Pakistan's poverty conundrum

The World Bank’s 2025 assessment delivers a sobering reality check: In 2025, the extreme poverty rate in Pakistan, measured by the World Bank’s $3.00/day poverty line, is 16.5%. This is a significant increase from the previous 4.9% under the old $2.15/day benchmark.

The overall poverty rate, using a $4.20/day threshold, is now 44.7%, according to the World Bank. Likewise, the latest Multidimensional Poverty Index (MPI) report (2019-2020) from the Planning Commission of Pakistan indicates a significant poverty rate in the country. The MPI measures poverty through various deprivations, including education, health, and living standards. 

As of the latest report, over 30.5% (three out of ten people) of the population is considered multi-dimensionally poor.

On the contrary, the regional poverty landscape presents both inspiration and cautionary tales, with South Asia’s diverging trajectories. On the one hand, China’s remarkable achievement of reducing extreme poverty below 1.0% through precision targeting shows what’s possible when political will meets systematic execution. However, its poverty rate at the World Bank’s benchmark of $6.85/day is projected to fall to 10.5% and 9.2%, respectively, in 2025 and 2026, while the World Bank projects a continued decline in its poverty rate in 2026.

In Bangladesh, the extreme poverty rate is projected to rise to 9.3% in fiscal year 2025, up from 7.7% in the previous year, according to The World Bank. This increase is expected to push an additional three million people into extreme poverty, defined as living on less than $2.15%, according to the World Bank.

Bangladesh is fighting its’ poverty war through its garment industry boom and microfinance revolution, proving that small-scale solutions can have large-scale impacts. However, Nepal has achieved a remarkable reduction in poverty over the past decade, with fewer than 2.2% living below the poverty line. However, progress on poverty reduction remains threatened by economic downturns and climate disasters.

Meanwhile, Pakistan’s 42.4% poverty rate (national line) tells a story of unfulfilled potential. While federal programmes under the flagship BISP have thrown lifelines to millions, they’ve become victims of their own success — overstretched, overfunded with lack of transformational, poverty graduation approaches, trying to plug holes in a sinking ship with golden resources instead of pulling people out of vicious quagmire of extreme poverty with time-tested graduation approaches.

Amid this challenging landscape, where poverty remains a persistent hurdle, we have, nonetheless, shining examples that have been quietly rewriting the playbook on economic uplift and omitting their mention will be akin to prejudice. As an age-old adage goes, where there’s a will, there’s a way — the Pakistan Poverty Alleviation Fund (PPAF), a public-private entity, stands as a testament to this adage. It surely deserves accolades, as the entity has supported millions of households in the country’s most deprived regions, leveraging innovative financial inclusion programs to open doors for the underserved.

The Pakistan Economic Survey 2025 highlights a community-driven, poverty graduation model as a key to sustainable poverty reduction. Moving beyond temporary aid, the approach empowers individuals through vocational training, financial literacy and business advisory services. It especially uplifts women, transforming them into entrepreneurs. The integrated model — combining interest-free loans, asset transfers and skills training — enables long-term self-reliance. Inspired by global best practices and aligned with Pakistan’s Sustainable Development Goals, it aims to shift households from welfare to economic independence, preventing dependency before it begins and turning barriers into opportunities for lasting transformation.

A recent analysis of Benazir Income Support Programme (BISP) beneficiaries reveals that out of 334,596 households, 108,043 (32%) have now turned the corner, reaching a position where they can graduate from BISP’s social safety net. This milestone, as highlighted in the survey, stands as living proof of the tangible and sustained outcomes achieved through PPAF’s comprehensive poverty reduction framework. The survey details that it has formed more than 171,000 Community Institutions nationwide, with 63% of women members, ensuring gender-inclusive growth.

In financial inclusion, the entity has disbursed over 3.5 million interest-free loans (56% to women), totaling Rs129.19 billion, and empowering low-income individuals to stand on their own feet by launching or expanding small enterprises. The organisation has also supported 963 SMEs, including those led by women and transgender entrepreneurs, fostering inclusive economic participation.

Herein lies the challenge. The PPAF’s remarkable achievements remain islands of excellence in a sea of need, like a drop in the ocean against Pakistan’s vast poverty landscape. Now, what we need to do is to strengthen country’s efficient institutions more and help them bridge the fundamental gaps: the absence of a comprehensive, multidimensional poverty database to guide targeted interventions. ‘Nemo dat quod non habet’ (you cannot give what you do not have): without accurate measurement, effective management remains impossible. Pakistan continues to fly blind in its poverty alleviation efforts, relying on outdated surveys and fragmented data systems that leave millions invisible to policymakers.

With the BISP's budget allocation increasing significantly from around 590 billion in 2024 to 716 billion in the current year, the programme should prioritise directing more resources toward poverty graduation initiatives. By adopting or complementing approaches similar to the PPAF's poverty graduation programmes, BISP can effectively uplift its 10 million social protection beneficiaries.

To reverse poverty trends, the government must, with support from institutions like the World Bank, ADB and IDB, enable BISP and PPAF to conduct a nationwide census capturing not just income but also access to health, education, energy and digital connectivity.

Inspired by China’s precision-targeting model, granular data is key to impactful policymaking. The PPAF should evolve into Pakistan’s poverty knowledge hub by tripling its research budgets, building real-time monitoring systems, and establishing provincial poverty observatories. Innovative financing — poverty bonds, climate funds for hotspots and CSR mandates — can drive progress. INGOs must be brought onto one oversight platform to align their programmes with national goals and ensure coordinated, accountable poverty alleviation efforts.

Amongst all the imperatives, breaking down bureaucratic silos is paramount. Merge the PPAF’s graduation approach with BISP's beneficiary database, social protection framework and BISP’s newly launched ‘Hunarmand’ initiative. Scale successful models like the seamstress initiative through women entrepreneurship zones, gender-responsive infrastructure, and childcare-supported vocational centres.

Pakistan stands at a crossroads. Successful models, such as the PPAF, prove that solutions exist, but they need bold policy support and strategic funding. With 44.7% of Pakistanis below the $4.20/day poverty line, the era of half-measures is over. As regional and local examples show, poverty reduction isn't rocket science; it demands political will, data-driven precision, strengthening public-private partnerships’ successful models and community ownership.

Pakistan has all the pieces. Will leadership rise to the occasion, or will another generation be trapped in poverty's vicious cycle? ‘Tempus fugit’ (time flies) — the moment for decisive action is now.

Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.

The writer is a climate governance expert. He tweets/posts @razashafqat and can be reached at: [email protected]

Originally published in The News