Economic Strain Intensifies in Pakistan: Unemployment Surges, Inequality Hits Worst Level Since 1998

A government survey released in February 2026 has exposed the deepening cracks in Pakistan’s socio-economic structure, contradicting official claims of “macroeconomic stabilization.” Data from the Labour Force Survey (FY 2024–25), along with statements by Planning Minister Ahsan Iqbal on February 20, 2026, show that national unemployment has climbed to 7.1% — the highest level in 21 years — while poverty has surged to 28.9%, up sharply from 21.9% in 2019, pushing nearly 70 million people below the poverty line.

Income inequality has also worsened to 32.7, marking its most severe level since 1998. The crisis is particularly acute in Balochistan, where poverty has reached a staggering 47% amid persistent security challenges and weak market connectivity, and in Sindh, where poverty has jumped to 32.6%, driven largely by the lingering devastation of the 2022 and 2025 floods, especially in rural districts. Khyber Pakhtunkhwa stands at 35.3% due to insecurity and trade disruptions, while Punjab, though relatively better at 23.3%, has also seen a significant rise from previous years. 

Economists attribute the downturn to IMF-backed austerity measures linked to a $7 billion bailout program, subsidy withdrawals, sharp currency devaluation, and inflation that has eroded household incomes by an estimated 12% over seven years. Climate shocks have compounded the crisis, with the 2025 monsoon floods causing $2.9 billion in losses after the catastrophic $30 billion damage in 2022.

Meanwhile, industrial stagnation has prevented large-scale manufacturing from returning to pre-pandemic output, leaving nearly 3 million annual youth entrants struggling to find work. Escalating violence in Balochistan and KP has further dampened investor confidence, as foreign direct investment fell to $808 million in the first half of FY26 from $1.4 billion a year earlier.

Although the State Bank projects GDP growth of 3.75% to 4.75% in 2026, analysts caution that headline growth figures are failing to translate into real relief for ordinary citizens, raising concerns about long-term social and economic stability.