Pakistan-occupied Kashmir (PoK) has been grappling with economic stagnation over the past decade, with a significant factor being its increasing fiscal vulnerability, as per a report by European Times. The region has witnessed slowing growth, rising unemployment, increased poverty, and reduced development spending. In 2020, public development spending represented 32 to 35 percent of regional budgets, but by 2024-25, this figure dropped to 22 to 25 percent due to rising subsidy bills and administrative costs.
The economic situation in PoK has been further exacerbated by high inflation, weak industrialization, declining infrastructure investment, and credit limitations hindering private-sector growth. The region’s reliance on remittances and federal transfers highlights its fragile fiscal capacity. Governance challenges, climate-related stresses, and deficiencies in human capital have compounded vulnerabilities, hindering sustainable and inclusive development.
Key indicators between 2020 and 2024-25 have shown declining productivity, rising unemployment, reduced public investment, and heightened dependence on external aid, reshaping the economic, infrastructural, and social landscape of the region. Despite an average income of approximately $1,400 to $1,500 in 2020, it slightly decreased to about $1,300 to $1,400 by 2024-25 due to inflation and currency devaluation, leading to reduced household consumption and weakened local demand.
The absence of industrial clusters, poor logistics, and limited access to finance have impeded industrial expansion in PoK, resulting in a failure to create high-productivity jobs and reinforcing reliance on agriculture, government positions, and remittances. Unemployment rates, estimated at 6 to 7 percent in 2020, rose to nearly 9-11 percent by 2024-25, particularly affecting youth and educated workers. Agriculture productivity also declined to nearly 92–95 by 2024/25 due to climate challenges and limited irrigation facilities, while small and medium enterprises face obstacles in accessing formal finance, resorting to high-interest informal lenders.
