A nation's strength lies in its middle class, but in Pakistan, this backbone is rapidly eroding. Once a symbol of resilience and upward mobility, the middle class now faces crushing inflation, IMF-led austerity, and declining economic opportunity. Global shocks and domestic mismanagement have pushed families to the brink. This editorial examines how the shrinking middle class threatens not only livelihoods but also the very fabric of national stability.
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The Fragile Pillar of Pakistan's Economic Landscape
For decades, the middle class in Pakistan has symbolized upward mobility, educational advancement, and civic engagement. However, a convergence of global and domestic economic forces has reversed many of these gains. Since the COVID-19 pandemic and subsequent geopolitical disruptions, global inflation has surged, particularly in energy and food prices, exerting severe pressure on import-dependent economies like Pakistan.
Simultaneously, Pakistan's recurrent fiscal crises have led to repeated bailouts from the IMF. The associated structural adjustment programs typically demand subsidy cuts, tax reforms, and strict monetary tightening, policies that disproportionately affect middle-income households. Where the elite remain shielded through asset buffers and offshore holdings, and the poor receive targeted subsidies (albeit often insufficient), the middle class is left with shrinking real incomes, increased taxation, and eroding public services.
The erosion of the middle class is not just an economic issue but a profound social transformation. Access to quality healthcare, education, and housing, the traditional markers of middle-class security, has become increasingly elusive. Consequently, the survival of this demographic is now a pressing concern, meriting both national introspection and multilateral policy rethinking.
Economic Fault Lines in a Shifting Global Financial Terrain
Disproportionate Impact of Global Inflation on Domestic Purchasing Power
The surge in international commodity prices, exacerbated by the war in Ukraine, post-pandemic supply chain disruptions, and aggressive monetary tightening by advanced economies, has had a cascading effect on consumer prices in Pakistan. While global inflation has moderated in many regions, Pakistan's Consumer Price Index (CPI) peaked at over 38 per cent in May 2023, one of the highest globally.
The depreciation of the Pakistani rupee, losing over 50 per cent of its value against the US dollar from mid-2021 to early 2024, has further amplified import costs. For middle-class families, this has translated into spiralling grocery bills, unaffordable fuel, and skyrocketing electricity tariffs. Household savings have dwindled as families prioritise essentials over education or preventive healthcare. Consequently, intergenerational upward mobility, a hallmark of the middle class, is under severe threat.
IMF Conditionalities and Domestic Austerity Measures
Pakistan's reliance on the IMF is not new, but the terms of the 23rd bailout program initiated in 2023 mark a significant intensification of austerity. Key IMF demands included phasing out energy subsidies, broadening the tax base, and maintaining a primary fiscal surplus, all aimed at macroeconomic stabilization.
While these measures may appear prudent from a fiscal lens, their immediate impact on the middle class is corrosive. Utility bills have surged as subsidies are withdrawn. Income and consumption taxes have been expanded without commensurate increases in public service delivery. The salaried class now shoulders a disproportionate share of direct taxation, despite limited representation in policymaking. Rather than targeting tax evasion among the affluent or reforming underperforming state-owned enterprises, IMF-guided policies often adopt a one-size-fits-all approach that exacerbates inequality.
Collapse of the Informal Safety Nets
Historically, the middle class in Pakistan has relied not solely on state mechanisms but on informal safety nets, extended families, community institutions, and informal credit systems. However, with widespread inflation, these networks are fraying. Remittances, a lifeline for many middle-class households, declined by over 10 per cent year-on-year in 2023, owing to global economic slowdown and currency fluctuations in host countries.
Furthermore, the rapid digitization of banking and financial systems, while modernizing, has excluded many traditional credit facilitators. Microentrepreneurs, private school teachers, and salaried employees now find it harder to access affordable loans, further limiting resilience against economic shocks.
Shrinking of the Job Market and Brain Drain
Pakistan's educated youth, traditionally the vanguard of the middle class, are confronting a dire employment landscape. Public sector hiring freezes, private sector contraction, and limited entrepreneurial support have led to record-high youth unemployment, estimated at over 31 per cent by 2024. Simultaneously, a rising wave of emigration underscores a broader crisis.
In 2023 alone, over 800,000 Pakistanis, many of them skilled professionals and degree holders, sought work abroad, reflecting both push factors (economic despair) and pull factors (foreign demand for skilled labor). This talent exodus may bring short-term relief through remittances, but in the long term, it hollows out domestic innovation capacity and perpetuates dependence on external lifelines.
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While global inflation and IMF prescriptions are significant stressors, domestic policy inertia, elite capture, and poor fiscal management have compounded their impact on the middle class. Structural tax inequities, energy sector mismanagement, and regressive development priorities must be addressed in tandem with external negotiations. Moreover, a purely macroeconomic view of stability, focused on deficit control and debt servicing, risks overlooking the human and societal costs of prolonged austerity. An inclusive, nationally anchored economic strategy is essential for restoring public confidence and ensuring equitable growth.
The vanishing middle class in Pakistan is both a symptom and a signal. It reflects the cumulative effects of global economic headwinds, stringent external financing conditions, and chronic governance deficits. However, this erosion also signals deeper risks to national stability, democratic resilience, and long-term development. Policymakers must recalibrate fiscal priorities to protect middle-income households, including targeted subsidies, progressive taxation, and reinvestment in public education and healthcare. IMF negotiations must incorporate social protection clauses and prioritize human development benchmarks. Without a robust and secure middle class, the dream of a prosperous, equitable Pakistan risks becoming increasingly unattainable.
