The World Bank, in its 2026 global human capital report, 'Building Human Capital Where It Matters', has once again highlighted a critical determinant of economic progress: the quality of human capital. The report says that sustained growth and productivity, particularly in developing countries, depend not merely on financial or physical resources, but on investments in people.
HUMAN RESOURCE
The World Bank, in its 2026 global human capital report, 'Building Human Capital Where It Matters', has once again highlighted a critical determinant of economic progress: the quality of human capital. The report says that sustained growth and productivity, particularly in developing countries, depend not merely on financial or physical resources, but on investments in people.
Alarmingly, it notes that in several countries, including Pakistan, human capital development is not only stagnating but, in some cases, regressing. Even more concerning is the finding that economic growth alone has not translated into better nutrition, improved learning or enhanced skills. To address such a disconnect, the report advocates a broader policy focus that extends beyond formal systems to include the “home, neighbourhood, and workplace” -- areas that profoundly influence long-term productivity.
In Pakistan’s case, the earlier World Bank study, 'Pakistan Human Capital Review: Building Capabilities Throughout Life' (2023), remains highly relevant. It had cautioned that the country’s low level of human capital development could significantly impede its aspiration to become an upper-middle-income country by 2047. This concern is borne out by empirical evidence: Pakistan has witnessed persistent declines in workforce skills, learning outcomes, and nutritional standards between 2010 and 2025. The country’s Human Capital Index (HCI) currently stands at 0.41, implying that a child born today will be only 41 per cent as productive as they could be with full access to quality education and healthcare. This figure falls below the South Asian average of 0.48. Disturbingly, Pakistan’s human capital indicators are now comparable to those of several Sub-Saharan African nations.
The situation is further corroborated by the UNDP Human Development Report 2025, which ranks Pakistan 168th out of 193 countries, placing it in the low human development category. With a Human Development Index (HDI) of 0.544, Pakistan lags significantly behind regional peers and remains only marginally ahead of Afghanistan. In contrast, Bangladesh has achieved an HDI of 0.685, while Nepal has also surpassed Pakistan. More troubling is the declining trend: Pakistan’s ranking has slipped from 161st in 2020–21, marking one of the slowest rates of human development progress in the region and reflecting a 35-year low in advancement. These figures point unmistakably to stagnation and reflect the urgent need for transformative interventions in education, healthcare and gender equality.
Pakistan’s agriculture, manufacturing and services sectors continue to underperform relative to regional counterparts, with productivity growth averaging a modest 1.5 per cent annually. Economic theory identifies three principal drivers of growth: human capital, physical capital and total factor productivity. In developing economies, human capital plays a particularly dominant role, serving as the foundation for technological progress and industrial expansion. Without a skilled, healthy and educated workforce, investments in infrastructure and machinery yield limited returns. Thus, the development of human capital is not merely a social objective but an economic imperative that determines the course of national progress.
Despite possessing a large and youthful population, Pakistan has failed to translate this demographic potential into a productive asset. Public expenditure on education has remained persistently low, fluctuating between 1.5 and 2.8 per cent of GDP over the past decade, and reportedly dipping to an alarming 0.8 per cent in 2024–25. The consequences are stark: approximately 26 million children remain out of school. This educational deficit severely constrains the population's ability to participate effectively in economic and civic life.
The World Bank estimates that Pakistan needs to create approximately 30 million jobs over the next decade, primarily through private-sector-led growth
Labour market indicators further illustrate the depth of the crisis. Of a workforce of approximately 85 million, about six million are unemployed. Particularly concerning is the plight of youth: an estimated 3.7 million people aged 15–29 are without jobs. Poverty levels have also surged, with nearly 70 million Pakistanis living below the poverty line. These figures not only reflect economic distress but also highlight the structural weaknesses in the country’s human capital ecosystem.
A particularly telling example is the situation of engineers, often considered the backbone of industrial and technological progress. While Pakistan produces around 25,000 engineers annually, the economy lacks the capacity to absorb them. Unemployment among engineers has risen sharply, exceeding 23 per cent in recent years, with over 150,000 engineers currently out of work. At the same time, the country is experiencing a steady outflow of skilled professionals, with approximately 6,000 engineers seeking employment abroad in 2025 alone. This paradox points to a mismatch between education and industry needs, as well as broader economic stagnation.
The implications are far-reaching. Engineers and other skilled professionals play a pivotal role in shaping modern economies. Their expertise is essential not only for technical innovation but also for effective resource management, strategic planning and industrial development. The inability to harness this talent represents a significant loss of opportunity for national growth.
Compounding these challenges are structural constraints such as energy shortages, water scarcity, sluggish industrialisation and outdated infrastructure. In an increasingly competitive and globalised world, these weaknesses further erode Pakistan’s ability to create jobs and sustain economic momentum. The World Bank estimates that Pakistan needs to create approximately 30 million jobs over the next decade, primarily through private-sector-led growth. Given the current economic and geopolitical environment, this target appears exceedingly ambitious.
Encouragingly, Pakistan has embarked on the Country Partnership Framework 2026–2035 in collaboration with the World Bank, with a strong emphasis on human capital development. The framework prioritises critical areas such as reducing child stunting, improving learning outcomes, ensuring access to clean water, addressing climate vulnerabilities and mobilising both public and private investment. While these objectives are well-aligned with national development goals, their successful implementation will require unwavering political commitment, institutional capacity, and sustained financial resources.
Pakistan’s human capital crisis lies at the core of the country’s development challenge. The evidence is overwhelming: declining education outcomes, poor health indicators, rising unemployment and stagnant productivity collectively threaten long-term economic stability and social cohesion. Addressing this crisis requires a paradigm shift in policy priorities, with human capital placed at the centre of national strategy. Substantially higher investments in education and healthcare, coupled with structural reforms to enhance job creation and align skills with market needs, are indispensable. Equally important is the need to foster an enabling environment where talent is retained and effectively utilised.
Without such concerted efforts, Pakistan risks squandering its demographic dividend and falling further behind in an increasingly knowledge-driven global economy.
The writer is a retired chairman of the State Engineering Corporation.
