RECENT high level trade talks between USA and Pakistan has managed to secure its stakes and seems to be positive for coming days.
However poverty is not merely a statistic, it is a lived reality for millions, deeply entrenched in the structural, political and economic fabric. According to the World Bank's 2025 findings, nearly 44.7% of the population lives below the poverty line, based on the revised threshold of $4.20 per person per day for lower-middle-income countries, a staggering figure that underscores the scale of deprivation. Even more alarming is that 16.5% of the population, around 39.8 million people, live in extreme poverty, earning less than $3 per day, a sharp rise from previous estimates of 4.9%. The Asian Development Bank reports that 4.2% of employed individuals earn below $2.15/day, indicating severe income insecurity even among the working population. This deepening poverty is mirrored by a labour market in distress. Over 60% of Pakistan's population is under the age of 30, presenting a potential demographic dividend that risks becoming a demographic disaster. The unemployment rate hovers around 6.5%, though unofficial estimates suggest it may be significantly higher when accounting for underemployment and the vast informal sector.
A large segment of Pakistan's workforce is trapped in low-paying, informal jobs that offer no security, legal protection, or social benefits. According to a joint study by SMEDA and the International Labour Organization, 72.5% of the country's non-agricultural labour force is employed in the informal sector. The informal economy, estimated at $457 billion, is 64% larger than the formal economy, which stands at $340 billion, yet it operates largely outside the reach of taxation, regulation and labour protections. In urban centres, informal employment dominates, with over 5.24 million small and medium enterprises (SMEs) fuelling economic activity, though most remain undocumented and unregulated. Workers in these roles often lack access to pensions, health insurance, or legal recourse in cases of exploitation or injury. This widespread informality perpetuates income insecurity and limits upward mobility. Over 31% of young graduates in Pakistan remain unemployed, with postgraduate degree-holders among the most affected. Universities and vocational institutes frequently fail to equip students with market-relevant skills, resulting in a surplus of graduates in oversaturated fields and a shortage in technical and industrial sectors. Many educated youth are underemployed, working below their skill level and earning inadequate incomes. The Higher Education Commission admits that curricula remain largely theoretical, disconnected from market needs. This inefficient utilization of human capital not only stifles individual aspirations but also hampers national productivity and economic growth.
Furthermore per capita income has stagnated and even declined in recent years, reflecting deepening economic challenges. According to the Pakistan Bureau of Statistics, during the fiscal year 2022-2023, the country recorded an 11.38% drop in per capita income, falling from $1,766 in 2022 to $1,568 in 2023. This decline coincided with a sharp contraction in the overall economy, which shrank by $33.4 billion, from $375 billion to $341.6 billion. The stagnation is largely attributed to persistent structural issues, including political instability, inflation, currency depreciation and weak industrial output. Compared to regional peers, Pakistan's GDP per capita remains significantly lower -- estimated at $6,950 in 2025. The economic disparity between urban and rural regions further entrenches inequality. Urban centres like Karachi, Lahore and Islamabad benefit from better infrastructure, diversified economies and greater access to services. In contrast, rural areas remain underdeveloped, with limited access to clean water, electricity, healthcare and education. Agriculture, the primary livelihood in these regions, suffers from low productivity and outdated practices.
Provincial disparities also persist. Punjab and Sindh attract more investment and development, while Balochistan and parts of Khyber Pakhtunkhwa lag behind due to historical neglect, weak governance. This uneven distribution of resources fuels social discontent and marginalization. Inflation, particularly in essential commodities, has become a chronic challenge in Pakistan, driven by currency depreciation, global market volatility and domestic inefficiencies. In July 2025, annual inflation rose to 4.1%, up from 3.2% in June, marking the highest level since December 2024. The impact is most severe in food and energy prices. The erosion of purchasing power among lower-income groups has led to widespread hardship, with many households forced to cut back on meals, education and healthcare. Public investment in education and health is critically low, with education spending reduced by 44% in the latest budget and health expenditure hovering around 1% of GDP
Efforts to alleviate poverty remain fragmented and underfunded. Cash transfer programs often fall short of covering basic living expenses and budgetary constraints limit their reach and sustainability. The absence of a coordinated, long-term poverty reduction strategy, one that integrates social protection with education, health, employment and rural development continues to undermine progress. Pakistan stands at a critical juncture. The convergence of poverty, unemployment, demographic pressure and inequality reflects a deeply rooted crisis with far-reaching consequences on poverty alleviation programs. Simultaneously, frequent electricity shortages and high energy costs continue to undermine industrial productivity, with power outages disrupting manufacturing operations, inflating production costs and forcing many enterprises to scale back or shut down. Thus it is necessary to contain the darker shades of economy with long term plan inclusive of multiple parameters.