Contrary to official claims of economic recovery and progress, poverty levels in Pakistan are on the rise. According to the World Bank’s new report entitled ‘Pakistan’s poverty, equity and resilience assessment’, which is the first comprehensive evaluation of poverty and welfare trends in the country since the early 2000s, the national poverty rate, which declined from 64.3% in 2001-02 to 21.9% in 2018-19, began to increase in 2020.
A more recent assessment by the World Bank estimates Pakistan’s poverty levels at 44.7 percent by using the lower middle income poverty level line at 4.20 dollars per day. According to the World Bank, rural poverty is double the urban poverty and levels vary from one region to another — a low of 3.9 percent in Islamabad and 71.5 percent in Khuzdar district of Balochistan.
Poverty is not just about low income. In its wider sense, it is about access to economic opportunities and social welfare facilities, particularly in the education and health sectors. In 2018, just over half of working-age Pakistanis were economically active. Even among those who work, over 85% of employment is informal, and among the poorest, it’s more than 95%. Jobs in agriculture, construction, and low-end services often offer very low wages and contribute to family poverty.
The WB report draws on official household surveys, educated projections and various administrative data sources. As is well known, official poverty estimates are based on the Household Integrated Economic Survey (HIES), using Pakistan’s national poverty line and methodology. For the sake of comparison, the report applies global poverty thresholds updated in June 2025. Beyond 2018-19—which is the latest available survey—it uses microsimulation models to project poverty estimates.
The rise in poverty in Pakistan is ascribed to various factors, including COVID-19, inflation, floods, and macroeconomic stress. Another important element in the situation is the short-sighted consumption-driven growth model pursued over the last few years. According to experts, another reason for rising poverty is incomplete devolution of public services leading to poor service delivery, regressive taxation, accounting for nearly 75 to 80 percent of all tax collections, rampant corruption and weak accountability.
The WB report finds that in the past two decades, poverty reduction in Pakistan was achieved by rising non-agricultural labor income, as more households shifted away from farm work to low-quality service jobs. However, built-in structural weaknesses have hindered new job creation and inclusive growth. As a result, low productivity across sectors has constrained an increase in income, deepening poverty.
The report also refers to human capital gaps which are a major reason for poverty. About 40 percent of Pakistani children are stunted; one-quarter of primary school-age children are out of school; and 75 percent of children who do attend primary school cannot read and understand a simple story by the end of the primary cycle. Public service deficits are widespread, with only half of all households having access to drinking water in 2018, and 31 percent lacking safe sanitation.
As part of the overall solution to the problem, the report calls for sustained and people-centered reforms to protect poor and vulnerable families, improve livelihood opportunities, and expand access to basic services for all. To quote the report, “It will be critical to protect Pakistan’s hard-won poverty gains while accelerating reforms that expand jobs and opportunities—especially for women and young people. By focusing on results—investing in people, places, and access to opportunities; building resilience against shocks; prioritizing fiscal management; and developing better data systems for decision-making—Pakistan can put poverty reduction back on track.”
The report emphasises the need for systematic and persistent spatial disparities in welfare across Pakistan. Rural poverty remains more than twice as high as urban poverty, and many districts that lagged behind decades ago continue to do so today. Furthermore, unplanned urbanization has led to overcrowded settlements with low living standards.
The report outlines a detailed programme for poverty reduction. First, the government should invest in people and opportunities to close human capital gaps, particularly for the most disadvantaged sections. Investments in public services such as health, education, housing, water, and sanitation, need to be accompanied by strengthening local governance. Second, the government should adopt measures to strengthen household shock-resilience by making safety nets widely available. Third, progressive fiscal measures should be adopted by improving municipal finance, phasing out inefficient and wasteful subsidies, and prioritizing targeted incentives for the poorest.
Last but not the least, a strong machinery should be set up at various levels to ensure rigorous implementation of the poverty reduction initiatives. To generate resources for the above programme, the government should curtail current expenditure which is budgeted to account for 93 percent of total outlay in the current year. Simultaneously the taxation system should be revamped to collect more revenue from the wealthy, especially the feudal class which pays very little tax at the moment.