ACCORDING to the World Bank’s new poverty estimates, 44.7 per cent of Pakistan’s population (around 110 million) now lives in poverty. The proportion of people living in extreme poverty has risen from 4.9pc to 16.5pc. This revision, based on revised threshold, does not take into account the fallouts from the Covid-19 pandemic, the 2022 floods, and recent years’ phenomenal spike in cost of living, that may have pushed more people into poverty.
Meanwhile, per capita income has increased to $1,824 in FY25. But this rise conceals worsening income disparity across the country. These aren’t just statistics; they are a reflection of policy choices and an indictment of the country’s economic direction. It shows that our economic model is broken, necessitating a complete rethink of our economic strategy to fighting poverty.
Successive governments have poured billions into subsidies and relief programmes such as the Benazir Income Support Programme (BISP), while neglecting growth, job creation, human development, and rural development. Poverty in Pakistan is not simply rising; it is being manufactured and maintained through decisions that entrench inequality and suppress opportunity.
BISP has played a crucial role in Pakistan’s social safety net by providing financial assistance to low-income families and vulnerable groups since 2008. In FY26, BISP allocation has been increased by 20pc to Rs 722bn (0.5pc of GDP) to expand coverage to 10m families. The quarterly stipend will increase from Rs13,500 to Rs14,500. While the government is striving to expand beneficiary coverage and improve transparency in fund distribution, the overall poverty reduction strategy needs a serious rethink, given limited fiscal space and the low-growth, low-investment trap.
Poverty in this country is the outcome of deliberate policy choices, neglect and systemic flaws.
Broadly speaking, the government needs focused policies to address critical issues directly affecting the public. The FY26 budget was directed at the IMF, business elites and government employees. There was no vision, strategy, or action plan to address economic stagnation, unemployment, poverty, inequality, or the country’s dismal state of human development.
Poverty in Pakistan is not just accidental. It is a consequence of deliberate policy choices, neglect and systemic flaws. For example, our farmers incurred Rs2.2 trillion losses in wheat production alone this year, jeopardising food security and reducing rural incomes. Agriculture, which accounts for 23pc of GDP, employs 37pc of the labour force, and contributes 60pc to export earnings, has been hit hard by climate shocks, plummeting prices, policy missteps and state neglect. Crop production fell by 13.5pc in FY25: cotton by 30.7pc, maize by 14.7pc, and wheat by 8.9pc. Fertiliser shortages during sowing seasons, removal of wheat support prices under IMF pressure, and abandonment of commodity procurement left farmers exposed to market volatility and exploitation by middlemen. Instead of ensuring a smooth policy transition and putting in place an alternative market mechanism to protect farmers, the government simply backed off. This underscores the lack of planning and blind implementation of IMF advice.
In a painful example of fiscal irresponsibility, the government has been increasing salaries and benefits of ministers, legislators, judges and bureaucrats. In a country scrambling for aid and barely managing debt repayments, such extravagance reflects a shocking disregard for the hardships faced by ordinary Pakistanis.
Likewise, our tax system perpetuates inequality. Salaried individuals contributed around Rs555bn in FY25, 51pc more than last year. Meanwhile, large retailers, landlords, speculators and grey-market earners remain untouched. The FBR’s Tajir Dost Scheme raised a mere Rs4m, against a Rs50bn target. Eminent economist Dr Hafeez Pasha estimates that the average real income of salaried individuals has declined by 30pc due to inflation and aggressive taxation.
Beyond the cynicism, let’s look at the global efforts to end extreme poverty, and to understand what works, and what doesn’t. Africa’s reliance on foreign aid offers a cautionary tale. Despite receiving billions in development assistance annually over decades — $53.5bn in 2022 alone — African countries are home to three-quarters of the world’s poor. Sub-Saharan Africa still has the highest number of people living in extreme poverty: 411m in 2023, 45pc up from 1990. Foreign aid has failed to eradicate poverty, highlighting the limitations of externally funded relief without structural reforms. Instead, Africa is drowning in debt.
In contrast, China, India and many Latin American countries pulled hundreds of millions out of poverty through sustained economic growth, institutional reforms and targeted support. China combined broad-based economic transformation with targeted assistance to disadvantaged regions and households, starting with agricultural reforms and later developing labour-intensive industries. India, the world’s fastest growing major economy over the last decade, more than doubled its GDP from $2.1tr in 2015 to $4.3tr in 2025, while investing in basic infrastructure such as toilets, clean water and electricity to uplift rural communities. Latin American countries, too, made significant progress by strengthening institutions, reducing inequality, and adopting sound policy frameworks.
Meanwhile, during the last three years, Pakistan has experienced negative per capita growth with GDP growth rate of -0.5pc in FY23, 2.5pc in FY45, and an estimated 2.68pc in FY25. Stabilisation without growth is becoming the country’s new normal and we can no longer afford it. It only exacerbates unemployment, poverty and inequality. With inflation easing and commodity sectors underperforming, we must use both fiscal and monetary policies to boost private investment and stimulate growth.
The 2023 digital census has shown startling gaps in literacy in rural Sindh, Balochistan and KP. Likewise, healthcare lacks adequate infrastructure and resources. Within provinces, there are substantial disparities between urban and rural areas, and between different districts. The government must focus on improving development outcomes in the districts that have the lowest development indicators.
The nations that have seen the most dramatic improvements in poverty reduction and other measures of human well-being have all focused on growth, economic reforms and targeted social protection policies. Pakistan must learn from these lessons. This will require sincere political will, a strong policy focus and coordination amongst the different tiers of government.
The writer is the author of The Shady Economics of International Aid. He is a former senior adviser of the IMF and ex-chief economist of the SBP.
dr.saeedahmed1@hotmail.com
Published in Dawn, August 1st, 2025