Pakistan's rebound from the global financial crisis has been slow and fragile, and unless it changes course swiftly, it could face the prospects of a second balance of payments crisis in less than five years. Its recovery from the 2008-09 global financial crisis has been the weakest in South Asia, featuring a unique double-dip growth pattern. With high fertility, Pakistan will double the size of its already young population by 2025. The only way to convert this massive demographic bulge from a political and social burden to an exceptional dividend is through rapid and inclusive growth that creates millions of new and better jobs. In sum, the two main challenges are improving the types of jobs available and enabling people to move into those more productive activities. The binding constraints to Pakistan's growth are both emerging and structural. Emerging constraints include massive cuts in electricity access and macroeconomic instability, leading to high country risk and a sudden stop in external and domestic financing. Structural constraints include low access to domestic finance and government and market failures (micro risks) that impede investment, entrepreneurial activity, and competitiveness, blocking the transition from low-productivity to high-productivity jobs. Pakistan is at a turning point. It could stick to a status quo of piecemeal reforms leading to partial and unsatisfactory outcomes, which at best would lead it to recover its modest historic growth rate of 4-4.5 percent, or it could aim for a bold reform agenda supporting rapid growth (on or above 7 percent) and job creation. Both options are possible, but the former would make it very difficult for Pakistan to meet the aspirations of its people, and especially of its youth.
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