Preparing a national budget amid soaring debt and shrinking fiscal space is no easy feat. The challenge becomes even more formidable when budget-makers must simultaneously allocate greater resources for national defence and security while poverty remains widespread and unemployment entrenched.
During nine months of this fiscal year, from July 2024 to March 2025, Pakistan spent a staggering sum of Rs6.44 trillion on external and domestic debt servicing, according to the latest publicly available fiscal data. Against this, the defence sector is about Rs1.42tr. These two heads of expenditure claimed about 48.2 per cent and 10.6pc, respectively, of the total revenue collected during this period (Rs13.37tr).
Slashing development spending due to fiscal constraints in next year’s budget will risk deepening the cycles of poverty and joblessness. These socioeconomic strains, in turn, may feed extremism and terrorism — further complicating the security landscape and demanding even more resources to safeguard national sovereignty and sustain economic growth.
The upcoming federal and provincial budgets for FY26 will serve as a critical test of the economic acumen and political maturity of Pakistan’s leadership. The budgets will signal to 250 million citizens how seriously the state takes their well-being and how much longer they must endure the man-made crises of joblessness and poverty.
Standing at the crossroads of demographic pressure and financial opportunity, the country must turn adversity into strength through people-centred reforms
According to the latest International Labour Organisation data, Pakistan’s mid-2025 unemployment rate stands at around 6pc — a seemingly modest figure. But this masks the depth of the crisis, especially among the youth. A staggering 32.5pc of young people aged 15 to 29 fall into the ‘Not in Employment, Education, or Training’ category. The World Bank notes that Pakistan’s labour force is expanding at an annual rate of 3.7pc — faster than the South Asian average of 3.1pc. Yet, the economy is struggling to absorb this influx.
Both local institutions, such as the Pakistan Institute of Development Economics, and international observers highlight a confluence of structural challenges at the heart of Pakistan’s employment crisis.
The country’s much-discussed youth bulge — once hailed as a demographic dividend — is fast turning into a demographic liability, as job creation continues to remain slower than population growth. Persistently low GDP growth, weak investor confidence, and a stagnant industrial base are stifling employment opportunities.
Even as thousands of university graduates enter the job market annually, many lack the practical, industry-relevant skills required by employers. A burdensome regulatory environment, erratic policies, and underdeveloped infrastructure further dampen local entrepreneurship and deter foreign investment.
Of equal concern is the low rate of female labour force participation — 22.8pc in 2024. Despite modest improvements in recent years, it remains suppressed by deep-rooted cultural norms, safety issues, and a lack of inclusive workplace policies.
Currently, 32.5pc of young people aged 15 to 29 fall into the ‘Not in Employment, Education, or Training’ category
To address these entrenched challenges, Pakistan’s response must be both swift and strategic. As the FY26 budget draws near, some promising policy recommendations are gaining traction, forming part of what Finance Minister Aurangzeb calls a “long-term strategic framework”.
Realigning educational priorities is urgent. The youth must be equipped with skills relevant to high-demand sectors such as information technology, healthcare, renewable energy, and logistics.
In parallel, encouraging entrepreneurship — especially in underserved rural areas — through microfinance, digital tools, and structured mentorship can transform individuals into job creators rather than job seekers.
Revamping industrial policy and investing in public-private infrastructure projects can generate immediate jobs and lay the groundwork for long-term growth.
Crucially, Pakistan must implement gender-sensitive reforms — such as flexible work arrangements, safer public transport, and women-focused employment initiatives — to unlock the potential of its largely untapped female workforce.
Pakistan’s employment crisis is not insurmountable. But overcoming it will require urgency, innovation, and, above all, compassion. Standing at the crossroads of demographic pressure and economic opportunity, the country must turn adversity into strength through people-centred reforms.
In the absence of decisive leadership, the risk of mass disillusionment, accelerating brain drain, and growing social unrest will intensify.
One must also not lose sight of the fact that 42pc of Pakistanis — more than 105m people — currently survive on less than $3.65 a day, or just over Rs1,000. Whether the upcoming budget will offer meaningful policies to address this staggering level of poverty remains uncertain.
Finance Minister Aurangzeb has indicated that the strategic framework in the national budget aims to transition from a consumption-led to an export-led growth model.
While the merits of export-led growth are undeniable, absorbing nearly 5.8m unemployed individuals into productive sectors — and significantly reducing poverty — will be extremely difficult under this model alone.
Since Pakistan’s current food exports consist mainly of grains and low-value-added products, such a shift risks triggering domestic food inflation and threatening national food security. According to the World Food Programme, Pakistan ranked 109th out of 127 countries in the 2024 Global Hunger Index.
Published in Dawn, The Business and Finance Weekly, June 10th, 2025
