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Poverty reduction has been at the centre stage of t he policy agenda in Pakistan since the beginning of economic reform in the 1990s . Conversely, poverty indices show that the level of poverty has shown no sign of sign ificant poverty reduction despite numerous policy and institutional initiatives under taken by the government. The debate on trends in poverty during the 1990s has been wide -ranging in Pakistan. Although there has been a consensus that poverty rose during the 1 990s, some controversies emerged on the analysis of poverty based on PSLM 2004-05. The official poverty estimates suggest that poverty declined substantially by 10 percentag e points from 34.5 percent in 2001-02 to 23.9 percent in 2004-05. In contrast to this, Wo rld Bank (2006) has shown that decline in poverty was by 5 percentage point during the abo ve period. While monitoring of poverty trends is fundamental t o evaluate the efficacy of policies adopted by the government under the poverty reducti on strategy, it is important to measure changes in poverty over time in its true spirit of the concept of absolute poverty using consistent methods of measurement. The concept of a bsolute poverty is linked with the purchasing power of minimum bundles of goods deemed to assure that basic food and nonfood needs for physical functioning are met in a so ciety in real term. For measuring changes in poverty over time, the rate of price inflation i s, therefore, important as the poverty line is kept constant in real term to buy minimum calorie i ntake of 2350 for a person per day. Thus, inflation matters in measurement of poverty trends. Any underestimation of rate of inflation will understate the level of poverty in the subsequ ent period. It is this context that guided the author to determ ine the rate of inflation for attainment of minimum cost of calorie intake of 235 0 and measure the level of poverty by deriving the poverty line from PSLM, 2004-05 using a consistent method based on the official methodology. The consistent approach adopt ed in this paper for updating the poverty line is based on the prevailing consumption pattern of the sampled households of PSLM 2004-05. While the theme of the conference is governance which together with acceleration of economic growth has been recognised a one of the important pillars of country’s poverty reduction strategy, the paper als o examines the trends in governance indicators constructed by independent institutions for the period covered in this study. The paper is organised as follows: The next section g ves a critical review of the most recent work on the trends in poverty in Pakist n. The data sets used in this study are

Trends in Absolute Poverty and Governance in Pakistan: 1998-99 and 2004-05