- Inflation and climate shocks preventing poverty reduction despite economic growth in recent years
Pakistan’s economic journey over the last decade reflects a troubling paradox. While the country has experienced periods of GDP growth and signs of macroeconomic recovery, millions of citizens continue to struggle with poverty, unemployment, and rising living costs. This contradiction where growth does not translate into relief for ordinary people highlights one of Pakistan’s greatest development challenges. Economic progress measured through national income statistics often fails to capture the everyday realities of households facing food insecurity, limited access to health services, and poor educational opportunities. This raises an important question: why has growth not been sufficient to reduce poverty in a meaningful way?
In recent years, Pakistan’s economy has recorded modest growth, recovering to around 2.5 percent in FY24 according to World Bank assessments. However, economists argue that growth rates of 3 to 4 percent are still too low to significantly reduce poverty or generate enough employment opportunities for a rapidly growing population. With millions of young people entering the labor force every year, Pakistan’s economy must expand at a much higher and more inclusive pace to create stable and decent jobs. Without strong employment generation, growth remains concentrated in limited sectors and does not improve living standards for the majority.
| GDP Growth (FY24) | ~2.5% |
|---|---|
| Population Below $4.20/day | 44.7% (~110 million) |
| National Poverty Headcount | ~40% |
| Youth Labour Force Entry (annual) | ~1.6 million |
| Indicator | Recent Value |
| Source: World Bank, Pakistan Development Update (2024); Pakistan Economic Survey 2023–24, Ministry of Finance. | |
The poverty situation remains deeply concerning. World Bank estimates indicate that around 44.7 percent of Pakistan’s population lives below the international poverty line of $4.20 per day. This translates into nearly 110 million people experiencing economic hardship. Even when measured through national poverty benchmarks, the poverty headcount remains close to 40 percent. Such figures reveal that poverty is not a marginal issue but a central development crisis affecting a large share of society. The persistence of poverty despite economic activity demonstrates that growth alone is not automatically inclusive. One major reason why growth has not reduced poverty is weak job creation. Pakistan’s economy is dominated by informal and low-productivity employment, where wages remain low and job security is minimal. Many workers are engaged in daily wage labor, small-scale agriculture, or informal services that do not provide stable income. As a result, even when GDP increases, the benefits do not reach those who depend on vulnerable forms of employment. Youth unemployment and underemployment further deepen poverty, creating frustration and limiting social mobility.
Inflation has also played a critical role in preventing poverty reduction. Rising prices of essential goods such as food, fuel, and electricity have eroded household purchasing power. Even families that are technically above the poverty line often remain vulnerable, as a sudden increase in living costs can push them back into poverty. In Pakistan, inflation has become one of the most direct forces worsening deprivation, especially for low-income groups whose earnings do not rise at the same pace as prices.
| Inflation Measure | Recent Trend |
|---|---|
| Food Prices (annual %) | High / volatile |
| General CPI (Annual %) | Elevated |
| Source: World Bank, Pakistan Development Update (2024); Pakistan Economic Survey 2023–24, Ministry of Finance. | |
Pakistan’s development pathway has also been disrupted by repeated economic and climate shocks. The COVID-19 pandemic, global commodity price increases, and devastating floods have severely affected livelihoods, particularly in rural areas. Climate-related disasters destroy crops, reduce incomes, and increase food insecurity. The World Bank has emphasized that Pakistan’s poverty reduction efforts have been stalled due to such vulnerabilities, showing that development cannot rely only on growth but must also build resilience against shocks. The persistence of poverty indicates that poverty alleviation must remain central to Pakistan’s development strategy. Development is not simply about increasing national income; it is about improving human well-being, ensuring access to education, health care, housing, and opportunities for productive employment. Growth that benefits only a small segment of society cannot create sustainable progress. Pakistan therefore needs an inclusive development model that directly targets the poor rather than assuming that benefits will automatically trickle down. Social protection programs offer one important tool for poverty alleviation. Initiatives such as the Benazir Income Support Program (BISP) and the Pakistan Poverty Alleviation Fund (PPAF) have provided financial assistance and livelihood support to vulnerable households. These programs demonstrate that targeted interventions can protect families from falling deeper into poverty. However, such measures must be expanded and complemented with long-term investments in education, skills training, and employment creation.
Pakistan’s future development path depends on shifting from growth that is narrow and uneven toward growth that is inclusive, resilient, and people-centered. This means creating productive employment, protecting households from inflation and shocks, investing in human capital, and ensuring that economic progress reaches those historically left behind. Only when poverty reduction becomes the true measure of development success can Pakistan move beyond the paradox of “growth without relief” and build an economy where prosperity is shared, opportunities are widespread, and development delivers real improvement in the lives of all citizens.
The Author is MD IRP /Faculty department of H&SS- Bahria University Karachi