EDITORIAL: During his recent visit to Pakistan, World Bank President Ajay Banga delivered a clear-eyed warning regarding the country’s economic trajectory: with one of the world’s largest youth populations entering the labour market, Pakistan must create 2.5-3 million jobs annually — or 30 million over the next decade — or risk pushing the economy to the edge of a precipice, fuelling instability and driving more young Pakistanis to seek livelihoods abroad. This, it is patently clear, could transform a potential demographic dividend into a long-term liability.
With a massive 80 percent of the population below the age of 40, and nearly two-thirds under 30, Pakistan’s demographic pressure is colliding with an unemployment rate that has climbed to a 21-year high of 7.1 percent, according to the latest Labour Force Survey.
Against this backdrop, it is hard to contest the logic of Banga’s conclusion: the country is no longer debating a secondary development goal but confronting a “generational challenge”, which will test its ability to absorb, skill and productively deploy a youth cohort entering the workforce at an unprecedented pace and scale. This poses a structural test for policymakers that will shape economic outcomes, social cohesion and the credibility of the country’s governing institutions for decades to come.
READ MORE: World Bank reaffirms $20bn 10-year development plan for Pakistan
No less critical is the remedy that Banga has advanced. Pakistan’s job-creation strategy, he has argued, must rest on three mutually reinforcing pillars: sustained investment in human capital and physical infrastructure; regulatory reforms that make it easier to start, run and expand businesses; and broader access to financing and insurance, particularly for SMEs and farming, which drive much of the country’s employment through labour-intensive activity but remain locked out of formal credit because they operate mostly within the informal sector.
It is abundantly evident that Pakistan cannot address its unemployment crisis with short-term fixes. And, as the World Bank president has stressed, building human capital must be at the heart of any lasting solution to this challenge. What is urgently needed first and foremost are innovative solutions that equip young people with skills directly aligned with market demands.
Yet, policy has often lagged in this area. Vocational and technical education has too often been sidelined instead of recognised as a central pillar of economic development. Strengthening and expanding polytechnic institutes and skills centres nationwide, then, is essential to cultivating a workforce equipped to meet the dynamic requirements of modern industry.
Polytechnic institutes, in particular, can serve as hubs of workforce development, enabling youth to access meaningful employment while simultaneously boosting productivity and competitiveness across labour-intensive sectors such as construction, manufacturing and agriculture.
Properly structured and adequately funded, these programmes can close the substantial and detrimental skills gap, unlock meaningful employment and economic empowerment for youth, and boost productivity across Pakistan’s key industries.
Equally crucial is enabling the SME and agricultural sectors to thrive through greater access to financing and insurance, as Banga has emphasised. But expanding credit depends on a broader shift to the formal economy, which is a step many businesses hesitate to take.
Cumbersome and convoluted legal requirements, from labour and social security regulations to EOBI compliance, combined with a complex taxation system featuring minimum taxes on turnover and varied withholding rates at each stage of business transactions, not only discourage formalisation but also limit the job-creating capacity of enterprises already operating within the formal sector.
READ MORE: OPINION: Need for creating 30m jobs over next decade
Without addressing these structural barriers, even businesses that have entered the formal economy face constraints on growth and employment generation, undermining the foundations of the inclusive job strategy the World Bank president has advocated.
Unless these challenges are tackled decisively, Pakistan risks letting its demographic potential go unrealised, with its youth remaining underemployed and the economy falling well short of its growth promise.
Copyright Business Recorder, 2026