The recently released World Bank report, Reclaiming Momentum Towards Prosperity: Pakistan’s Poverty, Equity, and Resilience Assessment, serves as a stark wake-up call. The report reveals that Pakistan’s current economic and development model, which initially steered the country towards significant poverty reduction, has now stalled and even reversed. Over the past three years, poverty levels have surged, erasing nearly two decades of hard-fought progress. The findings highlight systemic weaknesses and signal an urgent need for a profound transformation of Pakistan’s growth trajectory, one that aligns with inclusive growth, equity, and long-term investments in human capital.
Between 2001 and 2018, Pakistan’s poverty headcount dropped dramatically from 64.3% to 21.9%. This represented a remarkable average annual decline of roughly 3 percentage points until 2015. However, this momentum could not be sustained. The report projects poverty rising sharply again, from 24.7% in 2019-20 to 25.3% in 2023-24, marking a seven-point increase in just two years. Despite an ephemeral dip to 18.3% in 2021-22, largely attributed to pandemic relief efforts, the reversal is alarming. If confirmed by the ongoing Household Integrated Economic Survey (HIES) 2023-24, it would signal one of the most substantial setbacks in recent history.
Multiple shocks have triggered this reversal including the COVID-19 pandemic, rampant inflation hitting food and fuel prices, devastating floods displacing millions, political instability undermining investor confidence, and macroeconomic stress contributing to sluggish and volatile growth rates. But these factors alone do not tell the full story.
A critical insight of the report is that Pakistan’s economic model to date has been unduly reliant on consumption-driven growth rather than investment-led development or productive capacity enhancement. This model, while initially effective in reducing extreme poverty by boosting consumption, fails to build resilience or generate sustainable employment opportunities.
Low labor productivity, concentration in low-value service sectors, reliance on remittances, and limited export diversification mean economic gains are fragile and unevenly distributed. This growth pattern deepens structural vulnerabilities, disproportionately impacting the bottom 40% of the population who remain excluded from sustainable livelihood opportunities.
Pakistan’s social protection programs have played a vital role in cushioning households from the worst impacts of shocks. Initiatives like the Benazir Income Support Programme (BISP) and other initiatives have prevented many families from slipping into destitution during crises. Nonetheless, the World Bank report emphasizes that social safety nets alone cannot substitute for systemic reforms that address underlying structural imbalances.
Public expenditure on health and education, crucial drivers of human capital, remains woefully insufficient and ineffective in reducing inequality. Pakistan continues to grapple with regressive fiscal policies that lean heavily on indirect taxation, disproportionately burdening the poor while sparing the wealthy elite. These policies, coupled with weak governance and elite capture of resources, perpetuate inequality and limit poverty reduction.
The human development context further complicates Pakistan’s growth and equity challenges. Nearly 40% of children under five are stunted, a direct indicator of chronic malnutrition and long-term cognitive impairment. One in four primary-school-age children remains out of school, and among those attending, three out of four cannot read or write even after completing five years of schooling. Access to clean drinking water and sanitation remains limited, with only half the population having access to safe water and nearly a third lacking basic sanitation facilities.
The labor market tells a similarly grim story. Over 85% of jobs are informal, often insecure and low-paying, providing minimal social protection. Women and youth are systematically marginalized, with significant barriers to formal workforce entry and career progression. This entrenched exclusion not only stifles inclusive growth but threatens social cohesion and future economic prospects.
Regional and Spatial Disparities
Pakistan’s challenges are compounded by stark regional inequalities. Poverty rates in rural areas are more than twice those in urban centers, with underdeveloped districts trapped in cycles of poverty and limited economic opportunity. This spatial dimension demands context-specific policies that target these historically marginalized regions with tailored investments and governance reforms.
The World Bank report concludes with a clear call for a new development model centered on four strategic pillars:
A) Investing in People: Prioritize education, health, and skill development to build human capital and break the intergenerational transmission of poverty.
B) Transforming Places: Target investments and capacity-building in lagging regions to promote equitable spatial development and reduce disparities.
C) Strengthening Resilience: Expand social protection schemes and disaster preparedness to safeguard households against future shocks.
D) Improving Governance and Fiscal Management: Enhance transparency, combat elite capture, adopt progressive taxation, and ensure efficient public spending.
Investing in women and youth is a recurring theme, recognizing them as agents of growth and equity who require targeted inclusion measures. The report stresses that accelerating reforms to generate decent jobs and opportunities is indispensable for breaking poverty cycles sustainably.
The report underscores the importance of reliable and timely data, recommending investments in improved statistical and administrative systems to track poverty dynamics more effectively. This will enable policymakers to adapt interventions responsively and monitor their impact transparently.
The World Bank itself commits to supporting Pakistan with a $20 billion, 10-year country partnership framework aimed at driving these reforms and promoting sustainable, inclusive development.
CRUX
Pakistan’s recent poverty surge is a sobering reminder that early gains were neither guaranteed nor irreversible. The consumption-led growth model that supported rapid poverty reduction has reached its limits, exposing deep structural flaws that threaten future progress.
A decisive pivot is needed. One that integrates inclusive economic growth, equitable service delivery, resilient social protection, and strengthened governance. Without this holistic transformation, millions of Pakistanis risk being trapped in vulnerability, undermining the country’s aspirational vision of shared prosperity.
The Reclaiming Momentum report serves not just as an analytical assessment but as a strategic blueprint. Its findings demand urgent political will and coherent policy action to reclaim progress, protect the vulnerable, and put Pakistan firmly on a path to sustainable, inclusive growth.
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