Pakistan's young population could power its economy. The Economic Survey shows why it won't.

Twenty years ago, I asked whether Pakistan’s swelling working-age population would prove a demographic dividend or a demographic threat. The answer, I argued then, depended entirely on what governments chose to do, in education, health, and labour market policy, while the window remained open. That window ran from 1990 to roughly 2045 at that time. We are now 35 years into it.

The Economic Survey 2025-26, released on Thursday, offers the most current evidence on how the choice has been made. The government’s foreword celebrates GDP growth of 3.7 per cent, a historic primary surplus, and multi-year-high foreign exchange reserves. Fine. But macroeconomic stabilisation and the realisation of a demographic dividend are not the same thing, and a country that has been “stabilising” for 30 years without resolving its human capital deficit must at some point ask: stabilising for what exactly, and for whom?

The demographic dividend lives or dies in Chapters 10 through 12 of this Survey, i.e., the chapters on education, health, population and labour force. Read them carefully, and the celebration in the foreword becomes harder to sustain.

Our population

Pakistan’s population stands at 252 million, growing at 2.07pc annually. Some 56.9pc falls in the working-age group; 26.6pc is the youth cohort of 15–29 years. These are the proportions that define dividend potential. They are real, and, by a perverse irony, the window to capitalise on them has actually extended.

Earlier estimates placed the close of the demographic dividend around 2045; the slow pace of fertility decline has pushed that to roughly 2055, adding a decade to the opportunity. But this is not good news. A slower fertility transition means a larger, longer-sustained dependent population, more pressure on already strained services, and a dividend that can only be realised if investment in human capital accelerates, not defers, to match the extended timeline.

Health and education, the two sectors most essential to human capital development, command 1.6pc of national income from the state

Population growth is routinely treated as the problem to be solved, with family planning presented as the primary lever. That framing is too narrow, and the evidence does not support it. Population, education, health, and employment do not operate in a one-way causal chain; they are mutually constitutive. Better education, especially for girls, delays marriage and lowers fertility. Better health reduces child mortality and, with it, the precautionary demand for large families.

Better employment opportunities, particularly for women, change the calculus of childbearing entirely. Fertility rates do not fall because governments want them to. They fall when the conditions that make large families a rational response to poverty and insecurity are dismantled. The Survey’s numbers on education, health, and labour, read together, describe a country that has not yet dismantled those conditions.

Education investment

Every year of deferred investment in this cohort (or group of people of this shared demographic) compounds backward. The fertility transition continues on a “slow decline” scenario, the Survey’s own framing, which means the base of the population pyramid remains heavily loaded at 39.5pc under 15 years. The window is not yet closed. But it is not widening, and the investment to match it is not arriving.

Looking at education, we see the same gap. Pakistan’s Human Development Index rank is 168. Expected years of schooling, 7.9 years, is the lowest in the South Asian comparison table the Survey itself provides. Below Nepal. Below Bangladesh. Below Afghanistan. Mean years of schooling stand at a low 4.3 years.

Literacy stands at 63pc for those aged 10 years and above, going down to 54pc for women. In Balochistan, female literacy is 25 per cent in rural areas. These are populations the Survey simultaneously describes as the beneficiaries of the demographic dividend opportunity.

Among the school-age children, 28pc are out of school. In Balochistan, 45pc. The Net Enrolment Rate at primary level is 54pc nationally; at middle level it is 23pc; at matric level, 16pc. For girls in Balochistan at matric level, it is a depressing 3pc. The funnel is not narrowing through quality selection; it is narrowing through abandonment.

What does abandonment look like

The basic facilities data in the Survey confirm what that abandonment looks like on the ground: 15pc of Balochistan’s primary schools have electricity. Toilet availability in the province’s primary schools stands at a negligible 0.3pc. This is not an infrastructure footnote. This is where the demographic dividend is supposed to be forged.

Pakistan is spending less on education, as a share of national income, at the precise moment its largest-ever youth cohort passes through the school system

Education expenditure fell to 0.8pc of GDP in FY 2025, down from 1.5pc to 1.9pc in the preceding years documented in the same table. Pakistan is spending less on education, as a share of national income, at the precise moment its largest-ever youth cohort passes through the school system.

It is worth noting that the Survey’s discussion of provincial development programmes, i.e., figures for buildings constructed, schools upgraded, contracts awarded, is appropriately detailed. But none of it addresses the fundamental problem that what is being measured is input provision rather than learning outcomes. Another university building added to the existing over 270 is not a contribution to higher education per se. The quality of graduates it produces, the output, is what needs to be measured. Brick and mortar alone do not improve human capital.

The Survey’s concluding remarks on education call for “sustained investment,” “quality improvement,” and “aligning education with labour market needs.” These conclusions are correct. They are also indistinguishable from the conclusions of every Survey for the past twenty years. We are not failing to identify the problem. We are failing to treat it.

Health investment

Moving to health, we see some progress, but it has not closed the gap. Life expectancy improved from 66.5 to 67.8 years. Infant mortality fell from 60 to 47 per 1,000 live births. These are gains and should be acknowledged, but Pakistan’s infant mortality rate is double the South Asian average of 23.2 per 1,000 live births. Life expectancy trails the regional average by nearly five years. Public health expenditure is 0.8pc of GDP, precisely what education also receives, meaning together the two sectors most essential to human capital development command 1.6pc of national income from the state.

The nutrition data is where the macro stabilisation story meets its starkest counternarrative. Stunting in children under five is 33.6pc, above the South Asian average of 31.5pc.

Undernourishment affects 16.5 per cent of the population against a South Asian average of 11.7 per cent. Between 2018–19 and 2024–25, per capita consumption of pulses, meat, and milk all declined. Vegetable ghee consumption rose. Households are not substituting more nutritious foods; they are substituting cheaper ones. A nutritionally compromised cohort at early childhood ages does not generate the human capital the demographic dividend requires. The health chapter and the inflation chapter are about the same household, but the two chapters do not seem to be in dialogue with each other.

Not the right jobs to save

Labour earning constitutes the basis of the whole notion of demographic dividend. The Economic Survey’s labour market data present a paradox that deserves to be read slowly. Between 2020–21 and 2024–25, the employed labour force grew from 67.25 million to 77.2 million, i.e., ten million additional employed persons. This is real. But in the same period, the unemployed grew from 4.51 million to 5.9 million, and the unemployment rate rose from 6.3pc to 7.1pc. Both are growing. Unemployment is growing faster.

Manufacturing’s share of employment declined from 14.9pc to 14.8pc, effectively zero net industrial absorption of a dramatically larger workforce. The growth sectors are community and social services, and wholesale and retail trade: large, informal, low-productivity, low-wage. The demographic dividend’s promise is not jobs of any kind; it is productive employment that generates savings, taxation, and the intergenerational transfers that compound growth.

The Survey reports 762,499 workers registered for overseas employment in 2025, with 69.5pc going to Saudi Arabia. Remittances are valuable. But the Survey also presents a Saudi-Pakistan Human Resource Deployment Plan targeting 1.51 million annual Pakistani worker deployments by 2039. At what point does organised labour export at this scale stop being a bridge to domestic development and become a permanent substitute for it? The Survey does not ask. It should.

In my 2008 paper, I wrote that if appropriate policies were not adopted, the dividend period would end “with no significant gains and a very complex situation to tackle, having an aging population that is uneducated, untrained and with little savings to rely on.”

The 2025-26 Survey confirms the trajectory. Literacy at 63pc. Education spending at 0.8pc of GDP. Unemployment rising. Protein consumption declining. Infant mortality continuing to exceed the regional average. Manufacturing stagnant. Twenty-eight per cent of children are out of school.

These numbers do not describe a society realising its demographic dividend. They describe one that has been promising to begin, for thirty-five years, while the window closes one year at a time. The Survey itself, in its concluding remarks across Chapters 10 through 12, is not unaware of the gap. Each chapter ends with a variant of the same prescription: “sustained investment,” “quality improvement,” “reducing regional disparities,” “aligning education with labour market needs.” The continuity of the diagnosis is, in itself, a diagnosis.

The government that produced this Survey achieved a primary surplus while cutting education spending as a share of GDP. It stabilised the exchange rate while child stunting remained above the South Asian average. These are not incidental contradictions. They are choices, made under real constraints, but choices nonetheless, with consequences that will be legible in productivity data a decade from now.

The dividend does not wait for stabilisation to be complete. It never has. And in a country that has been stabilising since before most of its youth cohort was born, it is worth stating plainly: a primary surplus built on a 0.8pc education budget is not a foundation. It is a postponement dressed as an achievement. The window is still open, just barely, and not for much longer, but it is still open.