Research Analyst
Nov 23 - 29, 2009

Poverty in Pakistan is a growing threat to the society and the economy. Although the middle-class has crossed 35 million mark in Pakistan, still nearly one-quarter of the population could be classified as poor as of October 2006.

The declining trend in poverty as seen in the country during the 1970s and the 1980s was reversed in the 90s by poor federal policies and rampant corruption. As of 2007, Pakistan's Human Development Index (HDI) is 0.572, higher than that of nearby Bangladesh's 0.543. Pakistan's HDI still stands lower than that of neighboring India's 0.612.

According to the HDI, 60.3% of Pakistan's population lives with $2 a day, compared to 75.6% in India and 81.3% in Bangladesh, and about 22.6% live with $1 a day compared to 41.6% in India and 49.6% in Bangladesh.



2006/07 ACTUAL 2007/08 ACTUAL 2008/09 PROVISIONAL
Water Supply & Sanitation 16.6 19.8 9.1
Human Development 222.2 257.1 243.6
Education 162.1 182.6 195.6
Health 53.2 61.1 43.9
Population Planning 7.0 13.3 4.1
Rural Development 101.8 112.7 117.6
Agriculture 74.8 83.5 91.2
Rural Development 22.2 23.3 9.6
People Works Programme-II 2.5 2.7 14.2
Subsidies 5.5 54.9 231.1
Social Security & Welfare 4.5 18.9 37.0
Food Support Programme 3.5 4.4 15.3
People Works Programme-I 0.02 1.4 2.6
Low Cost Housing 0.3 0.6 1.3
Governance 7.2 10.2 52.5
Law & Order 2.1 2.4 46.6
Justice Administration 5.1 7.8 5.9
As % of GDP 4.89 5.46 5.86


Wealth distribution in Pakistan is highly uneven, with 10% of the population earning 27.6% of gross national income. Pakistan's human development indicators, especially those for women, fall significantly below those of countries with comparable levels of per-capita income.

Pakistan also has a high infant mortality rate (88 per 1000) than the South Asian average (83 per 1000). Income disparity, low quality of life, denial of opportunities and choices basic to human development are different stimulants of poverty.

The main objectives of government policies are to raise the standard of living and improve the socio-economic conditions of the people and thus reduce the incidence of poverty in the country. Government of Pakistan (GoP) has subscribed strongly to the belief that economic development if it is meaningful and really to be sustained, must involve all citizens, especially the poor, unemployed, marginalized communities and generally, the disadvantaged groups.


High imported inflation particularly in case of food and fuel, coupled with rupee depreciation of 17.7% during July 2008 to April 2009 triggered inflation in Pakistan with adverse implications for poverty reduction.

The price trends of essential items indicate that the major portion of food inflation stems from hike in prices of the products consumed by the poor household such as wheat, flour, rice, edible oil, vegetables, and pulses.


The Centre for Poverty Reduction and Social Policy Development (CPRSPD), Planning and Development Division estimated a sharp decline in the headcount poverty ratio for 2007-08. However, these findings appear to contradict other assessments conducted subsequently, and which better reflect global and domestic price developments after June 2008.

A report of a UN Inter Agency Assessment Mission found that food security in Pakistan in 2007-08 had significantly worsened because of food price hike. The total number of households falling into this category was estimated to be 7 million or about 45 million people.


1998-99 20.9 34.7 30.6
2000-01 22.7 39.3 34.5
2004-05 14.9 28.1 23.9
2005-06 13.1 27.0 22.3

In relative terms, the increase is more pronounced in rural areas, where food expenditure rose 10% and total expenditures 4%. In absolute terms, the increase has been higher in urban areas. It further indicates that more than 40% of households reported no change in income in 2008 since last year; 45% of the population working as employees witnessed decrease in their real wages.


Pakistan Poverty Alleviation Fund (PPAF) has disbursed approximately Rs55.5 to 75 billion Partner Organizations across the country. It is estimated that 15 million and 11 million individuals have been affected directly or indirectly by PPAF financial and non- financial services respectively.

Over four billion rupees have been disbursed up to end December 2008.

There are approximately 3.2 million business enterprises in Pakistan and SMEs constitute almost 99% of them. The contribution of SMEs towards GDP is over 30%, exports 25%, and 35% in the manufacturing value addition. It also generates 78% of non-agricultural employment.


Poverty increased during fiscal year 2008-09 with high domestic inflation caused by soaring food and energy prices. The poverty had declined by 5.1% to 17.2% in Pakistan in 2007-08. However, the poverty may have further increased in 2008-09 owing to high inflation as well as low growth.

The overall 20% increase in food prices will lead to 8% increase in the poverty headcount, from 36 to 44%, with the negative impact of food price shocks falling disproportionately on rural poor, as opposed to the urban poor.