Pakistan's public investment needs a new compass

Pakistan's public investment architecture has long conflated two distinct ideas: economic growth and human development. Growth measures how fast output expands - more roads, more megawatts, more cement poured. Development, as Mahbub ul Haq and Amartya Sen insisted when they formed the Human Development Index, asks a different question: are people living longer, healthier, more educated, and more capable lives? Growth is an input into development. It is not its synonym. A country can grow briskly while its people's capabilities stagnate, posting respectable GDP numbers even as schooling, health and nutrition outcomes barely shift. Pakistan's Public Sector Development investments offer a textbook illustration.

The evidence is stark. The 2025 Human Development Report places Pakistan at 168 out of 193 countries, in the "low" human development category, with an HDI value of 0.544. Adjust for inequality and the score collapses by a third, to 0.364, meaning the modest development Pakistan has achieved is distributed so unevenly that whole regions and income groups barely register it. That inequality penalty is the real story: growth has occurred, intermittently, but its conversion into broadly shared capability has not. The global average HDI stands at 0.744, and Pakistan's Multidimensional Poverty Index of 0.198 has barely moved from the previous reporting cycle, while its Gender Inequality Index ranks 145th of 172 countries, together a picture of stagnation rather than steady, if modest, convergence with the rest of the developing world.

The federal PSDP 2026-27, at Rs 1,000 billion, makes the pattern legible in numbers. Communications, overwhelmingly motorways and national highways, claims roughly a quarter of the entire federal envelope. Water Resources, dominated by large dams and hydropower, absorbs another tenth. Health receives less than 2 per cent. Higher education, after an increase this year, still sits under 5 per cent. The Economic Survey 2025-26 puts the underlying picture starkly: federal and provincial governments together spend only about 0.8 per cent of GDP on education and a similar 0.8 per cent on health, against a world average education outlay of nearly 4 percent, a gap that no single year's PSDP increment can close.

The provincial Annual Development Programmes, where health and education actually reside since the 18th Amendment devolved both subjects in 2010, show the same skew. Sindh, Khyber-Pakhtunkhwa and Balochistan's proposed ADPs 2026-27 reflect the business as usual trends of maximising allocations to energy and infrastructure against health, education and social protection. Existing unfinished projects have created large future commitments that leaves no fiscal space for new social-sector schemes regardless of stated political priorities. Punjab is the partial exception as its 2026-27 ADP explicitly invests in social sectors as the top priority, anchored in the Laptop Programme, the Honhaar Scholarship Programme, and an expanding network of primary-care clinics, even if execution capacity and recurring-cost sustainability remain open questions. The human cost is visible beyond the budget books: nearly 40 per cent of children under five are stunted nationally, and the literacy rate of roughly 61 per cent conceals a wide gender gap, outcomes no motorway or transmission line corrects on its own.

For Pakistan, the implication for PSDP and provincial ADP design is concrete, and the core principle should be stated plainly: every growth-oriented public investment, federal or provincial, should be judged not only on its rate of return but on whether it improves the lives of ordinary citizens - and that test belongs in appraisal criteria, not a preface paragraph. CDWP, ECNEC and provincial fora should require a human-capital impact estimate alongside conventional rate-of-return tests. A binding ceiling on new mega-infrastructure approvals, tied to throw-forward falling below a defined multiple of annual allocation, would free fiscal space for faster-disbursing social investment. A minimum social-sector floor, covering health, education, nutrition, water/sanitation and social protection, should be applicable when the legislature approves the development budget in the Finance Bill.

Given devolution, provinces must be treated as the primary owners of HDI outcomes. This requires three changes. First, the NFC Award and related transfers should incorporate an output-based component tied to verified health and education indicators, immunisation coverage, learning outcomes, maternal mortality, population control so provinces are fiscally rewarded for converting ADP spending into capability gains, not merely for population size. Second, the federal-provincial coordination gap needs a standing mechanism, a joint federal-provincial HDI council, reporting to the National Economic Council so health and education targets are tracked jointly rather than planned in silos.

Third, revenue-generating infrastructure, toll roads, power transmission, should be steered toward blended and private financing, since it alone can attract such capital, freeing public resources for the health and education investments.

However, none of this requires abandoning public investments in infrastructure as connectivity and energy security remain legitimate national priorities. It needs to be realised that infrastructure and human capital are complements, not substitutes, and that a planning architecture rewarding the former almost exclusively will keep producing exactly what Pakistan has not achieved: respectable growth episodes that never quite translated into development. Until public investment is judged by improvements in people's lives rather than kilometres of highways or megawatts installed, growth will remain visible on paper but absent in the everyday lives of millions of Pakistanis.