World Bank Warns Pakistan Faces Jobs Crisis Despite Economic Stability

According to the bank’s latest assessment, Pakistan’s economy grew by 3.7 per cent in fiscal year 2025–26, while the unemployment rate stood at 7 per cent in 2024. Around 3.5 to 3.6 million people enter the labour market each year, intensifying the challenge of creating enough productive jobs.

The World Bank’s October 2026 economic assessment highlights a sharp rise in poverty. The national poverty rate increased from 22 per cent in 2018–19 to 29 per cent in 2024–25, reflecting declining real incomes, persistent inflation and weak productivity growth.

The report notes that Pakistan created 17.7 million net jobs between 2018 and 2024, but many were concentrated in low-paid, informal or less productive sectors. Annual labour productivity growth averaged just 0.4 per cent between 2014 and 2024, limiting the potential for higher wages and sustainable improvements in living standards.

Women and young people face particularly difficult employment conditions, according to the assessment. The bank argues that economic growth alone will not meet the needs of an expanding workforce without reforms that encourage investment and private-sector job creation.

Growth and inflation outlook

Pakistan’s economic growth is projected to reach 3.8 per cent in fiscal year 2026–27, while average inflation is expected to rise to 8.2 per cent. Growth could reach around 4.5 per cent over the medium term under current assumptions, but the bank says faster structural reforms would be needed to achieve sustained annual growth of 6 per cent.

The assessment also warns that the conflict in the Middle East, the El Niño climate phenomenon, external financing pressures and limited fiscal resources could undermine economic recovery.

A prolonged regional conflict could increase Pakistan’s energy import bill and place additional pressure on the country’s external financing needs, imports and debt servicing. The bank has stressed the importance of maintaining economic stability while strengthening resilience against external shocks.

World Bank calls for structural reforms

The report identifies reforms in the energy sector, improved public service delivery, skills development and a more business-friendly environment as key priorities for generating productive employment.

It also recommends broadening the tax base, addressing weaknesses in fiscal federalism and reviewing unnecessary energy subsidies. Better implementation of reforms could help raise productivity, attract private investment and create more sustainable employment opportunities.

The bank has also highlighted the importance of the National Finance Commission Award and improvements in how public resources are allocated and used.

Remittances support economy amid trade deficit

Remittances continued to provide an important source of foreign exchange, reaching $41.6 billion during the previous fiscal year, according to the figures provided. However, Pakistan’s trade deficit stood at $33.7 billion, highlighting continued pressure on the external account.

The report also points to improved credit ratings and access to international bond markets as factors supporting the management of external financial pressures. The supplied figures cite $4 billion in bond issuance, including a $250 million Panda bond and $3.75 billion in Eurobonds; these amounts and the timing of the issuances should be verified before publication.

The World Bank’s broader assessment is that Pakistan will need sustained reforms, stronger productivity and a greater number of well-paid private-sector jobs to raise living standards and move towards upper-middle-income status by 2050.

The central challenge, it says, is turning macroeconomic stability into employment, higher real incomes and more inclusive economic growth.