WB sounds alarm on Pakistan’s worsening human capital crisis

Sami, 38, once employed at a jean factory, now works at a bed linen shop in a Karachi mall, hemming sheets and stitching pillow covers to order. He earns about Rs35,000 a month, an income far too low to support a family of four children.

“My income is less than it was four years ago, while the cost of living has skyrocketed. I had no choice but to pull my children out of school, move further out to save on rent, work longer hours, and try to stretch what little we have. I end up falling behind on utility bills, rent, and groceries, struggling to provide basic amenities like water, electricity and food for my family”, he shared, explaining why he resorts to cheap tobacco. The weary young man looked exhausted and on edge.

Sami lost his job at the textile mill when it shut down abruptly during the Covid crisis in 2020. Overwhelmed by the demands of daily survival, he reflected somberly, “When survival is at stake, you can’t afford to think about the future, either for yourself or your children”.

Every hardworking, skilled individual deserves better, and all children, regardless of background, have a right to a healthy, safe, and secure childhood with a future full of opportunity. Unfortunately, Sami and his family are far from alone in their struggle. Millions of families across the country live in similar, substandard conditions, facing daily challenges with little hope for improvement.

The World Bank’s recent Pakistan Development Update describes Pakistan’s worsening human development landscape as a “silent, deep human capital crisis.” In contrast, neighboring countries show better progress, while Pakistan’s inequality-adjusted human development index continues to decline. The nation also ranks poorly on the gender inequality index and faces high levels of multidimensional poverty. The Bank warns that without a bold and credible economic reform plan, confidence and investment will likely remain subdued, with real GDP growth projected at just 1.8% for fiscal year 2024.

The report acknowledges signs of recovery in Pakistan’s economy but raises concerns about its sustainability, noting that the growth rate remains too low to effectively reduce poverty, with 40% of Pakistanis currently living below the poverty line. Additionally, macroeconomic risks remain elevated due to the country’s substantial debt burden and limited foreign exchange reserves.

The World Bank report estimates that poverty in Pakistan rose by 4.5 percentage points in fiscal year 2023, with an additional 10 million people living just above the poverty line, vulnerable to both internal and external shocks. The poverty rate is projected at 40.1% for fiscal year 2024, up slightly from 39.9% in 2023. Measured at the lower-middle-income poverty line of $3.65 per day (2017 purchasing power parity), the poverty rate is expected to remain around 40% through fiscal years 2024–2026.

Addressing Pakistan’s deepening human crisis remains a challenge, as even the latest official data on the living standards is unavailable. The Pakistan Bureau of Statistics (PBS), the primary national data collection body, has been focused on census work since 2020. Dr Naeem uz Zafar, Chief Statistician of Pakistan, noted that while efforts to gather detailed insight into poverty and its various dimensions have now commenced, consolidated data is not expected until mid-next year.

In response to a request, officials in the federal ministry of planning shared an ‘internal document’ stating, “The poverty rate in Pakistan declined from 34.7% in 2001-02 to around 21.4% in 2018-19.” However, this data does not capture the impact of recent internal and external shocks—such as COVID-19, devastating floods, political instability, the economic downturn of FY2023 and 2024, renewed terrorism, and IMF-led stabilization policies—on poverty and public well-being.

Dr Nadeem Javed, Chief Economist, Planning Commission of Pakistan, highlighted high population growth as a significant factor for rising poverty in the country. “A vision for a more prosperous and equitable society in Pakistan cannot be materialized without addressing population control”, he remarked. “With a 1.94% annual population growth rate, Pakistan adds nearly five million people each year, intensifying pressure on an already struggling economy. The challenge extends beyond numbers, impacting the nation’s ability to adequately provide for its citizens and meet their basic needs.

“Pakistan’s current economic growth is insufficient to meet the growing demand for health, education, and other essential services. The rapidly increasing population exacerbates the strain on already limited resources, making it even more challenging to reduce poverty, improve health outcomes, and ensure equitable access to education.

“When a country’s population outpaces economic growth, it leads to overburdened infrastructure, rising unemployment, and higher dependency ratios, where the working-age population must support a larger segment of non-working dependents.

“In Pakistan’s case, these dynamics are driving lower living standards, higher rates of infant and maternal mortality, underfunded education systems, and widespread inequality and poverty. Without targeted measures, the country faces risk of entrenched inequality, leaving millions without opportunity for a better quality of life”.

Dr Javed emphasised, “To tackle this pressing issue, federal government, in collaboration with provincial governments, should implement a comprehensive strategy that includes improving education, empowering women, expanding access to family planning, and enhancing conditional cash transfers under Benazir Income Support Programme”.