Pakistan’s Poverty Surge: New Report Highlights Economic Struggles and Recovery Hopes

A new World Bank report reveals a significant increase in poverty in Pakistan, rising from 21.9% in 2018/19 to 25.3% in 2022/23, largely due to COVID-19, inflation, and climate disasters. However, projections indicate a potential decline to 18.7% by 2025, provided economic recovery efforts are sustained. The report underscores regional disparities, inflation’s disproportionate impact on the poor, and the need for robust social protection measures.

Pakistan’s economic challenges have taken a toll on its population, with poverty rates witnessing a sharp increase in recent years. A newly released report, Poverty Projections for Pakistan: Nowcasting and Forecasting, published by the World Bank’s Poverty and Equity Global Department, sheds light on the impact of economic shocks, inflation, and disasters on household welfare. While the findings are alarming, they also offer a glimmer of hope, predicting a potential decline in poverty by 2025 if economic recovery measures remain on track.

A Growing Crisis: How Poverty Rates Have Spiked

According to the report, 21.9% of Pakistan’s population lived below the national poverty line in 2018/19. However, the situation has deteriorated significantly due to multiple crises, including the COVID-19 pandemic, catastrophic floods in 2022, and record-breaking inflation. By 2022/23, the poverty rate surged to 25.3%, pushing an estimated 13 million more people into poverty.

The study underscores that poor households have been disproportionately affected. Inflation has eroded purchasing power, particularly in rural areas where many depend on agriculture and informal labor. The economic downturn has exacerbated vulnerabilities, making it harder for families to recover from financial shocks.

Data-Driven Forecasting: Understanding the Trends

The report adopts a microsimulation tool that integrates high-frequency macroeconomic indicators with household survey data to predict poverty trends. Since official poverty data has not been updated since 2019, this approach helps policymakers estimate real-time welfare conditions.

The model takes into account several factors,

Economic sector performance: Growth and employment changes in 11 key sectors, including agriculture, manufacturing, and services.

Inflation’s impact on different income groups: Poor households spend a higher proportion of their income on food, making them more vulnerable to price hikes.

Social transfers and labor market trends: Wage Changes, employment levels, and government aid programs.

Regional Disparities: Who Is Hit the Hardest?

The effects of rising poverty are not uniform across Pakistan. The report highlights regional disparities, showing that some provinces have been hit harder than others:

Balochistan and Khyber Pakhtunkhwa (KPK) saw the most significant increases, with poverty rates surpassing 40% and 30%, respectively.

Punjab and Sindh experienced fluctuations, but their poverty levels have somewhat stabilized compared to other regions.

Urban vs. Rural Divide: Urban households suffered more from inflation-driven cost-of-living increases, while rural populations faced economic distress due to climate disasters and lower agricultural productivity.

Can Pakistan Reverse the Trend? Forecasting a Possible Recovery

Despite the grim statistics, the report suggests that poverty levels could decline to 18.7% by 2025 if economic recovery measures are effectively implemented. Key drivers of this potential improvement include:

Economic stabilization policies that curb inflation and restore market confidence.

Stronger labor markets with increased employment opportunities.

Continued social safety nets such as the Benazir Income Support Program (BISP), ensuring financial aid reaches those in need.

Policy Actions: What Needs to Be Done?

To combat rising poverty and accelerate economic recovery, the report recommends the following policy interventions:

Expand Social Protection Programs: Strengthening initiatives like BISP can provide immediate relief to struggling households.

Boost Labor-Intensive Sectors: Investing in agriculture, construction, and manufacturing can generate more jobs and improve household incomes.

Control Inflation and Food Prices: Implementing subsidies and price regulations for essential goods can prevent further declines in purchasing power.

Improve Data Collection: Conducting more frequent household surveys will enable better tracking of poverty trends and inform targeted policy responses.

Final Thoughts: A Path Forward for Pakistan

The Poverty Projections for Pakistan report serves as a crucial reminder of the economic hardships millions face. While crises and financial instability have marked the past few years, the report’s findings emphasize that strategic interventions and policy-driven actions can lead to sustainable poverty reduction.

With inflation control, employment growth, and targeted welfare programs, Pakistan has an opportunity to reverse the rising poverty trend and foster long-term economic resilience. As the country navigates this critical period, proactive governance and data-driven policymaking will be essential in shaping a more equitable and prosperous future.