Poverty rises again, affecting 25 per cent of Pakistan’s population
After 20 years of progress, a recently released World Bank report paints a grim picture: one in four Pakistanis now lives in poverty, with peaks of 42.7 per cent in Balochistan. This is driven by a fragile growth model, based on informal employment, which has left millions of people vulnerable to the crises that have hit the country since 2020. Climate vulnerability, record inflation, and poor public services are exacerbating inequalities.
Islamabad (AsiaNews) – A new report released yesterday by the World Bank indicates that after nearly 20 years of progress, Pakistan has seen its poverty rate rise again, to 25.3 per cent for the 2023-24 fiscal year, up by about seven percentage points in the last three years with some 13 million more people living below the poverty line.
According to Reclaiming Momentum Towards Prosperity, the economic and environmental crises of recent years have reversed past progress. Between 2001 and 2018, the poverty rate fell from 64.3 per cent to 21.9 per cent (with an annual decline of 3 percentage points until 2015 and less than 1 percentage point per year thereafter).
This was made possible primarily by millions of people leaving subsistence farming and the expansion of male employment in informal sectors such as services and construction, as well as increased emigration and remittances from abroad.
The latter, however, are not a direct factor in reducing poverty since those who emigrate for economic reasons do not belong to the poorest segments of the population.
The report emphasises that the country’s development model was based on fragile grounds, not on a structural transformation of its economy.
Between 2001 and 2015, 95 per cent of informal jobs were held by people from the poorest segments of the population, offering slightly higher incomes than those in farming, but without guarantees or good prospects.
Overall, millions of people were temporarily lifted out of poverty, but without consolidating their position. In fact, between 2011 and 2021, real wages grew by just 2-3 per cent due to low productivity across all sectors.
All these vulnerabilities emerged with a succession of crises starting in 2020: the COVID-19 pandemic, economic and political instability, the devastating floods of 2022, and record inflation that exceeded 27 per cent in 2023.
The report highlights that in 2018, 14 per cent of the population was "vulnerable" and at risk of falling back into poverty at the first shock.
For the World Bank, the weakness of Pakistan's economic model is systemic. In addition to dependence on low-productivity informal sectors, inequality in opportunities, poor public services, the appropriation of resources by elites, and the fragile response to environmental devastation contribute to driving up the poverty rate.
Pakistan remains among the countries most vulnerable to climate change. The 2022 floods devastated a third of the territory, particularly rural communities, whose poverty rate is twice as high as that of the urban population (28.2 per cent versus 10.9 per cent).
Geographic disparities exist across provinces with Balochistan having the highest poverty rate, 42.7 per cent, as well as the highest ratio for multidimensional poverty at around 70 per cent.
The situation has become a human development crisis in Pakistan due to insufficient investment in essential public services.
The report notes that nearly 40 per cent of children under five suffer from stunting, and a quarter of school-age children do not attend primary school, while 75 per cent of those who do cannot read and understand simple texts.
In 2018, only half of households had access to safe drinking water, and 31 per cent lacked sanitation facilities for the safe management of human waste.
On the macroeconomic level, the outlook is no longer encouraging. The growth model, based on public and private consumption rather than investment and exports, has led to repeated cycles of boom and bust.
GDP grew by just 0.3 per cent in 2023, and the forecast for 2024 was 1.6 per cent, far too low for a country with a rapidly growing population.
Meanwhile, public debt has risen to 78 per cent of GDP, leaving little room for productive investment, while the tax burden remains among the lowest in the region.
According to the World Bank, breaking out of this spiral requires profound reforms: boosting the tax base and the efficiency of public spending, investing in human capital and innovation, diversifying the economy, and accelerating the energy transition.
Above all, it is necessary to strengthen social safety nets, currently largely insufficient, to protect the most vulnerable groups from future crises.
Although direct transfers to the poorest families, such as the Benazir Income Support Programme (BISP), have had a positive impact on reducing the poverty gap (making the poor less poor but without lifting them out of poverty entirely), this effect is often offset by the entire tax system, which therefore has virtually no impact on reducing inequality.
The report recommends eliminating inefficient subsidies (on fuel or energy, for example) that tend to disproportionately benefit the richest households, diverting valuable resources that could be redirected to the poorest 40 per cent of the population.
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18/11/2024 15:49
