Pakistan’s economy faces a brutal reality. The problem isn’t a lack of effort from its people. The real issue is an economic system that fails to turn skills and education into productive opportunities. This critical insight came from Dr Ali Cheema, Vice Chancellor of LUMS, speaking at ThinkFest yesterday.
In a session titled “Growth, Growth, Where Are You? Why Does Pakistan Remain Poor?”, Dr Cheema dismantled the common narratives surrounding the country’s financial struggles.
Pakistanis value learning. Households spend a massive share of their income on children’s education, one of the highest rates in South Asia. Dr Cheema described this commitment as a major national strength. However, the economy doesn’t return the favour.
Research shows that while education does provide value, Pakistan yields some of the lowest returns on education globally. Why? The market simply doesn’t create enough demand for skilled labour. The current economic structure generates jobs mostly in low-productivity agriculture or services. These sectors do not reward advanced skills, effectively putting a cap on social mobility.
Policymakers often obsess over managing financial inflows. Dr Cheema argues this focus is misplaced. The challenge isn’t that money doesn’t exist… it is that the money doesn’t lead to investment.
International research highlights a worrying trend for Pakistan, i.e., increased sovereign borrowing actually correlates with a decline in gross investment. This proves that the constraints on growth are structural, not financial. The available resources fail to catalyse the necessary structural change or job creation.
The cost paid because of stagnation is also very high. When compared to regional peers, the data is damning. Pakistan has suffered long-term stagnation rather than enjoying sustained growth. Dr Cheema noted that if Pakistan had matched Bangladesh’s growth pace since 1990, the average income in Pakistan would have doubled by now.
How do we fix this? Dr Cheema identified clear pillars for reform:
Concluding his address, the LUMS VC stressed that this growth journey transcends political cycles. It requires a serious, long-term conversation focused on policy coherence and institutional reform.