Pakistan Poverty Crisis Deepens as Jobs and Incomes Remain Under Pressure
Pakistan’s poverty rate has risen sharply in recent years, reversing much of the progress made during the first two decades of this century. According to the Pakistan Economic Survey 2025–26, the national poverty rate increased from 21.9 percent in 2018–19 to 28.9 percent in 2024–25. The increase means that poverty is no longer simply a concern associated with Pakistan’s poorest regions. It has become a national economic challenge affecting both rural and urban households.
The deterioration is particularly significant because Pakistan had made substantial progress in reducing poverty between 2001 and 2018. The World Bank estimates that the national poverty rate fell from 64.3 percent in 2001–02 to 21.9 percent in 2018–19. Much of that improvement came from rising labor incomes and the movement of workers from agriculture into low-skilled services. That model, however, has weakened considerably. Low productivity, limited investment and repeated economic shocks have made it increasingly difficult for households to improve their living standards.
The latest figures show that poverty has increased in both rural and urban Pakistan. Rural poverty rose from 28.2 percent in 2018–19 to 36.2 percent in 2024–25, while urban poverty increased from 11 percent to 17.4 percent. The provincial figures are also worrying, with poverty reaching 23.3 percent in Punjab, 32.6 percent in Sindh, 35.3 percent in Khyber Pakhtunkhwa and 47 percent in Balochistan.
These numbers matter because poverty is not simply a measure of household income. When families spend most of their earnings on food, electricity, transport and housing, they have little left for education, healthcare or investment in better skills. The result can be a cycle in which low incomes lead to low investment in human capital, which in turn limits access to better-paying jobs.
Inflation has played an important role in this deterioration. Pakistan has experienced repeated periods of high inflation, currency depreciation and rising energy costs. Although inflation has eased considerably from its recent peak and economic conditions have begun to stabilize, the damage to household purchasing power does not disappear immediately. The World Bank has noted that Pakistan’s poverty trends have been affected by COVID-19, the 2022 floods, macroeconomic instability and record inflation.
The deeper problem, however, is the lack of productive employment. Pakistan’s economy needs to create jobs at a much faster pace simply to absorb the growing working-age population. During his visit to Pakistan in February 2026, World Bank President Ajay Banga said the country needs to create between 2.5 million and 3 million jobs every year, or roughly 25 million to 30 million over the next decade. He described employment creation as a generational challenge.
That target will be difficult to achieve without a major improvement in the business environment. Private companies create most jobs, yet businesses continue to face high energy costs, complex regulations, limited access to finance and uncertainty over taxes and economic policy. Small and medium-sized enterprises are particularly important because they can create employment across cities and smaller communities, but many struggle to obtain affordable credit and expand beyond the informal economy.
Education and skills are another critical part of the problem. The World Bank has highlighted serious weaknesses in Pakistan’s human capital, including high rates of child stunting, children being out of school and poor learning outcomes among those who attend. The Pakistan Economic Survey has also reported a sharp decline in education spending, with expenditure falling to about 0.8 percent of GDP in FY2025.
Pakistan therefore needs to treat poverty reduction as an economic growth issue rather than only a social welfare issue. Cash assistance and social protection are necessary for families facing immediate hardship, but they cannot by themselves provide a lasting solution. The country needs more productive industries, competitive exports, reliable and affordable energy, better agricultural productivity and a business environment that encourages investment.
The power sector deserves particular attention. Expensive and unreliable electricity raises production costs, reduces industrial competitiveness and ultimately limits the number of jobs businesses can create. Banga has also identified power-sector reform as one of Pakistan’s most urgent near-term priorities.
There are signs that stabilization is beginning to improve some economic indicators. The World Bank reported that stronger activity in construction and logistics and lower food inflation helped reduce its projected national poverty estimate for FY2025 to about 22.2 percent, although it cautioned that these modelled estimates should not be confused with survey-based poverty figures. The newer Economic Survey data showing 28.9 percent poverty underline why the longer-term structural picture remains more important than short-term improvements.
Pakistan cannot reduce poverty sustainably without creating millions of productive jobs. The immediate task is therefore not simply to distribute more assistance but to build an economy in which businesses can invest, workers can earn rising incomes and young people can find productive employment. Without that shift, temporary economic stabilization may provide relief, but it will not reverse the deeper trend of rising poverty.
