According to the Pakistan Bureau of Statistics (PBS), the Consumer Price Index (CPI) for March increased by 7.3 percent year-on-year, up from 7 percent recorded in February, reflecting a rise of 0.3 percentage points. On a month-on-month basis, the increase was more pronounced, rising from 0.3 percent in February to 1.2 percent in March. Core inflation in urban areas also inched upward from 0.2 percent in February to 0.7 percent in March, marking an increase of 0.5 percentage points, while rural inflation rose from 0.4 percent to 0.8 percent during the same period, registering a 0.4 percentage point increase.
This escalation is largely attributable to volatility in food and energy prices, driven in part by the ongoing Middle East conflict. A sustained rise in inflationary pressure continues to make life increasingly difficult for the average household in Pakistan, particularly in a country where a significant proportion of the population lives below the poverty line. In this context, a recent report by the Social Policy and Development Centre (SPDC) has estimated the poverty rate at 43.5 percent—14.3 percentage points higher than the official figure reported by the Pakistan Bureau of Statistics.
The discrepancy between these estimates stems from differing methodologies. The SPDC employs a calorific or food energy intake approach, which defines poverty based on minimum caloric requirements necessary for basic sustenance and calculates the level of household expenditure required to meet those needs. In contrast, the PBS uses the cost of basic needs approach, which updates the poverty line based on the Consumer Price Index rather than deriving it from fresh household-level data.
It is also noteworthy that the World Bank has used a similar caloric-based methodology, estimating Pakistan’s poverty rate at 42.4 percent for 2025, based on a threshold of 3.65 dollars per day in 2017 purchasing power parity terms. The World Bank has attributed the rise in poverty since 2020 to economic instability and persistent inflation, noting that “a series of overlapping crises have exposed weaknesses in the country’s poverty reduction trajectory.” Furthermore, the Bank estimates that a population growth rate of 2 percent has resulted in approximately 1.9 million additional individuals falling into poverty during the last fiscal year.
On the other hand, the SPDC argues that the average consumption basket used in calculating the CPI is disproportionately influenced by the spending patterns of relatively better-off households. This approach tends to overlook regional disparities, particularly in remote and underdeveloped areas, and includes goods and services that are not relevant to low-income households. At the same time, it fails to adequately capture essential expenditures such as informal healthcare and access to clean drinking water, both of which constitute a significant burden for poorer segments of the population.
The International Monetary Fund (IMF), in its December 2024 loan approval documentation, also highlighted structural weaknesses in Pakistan’s statistical systems. It noted that “important shortcomings remain in the source data available for sectors accounting for around a third of GDP,” along with concerns regarding the granularity and reliability of Government Finance Statistics. These limitations prompted the IMF to extend technical assistance to the PBS, including support for the development of a new Producer Price Index and the initiation of fieldwork for four major surveys ahead of the planned National Accounts rebasing in fiscal year 2026.
Despite signs of macroeconomic stabilization and a decline in inflation over the past two years, Pakistan’s economic growth rate of 2.6 percent remains insufficient to significantly reduce poverty levels. External remittances have shown strong growth, increasing by 33 percent during the first half of fiscal year 2025. However, their impact on the poorest segments of society remains limited, as only 3.2 percent of the lowest-income households receive remittance inflows. Nevertheless, for households just above the poverty line, remittances play a critical role in preventing downward mobility in the face of economic shocks. Increased emigration since 2020, particularly among low-skilled workers, has somewhat broadened the reach of remittance benefits to lower-income groups.
On the social protection front, recent increases in benefits under the Benazir Income Support Program (BISP), exceeding the rate of inflation, along with plans to expand coverage to an additional 500,000 households by the end of the fiscal year, are expected to support household consumption and provide a buffer against short-term economic pressures.
However, the effectiveness of these measures has been undermined by ongoing external shocks, particularly those linked to the Middle East conflict. In light of these challenges, there is an urgent need to develop and implement a comprehensive, long-term strategy to address poverty in Pakistan.
One of the most effective pathways to poverty reduction lies in improving access to quality education. Pakistan has a large and growing youth population, yet many lack the skills required for gainful employment. Increased investment in education, particularly in technical and vocational training, can equip the workforce with skills aligned to the demands of emerging industries. Government initiatives aimed at expanding vocational training programs and reducing school dropout rates could yield significant long-term benefits.
A substantial proportion of Pakistan’s poor population resides in rural areas, where access to essential services such as healthcare, sanitation, and education remains limited. Empowering these communities through improved infrastructure, access to microfinance, and the promotion of agricultural innovation can enhance productivity and generate sustainable livelihoods. Collaboration between the government and non-governmental organizations can further strengthen grassroots development initiatives tailored to local needs.
Social safety net programs such as BISP have played a vital role in providing financial assistance to vulnerable households. Expanding these programs, with improved targeting mechanisms, can help lift more people out of poverty. Additionally, ensuring access to affordable healthcare and nutrition services would significantly improve overall living standards.
To stimulate broader economic growth, Pakistan must also prioritize the development of small and medium-sized enterprises (SMEs). Encouraging entrepreneurship through policy incentives, improved access to credit, and business development support can foster innovation and create employment opportunities, particularly in underserved regions.
Addressing poverty in Pakistan requires a coordinated and sustained effort involving the government, civil society, and the private sector. By investing in human capital, strengthening rural economies, expanding social protection, and promoting entrepreneurship, Pakistan can make meaningful progress toward reducing poverty and building a more inclusive and resilient economic future.