Pakistan grapples with a socioeconomic storm that threatens to undermine its progress. As of 2025, nearly 45% of the population lives below the poverty line, a stark increase driven by economic shocks, inflation, and sluggish growth. Unemployment, meanwhile, hovers around 8%, affecting millions and exacerbating inequality. Amidst political instability and global pressures, these issues not only stifle economic potential but also risk social unrest in a nation of over 240 million people.
Pakistan’s poverty rates have surged in recent years, reflecting a reversal of earlier gains. According to the World Bank, the lower-middle-income poverty rate stood at 42.3% in fiscal year 2024, with an additional 2.6 million people slipping into poverty due to recent economic pressures. By 2025, revised thresholds from the World Bank have pushed the national poverty rate to 44.7%, up from 39.8% previously, while extreme poverty has jumped to 16.5%. This means approximately 100 million Pakistanis are now struggling below the $3.65-a-day benchmark for lower-middle-income countries.
Urban areas like Karachi and Lahore face acute challenges, where inflation erodes purchasing power, but rural regions bear the brunt. Floods in 2022 and ongoing climate vulnerabilities have displaced communities and destroyed livelihoods in agriculture, which employs 42% of the workforce. The Asian Development Bank reports that 4.2% of the employed population earns below $2.15 PPP daily, highlighting persistent vulnerability. Compounding this, military spending diverts funds from social welfare, leaving poverty alleviation programs under-resourced.
Unemployment in Pakistan has climbed steadily, reaching forecasts of 8% in 2025, with 6.81 million people out of work. Official figures from the Ministry of Planning indicate a surge to 7% from a decade-low of 1.5%, though independent estimates suggest it could hit 7.5%, adding 5.6 million to the unemployed ranks. Youth unemployment is particularly alarming, with rates among the highest globally, as per the World Bank.
The labor market’s woes are evident in sectors like manufacturing and services, where job creation lags behind population growth. Pakistan’s GDP growth is projected at a modest 2.7% for fiscal year 2025, below the 3% needed to absorb new entrants. The International Labour Organization pegs mid-2025 unemployment at around 6%, but this masks underemployment, where many work informal jobs with meager wages. Women and rural youth face disproportionate barriers, with limited access to education and skills training perpetuating the cycle.
Several intertwined factors fuel this crisis. Economic slowdown under recent administrations has been the longest in Pakistan’s 78-year history, with average GDP growth trailing population expansion. Inflation hit a 10-month high in 2025, driven by rising commodity prices and energy costs, eroding real incomes. The 2024 floods alone contributed to 2.5 million “new poor,” as weak growth and high unemployment compounded vulnerabilities.
Political instability, including frequent government changes, has deterred investment. Foreign direct investment grew 20% in early 2025, but overall inflows remain low due to security concerns and bureaucratic hurdles. Structural issues like inadequate education—over 22 million children out of school—and skill mismatches leave graduates unemployable. The private sector’s limited role in job creation, amid regulatory burdens, further hampers progress. Global factors, such as IMF-mandated austerity under bailout programs, have raised taxes and cut subsidies, hitting the poor hardest.
The repercussions are multifaceted. Economically, rising poverty reduces consumer spending, stifling growth and perpetuating a vicious cycle. Unemployment contributes to brain drain, with skilled workers migrating abroad, depleting human capital. Socially, it breeds inequality, with mental health issues surging among the jobless—studies link prolonged unemployment to depression and anxiety in rural areas.
Families face food insecurity, child labor rises, and education suffers, entrenching intergenerational poverty. In regions like Balochistan and Khyber Pakhtunkhwa, unemployment fuels extremism and unrest. Climate anxiety among youth, amid job scarcity, adds psychological strain, with rates hitting 10.3% in some estimates. Overall, these issues threaten social cohesion, potentially leading to protests or migration crises.
The government, under IMF guidance, pursues structural reforms like tax broadening and energy sector improvements. Programs like Ehsaas and Benazir Income Support provide cash transfers to 9 million families, but coverage remains insufficient. The 2025-26 budget navigates IMF demands amid fragility, aiming for sustainable growth.
Looking ahead, experts urge investment in education, vocational training, and green jobs to combat climate impacts. Boosting exports and FDI could create employment, while digital economy initiatives might absorb youth. However, without political stability and anti-corruption measures, progress will falter. The World Bank projects modest recovery, but inclusive policies are essential to reverse trends.
Pakistan’s rising poverty and unemployment represent a humanitarian and economic imperative. With 45% in poverty and 8% unemployed, the nation stands at a crossroads. Addressing root causes through bold reforms and international support could unlock potential, fostering a resilient economy. Failure risks deeper division. As Pakistan navigates 2025, prioritizing people over politics is key to a brighter future.