Pakistan is home to almost half of the poorest people in a vast region stretching from North Africa to South Asia, according to a new World Bank report that paints a sobering picture of the country’s recent economic trajectory. The Washington-based lender, in its Middle East, North Africa, Afghanistan and Pakistan (MENAAP) report released last week said that Pakistan accounts for about 48 percent of people in the region living below the $3-a-day poverty line, equivalent to roughly Rs840 in daily income. The World Bank recently separated Pakistan from its South Asia grouping and placed it with the Middle East and North Africa region.
The report said the remaining poor are concentrated in three war-affected countries, Afghanistan, Syria and Yemen, which together account for another 47 percent. Poverty rates at the $3 line approached or exceeded 20 percent in Djibouti, Pakistan, Syria and Yemen. MENAAP now accounts for 14 percent of the world’s extreme poor, second only to Sub-Saharan Africa. After falling substantially during the 2000s and 2010s, poverty reduction stalled around 2019 and reversed after the COVID-19 pandemic.
The bank attributed the regional increase primarily to Pakistan, where the poverty rate rose by 6.4 percentage points at the $3 line and 3.2 percentage points at the $4.2 line between 2018-19 and 2024-25. It blamed a succession of adverse shocks: the pandemic, the devastating 2022 floods, a macroeconomic crisis marked by high inflation and currency depreciation, and a prolonged period of economic adjustment that weakened real household incomes and employment opportunities.
For the current fiscal year 2026-27, the World Bank projects economic growth of 3.8 percent and inflation of 8.2 percent. Population-growth-adjusted real GDP growth is expected at 2.2 percent, almost unchanged from 2.1 percent last year, a pace that offers little prospect of rapid poverty reduction. The report projects a current account deficit of 0.8 percent of GDP and a budget deficit of 3.5 percent. Both are higher than in the previous fiscal year but remain within manageable limits.
The findings are likely to renew debate over the cost of stabilisation. The prolonged adjustment under IMF programmes has been criticised for improving fiscal and monetary indicators while contributing to low growth, rising poverty and high unemployment. The World Bank’s own language, which links poverty to the weakening of real household incomes and job opportunities during adjustment, lends weight to that criticism.
The report warns that the Middle East conflict has brought fresh pressures. Governments across the region face simultaneous demands to cushion households from higher prices and respond to conflict-related humanitarian needs. Pakistan, it noted, has introduced targeted fuel and farm assistance.Petrol price increases of 40 percent or more were recorded in Lebanon, Pakistan, Syria and the UAE. Diesel prices have risen by more than 40 percent in Pakistan and the West Bank and Gaza since the conflict began, with sharper increases elsewhere in the region.
Pakistan is among six oil-importing countries, along with Djibouti, Egypt, Jordan, Morocco and Tunisia, that remain exposed through several channels. These include inflationary pressure from costlier oil and commodities, loss of fiscal space, lower remittances from Gulf economies, and higher borrowing costs driven by increased insurance risk as the conflict persists. For Pakistan, where Gulf remittances are a vital source of foreign exchange and household income, the remittance risk is particularly acute.
The report also points to weaknesses in the private sector. Product innovation among firms is significantly lower in MENAAP than in peer economies. In Pakistan, just 3 percent of firms reported introducing a new product or service and 1 percent reported process innovation, against lower-middle-income peer averages of 23 percent and 14 percent respectively. Egypt, by comparison, recorded 9 percent and 3 percent.
On artificial intelligence, Pakistan recorded the highest absolute conversation count in the region, but usage is concentrated in arts and media, including graphic design, content creation and translation, rather than software. The bank suggested this may reflect the country’s large presence on international freelance platforms, where such services are in demand.
Across the region, the share of job postings requiring digital skills rose substantially between 2021 and 2025, with double-digit percentage point gains in Pakistan, Bahrain, Lebanon and Saudi Arabia. However, infrastructure remains a constraint. Pakistan is among eight countries, along with Djibouti, Egypt, Iraq, Jordan, Oman, Syria and Yemen, with fewer mobile broadband subscriptions than income peers would predict. Uneven broadband access and electricity gaps limit the foundations for AI adoption.
The report’s central message is one of accumulated damage. Millions of Pakistanis have lived through the pandemic, deadly floods, soaring inflation and years of uncertainty, often with no chance to recover before the next crisis. For poor households, each setback leaves lasting scars. Families exhaust savings, sell livestock, borrow to buy food, or withdraw children from school to cut costs.
Such losses are not easily reversed. A farmer who has sold his animals or a small trader who has closed his shop cannot simply resume earning once conditions improve. This helps explain why poverty can keep rising even as the broader economy shows signs of recovery. Macroeconomic stability, in other words, does not automatically translate into relief for those at the bottom.
With new dangers emerging, the World Bank has cautioned that the Iran-related conflict could raise fuel and commodity prices, weaken remittances and increase borrowing costs, while adverse weather could push up food prices and hurt agricultural livelihoods. For households still reeling from earlier blows, another bout of inflation could prove devastating. Analysts say the response must go beyond post-disaster relief. The government needs to identify the families at greatest risk, strengthen early-warning and disaster-response systems, protect farming livelihoods, and ensure that assistance reaches vulnerable households before they are forced into desperate choices. Keeping children in school and preventing families from losing their means of earning must also be priorities.
The broader lesson is that poverty reduction cannot succeed if every new crisis pushes people back into hardship. With nearly half the region’s poor living within its borders, Pakistan faces the task of protecting the fragile gains its poorest citizens manage to make, while building an economy that is more innovative, better connected and more resilient to shocks.