Pakistan's poverty crisis deepens as institutions continue to fail: Report

New Delhi, March 18
As Pakistan faces a deepening poverty crisis as per the latest government data, the country is actually facing “institutional poverty” — the absence of strong, predictable and resilient institutions that protect incomes, enable opportunity and absorb shocks, a new report has said.

The Planning Commission of Pakistan revealed that monetary poverty has risen from 21.9 percent in 2018–19 to 28.9 percent in 2024–25, but the country is not only facing monetary poverty but also 'institutional poverty', said the report from Business Recorder.

The rural poverty exceeded 36 per cent and urban poverty crossed 17 per cent, with the national Gini index increasing from 28.4 to 32.7, amid sharper deterioration in some provinces, notably Sindh.

The Planning Commission of Pakistan found nominal incomes rising but real incomes falling because inflation outpaced earnings. Inequality widened across provinces and vulnerability to macro instability and climate shocks, according to the data. It indicated more than cyclical outcomes, but weak transmission mechanisms between policy and welfare, the report noted.

Institutional poverty manifests in policy volatility, weak labour formalisation, fragile local governance, the absence of automatic stabilisers in social protection, and planning without accountability.

"Most workers remain informal, without contracts, insurance, or productivity pathways. District-level institutions, where service delivery happens, remain administratively weak and fiscally dependent," the report said.

The report called for energy tariff reforms to include predefined compensatory mechanisms for the bottom income quintiles and agricultural shock insurance to be institutionalised rather than donor dependent.

“Five-Year Plans should be replaced, or at least complemented, by rolling resilience frameworks that integrate macro stability, labour markets, climate adaptation, and inequality monitoring,” the report noted.

A recent report said Pakistan has locked itself into a "dangerous economic trap" by prioritising short‑term expatriate remittances and foreign aid over productive development.

Remittances now account for nearly 10 per cent of GDP and rival export earnings, masking failures of the system such as idle factories, high unemployment and underutilisation of productive workforce, it noted.