MSc Social Policy and Development alum Asmat Kakar argues that Pakistan must invest in the education, upskilling and health of its population in order to reduce poverty and strengthen its economy.

Pakistan is facing an abysmal crisis of human capital. As per the World Bank report on the Human Capital, Index 2020 Update: Human Capital in the Time of COVID-19, Pakistan’s human capital accumulation ranking is the lowest in South Asia making it just slightly above Afghanistan and Sub-Saharan African countries. COVID-19 compounded by the recent economic crisis and biblical floods have undermined the progress made over the past two decades, and the impacts of these successive crises are yet to be assessed. Before the COVID-19 pandemic, economic crisis and floods, three in four children in Pakistan were in learning poverty due to schooling–related deprivations. Learning poverty in Pakistan may increase further beyond the 79 per cent estimated during COVID-19 by the World Bank. It means Pakistan, with a highly unproductive population, will have continuing poor economic growth in the coming years that will further exacerbate the existing challenges of extreme poverty, conflict, and climate change–related vulnerabilities. The United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) report on the Global 2022 Multidimensional Poverty Index (MPI) corroborates the gravity of the situation of the human capital crisis in Pakistan. The report shows that 38.3 per cent of the population in Pakistan live in multidimensional poverty— 21.5 per cent in severe and 12.9 per cent in vulnerable bands of multidimensional poverty. The report notes that deprivations in education (41.3 per cent) and health (27.6 per cent) are the main contributors to multidimensional poverty in Pakistan.

Underlying causes

There are many fundamental causes of the human capital crisis in Pakistan, but this article will discuss the main causes:

Poor public investment in human capital accumulation

Pakistan’s public spending on education and health is very low. As per the World Bank data for 2019, Pakistan’s total public expenditure on two main components of human capital development was 5.88 per cent— 2.5 per cent for education and 3.38 per cent for the health of the Gross Domestic Product (GDP) of the country. The evidence from the past few years shows that there is a decline in public investment in human capital.  According to the Economic Survey of Pakistan 2021-22, public spending on education and health was 1.77 per cent and 1.2 per cent respectively – their aggregate makes less than 3 per cent of the GDP.

Learning poverty

Pakistan learning poverty crisis is chronic and devastating for the development and prosperity of the country. It has the world’s second-highest number of out-of-school children, with an estimated 22.8 million children aged 5-16 not attending school, making it 11 per cent of the total population. More than 80 per cent of all children in Pakistan cannot read or understand a simple text by the age of 10. The gender gap is big—only 51.9 per cent of females compared to 73.4 per cent of males are literate by national literacy standards.

Unskilled youth bulge

Pakistan currently has the youngest population in its history (65 per cent of the total population is below the age of 30 while 29 per cent is between the ages of 15 and 29 years) but a majority of them lack relevant and advanced skills to fulfil the demands of global labour markets. According to International Labour Organization (ILO), there is a mismatch between the demand and supply of skills, and less than 6 per cent of youth have acquired technical vocational skills. Besides, women are denied access to knowledge and skills due to which they remain without work or end up in low-paid employment. This shows that when more than 80 per cent of all children are in learning poverty, expecting proficiency in digital skills to compete in the tech-savvy world is still a distant dream for most children in Pakistan. If the number of unskilled working-age individuals keeps increasing then this youth bulge, instead of a dividend, may become a demographic bomb that will be disastrous not only for Pakistan but also for the region and beyond.

Way Forward

Given the shrinking size of exports in other sectors, Pakistan, with its huge number of young people, can only export skilled and productive human resources to developed economies if it goes for high-value and long-term investments, ensuring high public as well as private spending on human capital development. The World Bank report on Poverty and Shared Prosperity 2022: Correcting Course suggests that low and lower-middle-income economies will have to adopt robust policy reforms, and prioritize public spending for long-term growth and high-return investments in education, health, research and development to eradicate extreme poverty and achieve sustainable development.

Pakistan has to take strong actions to make development inclusive, with particular consideration of investment in education, skills and health of girls, youth and marginalized areas to bridge the gaps. Without an educated and skilled female workforce, it cannot achieve development and economic growth. Investment in human capital accumulation is a matter of survival for Pakistan. If it cannot ensure increased investments, sustained political support, coordination among different sectors and evidenced-based reforms for human capital development – like today’s developed economies such as Singapore and others did decades ago – then Pakistan will struggle for survival through short-term support in the form of aid and loans. The trajectory of prosperity through productive human capital development demonstrated by others is a good lesson for Pakistan to withstand shocks and risks in future.

The views expressed in this post are those of the authors and do not reflect those of the International Development LSE blog or the London School of Economics and Political Science.

Image credit: DVIDSHUB on Flickr.