Pakistan remains classified as a lower-middle-income country by the World Bank for FY2026, allowing access to concessional financing. Despite this, the country faces challenges in poverty reduction, with a Gross National Income per capita of around 1,430 US dollars in 2024. The nation’s poverty levels are on the rise again after years of gradual improvement, highlighting systemic issues.
The root causes of Pakistan’s poverty reversal include an economy with insecure job opportunities, inflation outpacing wage growth, and a rural sector left behind in development planning. The country’s fiscal priorities have focused on debt servicing and defense spending rather than crucial sectors like health and education. Pakistan’s persistent lower-middle-income status reflects its inability to boost productivity and human capital.
Poverty in Pakistan has surged in recent years, with about 40.5 percent of the population living below the poverty line in FY2024. Rural poverty stands at 36.2 percent, exacerbating inequality with a widening wealth gap. Balochistan faces acute poverty challenges, with 47 percent below the poverty line and low literacy rates. The disparity between rural and urban poverty rates underscores the economic vulnerabilities of rural communities.
The country’s poverty crisis is exacerbated by a lack of secure employment opportunities, with over 85 percent of jobs being informal. Economic mismanagement has led to inflation eroding real incomes, particularly affecting vulnerable households. Pakistan’s fiscal constraints limit investments in poverty alleviation, with a significant portion of the budget allocated to debt servicing and defense, neglecting crucial social sectors.
Despite receiving external financial support, Pakistan has struggled to address structural weaknesses, such as low-productivity employment and inadequate public services. The country’s heavy reliance on borrowing and imports highlights the need for sustainable economic transformation. The central issue lies in the distribution and governance of resources, with a lack of emphasis on human development and social protection.
