Pakistan is grappling with a profound and escalating poverty crisis that threatens to undo decades of hard-won progress. According to the World Bank’s latest assessment, an alarming 25.3% of the population—over 60 million people—are ensnared in poverty, a stark indicator of the fragility of the nation’s economic framework.
This figure, drawn from Pakistan’s national poverty line, paints a grim picture, but the global poverty line suggests an even bleaker reality, estimating poverty at 45%. The resurgence of poverty, driven by a combination of systemic weaknesses and external shocks, demands urgent attention.
From 2001 to 2018, Pakistan achieved significant success in reducing poverty, slashing the rate from 64.3% to 21.9%, a remarkable decline of 3 percentage points annually until 2015. However, this momentum slowed dramatically, with annual reductions dropping to less than 1 percentage point before reversing entirely. By 2023/24, the poverty rate had climbed back to 25.3%, as detailed in the World Bank’s report, “Reclaiming Momentum Towards Prosperity: Pakistan’s Poverty, Equity and Resilience Assessment.” This reversal stems from a confluence of crises that have exposed the limits of Pakistan’s economic model. The COVID-19 pandemic disrupted livelihoods, devastating floods displaced millions and destroyed infrastructure, and record-high inflation eroded purchasing power. Economic instability, marked by fiscal imbalances and low export performance, further compounded these challenges, pushing millions back into poverty.
Regional disparities highlight the uneven distribution of economic hardship across Pakistan. Punjab, the most populous province, boasts the lowest poverty rate at 16.3%, yet it still accounts for 40% of the nation’s poor due to its large population. In contrast, Balochistan, the poorest province, sees 42.7% of its residents living below the poverty line, though its sparse population means it contributes only 12% to the national total. Sindh and Khyber Pakhtunkhwa, with poverty rates of 24.1% and 29.5% respectively, each represent about a quarter of Pakistan’s poor. These variations underscore the diverse economic realities within the country, where access to opportunities and resources differs significantly. For instance, Khyber Pakhtunkhwa experienced a notable increase in poverty between 2015 and 2018, a trend that persisted regardless of the methodology used to measure it.
The structural weaknesses in Pakistan’s economic model lie at the heart of this crisis. The growth model that once drove poverty reduction has reached its limits, leaving 14% of the population in 2018 vulnerable to slipping back into poverty during shocks. Low labor productivity, particularly in agriculture, which employs a significant portion of the poor, has stifled income growth. Underinvestment in human capital—education, healthcare, and skills training—has trapped millions in low-paying, low-productivity jobs. The poor are largely excluded from the benefits of economic growth, concentrated in sectors like agriculture, which has seen declining employment shares, or construction, where wages have stagnated. Commerce offers higher wages but has not expanded its employment share, while manufacturing, despite its potential to improve livelihoods, has seen sluggish job growth. Other sectors, such as transport and communications, employ relatively few poor individuals, highlighting a disconnect between economic growth and poverty reduction.
Inequality is another critical dimension of the crisis. Data from the Federal Board of Revenue (FBR) reveals a stark concentration of wealth among high-income individuals, far exceeding estimates from household surveys like the Household Income Expenditure Survey (HIES). For example, individuals earning over Rs1 million represent 23% of FBR records but only 3% of HIES respondents. Very high-income individuals, earning over Rs9 million, appear far more frequently in FBR data and have incomes ten times larger than those reported in surveys. Adjusting for these discrepancies, the share of total income held by the top 10% rises from 30% to 41%, and the top 1% from 7% to 21%. The Gini coefficient, a measure of inequality, increases from 0.39 to 0.48, indicating a 23% rise in inequality. These findings suggest that household surveys significantly underestimate wealth concentration, masking the true extent of economic disparity in Pakistan.
Migration has become a critical coping mechanism for many Pakistanis in the face of limited domestic opportunities. Nearly 11 million citizens have sought employment abroad, making international remittances a vital source of household income and foreign exchange. Between 2000 and 2022, remittances surged from $1.3 billion to $20 billion annually, equivalent to 8% of GDP in 2022. However, the real value of these remittances is declining, and the volatility of overseas employment underscores the unsustainability of relying on migration as a long-term strategy for poverty alleviation. While remittances provide a lifeline for many households, they cannot substitute for systemic reforms to boost domestic job creation and productivity.
Governance challenges further exacerbate the poverty crisis. Patronage politics dominate decision-making, with policy distortions that favor elites over the broader public. Public sector resources and regulatory concessions are often directed toward well-connected allies, undermining institutional performance and public service delivery. The incomplete implementation of devolution has led to higher fiscal costs, regressive taxation, and inadequate local services, disproportionately affecting the poor. Political instability erodes business confidence, deterring investment and stifling economic growth. These governance failures perpetuate a cycle of exclusion, where the poor remain marginalized from the benefits of economic progress.
To reverse this troubling trajectory, Pakistan must prioritize inclusive growth and resilience. Bolormaa Amgaabazar, the World Bank’s Country Director for Pakistan, emphasizes the urgency of protecting past gains while accelerating reforms to expand opportunities, particularly for women and youth. Investments in human capital—education, healthcare, and skills development—are essential to equip the workforce for higher-productivity jobs. Fiscal discipline, including improving tax performance and addressing fiscal imbalances, is critical to funding these investments. Better data systems can enhance decision-making, ensuring resources are allocated effectively. Revitalizing sectors like manufacturing and commerce could create quality jobs, while addressing agricultural stagnation would uplift rural communities where poverty is most entrenched.
The path forward requires a fundamental shift in Pakistan’s development model. Structural transformation must prioritize inclusivity, enabling the poor to participate in and benefit from economic growth. This includes expanding access to human, physical, financial, and social capital, which are currently out of reach for many. Building resilience against shocks—whether economic, climatic, or health-related—is equally vital, as the poor are disproportionately vulnerable to such crises. By addressing these challenges, Pakistan can create a more equitable and sustainable economic framework that lifts millions out of poverty.
Pakistan stands at a pivotal moment. The resurgence of poverty to 25.3% threatens to unravel decades of progress, leaving over 60 million people in economic distress. Yet, with bold reforms and a commitment to inclusive growth, the nation can reclaim its path toward prosperity. The stakes are high: failure to act risks deepening inequality and entrenching poverty for generations. By investing in people, strengthening governance, and fostering resilience, Pakistan has the opportunity to build a brighter, more equitable future. The time for decisive action is now, before the crisis becomes insurmountable.