The World Bank on Tuesday released a report noting Pakistan’s poverty rate had begun to climb from 2020 after a steady decline from 2001-2019, adding “compounded shocks” had raised it to a projected 25.3% in 2023-24.
The report, “Reclaiming Momentum towards Prosperity: Pakistan’s Poverty, Equity and Resilience Assessment,” is based on 25 years of official household surveys in the country and marks the first comprehensive evaluation of poverty and welfare trends in the country since the early 2000s. It calls for bold, sustained, and people-centered reforms to reduce poverty, strengthen resilience, and protect vulnerable populations.
Addressing a press briefing, World Bank Country Director Bolormaa Amgaabazar said the poverty level in Pakistan has increased by 7% over the past three years. “Poverty rate in 2022 was 18.3% and increased to 25.3% in 2024-25,” she said, noting it had declined from 64.3% in 2001 to 21.9% in 2018 before climbing back up. A core reason for the reversal, she said, was the COVID-19 pandemic of 2020. “Compounding crises—COVID-19, economic instability, devastating floods, and record-high inflation—have further exposed systemic weaknesses, leaving many in low-productivity activities and unable to cope with these challenges,” read the report.
Both Amgaabazar and the report note that the observed progress in poverty reduction is largely due to the expansion of male off-farm economic opportunities in the informal sector and the increase in out-migration and associated remittances, with non-farm labor income being the primary driver. In general, she said, Pakistanis’ income only increased by 2-3% between 2011 and 2021.
The report cites low productivity across sectors as limiting income benefits, stalling income growth. The diminishing impacts of labor incomes and poor public service provision have prevented resilience, creating a large pool of the population just above the poverty line and vulnerable to shocks. “The systemic weaknesses of the growth model are exacerbated by deep-rooted inequalities of opportunity, political instability, elite capture, and vulnerability to climate risks.”
“85% of people work in low-income sectors and 95% work in informal ones,” said the global lender’s country director. According to the report, geographic inequalities are a critical challenge, with rural areas remaining more than twice as poor as urban areas (28.2% vs. 10.9%) and the poverty rate in Balochistan standing at 42.7%. “Urbanization has failed to achieve anticipated productivity gains because of inadequate planning, infrastructure, and services in urban and peri-urban areas,” it states, adding districts that lagged decades ago remain behind today.
Proposals
The lender has proposed several “bold” policy reforms to address structural imbalances, prevent sliding back into poverty during shocks, and tackle the persistent challenges in remote areas. It stressed that safety nets such as the Benazir Income Support Program cannot substitute for structural policy shifts that address the root causes of poverty. It has suggested four pathways that, in combination, offer a comprehensive roadmap for reversing Pakistan’s stalled progress and creating sustainable prosperity for all citizens.
The first pathway calls for strategic investments in people, places, and access to opportunities by addressing the human capital crisis, investing in public services, creating new opportunities, and strengthening local governance, starting in disadvantaged and remote districts. These efforts, it stresses, must coincide with strengthened accountability via progressive implementation of devolution to local governments, improved processes for public sector appointments, and increased government transparency through enhanced digitization.
The second pathway focuses on building resilience by enhancing the responsiveness of social safety nets like BISP. The third critical pathway addresses financial constraints by prioritizing progressive fiscal interventions for the bottom 40% of households, despite limited fiscal space. This requires balancing optimal tax policy to promote growth while reducing the burden on the poorest segments of society, enhancing municipal financing mechanisms, and eliminating inefficient subsidies that disproportionally benefit wealthier households.
Finally, the fourth pathway seeks the development of better data systems through a robust statistical infrastructure that produces accessible, high-frequency, and granular data to enable evidence-based policymaking necessary to ensure these reforms achieve their intended impact.