For almost two decades, we have been told the reassuring story of Pakistan’s steady decline in poverty from 64 per cent in 2001-02 to almost 22 per cent in 2018-19.
While social indicators in the country have deteriorated over time, successive governments have continued to take credit that progress is being made in reducing monetary poverty. The latest report, released by the World Bank on Poverty, Equity and Resilience Assessment (PERA) 2025, tells a different story of Pakistan currently being on a backward trajectory as the earlier progress in poverty has since been reversed.
This incident of risen poverty can be better understood as a breaking point rather than a sudden collapse. On the one hand, the pace in the decline of poverty had already been slowed down since 2015. On the other hand, the underlying structural fragilities, higher vulnerability, weak safety nets, human capital deficit and poor resilience continued to build up for years and eventually reached to a point where it could no longer sustained events like floods, Covid-19 and inflation. This led to a reversal in the poverty trend from 2018 onwards.
Fifty-seven per cent of the decline in the poverty rates is also mainly attributed to non-agricultural income – rise in informal and urban jobs, services and remittances that could not provide protection against shocks. This reveals that, even though poverty declined, the patterns of poverty reduction were not resilient or sustainable, and millions of people were still vulnerable to falling back into poverty due to any small shock.
The report only echoed what many had already warned but still critics would point out the statistical credibility of the results been shared through projections and microsimulations. It is argued that the updated poverty figures are not based on the most recent household survey data and thus, carries methodological limitations. While this is true, the results are consistent with the macro indicators since economic growth came from rise in informal but low-productivity jobs rather than structural and stable transformation. Such consumption-driven economic growth made prior gains unsustainable long before 2020
The microsimulations are sensitive to the assumptions, but they are not based on speculations and refined over the years. Yes, these projections may under or over-estimate poverty and therefore, this reversal should be taken as plausible scenario instead of measured fact based on reality. Even if the exact poverty numbers vary, they remain reliable enough to ring alarm bells as millions of people were vulnerable to fall back into poverty due to any small shock.
It is also worth noting that the measurement of poverty matters a lot and the selection of poverty line can significantly change the poverty headcounts, as reflected in the World Bank’s recently updated estimates. Under the revised international poverty threshold of $4.20 by the World Bank, the number of poor people increases to almost double the numbers under the national poverty line. Even though both measures are neither wrong nor contradictory, this may create confusion among people as well as policy makers without explaining a measurement purpose, especially when there is sharp difference in numbers.
The national poverty line is most useful for targeting programmes, and reflects domestic costs while international poverty line primarily gives global comparison. In case of Pakistan, both measures confirm the rise in poverty from the past years.
The difference between the new and old poverty threshold shows the vulnerability of households hovering just above the previous poverty line who may slipped below easily by inflation or any unforeseen shock. This is where the report brings the most important shift in framing the poverty as a question of household resilience instead of a static headcount measure. To what extent was the progress made in poverty sustainable or any single climate event or price fluctuation pushed families back into the poverty?
Unfortunately, the evidence suggests that the escape from poverty was precarious, and many households marginally did so. It is argued that any progress without building up resilience – the capability to absorb any climatic, political or economic shock – every crisis would reset the poverty clock. And in case of Pakistan, the public service systems have remained underperformed, subsidies continue to benefit mostly better-off than the poor and tax base remains narrow.
While the PERA 2025 provides an important evidence base, several areas deserve deeper exploration to complete the picture of poverty in Pakistan. One is the political economy of reform. The report rightly highlights what needs to be done – better targeting of subsidies, stronger safety nets, more investment in human capital – but lasting progress also depends on understanding why reforms so often stall. Elite capture, weak implementation capacity and fragmented governance have historically undermined well-intentioned initiatives.
Addressing these realities is essential if policy prescriptions are to move from paper to practice. Similarly, household surveys, in Pakistan as elsewhere, tend to under-report top incomes. This can blur the true scale of disparity, making the poor appear less poor and the middle class larger than it actually is. If inequality runs deeper than we measure, then poverty is not just about low incomes but about an economy tilted against mobility and fairness.
Finally, while recent crises such as Covid-19, inflation and the 2022 floods clearly accelerated poverty, these shocks exposed long-standing structural weaknesses that had already slowed progress after 2015. To prevent future reversals, poverty must be seen not as a temporary deviation caused by shocks, but as the predictable outcome of fragile systems and unaddressed vulnerabilities.
The writer is a research fellow at the Lahore School of Economics. She can be reached at: samqk11@gmail.com
