World Bank Warns Poverty Rising Again in Pakistan, Calls for Urgent Reforms

The World Bank has released its flagship report, Reclaiming Momentum Towards Prosperity: Pakistan’s Poverty, Equity and Resilience Assessment, the first comprehensive evaluation of poverty and welfare dynamics in Pakistan since the early 2000s. The findings paint a sobering picture: while Pakistan made substantial progress in reducing poverty between 2001 and 2019, those gains are now at risk due to compounding crises and structural weaknesses.

From Success to Setback

Between 2001-02 and 2018-19, Pakistan’s poverty rate fell from 64.3% to 21.9%, thanks largely to steady economic growth and the expansion of non-agricultural employment. But progress stalled after 2020, as COVID-19, surging inflation, climate-related shocks such as the devastating floods of 2022, and macroeconomic instability pushed more families back into poverty.

The Bank warns that Pakistan’s consumption-driven growth model, which once delivered gains, has reached its limits. Without structural reforms, inequality will deepen, human capital development will lag, and growth will remain narrow and exclusionary.

Evidence Base: Two Decades of Data

The report draws on 25 years of household surveys, geospatial data, microsimulation models, and administrative datasets to evaluate poverty, welfare, and equity. It uses Pakistan’s official poverty line methodology for national analysis, while applying updated global thresholds (June 2025) for international comparisons.

New, survey-based estimates will be available once data from the Household Integrated Economic Survey (HIES) 2024-25 is published. Until then, projections are based on microsimulation models.

Key Drivers and Constraints

The report finds that poverty reduction since 2001 was largely driven by:

• A shift away from farm work toward low-productivity service jobs.

• Gains in non-agricultural labor income.

But structural transformation has been slow and uneven. Over 85% of jobs remain informal, productivity remains low across sectors, and women and young people are disproportionately excluded from the labor force.

Human Capital and Service Gaps

Pakistan faces severe human capital deficits:

• Nearly 40% of children are stunted due to malnutrition.

• One in four primary-aged children are out of school.

• Three out of four children in primary school cannot read and understand a simple story.

Public service delivery is also weak: in 2018, only 50% of households had access to safely managed drinking water, while 31% lacked safe sanitation facilities.

Inequality and Spatial Disparities

The report highlights persistent and systemic inequalities. Rural poverty is more than twice as high as urban poverty. Districts that lagged behind in the early 2000s remain disadvantaged today, reflecting spatially entrenched disparities. Rapid but unplanned urbanization has created “sterile agglomeration”—dense settlements with poor infrastructure and low living standards.

Quotes from the World Bank

Bolormaa Amgaabazar, World Bank Country Director for Pakistan, emphasized the urgency of reform:

“It will be critical to protect Pakistan’s hard-won poverty gains while accelerating reforms that expand jobs and opportunities—especially for women and young people.”

Christina Wieser, Senior Economist and lead author, added:

“Progress in poverty reduction is threatened by structural vulnerabilities. Expanding access to quality services, protecting households from shocks, and creating better jobs are essential to break cycles of poverty and deliver durable, inclusive growth.”

Four Pathways for Reform

The report outlines four priority areas to restore momentum:

1. Invest in people, places, and opportunities

   • Strengthen education, health, housing, water, and sanitation.

   • Close human capital gaps, especially for disadvantaged groups.

   • Empower local governments to deliver services effectively.

2. Build resilience to shocks

   • Expand and modernize social safety nets.

   • Ensure programs are responsive, inclusive, and adequately funded.

3. Adopt progressive fiscal reforms

   • Improve municipal finance.

   • Phase out inefficient subsidies that disproportionately benefit wealthier groups.

   • Prioritize spending on the poorest households.

4. Invest in timely data systems

   • Strengthen monitoring tools.

   • Improve targeting and tracking of resources.

   • Support evidence-based policymaking.

Looking Ahead

The World Bank concludes that Pakistan’s future prosperity depends on people-centered reforms that prioritize equity, resilience, and inclusion. The report urges policymakers to rethink the growth model, strengthen fiscal discipline, and ensure that investments in human and natural capital deliver long-term benefits.

By acting decisively, Pakistan can reclaim its poverty reduction momentum and build a more equitable and resilient path toward prosperity.