The World Bank’s latest report, Poverty Projections for Pakistan, has revealed a troubling surge in poverty rates in the country, with the poverty rate climbing to 25.3% in 2024, an increase of 7 percentage points from 2023. This rise has pushed an additional 13 million people below the poverty line, exacerbating the challenges faced by already vulnerable households.
The report underscores the disproportionate impact of rising poverty on poor households, noting significant welfare losses that push them deeper into deprivation. Utilizing a micro-simulation tool, the World Bank combined data from Pakistan’s recent digital census (2023) and national household surveys with high-frequency macroeconomic indicators. These projections consider factors such as inflation, labor market changes, social transfers, and remittances to model household consumption and welfare.
However, data challenges persist. The International Monetary Fund (IMF), in its Extended Fund Facility (EFF) staff report (October 2024), flagged significant shortcomings in Pakistan’s economic data, particularly in sectors contributing to about one-third of the GDP. The IMF has announced technical assistance to improve Government Finance Statistics (GFS) and the Producer Price Index, efforts echoed by Pakistani authorities in their Memorandum of Economic and Financial Policies.
The World Bank’s projections highlight an alarming trend. While a previous estimate pegged lower-middle-income poverty at 40.5% for fiscal year 2024, with 2.6 million additional people falling below the poverty line, the latest figures reveal a far grimmer picture. The total number of people pushed below the poverty line in 2024 has surged to 13 million, eclipsing earlier estimates by 10.4 million.
This stark reality challenges claims of economic improvement and underscores the deteriorating quality of life for the general population. The report calls for urgent action to mitigate the rising poverty levels, urging policymakers to prioritize the public’s welfare.
One proposed solution is to increase the budget allocation for the Benazir Income Support Programme (BISP) by Rs. 200 billion. However, experts caution that this additional funding should come from cutting non-essential expenditures rather than borrowing, which could further fuel inflation and worsen the economic plight of the poor.
The report also criticizes Pakistan’s reliance on indirect taxation, which disproportionately burdens lower-income groups. With indirect taxes accounting for 75-80% of revenue, the current fiscal policies fail to address the entrenched elite capture of resources. Despite rhetoric about cracking down on tax evasion, the government faces a revenue shortfall of Rs. 386 billion against its IMF-agreed targets for the first half of the fiscal year.
The ongoing economic challenges highlight the urgent need for structural reforms. These include reducing inefficiencies in state-owned enterprises, improving utility sector performance, and shifting to a more equitable tax system. Without meaningful reforms, public discontent will continue to grow, as the majority of government revenues come from lower-income groups while the benefits disproportionately favor the elite.
The World Bank’s report serves as a stark reminder of the deepening poverty crisis in Pakistan, urging policymakers to take immediate and sustained action to reverse the trend and prioritize the welfare of the country’s most vulnerable citizens.