elative economic stability achieved over the past year has not translated into job creation. Going forward, the choice of sectors best positioned to create jobs will depend on factors like investment trends, productivity and government policies.

The economic stabilisation measures may have prevented a crisis. However, these have not resulted in widespread job creation—at least not in the short term. Millions of young people entering the job market every year will not have stable employment opportunities as sectors like large scale manufacturing require long-term investment and policy support to expand.

The necessity of stabilisation will be discussed in a later part of this article. Let us first discuss the employment potential of three main sectors of the national economy: agriculture, services and manufacturing.

The agriculture sector has a moderate potential to create new jobs. It already employs a large portion of Pakistan’s workforce (37-40 percent). However, its productivity remains low due to outdated techniques, small landholdings and limited mechanisation.

The growth potential lies mainly in agri-processing; value addition (dairy, meat, organic farming); modern irrigation techniques; and exports (e.g. horticulture). The challenges agriculture faces include land fragmentation; climate change; and lack of necessary investment in research and development. Jobs in this sector will likely shift towards agribusiness and food processing rather than traditional farming.

The services sector has a strong potential to create new jobs. Services now contribute over 50 percent to GDP. There is ready capacity for job creation in IT, tourism, retail, logistics and financial services. The IT sector has been expanding in freelancing and software export subsectors. E-commerce and fin-tech are also promising. Tourism, if developed well, can absorb the semi-skilled labour. The main challenges to the services sector include informality, lack of vocational training and weak regulatory frameworks.

The job creation outlook in this sector is strong as given the right policies services, particularly IT, transport, and retail, can generate jobs quickly.

The industrial sector has the highest growth potential. However, its slow growth rate is a significant damper. Manufacturing, which accounts for 20 percent of the GDP, is struggling due to high energy costs, inconsistent policies and dependence on imports. There is a huge growth potential in engineering goods, textiles (higher-value exports), automobile manufacturing and renewable energy industries.

The challenges faced by the manufacturing sector include high cost of capital, weak supply chains and reliance on imported inputs. It can create a substantial number of jobs if these challenges are addressed. Even slow industrial growth can create stable, well-paid jobs. Pakistan must expand its industrial base (especially SME-led manufacturing) to create stable, well-paid jobs.

In the short-term, only the services sector, particularly IT, e-commerce and retail, are poised for job creation. Modernising agri-businesses can complement industrial job creation but will never be the main driver. For sustainable employment growth, Pakistan needs a mix of service-sector expansion and industrial revival with a focus on export-oriented production.

The cost of stability

Stabilisation focuses on macroeconomic indicators, not employment, as economic policies are geared towards controlling inflation, improving fiscal discipline and securing external financing, rather than stimulating employment-intensive growth. Tight monetary policies and high interest rates discourage business expansion and job creation.

Economic stability is just the first step. Pakistan must now shift its focus towards job creation and industrial expansion to ensure that the benefits of stabilisation reach the masses. Without this, millions of job seekers will continue to face uncertainty and informal work, limiting economic mobility and social progress.

The focus should now shift to growth-oriented policies like lowering interest rates gradually to revive investment, reducing tax burden on documented businesses, continuing efforts to eradicate tax evasion and supporting SME growth.

Stabilisation was necessary but it came at a high cost in the form of slowed growth, weak job creation and pressure on businesses. Without stabilisation, Pakistan risked default on loan payments, which would have triggered a severe economic crisis, including hyperinflation, capital flight and a collapse of essential imports like fuel and raw materials. However, the policies required for stabilisation—high interest rates, currency depreciation, subsidy cuts and tax hikes—faced strong resistance from businesses.

Those most affected by the stabilisation process included young graduates. Formal job creation in industries and services is too slow to meet the demand. Low-skill workers too are stuck in informal, unstable jobs with low wages. Participation rate of women remains low due to cultural and structural barriers, further limiting their access to new job opportunities.

The employment situation worsened due to the long time taken by the stabilisation process. Each of the major employment generating sectors was impacted by it. The worst affected was the industrial sector, which had already been struggling due to policy uncertainty. Industrial sector creates permanent jobs having the potential to take the employees up the ladder as they gain experience. Unlike daily wage workers, the industrial workers typically enjoy job security and social security.

Before the stabilisation measures, Pakistan had faced severe external imbalances, including a massive current account deficit and dangerously low foreign exchange reserves (barely covering a few weeks of imports). There was a heavy reliance on short-term, high-interest loans. Fiscal deficits had grown unsustainable as subsidies and low tax collection led to continuous borrowing. Import restrictions and supply chain issues led to high inflation, eroding the purchasing power of most consumers.

While stabilisation helped avert default, many businesses resisted many of the policies interest rates rose to 21-22 percent. Expensive credit made it difficult for businesses to expand or sustain operations. Understandably, industries lobbied against tight monetary policies, arguing that high borrowing costs were killing investment.

Currency depreciation raised the cost of imported raw materials, making manufacturing and exports more expensive. Import-dependent businesses (automobile, pharmaceuticals and consumer goods) struggled.

Higher taxes and documentation requirements too increased the burden, especially on retail, trade and small manufacturers, who largely operated in the informal economy. Traders protested against sales tax measures and digital payment tracking. Real estate and stock market investors opposed capital gains taxes. Large businesses argued against corporate tax increases, fearing a decline in profitability.

Removal of energy and fuel subsidies led to higher production costs for industries and higher transport costs for businesses relying on logistics. Textile manufacturers, a major export sector, demanded concessions on electricity and gas tariffs. The transport sector protested against rising fuel prices.

While necessary, stabilisation was hard on many. It caused a shrinking of the economy and hurt businesses. A lack of targeted relief meant that the SMEs and job creators were disproportionately affected. The IMF-mandated austerity made it difficult for industries to recover quickly. This delayed job creation.

With macroeconomic stability in place, the focus should now shift to growth-oriented policies like lowering interest rates to revive investment, reducing tax burden on documented businesses while continuing efforts to eradicate tax evasion, supporting SME growth through financing schemes and business-friendly regulations; and encouraging exports by reducing bureaucratic hurdles and improving infrastructure.

Stabilisation was necessary to prevent a catastrophic default, but the measures were painful. The challenge now is to move from stability to growth—ensuring that businesses can expand, investments resume and job creation pick up.

The writer is a senior economic reporter