Introduction / Executive Summary

Household incomes have risen, but so have essential expenditures, neutralising welfare gains. Across per-capita expenditure quintiles, essential spending continues to absorb a large share of household budgets, ranging from around 67 percent in the lowest quintile to 56 percent in the highest.

Budget rigidity remains high across the lower and middle distribution. The essential expenditure share declines only gradually from Q1 to Q3, suggesting that lower-middle and middle-income households face consumption constraints similar to those at the bottom. This limited flexibility restricts households’ ability to adjust spending.

HIES 2024–25 shows that food insecurity among households increased from 15.9 percent to 24.4 percent since 2018–19. The rise is especially pronounced in urban areas, where food insecurity more than doubled, reflecting the disproportionate impact of food inflation and cash-based cost pressures on urban households.

Reported savings overstate household resilience. While nearly half of households in the lowest quintile and two-thirds in the middle quintile can finance at least one month of essential expenditure from savings, far fewer can sustain themselves for three months. In the context of savings, urban households are systematically less resilient than rural households at similar welfare levels.

Digital access in Pakistan is widespread but largely nonautonomous and uneven in quality. Although over 90 percent of individuals report using a mobile phone, only about half own one, indicating heavy reliance on shared access.

Pakistan’s economy presents mixed signals, with tentative stabilisation alongside persistent external pressures. Export performance weakened across major markets and sectors, reflecting declining competitiveness amid a real appreciation of the exchange rate. The external account remained volatile, supported primarily by strong remittance inflows and relatively contained import pressures, while foreign direct investment stayed subdued.