During his recent visit to Pakistan, World Bank President Ajay Banga delivered a stark but necessary message: Pakistan must generate between 2.5 and 3 million jobs every year — roughly 30 million over the next decade — if it hopes to maintain economic stability and social cohesion.
His warning highlighted a reality that policymakers can no longer ignore. With one of the youngest populations in the world entering the labour market at an unprecedented pace, the country stands at a defining crossroads.
The challenge is not merely economic; it is generational. Pakistan’s demographic profile, often described as a potential dividend, could just as easily become a long-term liability if the economy fails to absorb the rapidly growing workforce. The question confronting decision-makers is whether the country can transform youth energy into productive growth or allow unemployment and underemployment to fuel instability and migration pressures.
Pakistan’s population structure amplifies the urgency of the situation. Nearly 80 percent of citizens are under the age of 40, while close to two-thirds are younger than 30. This youth-heavy demographic should, in theory, create a foundation for innovation, productivity, and growth. Yet the labour market tells a more worrying story.
According to recent labour statistics, unemployment has climbed to a 21-year high, reaching 7.1 percent. While the figure alone is concerning, it likely understates the broader problem of underemployment and informal work, where many young people struggle to secure stable, well-paid jobs. The mismatch between a rapidly expanding workforce and limited employment opportunities has placed immense pressure on both economic planners and social systems.
In this context, the assessment that Pakistan faces a “generational challenge” resonates strongly. The country is no longer debating incremental development goals — it is confronting a structural test that will shape its long-term trajectory.
The solution outlined by the World Bank chief rests on three mutually reinforcing pillars. The first is sustained investment in human capital and physical infrastructure. Without better education, healthcare, and transport networks, economic expansion remains constrained and uneven.
The second pillar involves regulatory reform. Businesses in Pakistan often face complex procedures and legal hurdles that increase costs and discourage expansion. Simplifying the process of starting and operating a business would not only stimulate entrepreneurship but also attract investment capable of generating jobs at scale.
The third pillar focuses on improving access to finance and insurance, particularly for small and medium enterprises (SMEs) and agriculture. These sectors account for a significant share of employment but frequently operate outside formal financial systems, limiting their ability to grow and hire more workers.
Together, these pillars suggest that job creation cannot be achieved through isolated policies. Instead, it requires coordinated structural reforms that address both supply and demand in the labour market.
Among the proposed remedies, investment in human capital stands out as perhaps the most critical. Pakistan’s education and training systems often fail to align with evolving market demands, leaving young people with qualifications that do not translate into employment opportunities.
Vocational and technical education has historically received insufficient attention, despite its direct link to workforce readiness. Expanding and modernizing polytechnic institutes and skills centres could bridge this gap by equipping youth with practical skills needed in industries such as manufacturing, construction, and agriculture.
These institutions can serve as hubs for workforce development, connecting training with real labour market needs. Properly funded and strategically designed programmes would not only improve employability but also enhance productivity across key sectors of the economy. In a competitive global environment, skills development is no longer optional — it is essential.
SMEs and the agricultural sector remain central to employment generation in Pakistan, yet both struggle with limited access to formal credit and insurance. A major reason for this gap is the large informal economy, where businesses avoid formal registration due to regulatory complexity and tax burdens.
Cumbersome legal requirements, ranging from labour regulations to social security compliance, often discourage entrepreneurs from formalizing their operations. Additionally, taxation policies such as minimum turnover taxes and multiple withholding mechanisms create uncertainty and reduce profitability for businesses attempting to operate within formal frameworks.
Without addressing these structural barriers, efforts to expand financing will have limited impact. Businesses hesitant to formalize cannot easily access the credit needed for expansion, and those already formalized may find growth constrained by compliance costs. Reforming this environment is crucial if Pakistan hopes to unlock the employment potential of SMEs and agriculture.
A key takeaway from Banga’s remarks is the inadequacy of short-term fixes. Temporary subsidies or isolated schemes may provide relief but do not address underlying weaknesses in productivity, education, and governance. Sustainable job growth requires a long-term strategy that encourages investment, innovation, and enterprise development.
Policymakers must also recognize that economic growth alone does not automatically translate into employment. Job-rich growth demands targeted interventions that connect young workers with emerging opportunities, particularly in sectors capable of absorbing large numbers of entrants.
Failing to address the employment challenge carries serious consequences. A large youth population without opportunities can increase social unrest, strain public resources, and accelerate outward migration as young Pakistanis seek livelihoods abroad. This would mean losing valuable human capital at a time when the country needs it most.
Moreover, underemployment can erode trust in institutions and weaken social cohesion, making economic reforms more difficult to implement. The stakes, therefore, extend beyond economics to the stability and credibility of governance itself.
Pakistan stands at a pivotal moment. Its youthful population offers immense potential, but only if the economy can generate sufficient opportunities to absorb millions entering the labour force each year. The message delivered by Ajay Banga is clear: the country must act decisively to transform demographic pressure into economic strength.
Investing in skills, easing business regulations, and expanding access to finance are not optional policy choices — they are essential components of a sustainable future. If implemented effectively, these measures could turn Pakistan’s youth bulge into a driving force for productivity and growth. If neglected, however, the same demographic trend could become a prolonged economic burden. The next decade will determine which path the country chooses.