ISLAMABAD:
Poverty in Pakistan has surged to an 11-year high of 29 per cent, while income inequality has reached its highest level in 27 years, as people’s real incomes and consumption nosedived during the past seven years, according to an official survey released by Planning Minister Ahsan Iqbal on Friday.
Around 70 million people in Pakistan are now living in abject poverty based on the monthly poverty line of Rs8,484 — a minimum expenditure threshold that is needed to have very basic needs of life.
The preliminary report on poverty estimation for the fiscal year 2024-25 showed that there was a 32% increase in the poverty since 2018-19 when the country had the last poverty survey.
According to the findings, in 2019 the poverty ratio was 21.9%, which during the first year of the government of Prime Minister Shehbaz Sharif (2024-25) jumped to 28.9%. It is the highest level since 2014 when the poverty rate was recorded at 29.5%.
The situation of income inequality in society was more alarming, as the survey showed that inequality jumped to 32.7 – the highest ratio since 1998 when it was recorded at 31.1.
Pakistan has now officially the 21 years’ highest unemployment rate of 7.1%, highest poverty rate in 11 years and the highest inequality in 27 years, which are the direct outcomes of the poor policy choices by the ruling class.
The planning minister admitted that economic stabilisation policies under the IMF programme contributed to increase in poverty, particularly because of withdrawal of subsidies and exchange rate devaluation that led to massive increase in inflation. He said that the natural disasters and low economic growth were the other factors behind the surge in poverty.
It was also for the first time during the past 13 years that the poverty reduction trend has reversed, reinforcing the worst impacts of the government’s policies on the socio-economic lives of the people.
The poverty in rural areas disproportionately increased, rising from 28.2% to 36.2%. Urban poverty, though lower in level, also rose from 11% to 17.4%.
Iqbal said that poverty across provinces also increased. In Punjab, poverty increased from 16.5 to 23.3%, an increase of 41% within seven years. In Sindh, poverty jumped from 24.5% to 32.6%, showing a surge of one-third within seven years.
In Khyber-Pakhtunkhwa, poverty jumped from 28.7% to 35.3% -a surge of nearly one-fourth within a year. The situation in Balochistan was the worst where almost every second person lives in poverty. The ratio in the insurgency-hit province increased from 42% to 47% -an increase of 12.4%.
Security challenges disrupt livelihoods, limit access to markets and essential services, and increase household vulnerability and as a result, poverty has risen in Khyber-Pakhtunkhwa and Balochistan, disproportionately affecting the most vulnerable populations in these provinces, according to the report.
Real incomes fall
The details showed that the real monthly household income decreased from Rs35,454 in 2019 to just Rs31,127 in the last fiscal year, a reduction of 12% in seven years instead of showing any increase. As a consequence, the real monthly household expenses decreased from Rs31,711 to Rs29,980 — a reduction of 5.4%, according to the survey.
The nominal rise in income was outpaced by inflation, causing real incomes to fall, according to the survey.
Despite recent macroeconomic improvement, households experienced prolonged real income compression due to historically high inflation, energy price adjustments, exchange rate depreciation, and higher taxation, especially indirect taxes. These factors increased the cost of essential consumption while eroding purchasing power, according to the report.
The journey to economic progress was first disrupted in 2018 and then again in 2022 consumption led economic growth caused the economy to crash in the following year, said Ahsan Iqbal while giving reasons behind the sharp surge in poverty.
The cash handouts under the Benazir Income Support Programme are not the solution to the increasing poverty and there is a need to accelerate growth and wealth creation, said Iqbal while also advocating to strike a balance between achieving higher growth and maintaining fiscal stability.
Macroeconomic stabilization measures, such as fiscal consolidation, including higher taxation, adjustments in energy tariffs, and the rationalization of untargeted subsidies, together with the monetary tightening required to restore stability, compressed household disposable incomes, particularly among lower-middle and vulnerable groups not fully covered by social protection programs.
Provincial inequality
The income inequality also increased across the country. The inequality in Punjab increased from 28.4 to 32, Sindh recorded a rise from 29.7 to 35.9, Khyber Pakhtunkhwa moved from 24.8 to 29.4, and Balochistan, though starting from a lower base, rose from 21 to 26.5.
The report showed that labor market conditions remained weak. Large Scale Manufacturing stayed below pre-COVID levels, limiting formal employment recovery.
Growth has been largely output-driven rather than employment-intensive, according to the Planning Ministry. This jobless or low-quality growth constrained income recovery, it added.
Only nine million overseas Pakistanis are sending $40 billion remittances while the reset of 240 million population cannot have $40 billion worth of exports, said Ahsan Iqbal.
To a question about the role of the PML-N policies in pushing the poverty high, the Planning Minister said that it took at least three years to reverse the adverse implications of the PTI policies, hoping that the next phase of economic growth will reduce poverty.
He ruled out prematurely exiting the IMF programme but said that the government still has policy space to spur growth in agriculture and information technology sectors.
Iqbal said that the ongoing stabilization and reform process provides a foundation for future poverty reduction, but welfare gains will depend on sustained employment growth, real income recovery, and strengthened social protection coverage.
