Beyond arithmetic

THE fiscal year that just ended has brought real GDP growth of 3.7 per cent — the fastest in four years. Yet ask the median household and the answer will not match the national accounts. Both are telling the truth. The distance between them is the most consequential number in Pakistani economic policy — and we do not officially measure it.

Call that missing number ‘welfare GDP growth’: what expansion actually reaches households, rather than what is produced within our borders. Four honest adjustments bridge the two. First, population — shared across ever more people, 3.7pc becomes barely 1.2pc per head. Second, income versus production — GDP is essentially blind to the $42 billion that our workers abroad send home each year. In contrast, the gross national disposable income, which is the truer measure of welfare, runs nearly a tenth above GDP. Third, distribution — growth led by corporate profits and financial assets accrues to those at the top, while the poorer half’s wages have not recovered from the inflation shock. Fourth, the prices that people experiencing poverty actually pay — food and energy claim over half their budget, so whenever food inflation outruns the headline index, official statistics flatter their condition.

Run the last five years through this arithmetic and the story inverts. Headline GDP expanded in four of these years. In welfare terms, FY23 alone — headline inflation near 30pc against core inflation of around 18pc, a gap borne squarely by the food-heavy budgets of people with low incomes, plus floods and a remittance slump — destroyed more household welfare than the other four years of growth have restored.

The median household ends the window no better off; the poorest two-fifths end it worse. Rising poverty estimates amid almost continuous headline growth are not a paradox; they are the measurement gap made visible.

Rising poverty estimates amid almost continuous headline growth are not a paradox; they are the measurement gap made visible.

The structure beneath explains why. Two in five Pakistanis are children; fewer than half of working-age adults are in the labour force, barely a quarter among them are women. Under a third of the population produces for all of it. Against nearly three million new labour-market entrants, the economy generates perhaps half as many jobs. Three-quarters of a million left for work abroad last year; the remainder was either accommodated in undocumented sectors with inadequate compensation or remains unabsorbed.

The remittances holding up household consumption are the wages of that exported cohort returned home — our lifecycle economy running partly offshore.

Why is a decade of stagnant household welfare so calmly borne? The reasons are both social and economic, and they trouble as much as they comfort. Let’s posit the economic ones. There are exit substitutes for pressure — the young who leave come precisely from the group the economy failed to absorb, and every remittance-receiving household is a grievance privately settled. Beneath the measured economy, an informal one of perhaps a third of GDP, kinship transfers and private charity provide the safety net the state does not. These cushions are a mercy for social peace and a quiet warning to reform — a system whose failures are privately insured generates little demand to fix them. The danger is not upheaval but its opposite — an equilibrium of managed decline, tolerable enough never to be broken.

Breaking that equilibrium is a choice — and composition matters more than pace. Forcing the pace under this structure would reproduce another 2023, as our balance-of-payments ceiling has repeatedly proven. The equilibrium worth pursuing is different — 5.5-6pc growth, export-led and labour-intensive, built so that growth creates jobs and feeds wages, not only profits; investment lifted by nearly half from today’s anaemic levels; far more women drawn into paid work; and inflation held in single digits.

Until that engine is built, labour export is our bridge financing, and deserves to be run like a treasury operation.

Better impact means shifting the mix: three in five of last year’s emigrants were unskilled, while certified caregivers, nurses and technicians remit three to four times as much. Destinations can be diversified. When nine in 10 exported workers and over half the remittances come from one international cluster, a single downturn could choke or narrow down that flow. The formal channel must be defended through exchange-rate credibility and, even more so, with lower, if not free, transfer costs, helped by the incentive architecture the industry is building on its own under the auspices of the State Bank. To finance the transition, we need models like Punjab’s Parwaaz Card — interest-free pre-departure loans against verified job offers, repaid through the remittance rails we want strengthened. It is a prototype of the national labour-export infrastructure we lack. None of this is theoretical: for instance, Punjab’s Kissan and Livestock Cards and guaranteed SME credit scheme have proven inclusion delivery at provincial scale; what remains is national orchestration.

How long should the bridge last? A decade at the outside: scale it for five years, taper thereafter, retire it when domestic hiring outpaces departures. The interim decides everything: remittance savings channelled into investment, listing of public sector entities, etc, through diaspora quota, housing and pension products; exports and skills bui< the classroom repaired. Do this and the bridge lands; fail, and it becomes a pier.

A modest beginning would cost nothing: publishing welfare-adjusted growth — measured by distribution-weighted per capita disposable income — alongside the headline figure. What gets measured gets managed. Growth that never reaches the household ledger is arithmetic, not development, and Pakistan has had quite enough arithmetic.

The writer is a senior banker and chairman of the Pakistan Banks Association.

Published in Dawn, July 29th, 2026 ...