Economic stabilisation without social progress
The writer is a PhD scholar
The Economic Survey 2025-26 shows a considerable decline in Pakistan's socioeconomic situation between 2018-19 and 2024-25. Poverty rose from 21.9% to 28.9%, signifying a 32% increase in the poverty headcount, implying that a higher proportion of the population is unable to fulfil basic living standards. Income inequality also deteriorated, with the Gini coefficient rising from 28.4 to 32.7, representing a 15% increase and suggesting a more uneven distribution of income.
Persistently high inflation has been a major contributing element to this downturn. The Consumer Price Index (CPI) increased by 125%, rising from 117.18 in 2018-19 to 264.03 in 2024-25, indicating that the overall price level more than doubled throughout the period. As prices climbed faster than incomes, household buying power fell dramatically. As a result, according to the planning commission, real income declines by 12% from Rs35,454 to Rs31,127, while real consumption also declines by 5% from Rs31,711 to Rs29,980, during the same period.
Overall, rising inflation has reduced real earnings and consumption, contributed to higher poverty rates and increased income inequality. These patterns point to a reduction in household welfare and living standards, particularly for low- and middle-income groups, emphasising the need for policies aimed at price stability, income growth, job development and social protection.
Pro-poor spending remained an essential policy tool for safeguarding vulnerable communities and promoting inclusive growth. As per economic survey, pro-poor expenditure rose from Rs3,099 billion in 2018-19 to Rs4,256 billion in 2024-25, a 37% rise. Despite an increase in pro-poor spending, poverty and inequality have deteriorated during the same period. This reflects that the increase in spending was insufficient to compensate for the negative consequences of high inflation, slower economic growth, falling real earnings and diminished buying power. The substantial increase in consumer prices reduced the actual value of government spending and household incomes, restricting the efficiency of social welfare programs.
The labour market statistics paint a dismal picture. Pakistan's population grew from 216.1 million in 2018-19 to 252.1 million in 2024-25, a 17% rise. This population boom was followed by a considerable expansion of the labour force, which increased by 21% from 68.8 million to 83.1 million. The number of employed people likewise climbed by 21%, from 64.0 million to 77.2 million.
Despite the growth in employment, unemployment grew by 25%, from 4.7 million unemployed people to 5.9 million. This shows that employment creation was insufficient to meet the rising labour force. As a result, the number of persons seeking job but unable to obtain it rose over time.
Even among those who stayed working, rising prices reduced the real worth of income, lowering living standards and financial stability. These data indicate that job creation alone was insufficient to enhance welfare outcomes because employment growth did not coincide with adequate real income growth. High inflation, diminishing buying power and growing unemployment harmed household welfare, putting more families below the poverty line and widening income gaps.
Despite the severity of these socioeconomic challenges, the Federal Budget 202627 falls short of providing a comprehensive strategy to address the underlying causes of rising poverty, inequality and declining household welfare. The budget places a strong emphasis on revenue mobilisation and fiscal consolidation, but it offers limited measures to safeguard real incomes, create significant job opportunities or promote widespread economic growth. Similarly, labour-intensive industries like manufacturing and SMEs which could absorb the expanding labour force and lower unemployment are not given much attention. The budget is unlikely to reverse the deteriorating trends in poverty, inequality and household welfare without focused interventions to reduce inflation, boost productivity, create high-quality jobs and bolster social safety nets.