Dr Zafar Khan Safdar
The World Bank’s latest economic assessment contains a statistic that should trouble Pakistan far more than another warning about its debt, currency or balance of payments. Pakistan accounts for 48% of the people living in extreme poverty across the Middle East, North Africa, Afghanistan and Pakistan region. Afghanistan, Syria and Yemen, countries scarred by conflict and prolonged instability, account for another 47% combined. Pakistan is not at war on the scale of these countries. It has a functioning state, elected governments, established financial institutions and access to international financing. Yet nearly half of the region’s extreme poor live within its borders. This does not mean Pakistan has a higher poverty rate than each of these countries. It reveals something equally disturbing. A country without comparable nationwide wartime destruction has become home to an extraordinary concentration of extreme poverty.
The government may point to Pakistan’s large population and the World Bank’s regional reclassification to explain the figures. Both factors influence the regional comparison, but neither explains the deterioration within Pakistan itself. The World Bank reports that the proportion of Pakistanis living below the international extreme-poverty threshold of $3 a day increased by 6.4 percentage points between 2018-19 and 2024-25. At the lower-middle-income threshold of $4.20 a day, poverty increased by 3.2 percentage points over the same period. These changes reflect Pakistan’s domestic economic course, not merely a shift in regional classification. The World Bank also identifies the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) as the only region where extreme poverty remains above pre-pandemic levels and continues to rise.
The shocks behind this deterioration are real. The Covid-19 pandemic disrupted employment and incomes. The devastating floods of 2022 inflicted enormous damage on homes, infrastructure and livelihoods. Inflation, which approached 40% in 2023, eroded purchasing power, while currency depreciation increased the cost of imported fuel, food, medicines and industrial inputs. Subsequent economic adjustment placed further pressure on households already struggling to meet essential expenses. These burdens deserve recognition, particularly when climate disasters repeatedly strike a country that contributes relatively little to global emissions. But external shocks explain only part of the story. They become national catastrophes when institutions fail to protect vulnerable people and the economy cannot provide them with a credible route out of poverty.
Pakistan entered these crises with a narrow tax base, weak public services and an economy insufficiently productive to support its growing population. Its tax-to-GDP ratio has remained low by international standards, restricting the resources available for education, healthcare, infrastructure and social protection. Agricultural income taxation has long been constrained by political resistance and uneven implementation. Property and real estate have provided opportunities for investment and wealth accumulation without consistently generating public revenue proportionate to their economic importance. Meanwhile, salaried workers in the formal sector face substantial withholding taxes, reinforcing the perception that compliance carries a heavier burden than political influence. The result is a state that repeatedly turns to those easiest to tax while struggling to bring economically powerful groups fully into the fiscal system.
This imbalance is not merely a question of fairness. It determines how well a society can withstand the next crisis. A family without savings cannot absorb another increase in food prices. A farmer without affordable credit cannot easily recover from a flood. A student whose parents lose purchasing power may abandon education before completing a degree. A patient unable to afford treatment may postpone care until a manageable illness becomes a financial disaster. Public policy should prevent such setbacks from becoming permanent declines in living standards. In Pakistan, inadequate public provision too often transfers the cost of economic adjustment from the state to individual households.
The weakness extends beyond taxation and social protection to the productive structure of the economy. The World Bank identifies low productivity and limited innovation among the constraints facing Pakistani businesses. Without more productive firms, the economy struggles to create stable, well-paid employment for the millions of young people seeking opportunities. Growth can return without generating enough good jobs. Exports can improve without substantially expanding productive employment. Financial markets can recover while families continue cutting spending on nutrition, education and healthcare. These are not contradictory outcomes. These outcomes expose the gap between macroeconomic recovery and improvements in household welfare.
That distinction matters as Pakistan pursues another phase of economic stabilisation. The World Bank projects economic growth of 3.8% for FY 2026-2027. Such growth would represent progress after years of disruption, but it cannot by itself establish whether the recovery is benefiting the majority. Per capita income, employment quality, real wages and access to essential services matter just as much. An economy can expand while large sections of its population remain too poor to participate meaningfully in that expansion. Stabilisation is necessary, but it is not a substitute for development. Controlling inflation does not automatically restore purchasing power already lost, and improving fiscal balances does not guarantee that public resources will reach those who need them most.
Pakistan’s repeated recourse to the International Monetary Fund reflects a deeper failure to resolve these structural weaknesses. Successive programmes have sought to address financing gaps, restore confidence and impose fiscal discipline. Such measures can be necessary when a country faces an external payments crisis. Yet recurring financial distress suggests that short-term stabilisation has not been matched by sufficient progress in taxation, productivity, exports, human development and employment. The answer is not to reject economic discipline, but to make it serve a wider social purpose. A sustainable recovery must expand the productive capacity of the economy while distributing its opportunities more broadly. Otherwise, each period of stability risks becoming a pause before the next crisis.
The World Bank’s figures should be read as more than an embarrassing international comparison. They expose the limits of an economic model that repeatedly seeks to protect the state from immediate financial collapse without adequately protecting citizens from persistent insecurity. Pakistan cannot control every flood, global price shock or geopolitical disruption. It can decide whom it taxes, where it spends, how it supports vulnerable households and whether it rewards productive investment over unearned privilege. These choices determine how much suffering an external shock produces and how quickly a society recovers.
Pakistan does not need to experience war to endure poverty that devastates lives across generations. Poverty can deny a child an education, force a family to sell its assets, delay medical treatment and turn unemployment into permanent exclusion without a single shot being fired. The World Bank has exposed the scale of Pakistan’s poverty crisis through a regional comparison. The challenge is no longer simply to stabilise the economy or improve the figures presented to international lenders. It is to build an economy in which stability reaches the kitchen, the classroom, the workplace and the hospital. Until that happens, the recovery will remain convincing on paper and painfully incomplete in the lives of millions.
The writer holds a PhD in Political Science from Griffith University, Brisbane, and specialises in political development and social change. He teaches as visiting faculty at Quaid-i-Azam University, Islamabad. He can be reached at [email protected] and on X @zafarkhansafdar.
