Poverty 14.6% above official estimates: SPDC

Poverty in Pakistan has surged to 43.5%, according to the Social Policy and Development Centre (SPDC), indicating a far graver situation than official estimates by the Pakistan Bureau of Statistics (PBS) and the Planning Commission, which place poverty at 28.9%.

In its report, the SPDC, a policy research institute, underscores that urban households have borne the brunt of the increase, with poverty rising faster in cities than in rural areas.

The report attributes the 14.6% disparity between SPDC and official figures to differences in methodology. The PBS relies on a Cost of Basic Needs approach, updating historical poverty lines using the Consumer Price Index (CPI), which largely reflects the consumption patterns of better-off households. This approach often underestimates the real cost of living for low-income families and overlooks essential expenses such as healthcare and access to clean water.

In contrast, the SPDC adopts a calorific, or Food Energy Intake, approach, linking household spending to minimum calorie requirements for basic subsistence. This method uses adult-equivalent units, adjusting for household composition, and estimates separate thresholds for urban (2,230 calories) and rural (2,550 calories) populations. The resulting monthly poverty line for 2024-25 is Rs13,476 in urban areas and Rs10,283 in rural areas, significantly higher than the official Rs8,484.

The SPDC analysis, based on the Household Integrated Economic Survey (HIES) 2024-25, shows that national poverty has risen from 36.6% in 2018-19 to 43.5% in 2024-25. Urban poverty increased by 10 percentage points, from 32.1% to 42.1%, while rural poverty rose by five percentage points, from 39.3% to 44.3%. In total, approximately 27 million people have been pushed below the poverty line over six years.

Measures of income inequality, including the Gini coefficient and Palma ratio, indicate that wealth is increasingly concentrated among the richest segments, with urban areas witnessing sharper disparities between rich and poor households. These trends reflect a combination of political instability, high inflation, fiscal and external imbalances, and the lingering economic effects of the Covid-19 pandemic.

"SPDC uses the caloric approach for measuring poverty. This is often regarded as more suitable than the Cost of Basic Needs (CBN) approach, used by the government, especially in developing countries, because it concentrates directly on food requirements," SPDC Managing Director Muhammad Asif Iqbal told The Express Tribune.

He said the approach offers a more precise reflection of the consumption patterns of low-income populations, noting that poor households in Pakistan spend a disproportionately high share, more than half, of their total income on food. Therefore, the caloric approach better reflects their realities, he added.

He further said that, under the official method, poverty estimates are completely disconnected from the economy's performance, which runs counter to both economic theory and real-world experience. For instance, official data indicate that poverty fell consistently from 50.4% in 2005-06 to 21.3% in 2018-19, Iqbal emphasised.

The SPDC emphasises that official measures have structural shortcomings. Historical PBS data, at times, indicate declining poverty even during periods of weak economic growth, a trend inconsistent with economic theory and everyday realities. CPI-based adjustments mask local price differences and exclude costs that disproportionately affect low-income households, such as healthcare, clean water and other essential services.

The report concludes that Pakistan is facing a broad-based deterioration in living standards, particularly in urban areas, and underscores the urgent need for more accurate and credible measurement of poverty and inequality.

The SPDC recommends that policymakers use these updated figures to design targeted interventions to address urban poverty, improve access to basic services and reduce income disparities, ensuring that economic growth translates into tangible improvements for all citizens.