5 Key Takeaways
- Pakistan accounts for 48% of the MENAAP region's population living on less than $3 a day, making it the central driver of regional poverty and helping make MENAAP the only world region where poverty remains above pre-pandemic levels and is still rising.
- Pakistan's $3-a-day poverty rate rose 6.4 percentage points between 2018-19 and 2024-25 to exceed 20%, while national poverty reached an 11-year high of 29% and income inequality hit a 27-year high.
- Poverty deepened due to layered shocks including Covid-19, the 2022 floods, a macroeconomic crisis with high inflation and currency depreciation, and prolonged economic adjustment that weakened household incomes and employment.
- Pakistan's recovery is modest: GDP growth is projected at 3.8%, inflation at 8.2%, and real GDP per capita at only 2.2%, barely outpacing population growth, with current account and fiscal deficits projected at 0.8% and 3.5% of GDP.
- New risks include Gulf conflict-driven fuel price shocks, higher inflation, weaker remittances, and debt or financing pressures; the World Bank favors targeted cash transfers over broad subsidies to protect poor households while preserving fiscal space.
Pakistan Is Home to Nearly Half the Poor in the Greater Middle East
The World Bank’s latest Economic Update for the Middle East, North Africa, Afghanistan and Pakistan region, released Tuesday, 8 October 2026, puts one country at the centre of an alarming poverty story. Pakistan alone accounts for 48 percent of the people living on less than $3 a day in a region stretching from Morocco to Afghanistan. That concentration is so large that it has changed the regional picture: MENAAP is now the only world region where poverty remains above pre-pandemic levels and is still rising.
Three dollars may sound like a modest sum, but it is a standard international poverty line. In local terms, it is roughly 830 Pakistani rupees or about 290 Indian rupees. A poverty rate is simply the ratio of a population whose income falls below that line. Between 2018-19 and 2024-25, Pakistan’s poverty rate at the $3 line jumped 6.4 percentage points. At the higher $4.20 line, it rose 3.2 percentage points. The $3-a-day poverty rate has now exceeded 20 percent.
Afghanistan, Syria and Yemen together account for another 47 percent of the region’s population living below the same $3-a-day threshold. The World Bank estimates that the MENAAP region accounts for 14 percent of the world’s extreme poor, second only to Sub-Saharan Africa. Earlier in February, Pakistan’s national statistics painted a similarly grim picture: poverty surged to an 11-year high of 29 percent, and income inequality reached its highest level in 27 years.
Why Poverty Deepened
The bank’s explanation for this deterioration is layered. It points to the Covid-19 pandemic, the devastating 2022 floods, a macroeconomic crisis characterized by high inflation and currency depreciation, and a prolonged period of economic adjustment that weakened real household incomes and employment opportunities. Pakistan’s poverty rise is not the result of one bad year but of repeated disruptions that eroded families’ purchasing power.
“The increase was driven primarily by a rise in poverty in Pakistan.”
The latest estimates show that poverty at the $3-a-day threshold has approached or exceeded 20 percent in Djibouti, Pakistan, Syria and Yemen.
Even with growth, the recovery is modest. The World Bank expects Pakistan’s economy to grow 3.8 percent in the current fiscal year, while inflation is projected to reach 8.2 percent. But once population growth is taken into account, real GDP per capita—the average economic output per person after adjusting for inflation—is projected to rise by only 2.2 percent, compared with 2.1 percent last year. The economic expansion is barely outpacing the number of people joining the population.
The forecasts have shifted over time. The 2024 World Bank update had projected 2.8 percent growth for Pakistan in FY25 and 3.2 percent in FY26, with inflation easing to 9 percent in FY26. It also forecast a current account deficit of 0.7 percent of GDP in FY26. The 2025 MENAAP report placed Pakistan’s FY2025-26 growth at 2.6 percent and FY2026-27 growth at 3.4 percent. The current update projects a current account deficit—the shortfall when a country spends more on foreign goods, services and investments than it earns from the rest of the world—of 0.8 percent of GDP. It also projects a fiscal deficit, the gap between government spending and revenue, of 3.5 percent of GDP this fiscal year. Both deficits are higher than the previous year but remain within what the bank describes as manageable levels.
Fuel Shocks, Inflation and Remittance Risks
The nature of the threats has also changed. In 2025, the main economic threat was floods and weak agriculture. In 2026, the dominant risk is the Gulf conflict, with fuel price jumps, a weaker current account, possible remittance losses and El Niño exposure, the periodic warming of Pacific Ocean waters that can disrupt rainfall and agriculture. Governments across the region are facing competing demands to protect households from rising prices while also responding to humanitarian needs arising from regional conflicts.
Fuel prices have risen sharply since the start of the West Asia conflict. Petrol prices increased by 40 percent or more in Lebanon, Pakistan, Syria and the United Arab Emirates. Diesel prices rose by more than 40 percent in Pakistan and the West Bank and Gaza. The increases were substantially higher in some countries: diesel rose by more than 80 percent in Lebanon and nearly 70 percent in the UAE.
These price increases matter for poverty because poorer households spend 35 to 50 percent of their budgets on food. When food and fuel become more expensive, those households are hit hardest. Pakistan is among the countries where gasoline prices have risen by 40 percent or more, and diesel is up over 40 percent since the conflict began.
The World Bank places Pakistan in the “developing oil importers” group, which is projected to grow 4.3 percent in 2026, while Gulf economies contract sharply. But that growth does not remove vulnerability. Along with Djibouti, Egypt, Jordan, Morocco and Tunisia, Pakistan faces the risk of higher inflation and commodity prices, reduced fiscal space—less room in government budgets to respond to shocks—weaker remittance flows from Gulf economies and higher borrowing costs as geopolitical risks persist.
Inflation numbers reflect the pressure. The World Bank update puts Pakistan’s inflation at about 11 percent by midyear. The fiscal-year forecast of 7.1 percent is lower than the previous year, but the update projects inflation rising further to 8.2 percent in FY2027.
On the fiscal and external front, Pakistan slips from a surplus to a growing deficit. The bank lists Pakistan among the economies facing “significant debt or financing pressures,” alongside Algeria, Djibouti, Iraq and Morocco. To counter rising costs, the government has introduced targeted fuel and farm assistance. The World Bank has advocated for targeted cash transfers over broad subsidies, arguing that they are cheaper and better for fiscal space.
Remittances are another vulnerability. Pakistan is a major labour-sending economy to the Gulf, meaning many Pakistani workers abroad send money home. A prolonged slowdown in Gulf tourism, construction and hospitality could weaken the income flowing home. The World Bank names remittance decline as a risk channel for oil importers generally, but it has particular significance for Pakistan.
A New Regional Grouping
The update also reflects a relatively new institutional lens. In 2025, the World Bank reclassified Pakistan, along with Afghanistan, from its South Asia region into the newly created MENAAP grouping. The reason is structural: Pakistan’s economic and external debt profile increasingly resembles that of Middle East and North Africa economies. Its debt-to-GDP ratio, a measure of government debt relative to the size of the economy, is estimated at around 33.4 percent, broadly comparable with regional patterns.
Pakistan also shares several demographic and labour-market characteristics with MENA countries. These include a high youth dependency ratio—a large number of children and young people relative to the working-age population—low employment-to-population rates and relatively weak labour-force participation. Female participation in the workforce remains particularly low, mirroring a broader challenge across much of the region.
Pakistan’s economic fortunes are increasingly connected to the Gulf and wider West Asia through remittances, capital flows and energy dependence. These ties have become an important component of Pakistan’s macroeconomic stability, outweighing the country’s relatively limited economic integration with other South Asian economies.
What Happens Next
The implications are straightforward. Pakistan’s poverty crisis is no longer just a domestic issue; it is the central driver of poverty trends in an entire region. With population growth eating into economic gains, food and fuel prices rising, and remittance flows exposed to conflict in the Gulf, the path to reducing the $3-a-day poverty rate looks difficult. The World Bank’s preferred policy direction—targeted cash transfers rather than broad subsidies—offers one route, but the headwinds from inflation, debt and external shocks will make implementation hard.
For now, the bank’s numbers leave no doubt: nearly half the poor in the Greater Middle East live in Pakistan, and that share is still shaping the region’s post-pandemic poverty trajectory.
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