Poverty in Pakistan 2026: Empirical Evidence of an Upsurge (SPDC Research Report)

SPDC’s report Empirical Evidence of Upsurge in the Poverty Numbers: Pakistan, 2025 Scenario presents independent estimates showing that 43.5% of Pakistan’s population (about 105 million people) now lives below the poverty line, compared to the official figure of 28.9%. Drawing on the latest HIES 2024–25 data, the analysis highlights a disproportionate rise in urban poverty, a 6.9 percentage‑points increase since 2018-19, and a substantial rise in inequality measured by the Gini coefficient and Palma ratio.

Key findings at a glance

• 105 million Pakistanis are estimated to be living below the poverty line in 2024-25.
• 27 million additional people have fallen into poverty since 2018-19, when the poor population stood at 78 million.
• Urban poverty rose by 10 percentage points (from 32.1% to 42.1%), while rural poverty rose by 5 (from 39.3% to 44.3%).
• The Gini coefficient rose to 44.0 from 39.3, a 12% increase in measured per-capita income inequality.
• The Palma ratio rose to 2.3 from 1.8, meaning the richest 10% of Pakistanis now earn 2.3 times what the poorest 40% earn combined.
• SPDC’s poverty lines for 2024-25 stand at Rs. 13,476 per adult equivalent unit per month in urban areas and Rs. 10,283 in rural areas.

Download the full report on Poverty in Pakistan (PDF)

Why SPDC’s 43.5% figure differs from the official 28.9%

Both figures are drawn from the same underlying dataset (HIES 2024-25), but they use different methodologies to draw the poverty line. The Planning Commission’s official methodology updates a previously estimated poverty line using the Consumer Price Index (CPI). SPDC re-estimates the poverty line from scratch each survey round using the Food Energy Intake approach, which anchors the line to the rupee cost of meeting minimum calorie requirements for the current consumption patterns of low-income households.

SPDC’s position is that CPI-based updating has four well-documented limitations when used to track poverty:

• Substitution bias. The CPI often assumes a fixed basket of goods. When prices rise, the poor switch to cheaper alternatives (for example, from beef to pulses). The index may not capture this forced change in behavior, potentially over- or under-estimating the welfare loss.
• Plutocratic bias. The CPI is a weighted average based on the spending patterns of the average household. Because wealthier households spend more in absolute terms, their consumption patterns have a larger influence on the index. The poor spend a much higher share of income on food, so if food prices rise faster than the general CPI, the official inflation rate will understate the actual cost-of-living increase for the poor.
• Geographical disparities. While Pakistan now uses Urban and Rural CPIs, the general national inflation figure often masks local realities. Poverty is frequently concentrated in remote areas where supply chain disruptions can make basic goods far more expensive than the prices collected in the 35-plus cities sampled by the PBS.
• Quality and non-food items. The CPI includes many items the poor rarely consume (recreation, luxury services). Conversely, it may not adequately capture the out-of-pocket costs for essential services like clean water or informal healthcare, which can consume a massive share of a low-income budget.

A second important difference is that the Planning Commission reports inequality in household income, while SPDC reports per-capita income inequality, so the absolute magnitudes are not directly comparable. The magnitudes of changes in poverty level, however, are similar: both the Planning Commission and SPDC place the increase from 2018-19 to 2024-25 at roughly 7 percentage points.

The trend in poverty incidence since 1987-88

SPDC has produced poverty estimates from HIES microdata using a consistent, identical methodology across survey rounds, which makes inter-temporal comparison meaningful.

Pakistan poverty incidence over time (% of population below the poverty line)

Source: SPDC estimates from HIES microdata, various years.

The data shows a relatively higher incidence of rural poverty throughout the period 1987-88 to 2024-25. A comparison of 2001-02 and 2004-05 shows a 3 percentage-point decline in poverty incidence, with the decline in urban poverty smaller than that in rural poverty. However, poverty rates began to rise again after 2004-05. SPDC notes that economic growth, while not always sufficient to reduce poverty, is certainly necessary, and the long-run data shows an inverse relationship between poverty and GDP growth in Pakistan.

Urban poverty in Pakistan is rising faster than rural

Although rural poverty remains higher in absolute terms (44.3% versus 42.1%), the rate of increase in urban areas between 2018-19 and 2024-25 is roughly twice that of rural areas.

Poverty incidence change between 2018-19 and 2024-25

Source: SPDC estimates from HIES 2018-19 and 2024-25 microdata, consistent methodology.

The depth and severity of poverty (measured by the Poverty Gap Index and the FGT severity index) are also relatively higher in urban areas than in rural areas, despite urban incidence being marginally lower than rural. In absolute numbers, 27 million people have been added to the population below the poverty line between 2018-19 and 2024-25. Close to 78 million persons were estimated to be poor in 2018-19, while the estimated poor population is 105 million in 2024-25.

Income inequality in Pakistan: Gini coefficient and Palma ratio

Alongside the poverty estimates, SPDC computed two inequality measures from HIES per-capita income data for 2018-19 and 2024-25. Both rose substantially over the period.

Per capita income inequality in Pakistan, 2018-19 vs 2024-25

Source: SPDC estimates from HIES 2018-19 and 2024-25 microdata.

The Gini coefficient rose by about 5 percentage points, or 12%, between 2018-19 and 2024-25. Urban income inequality, as measured by the Gini, has increased more sharply than rural income inequality (11.9 versus 9.8 percentage points). The Palma ratio for Pakistan stands at 2.3 for 2024-25, up from 1.8 in 2018-19, a close to 22% increase. The increase in urban Palma is close to 18%, while rural Palma shows a rise of 16%.

The Palma ratio is the income share of the richest 10% of the population divided by the share of the poorest 40%. It was proposed by economists Alex Cobham and Andy Sumner (Cobham and Sumner, 2013), based on the observations of Chilean economist Gabriel Palma (Palma, 2011). SPDC notes that it is a more sensitive, policy-relevant alternative to the Gini coefficient because it focuses on the extreme ends of the income distribution, unlike the Gini, which can be overly sensitive to changes in the middle.

Methodology: how SPDC measures poverty in Pakistan

SPDC’s estimates follow the Food Energy Intake approach developed in Jamal (2002). The procedure has four steps.

1. Translate household food consumption into calories. The Food Consumption Tables for Pakistan (GOP, 2001) provide both the calorie content of food items and recommended daily allowances by age and sex. Household demography is used to compute Adult Equivalent Units (AEUs) for each household.
2. Estimate the Calorie-Consumption Function (CCF). Per-AEU calorie consumption is regressed on the lowest quintile of household total expenditure, which ensures the dietary pattern of the low-income group anchors the poverty line. Provincial dummies control for socio-economic differences. The regression coefficient indicates the rupee cost of one calorie.
3. Apply separate urban and rural calorie norms. Following the 1997 Task Force on Poverty Alleviation, minimum calorie requirements of 2,550 (rural) and 2,230 (urban) are used. For 2024-25, this yields poverty lines of Rs. 13,476 per AEU per month in urban areas and Rs. 10,283 in rural areas.
4. Aggregate using the Foster-Greer-Thorbecke (FGT) family of measures. The Head Count Index gives the incidence of poverty, the Poverty Gap Index captures depth, and the FGT2 index captures severity by weighting households further below the line more heavily.

The data source is HIES 2024-25, the first fully digital and ninth round of the Provincial-level HIES. The survey was conducted between September 2024 and June 2025 using a tablet-based Android application and covered 32,814 households across all four provinces, Azad Jammu and Kashmir, and Gilgit-Baltistan.

Concluding remarks

The upsurge in poverty and inequality is not shocking given the cumulative impact of severe domestic and external shocks during the period 2018-19 to 2024-25. According to the World Bank’s Macro Poverty Outlook, cited in the report, Pakistan faced an economic crisis at the beginning of 2023-24 with heightened risks of debt default, with political uncertainty, fiscal and external imbalances, and global monetary tightening leading to pressures on domestic prices and foreign reserves. Following the COVID-19 pandemic, the economic slowdown, rising unemployment, and persistently high inflation between 2020-21 and 2023-24 reinforced these pressures. A broad consensus has consequently emerged among the masses, policymakers, and international agencies regarding the rise in poverty levels.

About the author

This research was authored by Haroon Jamal. The methodology applied in this report builds on Jamal (2002), “On the Estimation of an Absolute Poverty Line: An Empirical Appraisal”, published in The Lahore Journal of Economics, July-December.

References

• Cobham, A., & Sumner, A. (2013). “Is It All About the Tails? The Palma Measure of Income Inequality.” Center for Global Development Working Papers 308, ECINEQ, Society for the Study of Economic Inequality.
• Foster, J., Greer, J., and Thorbecke, E. (1984). “A Class of Decomposable Poverty Measures”, Econometrica, Vol. 52, No.3, Pp. 761-765
• Government of Pakistan (1997). “Overcoming Poverty: Report of the Task Force on Poverty Alleviation”.
• Government of Pakistan (2001). “Food Consumption Table for Pakistan”, Department of Agricultural Chemistry, NWFP Agriculture University, Peshawar, UNICEF, Islamabad, Ministry of Planning and Development, Islamabad
• Iqbal, Nasir (2020), PIDE Knowledge Brief, “National Poverty Estimates 2018-19”, Pakistan Institute of Development Economics, Islamabad,
• Jamal, Haroon (2002), “On the Estimation of an Absolute Poverty Line: An Empirical Appraisal”, The Lahore Journal of Economics, July-December.
• Pakistan (2018), “National Poverty Report – 2015-16, Planning Commission, Ministry of Planning, Development and Reform, Government of Pakistan.
• Pakistan (2026), “Preliminary Report on Poverty Estimation – 2023-2, Planning Commission, Ministry of Planning, Development and Reform, Government of Pakistan.
• Palma, J. G. (2011). “Homogeneous middles vs. heterogeneous tails, and the end of the ‘inverted- U’: It’s all about the share of the rich.” Development and Change, 42(1), 87–153.
• World Bank, “Macro Poverty Outlook for Pakistan: October 2024 (English). Macro Poverty Outlook” World Bank Group
  http://documents.worldbank.org/curated/en/099712010152440272