Pakistan’s Education Budget at a Crossroads: Meeting the Challenges of 2026-27

Pakistan’s education sector continues to face a severe funding crisis despite repeated commitments by successive governments to improve literacy, human capital development, and research capacity. As the federal and provincial governments prepare for the fiscal year 2026-27 budget, economists and education experts argue that Pakistan must substantially increase investment in education and research if it hopes to compete in an increasingly knowledge-based global economy. According to Pakistan’s Economic Survey 2024-25, total public expenditure on education by the federation and provinces remained approximately 0.8 percent of Gross Domestic Product (GDP), among the lowest levels in the world. Education spending during the first nine months of FY2024-25 declined significantly to around Rs899.6 billion compared with Rs1.25 trillion during the same period of the previous fiscal year. Literacy stands at approximately 60.6 percent, with a substantial gender gap, as male literacy is estimated at 68 percent while female literacy remains around 52.8 percent. Pakistan’s economy is estimated at approximately US$411 billion, equivalent to about Rs115 trillion at current exchange rates. Economic growth for FY2024-25 has been estimated at 2.68 percent, reflecting a gradual recovery after years of economic instability. The federal budget for FY2025-26 totals Rs17.57 trillion. While the budget includes development allocations and funding for social sectors, education continues to receive a relatively small share compared with debt servicing, defense, pensions, and subsidies. Development funding for the Higher Education Commission (HEC) projects has been allocated approximately Rs39.5 billion in FY2025-26, which many analysts consider insufficient for a country of more than 240 million people. International organizations have repeatedly emphasized that countries should allocate at least 4 to 6 percent of GDP and 15 to 20 percent of total public expenditure to education in order to achieve sustainable development goals and improve educational outcomes. UNESCO identifies the 4 to 6 percent of GDP benchmark as the minimum level required for meaningful progress in education systems. Applying this benchmark to Pakistan’s economy highlights the magnitude of the challenge. If Pakistan were to allocate 4 percent of GDP to education, annual education spending would need to reach approximately Rs4.6 trillion. At 5 percent of GDP, spending would rise to about Rs5.75 trillion, while a 6 percent target would require nearly Rs6.9 trillion annually. These figures are several times higher than current expenditure levels. Education experts argue that a realistic medium-term target for FY2026-27 would be an allocation of at least Rs3 trillion to Rs3.5 trillion for the education sector, representing a major increase but still below the internationally recommended threshold. Such funding would be needed to address the country’s estimated millions of out-of-school children, improve teacher training, modernize curricula, expand digital learning infrastructure, and rehabilitate thousands of public schools lacking basic facilities. Research and development (R&D) presents an equally serious challenge. Pakistan spends less than 0.3 percent of GDP on research and innovation, far below emerging economies and advanced nations. Countries such as South Korea invest more than 4 percent of GDP in R&D, while China invests over 2.5 percent. The United States, Germany, and Japan consistently devote between 3 and 4 percent of GDP to scientific research and technological innovation. To meet global challenges related to artificial intelligence, climate change, biotechnology, food security, energy transition, cyber security, and industrial competitiveness, Pakistan would need to gradually increase R&D spending to at least 1 percent of GDP over the next decade. Based on the current size of the economy, this would require annual research funding of approximately Rs1.1 trillion to Rs1.2 trillion. For FY2026-27, a practical target would be an initial R&D allocation of Rs300 billion to Rs500 billion focused on universities, innovation centers, technology parks, scientific laboratories, and industry-academia collaboration. Such investment could strengthen domestic technological capacity, reduce dependence on imported technologies, and create high-skilled employment opportunities for Pakistan’s growing youth population. Economists emphasize that education and research should not be viewed merely as social expenditures but as long-term investments. Countries that transformed their economies during the last three decades, including South Korea, Singapore, China, and Malaysia, achieved sustained growth through large-scale investments in education, science, and innovation. Pakistan’s demographic profile presents both an opportunity and a challenge. With more than 240 million citizens and one of the youngest populations in the world, the country possesses significant human capital potential. However, without substantial increases in educational funding and research investment, this demographic advantage may not translate into economic productivity and global competitiveness. As policymakers prepare the 2026-27 budget, experts argue that Pakistan should adopt a phased strategy to raise education spending toward 4 percent of GDP while simultaneously expanding research and development funding toward 1 percent of GDP. Such a strategy would require fiscal discipline, improved tax collection, greater efficiency in public spending, and stronger accountability mechanisms. Nevertheless, many analysts believe that no other investment offers greater long-term returns for economic growth, social stability, technological advancement, and national development than education and research. The debate surrounding the 2026-27 budget therefore extends beyond accounting figures. It concerns Pakistan’s ability to equip future generations with the knowledge, skills, and innovation capacity necessary to compete in a rapidly changing global economy. Without a significant increase in educational and research investment, achieving sustainable development and economic transformation will remain a difficult challenge.