World Bank Warns of Deepening Employment Crisis and 7% Rise in Poverty Over Six Years in Pakistan Development Update 2026; Notes 1 in 6 Citizens Unemployed Amid Stagnant Real Incomes
ISLAMABAD: The World Bank has issued a strong warning on Pakistan’s socio-economic situation stating that despite real GDP growth of 3.7 percent, and unemployment at 7 percent, macroeconomic stabilization alone is not enough to address the high demand for jobs in the country.
A Pakistan Development Update 2026, released today, shows that poverty in Pakistan has increased cumulatively by 7 per cent over the last six years. The poverty rate remained at 22 percent in 2018–19 but jumped to 29 percent in 2024–25, due largely to falling real labor earnings, continued high inflation, and weak productivity growth.
The World Bank Pakistan Development Update 2026 outlines the following key highlights:
The report shows that every year 3.6 million young people join Pakistan’s labor market, creating staggering labor market pressures. Since 2018, 1 in 6 Pakistanis has been jobless, and the 17.7 million jobs that have been added since then are mostly held by those with lower wages and productivity. Annual labor productivity growth was stuck at 0.4 percent from 2014 to 2024.
Economic Projections and Inflation: GDP growth is estimated at 3.8 percent this year, up from 3.7 percent last year, and average inflation is expected to stay at 8.2 percent. Medium-term growth could rise to 4.5 per cent by 2030-31, but consistent 6 per cent growth will need strong and proactive structural reforms and jobs creation by the private sector.
The World Bank has pinpointed four significant threats to the Pakistani economy: the Middle East conflicts, which could push up energy import bills by 30 percent and external financing needs by 15 percent of GDP; external financing constraints; fiscal resource constraints; and the El Niño weather shocks.
Recommended Structural Reforms: The report emphasizes the need to reform the energy sector (including the elimination of untargeted subsidies), enhance public service delivery, broaden the tax base, create a business-friendly environment, and execute the NFC Award properly, so as to unlock a potential GDP growth trajectory of 6.2 to 6.9 percent.
On the bright side is external remittances of $41.6 billion to help plug a trade deficit of $33.7 billion last year. Moreover, the recent improvement in sovereign ratings by Moody’s and S&P has, together with P4 billion government bonds being issued in Eurobonds and Panda bonds after four years, reduced the external financial pressures.