ISLAMABAD: The World Bank (WB) has projected Pakistan’s poverty rate at 25.3 percent, indicating more than 60 million people are living in the cruel clutches of poverty.
The WB argAues that the growth model remained insufficient to dent poverty from 2018 to 2024.
When the WB’s high-ups’ attention was drawn to the fact that the flawed growth model was followed on the dictates of the IMF/ World Bank, the WB’s Chief Economist, Tobias Haque, defended the multilateral creditors’ policies, saying that poverty reduction was dependent on multiple factors, including macroeconomic stability, curtailing inflation, generating revenues, and opening up the economy.
The WB also explained that the global poverty line and Pakistan’s national poverty line are not comparable. According to the WB’s global poverty index, poverty in Pakistan stood at almost 45 percent. However, by using Pakistan’s official poverty line, the WB has estimated that it stands at 25.3 percent.
“Pakistan’s once-promising poverty reduction trajectory has come to a troubling halt, reversing years of hard-fought gains. After reducing poverty from 64.3 percent in 2001 to 21.9 percent in 2018 — declining by 3 percentage points annually until 2015 before slowing to less than 1 percentage point per year — recent compounding shocks have pushed poverty rates back up to a projected 25.3 percent by 2023/24,” the World Bank stated in its report “Reclaiming Momentum Towards Prosperity: Pakistan’s Poverty, Equity and Resilience Assessment,” launched here at the Bank’s office on Tuesday.
The WB also estimated that poverty levels vary widely across Pakistan’s provinces. Punjab, with the lowest poverty rate at 16.3 percent, is the most well-off province, but still houses 40 percent of the country’s poor due to its large population.
Balochistan, the poorest province, has 42.7 percent of its population living below the poverty line, but accounts for only 12 percent of Pakistan’s poor because of its sparse population. Sindh and Khyber Pakhtunkhwa (KP) have poverty rates of 24.1 and 29.5 percent, respectively, each contributing to about one-quarter of the total poor population. Regardless of methodological differences, it is certain that there was a real increase in poverty in KP between 2015 and 2018.
“It will be critical to protect Pakistan’s hard-won poverty gains while accelerating reforms that expand jobs and opportunities—especially for women and young people,” said Bolormaa Amgaabazar, World Bank Country Director for Pakistan, who has recently assumed her office. “By focusing on results—investing in people, places, and access to opportunities; building resilience against shocks; prioritising fiscal management; and developing better data systems for decision-making—Pakistan can put poverty reduction back on track,” she added. The WB says the economic model that delivered early wins has reached its limits, with 14 percent of the population in 2018 remaining vulnerable to falling back into poverty when faced with shocks. Compounding crises—Covid-19, economic instability, devastating floods and record-high inflation—have further exposed systemic weaknesses, leaving many in low-productivity activities and unable to cope with these challenges.
The WB also quoted the FBR records and demonstrated a significantly higher concentration of income among very high-income individuals than survey-based data sources. For example, individuals with incomes over Rs1 million represent 23 percent of all FBR individuals but only 3 percent of all (Household Income Expenditure Survey (HIES) individuals. Very high-income individuals (greater than 9 million PKR) appear much more frequently in the FBR records than in the HIES data and, furthermore, have incomes that are 10 times as large. After adjusting the very high-income concentration shares and magnitudes in the HIES, we find that: (i) the share in total income of the top 10 percent increases from 30 to 41 percent; (ii) the share in total income of the top 1 percent increases from 7 to 21 percent; and (iii) the Gini coefficient increases from 0.39 to 0.48 (23 percent increase in inequality. These results reveal that Pakistan’s HIES is failing to capture top incomes, and in consequence, substantially underestimates inequality in the country.
Since 2015, Pakistan’s progress in reducing monetary poverty has slowed—and reversed after 2020—due to the fragile foundations of its development model. The diminishing impact of labor income on poverty reduction reflects persistent structural challenges, including economic and fiscal instability, low labor productivity (especially in agriculture), underinvestment in human capital, and entrenched inequalities of opportunity. The situation worsened after 2020, as a series of overlapping crises—including the COVID-19 pandemic, natural disasters, and economic shocks—eroded earlier gains and pushed many households back into poverty. By 2023/24, the poverty rate had risen to 25.3 percent. Many Pakistanis remain trapped in low-productivity activities due to limited access to human, physical, financial, and social capital, leaving them highly vulnerable to compound shocks. These setbacks are rooted in long-standing weaknesses in Pakistan’s growth model: fiscal imbalances, low export and tax performance, stagnant agricultural productivity, and insufficient investment in people. The poor remain largely excluded from the growth process. They are concentrated in sectors that have experienced either declining employment shares or stagnant wages over the past decade. Agriculture continues to shrink in employment relevance, and while construction has absorbed some rural labor, it too has seen limited wage growth. Commerce has delivered higher wages but has not expanded its employment share, and manufacturing—despite its potential to improve livelihoods—has seen slow job growth. Other expanding sectors, such as transport, communications, and mining, employ relatively few poor individuals. This disconnect between economic growth and poverty reduction highlights the need for a more inclusive structural transformation that enables the poor to participate in and benefit from economic progress.
Pakistan’s limited progress in boosting productivity, creating quality jobs, and curbing population growth has led nearly 11 million citizens to seek employment abroad, making migration a key source of household income and foreign exchange. Between 2000 and 2022, international remittances rose from US$1.3 billion to US$20 billion annually, reaching 8 percent of GDP in FY22 and positioning labor as the country’s largest “export.” Yet, the value of real remittances is declining over time, and the number of workers abroad is volatile.
Politics in the country is dominated by patronage, with policy distortions that weaken governance and institutional performance in public service provision. These distortions allow elites to direct public sector rents and regulatory concessions to their allies rather than the public. The incomplete implementation of the devolution agenda has led to higher fiscal costs, regressive taxation, and poor service delivery at the local level. Political instability continues to erode business confidence, negatively impacting economic growth. “Progress in poverty reduction is threatened by structural vulnerabilities,” said Christina Wieser, Senior Economist and one of the lead authors of the report. “Reforms that expand access to quality services, protect households from shocks, and create better jobs—especially for the bottom 40 percent—are essential to break cycles of poverty and deliver durable, inclusive growth,” she concluded.