significant reduction from Rs716.7bn in FY26 to Rs214bn. Consequently, the adaptation budget has been reduced to Rs70.4bn from Rs85.4bn, while the mitigation budget has been reduced to Rs124bn from Rs603bn.

So, on one side, hazards are intensifying: more heat waves, more droughts, a rise in temperature, especially nighttime temperature, irregular precipitation with more and violent floods, while on the other side, fiscal space is limited, and access to international resources is narrow.

Given this context, each rupee redirected toward climate action is a rupee not available for debt servicing, health, education, or immediate disaster response. Moreover, every additional dollar of climate-related borrowing adds to a debt burden; this is itself becoming a constraint on future climate investment.

According to the latest NDCs, Pakistan must reduce 50pc of its projected emissions by 2035, which requires $565.7 billion, but so far, we have accessed less than $500m from all available international sources

This is the trap Pakistan’s climate finance strategy must now steer: climate risk is rising, and fiscal space is dipping. The strategic way forward is to channel climate finance from where it can realistically come from, and how efficiently Pakistan can channel what already exists.

There are multiple structural barriers limiting available financial opportunities. Firstly, climate responsibility has been devolved to provincial governments, while international commitments and carbon market coordination remain with the federal government. This devolution has resulted in overlapping mandates and insufficient coordination, with gaps in governance both vertically and horizontally.

Secondly, our technical capacity to prepare bankable climate projects is inadequate. That’s why we often fail to present fundable proposals, which is a primary requirement, even when funding windows are open.

Thirdly, there is almost no consolidated system that can track non-budgetary flows such as international, private, or blended finance. This undermines Pakistan’s ability to quantify its own needs and credibly negotiate internationally.

The fourth constraint is about the limited fiscal space. Low savings and investment ratios, high public debt, and currency risk on foreign-denominated finance constrain both domestic mobilisation and the terms on which international finance can be absorbed.

The fifth constraint is about private-sector capital. As public funds still account for the overwhelming share of adaptation finance, private investors lack the tools to price climate risk and adaptation projects and, unlike renewable energy, often lack a clear, commercial return. This limits the private sector appetite precisely where public finance is rarest.

Pakistan has established its climate finance strategy around establishing a climate finance taxonomy and expanding budget tagging to non-budgetary flows, screening public investment for climate risk and prioritising resilient infrastructure, building a bankable projects pipeline through an integrated climate action platform and an operational Pakistan Climate Change Fund, which will help mobilise domestic capital through carbon markets, green and sustainability-linked bonds, blended finance, and climate-aligned public-private partnerships, and developing green skills and innovation capacity through a proposed green university and startup ecosystem.

Pakistan is also deepening its existing channels at the international level, including the World Bank’s $40bn country partnership framework for 2026-35, the Asian Development Bank’s climate commitment of around $2.43bn for 2022-24, the International Monetary Fund’s $1.3bn Resilience and Sustainability Facility tied to climate-informed public financial management reforms, and a better-prepared pipeline of proposals.

However, none of these instruments, alone, will close the gap. What is required at the top is credible coordination, a single national system to track needs and allocations, project screening, and directing both domestic revenue and international finance toward the same prioritised pipeline.

Pakistan’s climate future requires a strategic, predictable, and development-oriented financing framework: no aid, no loans, but grants and concessional loans, so that we can protect vulnerable populations while supporting economic transformation.

The writer is an assistant professor at the Pakistan Institute of Development Economics

Published in Dawn, The Business and Finance Weekly, September 28th, 2026

A provocative new book joins this debate. In Profits, Prophets, Coaches, and Kings: (When) do Leaders Make a Difference Jared Diamondexamines whether individual leadersalter the course of their societies. The study marks a break from the American author’s earlier books which earned the Pulitzer Prize winner much fame. But his bestselling 1997 book Guns, Germs, and Steel and other works also attracted criticism for geographic determinism and playing down human agency. His latest book reverses the lens. Across politics, business and sports, it examines whether individual leaders play a decisive role in shaping the world around them, and under what conditions if they do. He considers how the interplay between an exceptional individual and historical circumstances determines success or failure.

At the book’s outset, Diamond narrates the incident of March 1930 when Adolf Hitler’s car was hit by a huge trailer truck in which he survived. Three years later, Hitler became chancellor of Germany and unleashed the Holocaust and World War II, in which millions of people were killed. He asks whether these horrific events would have happened if Hitler had died in the car crash. Some will argue things would have turned out differently. Others would point to the humiliation inflicted on Germany by the Treaty of Versailles, by the hyperinflation it suffered and the fact that antisemitism was deeply embedded in the country well before Hitler’s rise. That makes it hard to decide whether Hitler made a difference. This, Diamond says, exemplifies the question of whether leaders determine outcomes, for better or for worse.

The role individuals play in shaping history has always been a contested issue in an age-old debate.

He mentions three competing schools of thought in this debate. One sees exceptional and heroic leaders determining history. The opposite view is that leaders are constrained by circumstances and have little influence on events. An in-between view holds that individual leaders sometimes do and sometimes don’t make a difference. His book takes a middle ground in this debate. For the author, the key question is under what conditions can leaders make a difference.

In his discussion of leaders’ impact on history, Diamond sets what he calls the Hamlet test. This refers to whether any contemporary person had comparable qualities to achieve a similar outcome as the individual being assessed. In Shakespeare’s case, his unique talent meant no other Elizabethan could have written Hamlet if Shakespeare hadn’t done so. He cites the example of independent Botswana’s first president as a political figure who passes the Hamlet test. Seretse Khama’s policies made his country well-governed and not consumed by civil wars or diamond revenues being wasted on ostentatious projects. Although he leveraged Botswana’s inherent advantages and his position as a tribal leader, his contributions to his country would not have happened under another founding president. No other figure had comparable skills. He was an effective leader at a particular place and time, and therefore made a difference.

Leaders however gifted, Diamond says, can be effective only in certain circumstances. For example, Genghis Khan, who established the largest land empire in history, had exceptional qualities but was lucky enough to be born “at the start of the wettest decade in the last 2,000 years on the steppes of Central Asia”. In other words, a military and administrative genius was helped crucially by climatic factors which had favourable economic, social and demographic consequences. Therefore, much turns on enabling conditions.

Diamond draws up a list of 22 modern leaders — familiar names — and asserts that historical figures may be forces for either good or bad. Some leaders led their countries to independence and left lasting legacies. Others established dictatorships and systems that did not outlive them. Some leaders had enough power to execute their policies and make an impact. Being at the right place and at the right time, their context aided them to make a difference.

One conclusion he draws is that those who made a difference rarely left office voluntarily — the two notable exceptions being Nelson Mandela and Lee Kuan Yew. He regards education as an important variable in a leader’s effectiveness. He cites the cases of Lee Kuan Yew and South Africa’s president Thabo Mbeki, trained in economics, whose countries’ economies grew spectacularly under their leadership. His account of leaders who contributed positively — and negatively — to national economic growth is particularly insightful.

In discussing business leaders, Diamond notes that many famous names notably Jeff Bezos, Bill Gates, Elon Musk and Mark Zuckerberg are credited with changing the world. But were they uniquely qualified to accomplish what they did? He concludes that none of them pass the Hamlet test. They are important and successful risk-takers in modern business but they were all replaceable. If Bezos hadn’t built an online ‘everything store’, someone else would have, as its time had come thanks to the explosion of the internet. These business leaders made a difference but not the kind that shapes a society’s trajectory.

Diamond concludes that context, timing and a leader’s abilities determine impactful leadership. Some situations offer an opportunity for leaders to make impactful decisions while other situations severely constrain a leader. “A leader’s lowest potential for impact is under circumstances making it improbable that a single person could have changed the outcome,” he writes.

There is much in the book to criticise. In places, Diamond’s what-if counterfactuals confuse rather than clarify. His “natural experiment” methodology of comparing similar societies or business firms facing similar crises but led by different individuals, in order to isolate the leader’s impact, also raises questions. History rarely provides comparable cases. Although he acknowledges the importance of charisma, he says too little about the distinctive qualities that leaders need to be effective. Still, it is an engaging book that makes an important contribution to a debate that will undoubtedly continue for years to come.

The writer is a former ambassador to the US, UK and UN.

Published in Dawn, September 28th, 2026

The challenge is no longer simply access to information, but knowing what deserves belief. This year’s message, ‘Choose trusted journalism’, is therefore particularly apt. Yet trust cannot be demanded by news organisations as a birthright. It must be earned through the daily, often invisible work of checking claims, verifying evidence, consulting multiple sources, separating fact from opinion and correcting mistakes openly. In a media environment that rewards speed, outrage and certainty, such principles may appear old-fashioned. They are, in fact, journalism’s strongest defence. They also remain essential because false information can inflame tensions and erode confidence in institutions.

Newsrooms must look inward. Every sensational headline, careless error or blurring of reporting and commentary weakens public confidence and makes serious journalism harder to distinguish from the flood of material surrounding it. But responsibility does not rest with journalists alone. In Pakistan, the work of verification is made more difficult by pressures on reporters and news organisations, restricted access, interruptions to communications and the use of legal and administrative measures that inhibit independent reporting. When journalists cannot investigate freely, citizens know less about the exercise of power. When communications are blocked during moments of crisis or political tension, rumour gains ground. This is why press freedom and public access to credible information are inseparable. A society cannot demand trustworthy journalism while simultaneously making the practice of it more precarious.

That is why World News Day should be less a celebration of the press than a reminder of mutual obligations. Journalists owe the public accuracy, fairness, independence and the humility to correct themselves. Governments owe journalists the freedom to ask difficult questions, pursue uncomfortable facts and publish without intimidation. Readers, too, must learn to recognise the difference between reporting built on evidence and content engineered for reaction. News organisations can help by being more transparent about how stories are sourced, verified and corrected, and by resisting pressures that reward sensationalism over substance. The problem of misinformation will not be solved by adding yet more information to an already crowded stream. What matters is whether information has been questioned, corroborated and placed in context. In an age when technology can create convincing falsehoods in seconds, scrutiny is not an optional extra. It is the value journalism must continue to provide — and the reason it must continue to be protected.

Published in Dawn, September 28th, 2026

The scale of Pakistan’s crypto economy makes the question particularly important.

The Chairman of the Pakistan Virtual Assets Regulatory Authority (PVARA), Bilal Bin Saqib, recently told a Senate committee that approximately 40 million Pakistanis have crypto-linked accounts. He estimated Pakistanis hold between $10 billion and $20bn in crypto assets outside Pakistan. Chainalysis ranked Pakistan third globally in its 2025 Global Crypto Adoption Index, behind India and the United States. Pakistan ranked second for retail activity through centralised crypto services.

What is remarkable is that much of this ecosystem developed outside Pakistan’s traditional financial system and clearly violates current State Bank of Pakistan regulations. However, Pakistanis can download an app like Binance, open a USDT account, and then make a rupee transfer via Raast or inter-bank fund transfer to local facilitators listed on the app, getting USDT credited to their offshore account through ‘institutional’ hawala.

Controlling access to a global digital financial network is considerably more difficult than regulating local institutions

They can acquire USDT, hold digital assets in offshore or self-custodied wallets, transfer them internationally and increasingly use those assets for payments. The arrival of stablecoin-funded international cards makes the regulatory challenge even more interesting. Companies such as RedotPay and Fasset illustrate how quickly the distinction between cryptocurrency and conventional payments is disappearing. A consumer can hold USDT and use a card linked to those digital assets to make purchases through the international payments infrastructure in Pakistan.

The number of Pakistani customers using these services is not publicly disclosed. It would therefore be misleading to claim a specific figure. Nevertheless, if Pakistan really has tens of millions of crypto-linked accounts and $10–20bn of Pakistani capital invested in virtual assets, the potential market for offshore crypto-linked financial services is clearly substantial.

A Pakistani consumer can acquire USDT from another individual, transfer it to a wallet operated by an international company and use a foreign-issued virtual card to purchase goods or services. The customer may be in Pakistan, but the crypto platform could be licensed in another jurisdiction. The digital asset exists on a global blockchain. The card programme could operate from another country, while the merchant could be somewhere else entirely or in Pakistan.

That raises the question: Which regulator controls that transaction? No single regulator completely does.

If Pakistan really has tens of millions of crypto-linked accounts and $10–20bn of capital invested in virtual assets, the potential market for offshore crypto-linked financial services is clearly substantial

This does not mean governments are powerless. They can regulate domestic banks, payment companies, exchanges, fiat on-ramps and off-ramps. They can require locally operating businesses to identify customers, monitor transactions, maintain records and report suspicious activity. But controlling access to a global digital financial network is considerably more difficult.

Pakistan has responded by creating PVARA and establishing a formal licensing framework for Virtual Asset Service Providers. Companies wishing to offer virtual-asset services in Pakistan are required to enter the regulatory framework, establish the appropriate local presence and comply with requirements including know-your-customer (KYC), anti-money laundering and combating the financing of terrorism, transaction monitoring and record-keeping.

This is an important development since it creates an opportunity for reputable international crypto companies to regularise their operations and participate legitimately in one of the world’s largest crypto markets.

The more difficult question is why Pakistan’s existing crypto users would move from offshore platforms into the regulated domestic ecosystem. For regulators, greater KYC, transaction monitoring and tax transparency are essential characteristics of a legitimate financial system.

For some existing crypto users, however, those same requirements may represent additional friction. This does not mean offshore crypto lacks KYC. However, they do not verify the primary document. This, plus the fact that their assets, accounts and transaction records sit outside Pakistan’s immediate financial and tax-reporting infrastructure, is a key consideration.

That creates the central challenge for PVARA. Pakistan can require a company seeking to operate formally in the country to obtain regulatory approval. But preventing an individual from accessing an offshore wallet, exchange or blockchain application through the internet is much harder. And this phenomenon is not unique to Pakistan. It is inherent in the architecture of digital assets. The solution therefore cannot depend solely on enforcement.

Pakistan’s regulated crypto ecosystem must become more attractive than the offshore alternative. That means easy conversion between rupees and digital assets, integration with banks and payment systems, competitive transaction costs, consumer protection, efficient dispute resolution and legitimate everyday applications. Most importantly, users need to see a benefit from becoming part of the regulated system.

PVARA has an opportunity to bring a huge existing digital-asset economy into Pakistan’s formal financial architecture. But issuing licences may prove to be the easier part. The real test will be persuading millions of existing crypto users that moving into the regulated ecosystem is actually in their interest. That is perhaps the larger lesson for regulators everywhere.

In a borderless financial system, regulation cannot rely solely on control. It must also compete.

The writer is the chairman of the Pakistan Fintech Network

Published in Dawn, The Business and Finance Weekly, September 28th, 2026

The September State Bank of Pakistan (SBP)–Institute of Business Administration (IBA) Confidence Index stood at 49.1 compared with just 33.6 on the Q3 Ipsos Consumer Confidence Index. This striking gap could reflect differences in how businesses and households interpret headline economic indicators, varying level of trust in government, or, more fundamentally, their contrasting economic realities: a financially stronger minority with greater resources, choices and capacity to absorb shocks versus a much larger population struggling individually with weaker purchasing power and greater vulnerability.

Dr Durre Nayab, Director, Socioeconomic Insights and Analytics, and former joint director at the Pakistan Institute of Development Economics (PIDE), offered a different explanation, attributing the apparent divergence largely to measurement methodology and sampling.

“To me, the gap is a measurement artefact. First, the two numbers aren’t on the same scale. The SBP-IBA index is a diffusion index, where 50 signals neutrality, zero indicates no confidence and 100 extreme confidence. The Ipsos index is constructed differently and has historically hovered in the 30s. So, 33.6 cannot be read as ‘16 points below neutral’ in the same way that 49.1 can be described as ‘near neutral’.”

Survey results indicate that consumers are less optimistic about Pakistan’s economy than businesses

She noted that the direction of the Ipsos index was, in fact, slightly positive: it rose 0.4 points to 33.6, while and 24 per cent of the respondents said the country is heading the right direction, up from 11pc in August 2024.

“Second, who gets surveyed matters most,” Ms Nayab said. “The business survey draws from about 2,000 large, Securities and Exchange Commission of Pakistan-registered firms, with about 500 surveyed each month, selected on the basis of the highest paid-up capital. It, therefore, captures the corporate top tier, not the kiryana store, the mohalla khokha or the small and medium enterprises.”

Large firms, she argued, are better positioned to pass higher costs on through prices, benefit from interest rate cuts, and hedge against risks. “Households, meanwhile, absorb those passed-on costs, often on fixed or informal incomes. The two groups are living different economic realities.”

Nasim Beg, CEO, Arif Habib Consultancy, believes the contrast stems partly from their different perspectives: businesses tend to be forward-looking, basing decisions on assessment of future economic conditions, while consumers respond more directly to their lived experience.

“The average consumer’s behaviour is influenced by lived reality. Over the last five years, Pakistani consumers have suffered a sharp erosion of purchasing power alongside income compression. Even if the economic outlook is improving, households continue to feel the cumulative impact of that squeeze.”

Ehsan Malik, former CEO, Pakistan Business Council, also blamed the divergence more to contrasting economic realities than differences in understanding. “Businesses are not truly optimistic: at 49.1, confidence remains below neutral, though expectations are improving. Larger firms can raise prices, alter products, defer investment, hedge risks and lobby for subsidies, guaranteed returns and protection.

“Consumers have no such options. They must absorb higher food, electricity, rent and tax costs, while slower inflation does not restore lost purchasing power.

“Trust further widens the divide when the burden of adjustment appears unfairly distributed. Consumers understand their vulnerability well. Pakistan has achieved some macroeconomic stabilisation, but confidence will converge only when it translates into secure jobs, recovering real incomes and affordable essentials.

“The divergence should therefore be seen as a policy warning, not a survey anomaly or evidence that consumers poorly understand an economy in which spending power has eroded”.

Industrialist Majyd Aziz attributed consumers’ pessimism primarily to small paychecks failing to keep pace with rising living costs. Pakistan’s import-dependent economy remains vulnerable to global supply and demand shocks, while deindustrialisation, galloping inflation, and depleting household savings have intensified the squeeze. “Unlike businesses, consumers buy daily and have their feet firmly on the ground,” he said.

Mr Aziz also questioned whether the Ipsos Consumer Confidence Index fully captures ground realities, noting that it surveyed 1,000 people by telephone rather than through face-to-face interviews. He found the provincial variations striking: 31pc of respondents in Balochistan believed the country was on the right track, compared to only 14pc in KP.

More tellingly, he said, only 10pc of consumers felt comfortable making household purchases, underscoring weak purchasing power and explaining difficulties facing domestic businesses. High electricity, gas, and fuel costs continue to strain household budgets despite the survey showing greater optimism about personal finances.

Mr Aziz argued that rising stock prices, property investment, automobile purchases and improving industrial indicators largely reflect the choices available to the affluent and should not automatically be equated with broad-based economic recovery. The survey’s optimism, he said, must, therefore, be weighed against the frustration, uncertainty and vulnerability confronting ordinary consumers.

Members of the government’s economic team and the State Bank were approached for comment, but no response had been received by the time this report was filed.

The writer is a former Dawn staffer.

Published in Dawn, The Business and Finance Weekly, September 28th, 2026