Pakistan's poverty crisis has intensified significantly, with nearly 45% of the population now living in poverty amid a deepening governance and institutional crisis, according to a report published in The Dawn. This represents a substantial increase from the previously reported 28.9% poverty rate in 2024-25, which had already shown a dramatic rise from 21.9% in 2018-19. The updated figures reveal the severity of economic challenges facing Pakistan's population, with the crisis stemming not solely from economic policy failures but from a broader leadership deficit and weakening institutions.
The report identifies patronage networks and political interference as key factors weakening Pakistan's civil service and public institutions, discouraging merit-based decision-making and reducing administrative efficiency. Boards of state-owned enterprises, regulatory authorities and major institutions are frequently populated through personal connections rather than merit, limiting accountability and effective oversight. The judicial system faces significant challenges with more than two million pending cases in district courts and over 1,100 vacant judicial positions, which have weakened contract enforcement and investor confidence. These governance failures have undermined the country's economic potential despite its significant economic advantages.
The country's economic challenges extend beyond poverty to broader structural issues, with Pakistan's private sector credit-to-GDP ratio falling dramatically from 27% in 2008 to just 8.7% in 2025, among the lowest levels across emerging economies. Small and medium enterprises (SMEs) have witnessed a significant decline in financing, with SME lending dropping from around 17% in the mid-2000s to just 6%. Export performance has also deteriorated, with exports now representing only 10% of GDP, down from 17% two decades ago, reflecting the country's inability to diversify and strengthen its industrial base. The report notes that Pakistan has repeatedly entered IMF-supported programmes, achieving temporary macroeconomic stability but failing to address underlying economic weaknesses.
The poverty increase has been widespread across all provinces, with rural areas experiencing more severe impacts. Rural poverty rose from 28.2% to 36.2%, while urban poverty surged from 11.0% to 17.4% over the six-year period. Balochistan recorded the highest poverty incidence at 47.0%, followed by Khyber Pakhtunkhwa at 35.3%, Sindh at 32.6%, and Punjab at 23.3%. Punjab maintained the lowest poverty rate among the four provinces, while Balochistan remained at the top position. The updated estimates show significant improvements in Punjab's poverty rate, which decreased from 16.5% in 2018-19 to 23.3% in 2024-25, while Balochistan's poverty increased from 41.8% to 47.0% over the same period.
Despite Pakistan's significant economic potential due to its large population, entrepreneurial base and strategic location, the report warns that continued governance failures and the exclusion of capable individuals from decision-making processes could further erode the country's growth prospects. The findings come at a time when the government is touting economic stabilisation achievements, including 3.7% GDP growth, lower fiscal deficits, stronger foreign exchange reserves and improved investor confidence, but the poverty numbers show that stabilisation has not yet reached the common people. The report emphasizes that while Pakistan possesses substantial economic potential, the current governance crisis threatens to undermine these advantages and limit the country's long-term development prospects.
