ISLAMABAD:
Poverty in Pakistan has risen to an 11-year high of 29 percent, while income inequality has reached its highest level in 27 years as people’s real incomes and consumption fell sharply over the past seven years, according to an official survey released by Planning Minister Ahsan Iqbal on Friday.
About 70 million people in Pakistan now live in abject poverty based on the monthly poverty line of Rs 8,484. – a minimum expenditure threshold necessary to have very basic needs in life.
The preliminary poverty estimation report for the financial year 2024-25 showed that there was a 32% increase in poverty since 2018-19, when the country had its last poverty survey.
According to the findings, the poverty rate in 2019 was 21.9%, which during the first year of Prime Minister Shehbaz Sharif’s government (2024-25) jumped to 28.9%. This 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 rose to 32.7 – the highest ratio since 1998 when it was recorded at 31.1.
Pakistan now officially has the highest unemployment rate in 21 years at 7.1%, the highest poverty rate in 11 years, and the highest inequality in 27 years, which are the direct results of the bad policy choices of the ruling class.
The Planning Minister admitted that economic stabilization policies under the IMF program contributed to increasing poverty, especially due to withdrawal of subsidies and exchange rate devaluation that led to massive increase in inflation. He said natural disasters and low economic growth were the other factors behind the rise in poverty.
It was also for the first time during the last 13 years that the trend of poverty reduction has reversed, reinforcing the worst consequences of the government’s policies on the socio-economic life of the population.
Rural poverty increased disproportionately, rising from 28.2% to 36.2%. Although urban poverty was lower, it also increased from 11% to 17.4%.
Iqbal said poverty across provinces also increased. In Punjab, poverty rose from 16.5 to 23.3%, a 41% increase within seven years. In Sindh, poverty rose from 24.5% to 32.6%, showing an increase of one-third within seven years.
In Khyber-Pakhtunkhwa, poverty rose from 28.7% to 35.3% – an increase of almost a quarter within a year. The situation in Balochistan was the worst, where almost every second person lives in poverty. The share in the insurgency-hit province rose 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 increased in Khyber-Pakhtunkhwa and Balochistan, disproportionately affecting the most vulnerable populations in these provinces, according to the report.
Real income falls
The details showed that real monthly household income fell from Rs35,454 in 2019 to just Rs31,127 in the last financial year, a reduction of 12% in seven years instead of showing any increase. As a consequence, real monthly household expenditure fell from Rs31,711 to Rs29,980 – a reduction of 5.4%, according to the survey.
The nominal increase in income was overtaken by inflation, causing real incomes to fall, according to the survey.
Despite the recent macroeconomic improvement, households experienced prolonged real income compression due to historically high inflation, energy price adjustments, exchange rate depreciations 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, Ahsan Iqbal said while giving the reasons for the sharp rise in poverty.
The cash handouts under Benazir’s income support program are not the solution to rising poverty and there is a need to accelerate growth and wealth creation, Iqbal said, while also advocating a balance between achieving higher growth and maintaining fiscal stability.
Macroeconomic stabilization measures, such as fiscal consolidation, including higher taxation, energy tariff adjustments, and rationalization of non-targeted subsidies, together with the monetary tightening required to restore stability, compressed household disposable incomes, especially among lower-middle and vulnerable groups not fully covered by social protection programs.
Provincial inequality
Income inequality also increased across the country. Inequality in Punjab rose from 28.4 to 32, Sindh registered an increase from 29.7 to 35.9, Khyber Pakhtunkhwa moved from 24.8 to 29.4 and Balochistan, although starting from a lower base, rose from 21 to 26.5.
The report showed that labor market conditions remained weak. Large-scale manufacturing remained below pre-COVID-19 levels, limiting the formal recovery of employment.
Growth has been largely output-driven rather than employment-intensive, according to the Ministry of Planning. This growth in unemployment or low quality limited the income recovery, it added.
Only nine million overseas Pakistanis send $40 billion in remittances, while the reset of 240 million residents cannot export worth $40 billion, Ahsan Iqbal said.
Asked about the role of PML-N policies in pushing poverty high, the planning minister said it took at least three years to reverse the negative impact of PTI policies, hoping that the next phase of economic growth will reduce poverty.
He ruled out leaving the IMF program prematurely, but said the government still has policy space to spur growth in the agriculture and information technology sectors.
Iqbal said the ongoing stabilization and reform process lays the foundation for future poverty reduction, but welfare gains will depend on sustained employment growth, real income recovery and strengthened social protection coverage.
