A World Bank report reveals that approximately 45 percent of Pakistan’s citizens live below the poverty line. The change in the domestic poverty rates stems from updated poverty lines by the international lender.

 

According to the report, the percentage of Pakistanis living in extreme poverty skyrocketed from a conservative 4.9 percent to a staggering 16.5 percent. This rise in poverty rates does not have any correlation with macroeconomic conditions; it only changes because of the update in the international poverty line.

 

The global lender outlined how the poverty rate in Pakistan has been formulated keeping in view the updated $3 international poverty line (IPL) as per the 2021 purchasing power parity (PPP). This caused the new poverty rate to balloon to 16.5 percent.

 

Previously, the World Bank used a poverty line of $2.15 under 2017 PPP, which showed only 4.9 percent living in extreme poverty. The report explained that a whopping 82 percent of the rise in poverty can be explained by the higher IPL value.

 

The other 18 percent increase can be explained by price increases in the domestic economy that occurred during the 2017-21 time frame. The report also outlined how the poverty rate sits at 44.7 percent under an IPL of $4.2.

 

However, the global lender has highlighted that while Pakistan has witnessed a substantial hike in the rate of poverty, overarching trends in poverty remain unchanged. Senior Economist of the Poverty and Equity Global Practice, Ms Wieser, has outlined that shifting global poverty lines do not indicate that “poverty in Pakistan has worsened as living standards of the population have not changed to what was previously reported”.

 

Nevertheless, the report paints an alarming picture of the state of the economy. According to data released by the International Monetary Fund (IMF), Pakistan’s real gross domestic product (GDP) growth rate sits at an abysmally low 2.6 percent.

 

The aforementioned rate of economic growth is alarmingly low for an economy with a GDP per capita value of $1,580. The GDP per capita value may not witness a substantial rise in the coming period, given that Pakistan’s population growth is under two percent.

 

A slower growth in GDP per capita value indicates lower wealth being created per person. According to economists, this phenomenon may not allow Pakistan to escape the shackles of poverty for a prolonged period.