Poverty rises to 28.9% despite economic recovery

Rural poverty at 36.2%, more than double urban rate of 17.4%; income inequality widens

KARACHI:

Pakistan's poverty rate has climbed to 28.9% despite signs of economic recovery and improved macroeconomic stability, highlighting disconnect between the headline growth figures and living standards for millions of households.

"Pakistan's poverty trends over the longer term show a significant decline until the latest round," stated the Pakistan Economic Survey 2025-26.

Based on the national poverty line estimated under the Cost of Basic Needs (CBN) approach, the poverty headcount fell from 50.4% in 2005-06 to 21.9% in 2018-19. Similar improvement was observed in both urban and rural areas, indicating broad-based gains in household welfare over time.

"This historical progress reflects improved access to public services and continued public efforts towards poverty reduction through the extension of social safety networks," the Economic Survey stated. "Latest estimates, however, indicate a reversal in this declining trend."

The national poverty headcount increased to 28.9% in 2024-25, compared to 21.9% in 2018-19. Poverty remained significantly higher in rural areas. Rural poverty increased from 28.2% to 36.2%, while urban poverty increased from 11.0% to 17.4% over the same period.

At the provincial level, poverty increased across all provinces. In 2024-25, poverty was estimated at 23.3% in Punjab, 32.6% in Sindh, 35.3% in Khyber-Pakhtunkhwa, and 47.0% in Balochistan. In 2018-19, the corresponding percentages were 16.5%, 24.5%, 28.7%, and 41.8%, respectively. Balochistan continued to record the highest poverty incidence, while Punjab remained the lowest among the four provinces.

The updated estimates also indicate a rise in inequality. The national Gini coefficient increased from 28.4 in 2018-19 to 32.7 in 2024-25. The increase was visible in both urban and rural areas. Urban inequality rose from 31 to 34.4, while rural inequality increased from 23.4 to 29.2. This suggests that the recent rise in poverty was accompanied by wider disparities in income distribution.

The findings come at a time when the government is touting economic stabilisation achievements, including a 3.7% GDP growth, lower fiscal deficits, stronger foreign exchange reserves and improved investor confidence.

Economists say the latest poverty figures suggest the benefits of stabilisation have yet to reach a large segment of the population, particularly in rural areas and among low-income households.

The survey showed that rural poverty stood at 36.2%, more than double the urban poverty rate of 17.4%, underlining persistent disparities between cities and the countryside.

The rise in poverty comes after years of economic shocks, including inflationary pressures, currency depreciation, floods and slower income growth. Although inflation has eased considerably from crisis levels, households continue to struggle with elevated food, energy and transport costs accumulated over recent years.

The government argues that social protection programmes have helped cushion the impact on vulnerable groups. Pro-poor expenditures reached Rs4.66 trillion during July-March FY26, compared with Rs4.25 trillion a year earlier, the government claimed. This shows an increase of 9.56%. The overall spending pattern reflects continued government focus on welfare protection, disaster response, public service delivery, and enabling infrastructure.

The Benazir Income Support Programme (BISP), the country's largest social safety net, received an allocation of Rs722.49 billion in FY26, with Rs540.27 billion disbursed during the first nine months of the fiscal year. Social security and welfare spending increased to Rs822.21 billion, while disaster-related expenditures rose sharply to Rs224.92 billion amid climate-related challenges and recovery efforts.

Despite the rise in poverty, the survey noted improvements in several social indicators. School attendance, literacy levels, internet access, immunisation coverage, sanitation facilities and access to cleaner fuels all improved between 2018-19 and 2024-25.

Analysts argue that while macroeconomic stabilisation is a necessary prerequisite for sustainable growth, stronger job creation, productivity gains and investment are required to meaningfully reduce poverty levels.

The finance minister acknowledged the situation and stated that traditional economic indicators were not ensuring job growth. He added, "We need a paradigm shift in the age of AI. India, which we all praise for its development, is being criticised for jobless growth," he stated.

Sustainable Development Policy Institute (SDPI) Executive Director Dr Abid Qaiyum Suleri said the Economic Survey reveals Pakistan managed to move from balance-of-payments crisis to a fragile recovery. However, the poverty numbers show that stabilisation has not yet reached the common people.

Households are still carrying the accumulated cost of inflation, floods, energy prices and weak real incomes. BISP and other welfare programmes have prevented deeper distress, but they remain a cushion, not a route out of poverty. The increased inequality numbers are an indication of widening gap between the haves and have-nots, he said.

"Through the budget, the government should try to support initiatives that link cash support with jobs, nutrition, schooling, climate-resilient rural livelihoods and inflation-sensitive benefits. Otherwise, Pakistan may report better macro indicators while millions remain poor, more vulnerable and less confident in the promise of recovery," added Suleri.

AHL Head of Research Sana Tawfiq said Pakistan's latest poverty figures suggest that while economic conditions have shown signs of stabilisation, the benefits of recovery have not yet been experienced evenly across society.

With poverty estimated at around 28.9%, the key challenge is ensuring that economic growth translates into improved living standards, stronger employment opportunities, and higher household incomes, she said. "The current situation highlights the importance of continued attention to social welfare, education, healthcare, and workforce development so that a larger share of the population can participate in and benefit from economic progress," said Tawfiq.