PK-LIVE NEWS

SOME people may have watched Indiana Jones and the Last Crusade starring Harrison Ford as the eponymous swashbuckling archaeologist on a mission to find the holy grail — the cup said to grant eternal life to whoever drinks from it. In common usage, ‘holy grail’ signifies a highly sought-after goal that is extremely difficult or seemingly impossible to achieve. In this sense, economic growth is undoubtedly the holy grail of economics as it remains the most-coveted prize for policymakers everywhere.

Globally, countries have reduced poverty and improved living standards through strong and sustained economic growth, not least because economic growth creates more high-quality jobs. China’s breakneck economic growth in the 1990s lifted hundreds of millions out of poverty and built the very foundation for China’s emergence as a global manufacturing powerhouse by the 2000s. At the same time, China’s rapid economic growth generated the necessary fiscal space for Beijing to build infrastructure, expand social security coverage and modernise its military, all without resorting to unsustainable borrowing.

Since independence, Pakistan achieved decent rates of economic growth, while India muddled along at the ‘Hindu rate of growth’ below four per cent. But, in the 1990s, as Pakistan’s economic engine started sputtering, Indian economy, unshackled from ‘licence Raj’, came into its own. By 2008-09, Pakistan’s economic engine finally ran out of steam enabling India’s per capita income to catch up and overtake that of Pakistan.

Even after two decades, despite the sound and fury of ‘stabilisation’, Pakistan remains largely unsuccessful in kick-starting its economic engine. In the last four years, economic growth has averaged a paltry 2.3 per cent. With some estimates putting population growth rate at 2.55pc, the per capita growth, responsible for raising living standards, has actually been negative. The most recent HIES, Pakistan’s flagship survey, indicates an almost 20pc reduction in the real income of urban households over the last six years.

Despite costly plans, economic growth remains stuck, suggesting that the problem isn’t simply a shortage of strategies, but something deeper.

Despite the recent warning from the World Bank regarding the need for 30m jobs over the next 10 years, it has been almost impossible to create high-quality jobs due to anaemic economic growth. It is thus no surprise that this mothballed economic engine is forcing thousands of young Pakistanis to undertake perilous journeys to greener pastures abroad.

Pakistan’s stagnant growth is not the result of a lack of trying as policymakers have repeatedly brought in expensive foreign consultants to prescribe fixes. Yet despite these costly plans, growth remains stuck, suggesting that the problem isn’t simply a shortage of strategies, but something deeper.

The most important lesson in economics is that productivity is key to economic growth. Productivity’s contribution to growth in Pakistan has been almost zero over 2000-2022, compared to positive contributions of 25pc in China and 32pc in India, which means that all of Pakistan’s growth in this period came from throwing in more capital and labour, and none from using these better.

Essentially, productivity is driven by four components: innovation or new technologies; education or workforce capacity; efficiency or effective allocation of resources; and infrastructure for private sector activity. Of these four, education appears to be Pakistan’s binding constraint due to persistent backsliding as evidenced by a recent report that puts the number of out-of-school children at 26.2m.

Policymakers need to begin with a focus on reducing the number of out-of-school children in the country. There is no lack of precedent. Bangladesh, despite starting from a similar base, cut its out-of-school numbers through a two-pronged approach, focusing on conditional cash transfers that paid mothers to keep children enrolled, and BRAC’s community-run ‘second chance’ schools, which have graduated over 14m children — dropped out or never enrolled. Ghana abolished school fees in 2005, producing a 17pc jump in primary enrolment within a year.

Pakistan’s attempts have relied on distant, provincial-level management, disconnected from the ghost schools, absentee teachers and missing toilets that plague the system on the ground. Notifying a new national education council, comprising local educationists who understand such implementation failures, would be a good start. However, sustainable progress will require going further by devolving school management to city halls, following the same principle of local, community-anchored delivery that made the reforms in Bangladesh and Ghana reforms work.

In the final analysis, economic growth remains the best bet for reducing poverty and improving living standards. The surest path to economic growth is through productivity gains. Low productivity nations — like those which have millions of out-of-school children — cannot hope for sustained economic growth. In the case of Pakistan, a sincere, focused and effective approach on education holds the promise of being a game changer. Without it, growth — the holy grail of economics — will remain permanently out of reach.

The writer completed his doctorate in economics on a Fulbright scholarship.

aqdas.afzal@gmail.com

X: @AqdasAfzal

Published in Dawn, July 24th, 2026