Poverty and Inequality Worsen
The Economic Survey 2025-26 reveals a significant decline in Pakistan's socioeconomic conditions between 2018-19 and 2024-25. The poverty rate surged from 21.9% to 28.9%, a 32% increase in the poverty headcount, indicating a larger share of the population unable to meet basic living standards. Income inequality also deteriorated, with the Gini coefficient rising from 28.4 to 32.7, a 15% increase that reflects a more uneven income distribution.
Inflation Drives Decline in Real Incomes
Persistently high inflation has been a major factor behind this downturn. The Consumer Price Index (CPI) rose by 125%, from 117.18 in 2018-19 to 264.03 in 2024-25, meaning overall prices more than doubled over the period. As prices outpaced incomes, household purchasing power fell sharply. According to the Planning Commission, real income declined by 12%, from Rs35,454 to Rs31,127, while real consumption fell by 5%, from Rs31,711 to Rs29,980, over the same period.
Pro-Poor Spending Increases but Falls Short
Pro-poor expenditure rose from Rs3,099 billion in 2018-19 to Rs4,256 billion in 2024-25, a 37% increase. However, despite this rise, poverty and inequality worsened. The increase in spending was insufficient to offset the negative impacts of high inflation, slower economic growth, falling real earnings, and diminished buying power. The substantial rise in consumer prices eroded the real value of government spending and household incomes, limiting the effectiveness of social welfare programs.
Labour Market Challenges
Pakistan's population grew from 216.1 million to 252.1 million, a 17% increase. The labour force expanded by 21%, from 68.8 million to 83.1 million, while employment also rose by 21%, from 64.0 million to 77.2 million. Yet unemployment grew by 25%, from 4.7 million to 5.9 million, indicating that job creation failed to keep pace with the growing labour force. Consequently, the number of job seekers without work increased. Even among those employed, rising prices reduced the real value of incomes, lowering living standards and financial stability.
Budget 2026-27 Criticized for Inadequate Response
Despite these severe socioeconomic challenges, the Federal Budget 2026-27 lacks a comprehensive strategy to address the root causes of rising poverty, inequality, and declining household welfare. The budget emphasizes revenue mobilization and fiscal consolidation but offers limited measures to protect real incomes, create substantial job opportunities, or promote widespread economic growth. Labour-intensive sectors such as manufacturing and SMEs, which could absorb the expanding labour force and reduce unemployment, receive insufficient attention. Without focused interventions to curb inflation, boost productivity, generate quality jobs, and strengthen social safety nets, the budget is unlikely to reverse the deteriorating trends in poverty, inequality, and household welfare.
