ISLAMABAD:
In Pakistan, poverty has reached 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 have fallen over the past seven years, according to an official survey released Friday by Planning Minister Ahsan Iqbal.
In Pakistan, around 70 million people now live in abject poverty, based on the monthly poverty line of Rs 8,484 – a minimum spending threshold necessary to meet their most basic living needs.
The preliminary poverty estimate report for the financial year 2024-25 showed that there has been a 32 per cent increase in poverty since 2018-19, when the country conducted the last poverty survey.
According to the results, in 2019, the poverty rate was 21.9%, which in 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 soared 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 (7.1%), the highest poverty rate in 11 years and the highest inequality in 27 years, which are direct consequences of the poor political choices of the ruling class.
The Minister of Planning admitted that economic stabilization policies carried out under the IMF program have contributed to the increase in poverty, in particular because of the withdrawal of subsidies and the devaluation of the exchange rate which led to a massive increase in inflation. He said natural disasters and low economic growth were the other factors behind the increase in poverty.
It is also for the first time in the last 13 years that the trend of poverty reduction has been reversed, thus reinforcing the worst impacts of government policies on the socio-economic life of the population.
Poverty in rural areas increased disproportionately, from 28.2% to 36.2%. Urban poverty, although at a lower level, also increased from 11% to 17.4%.
Iqbal said poverty in the provinces has also increased. In Punjab, poverty increased from 16.5% to 23.3%, an increase of 41% in seven years. In Sindh, the poverty rate rose from 24.5% to 32.6%, an increase of a third in seven years.
In Khyber-Pakhtunkhwa, the poverty rate rose from 28.7% to 35.3%, an increase of almost a quarter in one year. The situation in Balochistan is the worst, where almost one in two people live in poverty. The ratio in the insurgency-affected province rose from 42% to 47%, an increase of 12.4%.
Security concerns disrupt livelihoods, limit access to markets and essential services, and increase household vulnerability. As a result, poverty increased in Khyber-Pakhtunkhwa and Balochistan, disproportionately affecting the most vulnerable populations in these provinces, the report said.
Real incomes fall
Details showed that real monthly household income fell from Rs35,454 in 2019 to just Rs31,127 in the last fiscal year, a reduction of 12% in seven years instead of showing any increase. As a result, 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 has been outpaced by inflation, leading to a decline in real income, the survey found.
Despite recent macroeconomic improvement, households have experienced a prolonged compression of real income due to historically high inflation, energy price adjustments, exchange rate depreciation and higher taxation, particularly indirect taxes. These factors have increased the cost of essential consumer goods while eroding purchasing power, the report said.
The path to economic progress was disrupted for the first time in 2018 and then again in 2022, consumption-led economic growth caused the economy to collapse in the following year, Ahsan Iqbal said while explaining the reasons for the sharp increase in poverty.
Cash handouts under the Benazir Income Support Scheme are not the solution to growing poverty and there is a need to accelerate growth and wealth creation, Iqbal said while also pleading for striking 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 untargeted subsidies, as well as monetary tightening needed to restore stability, have compressed disposable household incomes, particularly among middle and vulnerable groups who are not fully covered by social protection programs.
Provincial inequality
Income inequality has also increased across the country. Inequality in Punjab increased from 28.4 to 32, Sindh recorded an increase from 29.7 to 35.9, Khyber Pakhtunkhwa increased from 24.8 to 29.4 and Balochistan, although starting from a lower base, increased from 21 to 26.5.
The report shows that labor market conditions remain weak. Large-scale manufacturing remained below pre-COVID-19 levels, limiting the recovery of formal employment.
According to the Planning Ministry, growth has been largely focused on production rather than employment. This jobless or poor-quality growth has limited income recovery, the report adds.
Only nine million overseas Pakistanis send $40 billion in remittances, while resetting 240 million cannot generate exports worth $40 billion, Ahsan Iqbal said.
To a question on the role of PML-N policies in increasing poverty, the planning minister said it took at least three years to reverse the negative implications of PTI policies, hoping that the next phase of economic growth will reduce poverty.
He ruled out a premature exit from the IMF program, but said the government still had policy space to boost growth in the agriculture and information technology sectors.
Iqbal said the ongoing stabilization and reform process provides a basis for future poverty reduction, but welfare gains will depend on sustained employment growth, a recovery in real incomes and strengthened social protection coverage.
