I teach as a visiting faculty member at different universities in Islamabad. Interacting with young minds has always been an interesting and optimistic experience. Classroom discussions were once filled with new ideas, ambition and hope. Over the past few years, however, I have noticed a troubling change.
Students are increasingly anxious and pessimistic about Pakistan and their own future. They no longer see the same opportunities in this country that students appeared to see only a few years ago. Classroom discussions now frequently turn to Pakistan’s economic prospects and a difficult question: what does this country have to offer its young people?
I do not wish to spread despondency, but it is becoming difficult to ignore the growing disillusionment among Pakistan’s youth. They are worried about both the country’s economic future and their own prospects. Yet Pakistan’s ruling elite may not fully recognise the seriousness of this crisis or respond to it with the urgency it demands.
Since 2022, Shehbaz Sharif has led what is widely described as a hybrid political regime. Although a caretaker government held office for an interim period, there was broad continuity in the country’s fundamental economic policies.
When the Pakistan Democratic Movement, led by Maulana Fazlur Rehman, brought Shehbaz Sharif to power, Pakistan was approaching the risk of default after the economic difficulties that had intensified under Imran Khan’s PTI government. The new government returned to the International Monetary Fund for financial assistance and took difficult measures to prevent a default.
This marked the beginning of a long and painful journey towards economic stabilisation. Once again, however, the public paid the heaviest price through severe inflation, falling purchasing power and declining economic opportunities. Pakistan achieved a measure of stability through harsh IMF-backed programmes, tight monetary policy and strict fiscal austerity. These measures reduced external risks, brought inflation down from crisis-level highs and helped the government produce primary fiscal surpluses.
An economy may become more stable on paper while still failing to provide opportunities to its people.
Economic stabilisation is arguably the biggest achievement of the present political arrangement. Pakistan’s total liquid foreign exchange reserves increased from approximately $17bn when the PDM government assumed office in April 2022 to $22.68bn by 10 July 2026. Reserves held by the State Bank alone increased from $10.85bn to $17.23bn.
When the PDM government took office in April 2022, headline inflation stood at 13.4%. It subsequently surged to a record 38% in May 2023 before gradually declining. Average inflation fell to 4.49% in the 2024–25 financial year but rose again to 7.05% in 2025–26. The latest monthly reading reached 11.1% in June 2026.
Although inflation declined considerably from its peak, this does not mean that prices returned to their previous levels. It only means that prices began rising more slowly. The cumulative increase in the cost of food, energy, transport, housing and other necessities continues to weigh heavily on household purchasing power.
The current account deficit has also been brought under control. Pakistan recorded a deficit of approximately $17.5bn, or 4.7% of GDP, in 2021–22. It declined to $3.28bn in 2022–23 and $2.07bn in 2023–24 before turning into a surplus of $1.84bn in 2024–25. Pakistan returned to a marginal deficit of $139m in 2025–26.
These improvements are important. But stabilisation came at a considerable cost. High interest rates, fiscal austerity and suppressed domestic demand weakened economic activity and limited job creation. An economy may become more stable on paper while still failing to provide opportunities to its people.
Pakistan has a labour force of approximately 71.8 million people. Estimates suggest that about 2 million young Pakistanis enter the labour market each year, while the country produces hundreds of thousands of university graduates annually. They enter an economy that is struggling to provide enough secure and productive employment.
According to the International Labour Organisation’s Pakistan profile, approximately 32.5% of Pakistanis aged 15–29 are not in employment, education or training. Only about 23% of the workforce is employed in the formal economy, while female labour force participation stands at approximately 21.4%.
These figures reveal that Pakistan’s problem is not limited to unemployment. Even among those who are working, millions remain trapped in informal, insecure and poorly paid employment without contracts, social protection or meaningful prospects for advancement. World Bank president Ajay Banga has said that Pakistan needs to create between 25 million and 30 million jobs over the next decade if it is to absorb its growing youth population. That means generating roughly 2.5 million to 3 million additional employment opportunities every year.
Creating jobs on this scale requires sustained economic growth. The government has set a growth target of 4% for the current financial year. The question is whether Pakistan can achieve even this relatively modest target under the present circumstances. The country has missed its official growth target in each of the past three financial years. Against a target of 3.5%, the economy grew by approximately 2.6% in 2023–24. Growth improved to about 3% in 2024–25 but remained below the 3.6% target. In 2025–26, the economy expanded by an estimated 3.7%, again falling short of the government’s 4.2% target.
Before the latest budget, there was some optimism that, after achieving a degree of economic stability, the government would begin moving decisively towards growth. More than two years into its term, it was expected to present a budget that would stimulate investment, revive economic activity and create employment.
Many analysts, however, do not consider it a growth-oriented budget. They see it as another consolidation budget, designed primarily to reassure the IMF and other lenders rather than reinvigorate the economy. Under these circumstances, expecting the budget alone to generate strong growth and millions of jobs appears increasingly unrealistic.
The renewed conflict between the United States and Iran has created another serious threat to Pakistan’s economic prospects. Pakistan invested considerable diplomatic effort in bringing the two sides to the negotiating table and helping secure a memorandum of understanding. But the resumption of hostilities has once again disrupted oil supplies and pushed global energy prices higher.
As an energy-importing country, Pakistan is particularly vulnerable to such shocks. Higher oil prices increase the import bill, put pressure on foreign exchange reserves, weaken the rupee and contribute to domestic inflation. They can also force the government to tighten economic policy at precisely the moment when businesses need lower costs and greater support for investment.
Pakistan had hoped to gain economic benefits from regional de-escalation. Many Pakistanis also hoped that improved relations with Iran might eventually provide access to more affordable oil and gas. With hostilities resuming, those possibilities once again appear increasingly distant. Pakistan urgently needs economic growth capable of creating productive jobs for the millions of young people entering the labour market. But how this growth will be achieved under the current fiscal, political and geopolitical constraints is an extremely difficult question.
After the summer break, I will return to the classroom and once again face students who want to know whether Pakistan has a place for them. I will try to remain optimistic and encourage them to believe in their country and their abilities. But optimism cannot be sustained by words alone. It requires credible economic opportunities, functioning institutions and policies that place young people at the centre of Pakistan’s development strategy.