At a bustling general store in Lahore, people ask a lot of questions about one seemingly innocuous product: table salt. If it contains iodine, about 40% of his customers spurn it, according to proprietor Muhammad Waqas Vicky. They won't allow their families to consume what they call "mixed salt", believing it causes infertility. "The majority among them are businessmen and religious people," said Vicky. Pakistanis of all classes have been hearing about the alleged dangers of iodised salt for nearly two decades. But insufficient iodine in the diet can cause spontaneous abortion, stillbirth, goitre, mental retardation, birth defects and other problems.

Anti-polio campaigns here have been the target of deadly attacks that stemmed from similar myths, but officials blame the iodine-related infertility rumours, at least in part, for a massive health crisis. Nearly half of Pakistan's population of 200 million suffers from some form of iodine deficiency disorder, according to last year's National Nutrition Survey, which was carried out by academics, Unicef and Pakistan's health ministry. Various reports have linked manifestations such as lethargy and lower IQ scores to dampened national productivity, which can further harm a fragile country like Pakistan, consistently beset by economic crisis as it is.

How did this happen? Some experts see little mystery in the evolution of what has become one of Pakistan's more bizarre and destructive conspiracy theories. Seventeen years ago, well-meaning government officials launched a maternal health initiative in the face of ever-rising birthrates. To this day, people remember a slide show on official Pakistan television – at the time the nation's only channel – that pushed prenatal care and awareness of vital nutrients. The penultimate slide promoted one element in particular: iodine.

The final slide, officials recall, credited the initiative to the government's department of primary health and family planning. "There was a communication mistake," Tariq Aziz, an expert on iodised salt production, said of the 1995 broadcast. "People thought this was purely a family planning initiative."

After the public conflated iodine with government-enforced birth control, rumours took off about an international scheme to limit Muslim population growth through iodised salt. The falsehoods became especially potent in a society that prizes large families and where contraception use is low. By 2001, a mere 17% of Pakistani households used iodised salt, Unicef reported, compared with, say, Bangladesh, where the consumption rate was 78%. Today as many as 30% of Pakistanis still won't allow the dreaded element to reach their tables, according to Aziz, a Lahore-based official with the nonprofit Micronutrient Initiative, a Canadian-funded programme that promotes more use of iodine, vitamin A, zinc and iron.

In the United States, medical researchers began goitre-prevention programmes using iodine in the 1920s. Access to and consumption of iodised salt is universal in many developed nations. But according to research published last year in the Journal of Nutrition, an estimated 242 million children worldwide don't get enough iodine, and about 30% of the planet's population still have insufficient iodine intake, "despite remarkable progress". From 2003 to 2011, the number of countries rated iodine-deficient dropped from 54 to 32.

Pakistan's health crisis isn't just the fault of rumours. The country's soil is already deficient in iodine because of flooding and erosion, and successive administrations failed to heed calls for mandatory iodisation laws. Politicians dallied for years before crafting legislation to require universal iodisation, despite the well-proven damage inflicted on children. No federal law ever passed, and in 2010, responsibilities for many federal functions devolved to the provinces under a constitutional amendment.

But critics say salt iodisation laws are not uniform and are haphazardly applied at local levels. The provinces hardest hit by iodine-deficiency health problems are Balochistan, where only 41% of households use iodised salt, and Sindh, where 52% do, according to the National Nutrition Survey.

Avoidance of iodine tends to be most common in rural areas where illiteracy rates are high, public health advocates say, but it reaches across the nation. In one school district near Lahore, half of the 1,200 students showed signs of iodine deficiency disorders, according to the Micronutrient Initiative.

In a small village on the outskirts of the capital, Islamabad, 58% of the inhabitants had developed visible goitres, said Rubina Bhatti of the Network for Consumer Protection, a health advocacy group. In rural parts of Punjab province and other areas, people tend to use natural rock salt that they mine and grind themselves.

"Once I bought a packet of salt along with other household items and my wife refused to use it," said Muhammad Zafar, a labourer from a village 100km from Lahore. "Even some of my friends have told me stories that the doctors have advised them to not use iodised salt if they want to avoid infertility."

Mosque leaders also continue to argue that iodine is a health scourge, or at very the least a western plot. "I do not use iodine salt, and I advise my relatives and friends not to use it as well," said one Lahore cleric, Maulana Muhammad Asim. "I do not have any evidence to prove that it is causing infertility. But my question is: why are the US and the west so worried about the health of Pakistanis that they are forcing us to use iodine? … They have an agenda."

In Pakistan, some non-governmental public health organisations have resorted to what amounts to stealth iodisation, providing subsidies to salt factory owners who add the micronutrient during production. The salt often reaches markets unpackaged, to be vended by weight.

"It is sold in bulk, unbranded – it is open-bag salt, and consumers will not know if contains it iodine," said Muhammad Yasin of the Micronutrient Initiative. "They get the health benefit even if they don't know it."

Additional reporting by Babar Dogar

• This story appeared in Guardian Weekly, which incorporates material from the Washington Post