Pakistan’s threshold: World Bank fixes new poverty lines at $4.20/person/ day

ISLAMABAD: The new poverty lines for Pakistan — a lower middle-income country, set at $4.20/person/day up from $3.65/person/day, affecting 44.7 percent of the population rose from 39.8 percent, says the World Bank in its updated international poverty lines by increasing the threshold.

The extreme poverty line is now $3/person/day, impacting 16.5 per cent of the population, up from 4.9 per cent under the previous $2.15 threshold. The upper-middle-income poverty line is $8.30/person/day, covering 88.4per cent of the population.

Adjusting for purchasing power parities (PPPs) and inflation, the real value of the international poverty lines increases by 28per cent, 5per cent and 11per cent for the lower income countries (LIC), lower-middle-income countries (LMIC) and upper-middle-income countries (UMIC) thresholds, respectively.

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The updates to the international poverty lines (IPL) are based on 2021 PPP data from the International Comparison Program (ICP) and ensure that poverty estimates remain accurate and comparable across countries.

Christina Wieser, senior economist, Poverty and Equity Global Practice, World Bank, along with Tobias Haque, lead country economist for World Bank Pakistan, while briefing media said that thebank is updating its global poverty lines to reflect changes in the cost of living and consumption habits of people around the world, based on newly available data.

As price levels and the cost of basic needs across the world and within income groups evolve, global poverty lines are periodically updated to allow for global comparisons, Wieser added.

The new poverty lines are $3 per person per day for LIC, $4.20 for LMIC, and $8.30 for UMIC. These lines are based on 2021 purchasing power parity rates, as well as updated national poverty lines. For Pakistan, 16.5 per cent of the population lived below the $3 international poverty rate in 2018-19 (latest available survey year); and 44.7 per cent below the more relevant lower-middle-income line of $4.20.

The revision does not suggest that poverty in Pakistan has worsened as living standards of the population have not changed to what was previously reported. The change in international poverty rates merely reflects a higher threshold for being “non-poor,” based on improved consumption measurement across low-income countries; changes to LMIC and UMIC lines, where data is of relatively high quality, may reflect an increase in the value of poverty lines as countries become richer.

IPL should be used only for cross-country comparison and analysis; for evaluating poverty in a particular country (Pakistan), the national poverty line remains the appropriate standard.

The new IPL only affects the level of poverty, trends in poverty remain unchanged. Pakistan is among the countries experiencing the largest changes in poverty when transitioning to the 2021 PPPs based on the Low-Income International Poverty Line. This significant shift in poverty rates under the LIC line, compared to the LMIC and Upper-Middle-Income Country (UMIC) lines, is due to a concentration of households with welfare levels between $PPP2.15 and $PPP3, which is near the International Poverty Line.

The need for new international poverty lines arises from the evolving price levels and cost of basic needs across the world and within income groups. To maintain accurate global comparisons, the World Bank periodically updates these poverty lines. International poverty estimates are based on the headcount of people with consumption below the international poverty line, defined in PPPs.

Christina Wieser said the update of poverty estimates from 2017 PPP to 2021 PPP, and the new lines, preserves the trends observed in Pakistan, but with higher levels, including in World Bank projected estimates from 2019-2025.

The new lines reflect 3 key updates at the global level including New and improved Purchasing Power Parity (PPP) factors, Improved data quality and greater accuracy in welfare measures and Updated values of national poverty lines reflecting current definitions.

Copyright Business Recorder, 2025

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