For much of the last two decades, Pakistan’s political leadership, economic managers, and international financial institutions promoted a reassuring narrative about poverty. The country, they argued, may have suffered periodic political crises, IMF programmes, and recurring balance-of-payments emergencies, but the broader direction remained positive. Poverty was falling. Consumption was rising. Millions were supposedly entering the lower middle class. Pakistan, despite its instability, was still progressing socially.

That narrative rested heavily on official household survey data showing a dramatic decline in poverty between the early 2000s and the late 2010s. Using Pakistan Bureau of Statistics household surveys, the World Bank estimated that poverty fell from roughly 64 percent in 2001–02 to about 21.9 percent by 2018–19, using revised national poverty lines. Though comparisons across methodologies are imperfect, on paper, this appeared to be one of Pakistan’s most important social achievements since independence.

Yet even during the years when these figures were celebrated, the foundations of the story were more fragile than policymakers admitted. Pakistan was not undergoing the kind of structural transformation that historically produces durable prosperity. It did not experience the export-led manufacturing revolution that transformed East Asia. Nor did it generate the broad-based productivity gains that powered India’s post-1991 growth trajectory. Instead, poverty reduction relied heavily on remittance-driven consumption, informal urbanisation, and repeated external stabilisation cycles.

In effect, Pakistan reduced poverty statistically without fundamentally transforming the structure of its economy. The most important pillar of this apparent poverty reduction was the extraordinary rise in workers’ remittances. Pakistan’s dependence on remittances deepened sharply over the past two decades. Inflows rose from roughly $6 billion in 2007 to around $13–14 billion in 2012, $19–20 billion in 2017, and $38.3 billion in FY2024–25.

Relative to GDP, remittances increased from about 3.3 percent in 2007 to 5.6 percent in 2012 and 5.8 percent in 2017, before rising sharply to around 8.1 percent in 2024 and 9.3 percent in 2025, placing Pakistan among the most remittance-dependent large economies in the world. On a per capita basis, the increase is more modest but still significant, rising from roughly $35–40 per person in 2007 to around $150–155 today. Even so, much of this gain has been diluted by rapid population growth and persistent inflation.

This scale of inflow has real welfare effects, but it is structurally uneven. Household surveys consistently show that remittance-receiving families have lower........

© The Friday Times