Poverty reduction is the main objective of the global agenda for sustainable development. The identification of the poor and the evaluation of the extent of poverty has received considerable attention in the design of cost-effective poverty reduction programs and safety nets. The degree of poverty should be estimated to assess the budgetary needs, and to evaluate the social safety net programs. Poverty is one of the indicators used to determine the respective share of each province in the divisible pool of federal transfers to the provinces through the National Finance Commission (NFC) Award. Thus, the measurement of poverty has important policy implications. Pakistan has witnessed a persistent decline in poverty both at national and provincial levels. The government of Pakistan adopted the cost of basic need (CBN) methodology in 2013-14 to estimate poverty. According to the CBN approach, poverty declined from 50.4% in 2005-06 to 24.3% in 2015-16 (GoP, 2018). Poverty in both rural and urban areas has also been on the decline with poverty headcount of 12.5% in urban and 30.7% in rural areas in 2015-16. The decline in poverty is more pronounced in urban areas than rural areas.