Pakistan's Economy Sinks in Debt, Poverty and Investment Crisis: Per Capita Income Stagnant, Extreme Poverty at 23 Percent

Despite much talk of returning economic stability, the fundamental indicators of Pakistan's economy still point to a deep crisis. Per capita income is stagnant, investment is falling, export earnings are weak and the burden of government debt keeps growing.

Since 2024, the country's per capita GDP growth has remained close to zero — among the weakest performances in South Asia.

Import-dependent short-lived growth has not proved sustainable in the long run either. As a result, pressure on foreign currency has increased, and Islamabad has once again had to rely on loans and conditions from the International Monetary Fund (IMF) to manage the economic crisis, lengthening the cycle of low growth, debt dependence and economic weakness.

Pakistan was once among the comparatively advanced South Asian countries in per capita GDP. But its position in regional competition is now steadily slipping. As people's incomes fail to rise, poverty is also spreading.

The analysis puts Pakistan's extreme poverty rate at 23 percent. In 2011, the country's extreme poverty rate was close to India's, but the gap has since widened greatly; according to the analysis, Pakistan's rate is now about 10 times India's.

Structural weakness is deepening the crisis further. About 82 percent of Pakistan's gross domestic product (GDP) depends on consumption, while the investment rate is only 14 percent. Pakistan's position is weak on both indicators among South Asian countries.

India and China, by contrast, invest more than 30 percent of their GDP in expanding production, infrastructure and employment.

Industrial expansion in Pakistan has also been limited for a long time. For more than five decades, industry's contribution to GDP has remained stuck at around one-fifth, whereas the rate is about one-fourth in India and Sri Lanka and about one-third in Bangladesh. Slow industrialisation has made it hard to create new jobs, develop technology and raise export capacity.

Export sector weakness has sharpened Pakistan's crisis. Exports' contribution to GDP peaked at 17 percent in 1992; it has now fallen below 10 percent — among the lowest rates in South Asia. Not just the volume of exports, but the lack of product diversity and technological quality is also a major problem.

In Harvard University's Economic Complexity Index, Pakistan ranks 89th among 145 countries, indicating the limited diversity of its export products and its comparatively low technological capability. As a result, raising export earnings by competing in international markets has become difficult.

In this situation, remittances sent by expatriates are giving the economy some relief. In Pakistan, remittances have nearly reached the level of export earnings. In India, by contrast, export earnings are about six times remittance income. The difference highlights the gap between the two countries' production- and export-based economic capacity.

The crisis is deep in government revenue and spending as well. The country's revenue income is only 11 percent of GDP — among the lowest in South Asia. A weak tax system and the limited tax contribution of influential sectors have made it hard to raise government income, while the pressure of new direct taxes falls on salaried workers and the formal industrial sector.