Dr. Muhammad Shahid
| Pakistan is witnessing a deeply concerning reversal in its poverty trajectory. According to recent official estimates, national poverty has increased from 21.9 percent in 2018–19 to 28.9 percent in 2024–25, marking a substantial deterioration in household welfare over a relatively short period. The increase is visible across both spatial categories of deprivation. Urban poverty has risen from 11.0 percent to 17.4 percent, while rural poverty has escalated from 28.2 percent to 36.2 percent over the same period. These figures point to a broad-based erosion of living standards and indicate that poverty in Pakistan is no longer confined to traditionally marginalized rural populations but it is increasingly becoming a systemic and multidimensional development challenge affecting both rural and urban economies. The increase follows years of earlier progress, which had reduced national poverty significantly up to 2018/19, but that momentum has now reversed under the combined pressure of macroeconomic instability, repeated shocks, and weak structural transformation. 1. Structural and Macroeconomic Drivers of Rising Poverty The recent rise in poverty is rooted in a convergence of macroeconomic stress, weak labor absorption, inflationary pressures, and policy fragility. Pakistan’s growth model has historically relied on consumption-led expansion, low-productivity informal employment, remittances, and public expenditure cycles, rather than sustained productivity growth and structural transformation. While this model generated some poverty reduction in the past, it proved insufficiently resilient to shocks. Since 2019, Pakistan has experienced repeated episodes of currency depreciation, high inflation, fiscal compression, energy price adjustments, and declining real wages, all of which have reduced the purchasing power of households, especially among the poor and vulnerable. Rising food and fuel inflation have been particularly regressive, disproportionately affecting lower-income groups that allocate a larger share of expenditure to basic consumption. In effect, poverty has expanded not only because incomes have stagnated, but because the real value of household consumption has sharply deteriorated. The World Bank has similarly argued that Pakistan’s earlier poverty reduction model has reached its limits and that recent crises exposed its underlying fragility. A second major driver is the country’s increasing exposure to covariate shocks, particularly climate-related disasters and post-pandemic socioeconomic disruptions. The 2022 floods represented a major welfare shock, destroying crops, livestock, housing, local infrastructure, and income-generating assets across already vulnerable districts. For poor and near-poor households, the destruction of physical and productive assets translated into a long-term decline in resilience and consumption capacity. At the same time, Pakistan’s labor market has remained unable to generate sufficient productive, formal, and wage-paying employment, especially for youth, women, and low-skilled workers. This has produced a large class of households that may not appear chronically poor in static asset terms, but remain highly vulnerable to falling below the poverty line due to illness, inflation, crop failure, underemployment, or debt distress. In development terms, Pakistan is experiencing not only a rise in chronic poverty, but also an expansion of transitory and shock-induced vulnerability. 2. Why Rural Poverty Has Risen More Sharply Than Urban Poverty The sharper increase in rural poverty from 28.2 percent to 36.2 percent reflects the deep structural vulnerabilities of Pakistan’s rural economy. Rural livelihoods remain heavily dependent on smallholder agriculture, informal labor, livestock, and climate-sensitive production systems, all of which have come under severe pressure from rising input costs, erratic weather, declining productivity, and weak market integration. Many rural households face a combination of low farm returns, indebtedness, poor access to irrigation and extension services, and limited opportunities for non-farm diversification. These constraints are compounded by inadequate access to quality education, healthcare, digital connectivity, and rural infrastructure, which suppress long-term productivity and social mobility. In many districts, rural poverty is therefore not merely an income deficit but it is a manifestation of spatial exclusion, low asset accumulation, and persistent capability deprivation. Urban poverty, although lower in incidence, has also increased significantly from 11.0 percent to 17.4 percent signaling the growing fragility of urban livelihoods. This trend reflects the expansion of working poverty in cities, where many households are concentrated in low-paid informal services, transport, construction, petty trade, and casual labor. Rising rents, utility costs, transport expenses, and food inflation have made urban living increasingly unaffordable for lower- and lower-middle-income households. Importantly, urban poverty in Pakistan is no longer confined to slum populations alone, it is increasingly visible among households previously considered economically secure but now exposed to precarious employment, inflation, and inadequate social protection. This suggests that poverty in Pakistan is becoming more heterogeneous, fluid, and urbanized, requiring a rethinking of traditional poverty targeting and anti-poverty policy design. 3. Developmental Consequences of Rising Poverty The consequences of rising poverty are not merely distributive but they are deeply developmental, institutional, and intergenerational. First, higher poverty levels are likely to intensify human capital erosion, as poor households reduce expenditures on nutrition, preventive healthcare, schooling, transport, and productive inputs in order to smooth short-term consumption. This creates a dangerous cycle in which current shocks produce future capability deficits. Second, rising poverty is likely to worsen multidimensional deprivation, particularly in lagging districts where poor service delivery and infrastructure deficits already constrain development outcomes. Third, poverty expansion can weaken social cohesion and political legitimacy, particularly when households experience repeated welfare losses without visible pathways for recovery. Rising economic insecurity can also exacerbate gender inequality, child labor, school dropouts, and negative coping strategies such as distress migration and asset liquidation. From a macro-development perspective, rising poverty also undermines the foundations of inclusive growth. Poor households have limited capacity to invest in education, entrepreneurship, mobility, and technology adoption, thereby reducing labor productivity and suppressing domestic demand. As poverty becomes more entrenched, it can lock entire communities into low-productivity equilibria and perpetuate spatial and intergenerational inequality. In this sense, the current poverty reversal in Pakistan is not simply a welfare setback it represents a developmental regression that threatens long-term progress on human development, resilience, and social inclusion. Pakistan’s own multidimensional poverty evidence has long shown that income poverty is closely intertwined with deficits in health, education, housing, and basic services, meaning that the rise in monetary poverty will almost certainly deepen broader forms of deprivation as well. 4. Policy Response: From Poverty Relief to Resilience-Oriented Development The policy response to rising poverty must be multi-layered, evidence-based, and structurally oriented. At the macroeconomic level, Pakistan requires a pro-poor stabilization framework that restores price stability while protecting essential social expenditures and avoiding adjustment strategies that disproportionately burden poor households. Fiscal consolidation remains important, but it must be pursued through progressive revenue mobilization, tax broadening, reduction in untargeted subsidies, and improved expenditure efficiency, rather than through contractionary measures that reduce social spending or public investment in human development. Stabilization without social protection will deepen poverty. Equally, social protection without growth and employment will remain fiscally unsustainable. At the meso and micro levels, poverty reduction must be anchored in livelihood diversification, employment-intensive growth, and territorial development. This requires targeted support for agro-processing, climate-smart agriculture, small and medium enterprises (SMEs), labor-intensive manufacturing, digital services, and local value chains, especially in lagging districts. Rural poverty cannot be reduced sustainably without strengthening agricultural productivity, improving market access, reducing post-harvest losses, and expanding rural non-farm employment. Urban poverty, meanwhile, requires investments in affordable transport, skills, housing, municipal services, and labor formalization. A credible anti-poverty strategy must therefore be linked to a broader agenda of productive inclusion and structural transformation, rather than relying solely on income support. 5. Strengthening Social Protection and Poverty Targeting A central pillar of the response must be the modernization of Pakistan’s social protection architecture, particularly the Benazir Income Support Programme and the National Socio-Economic Registry. The new poverty profile suggests that Pakistan’s vulnerable population is becoming more dynamic, shock-prone, and heterogeneous, which challenges static assumptions built into traditional targeting systems such as the Proxy Means Test (PMT). Poverty is increasingly shaped by inflation, climate risk, urban precarity, disability, labor informality, and geographic exclusion factors that are not always fully captured by static asset-based scoring systems. This calls for a transition from a narrow poverty targeting approach toward a more adaptive dynamic social registry and shock-responsive social protection system. In practical terms, social assistance should be increasingly linked to nutrition, education retention, health access, women’s economic empowerment, skills development, and graduation pathways, so that poor households are not merely protected from destitution but supported toward resilience and upward mobility. The World Bank’s recent support to Pakistan’s crisis-resilient social protection systems reinforces the need to build a scalable, integrated, and adaptive social protection ecosystem. Conclusion The rise in poverty in Pakistan from 21.9 percent in 2018–19 to 28.9 percent in 2024–25 is a stark reminder that earlier welfare gains were fragile, uneven, and insufficiently resilient to shocks. The parallel increase in urban poverty (11.0 to 17.4 percent) and rural poverty (28.2 to 36.2 percent) demonstrates that the poverty challenge is now both deepening and broadening, with serious implications for social stability, human development, and long-term growth. Pakistan is therefore not facing a temporary poverty spike, but a more profound crisis of economic vulnerability, institutional responsiveness, and developmental inclusion. Reversing this trend will require more than emergency relief. It demands a new social contract built around inclusive growth, climate resilience, labor market transformation, and adaptive social protection. Without such a shift, poverty in Pakistan will remain cyclical and entrenched. With it, however, the current setback can still become an opportunity for structural reform and renewed developmental progress. |
