Poverty in Pakistan hits 44.7% — Real numbers could be worse

The general global trend has been of a consistent and significant decline in poverty figures. Over the last few decades, countries in the Indian subcontinent, like India and Sri Lanka have successfully pulled a majority of their population out of poverty. Contrary to these developments, Pakistan has registered a drastic increase in its poverty figures over time. With the recent and updated estimates from the World Bank, the poverty headcount in Pakistan has increased to 44.7 percent. It implies that almost half of its population is living below the poverty line, subjected to abject poverty conditions. What is even more unfortunate is the fact that the given figures are a conservative count, as they are not based on the most up-to-date data. Thus, given the current economic situation in Pakistan, experts opine that the figures with an updated dataset would reflect an even more gruesome reality of Islamabad. 

To estimate poverty figures, one needs consumption or income data for the country. For the case of Pakistan, the data comes from the 2018-19 Household Income and Expenditure Survey (HIES). Now, this is the catch here. Many of the poverty-exacerbating events have occurred post-2019 for Pakistan. First, the economy faced two significant climatic and health shocks: COVID-19 and the 2022 Pakistan Floods. The 2022 floods alone were responsible for total economic losses of about USD 15.2 billion. 

The assessments revealed that more than 8 million people were pushed below the poverty line. As per another study, the impact of Covid-19 was no less lethal to the conditions of the poor, leading 41 percent increase in poverty in areas under study.  

However, it's not just the external shocks, but the internal factors, the very regime of Pakistan, and the (mis)management of resources that are highly responsible for aggravating the situation. This brings us to the second set of factors: the political and macroeconomic shocks. Over the last half a decade, the country has been grappling with the issues of rising inflation, currency depreciation, large trade deficits and exorbitant debts. First, in 2022, while the nation was facing devastating floods, Pakistan was also plunged into another episode of political instability.

The then-Prime Minister Imran Khan dissolved the Parliament, claiming  U.S.-led conspiracies to pull him down. Later,  the no-confidence vote was passed, and he was removed from his position. Thus, elections took place after a lot of political drama involving protests funded by a militant organisation named Tehrik-e-Taliban Pakistan, various corruption charges, arrests, etc.  

Second, following the instability was Pakistan’s worst financial crisis. People, especially the poor, faced record inflation with the annual inflation rate peaking at 38 percent.  The poor were the worst hit as the prices of essential commodities skyrocketed, with wheat flour prices increasing by 106.7 percent, chicken prices by 43.1 percent, pulse gram prices by 48.4 percent, rice by 87.9 percent, milk by 36.4 percent, and cooking oil by 34.7 percent in April 2023 vis-à-vis in 2022.​

Islamabad tried to curb one economic crisis by creating another. In order to reduce their trade deficit, they tried to curb imports. However, the most beautiful as well as the ugliest thing about any economy is that it is hyper-connected, and nothing operates in isolation. As the producers were not able to procure raw materials due to import restrictions, they had to scale down their operations, leading to a rise in unemployment and shortages of products ranging from refrigerators to soaps to X-ray films.

This led to yet another classic episode of patronage politics: the bureaucrats were allowed to take down import restrictions arbitrarily, putting all the burden on the small businesses and the poor. The youth, between 15-24 years of age, are hit the hardest, with 4.5 million individuals unemployed. The current reality of Pakistan is that it is reliant on the IMF's bailouts, with more and more new conditions slapped in its face with every release of funds. 

Third, and the most crucial factor, where Pakistan has the potential to improve, but it diligently refuses to, is the budgetary processes. It is not just economically antithetical but also ethically appalling to see how Islamabad is cutting a larger share of its pie to the defence sector year after year.

As per the recent budget, Pakistan raised defence spending by 20 percent, reaching $9 billion. Interestingly, the government has made a 7 percent cut in overall spending. The development expenditure stands at 6 percent of total budgetary allocation says a lot about future prospects: drones over development!

Coming back to the poverty discourse, the critics might argue that the rise in poverty figures is due to poverty lines, which are revised upwards. However, whichever poverty line one chooses, whether $3 or $4.20, the data reveals the same point. Using the revised poverty line of $3, poverty is 16.5 percent compared to 4.9 percent using the erstwhile $2.15 threshold. And using $4.20 (updated from $3.65), the poverty has increased from 39.8 percent to 44.7%. Moreover, given that poverty is multidimensional, and indeed Pakistan has performed poorly across various dimensions of development, including education, health, and living standards, poverty has increased more than we can estimate using current data, irrespective of the measure we use.

As per the multidimensional poverty index (MPI), about 40 percent of the Pakistani population is deprived of basic health, education, and living standards, considered necessary to live a meaningful life. ​​

Truth be told, the economic performance of Pakistan over the past fifty years has been dismal. Compared to other South Asian countries, the living standards in Pakistan have improved at a lagging pace. The structural issues, like mismanagement of resources, political instability, excessive control by the military, and elite capture, have further derailed Pakistan from its development path by discouraging investment in the conflict-ridden economy. The interplay of climate, political, and economic shocks has just increased the number of people below the poverty line, but has also pushed them further down, widening the gap between their consumption and the poverty line threshold.

Thus, though the currently available data tells that about 45 percent of the population is below the poverty line, the updated data would reveal even appalling conditions of the Pakistani poor.