PAKISTAN, the 5th most populous nation, stands at a critical socio-economic juncture these days. According to the Pakistan Economic Survey, the country has a population of more than 252.09 million, with 129.54 million males and 122.45 million females. The population growth rate is increasing 2.07% annually. The country faces fragile macroeconomic stability, severe structural vulnerabilities, human development crisis and political friction. The survey further highlights that the July-March 2026 FY, Interest expense on public debt totaled Rs 4,947 billion, comprising Rs 4,287 billion on domestic debt and Rs 660 billion on external debt.
The country largely relies on external finance to meet debt repayments and shore up foreign exchange reserves. The IMF will unlock about $1.21 billion as the country grapples with spiking food and fuel prices and high human unemployment. The conflict between Russia and Ukraine as well as Iran and the US, has further exacerbated inflation in Pakistan. Astoundingly, each bailout provides temporary breathing space; however, long-term survival hinges on structural economic diversification. Economic transformation and export-led growth are stagnant and the country is survives mainly on domestic markets rather than global exports.
Social contract and human capital development cannot expand while nearly one-third of children, below five, face severe stunted growth. More than 25 million children are out of school. Education figures indicate that the country’s literacy rate currently stands at 63%. School attendance is 67% nationwide. The country comprises 284 public and private universities, 164 are the public sector while 120 are private sector. Despite these degree-awarding institutions, the job market is shrinking rapidly. A major gap exists between degree-awarding institutions and market needs. The economic survey also highlights that the unemployment rate increased from 4.51 million to 5.9 million. The NGO sector has stopped to hire university graduates to effectively harness the potential of the burgeoning youth population. In his speech, the incumbent Overseas Minister has stated that more than 1.871 million people have left the country in the last three years, mostly due to brain drain, including Doctors, Engineers, IT professionals and the educated class for seeking better livelihoods.
Health is another big issue for Pakistan. In FY2025, public health expenditure stood at just 0.8% of GDP, while the health sector public sector development program (PSDP) allocation amounted to Rs. 19.375 billion. According to the ESP, the country had approximately 1,934 hospitals and 5,746 Basic Health Units (BHUs). These hospitals have approximately 336,582 beds (provincial). By population, the data show that 129,782 people have one hospital, while each BHU serves 43,683 people. In other words, only one bed for every 746 patients- what a hilarious figure. These figures highlight that the healthcare system is the country’s weakest area.
Reforming these issues requires inclusive ownership, not the state alone. The government should broaden the tax base and rationalize non-development expenditure. For this, a long-term debt management strategy should prioritize export-led growth, foreign exchange reserve accumulation and foreign direct investment. The government should shift its policy from consumption-driven growth towards export-oriented industrialization by supporting SMEs.
Pakistan should expand maternal and child healthcare while improving access to nutritious food and both the federal and provincial governments should establish measurable targets to reduce stunting and improve the child health outcomes. The government should focus on school enrolment, retention and girls’ education. For this, they should engage out-of-school children through non-formal education and public-private partnerships (PPP). Universities should redesign curricula in consultation with experts while keeping in minds the marketing needs. Expansion of technical and vocational education and digital skills into degree programs are essential to incentivize labor-intensive industries to reduce unemployment. Merit-based recruitment and competitive professional compensation are essential to control brain drain within the country. To reduce rising public debt and interest payments, the government should implement medium-term fiscal consolidation to reduce borrowing by strengthening domestic revenues.
Pakistan should progressively increase public health spending to improve hospitals, BHUs and rural health units. Political parties should strengthen internal democracy rather than increasing their businesses. Accountability and transparencies are key to success for a good governance. All state institutions should operate within their constitutionally defined mandates rather than interfering in each other’s affairs. Judiciary reforms and civil-military balance are essential for democratic institutions and ensuring the rule of law. The country must move beyond short-term economic stabilization in order to address deep-rooted institutional weaknesses. Sustainable progress for Pakistan requires structural reforms, accountable governance and strong democratic institutions.
—The write is PhD Scholar of Public Policy and Governance at PIDE and associated with Institute of Strategic Studies, Islamabad.
