ISLAMABAD: Pakistan’s economy is showing signs of stabilization, with growth projected at 2.7 percent for the current fiscal year, according to the World Bank’s latest report. The Pakistan Development Update highlights the role of recovering private consumption and investment, spurred by easing inflation and lower interest rates, in supporting this growth.
The report notes that while financial conditions have improved, economic growth remains subdued. Agriculture and industrial sectors have faced challenges, including adverse weather and high input costs, leading to limited growth. The services sector also showed muted growth due to its reliance on weakened agriculture and industry.
Najy Benhassine, World Bank Country Director for Pakistan, emphasized the importance of transforming stabilization gains into sustainable growth. He pointed out the necessity of reforms in the tax system, exchange rates, import tariffs, and the business environment to foster confidence and attract investment.
Real GDP growth is projected to reach 3.1 percent in FY26 and 3.4 percent in FY27, contingent on ongoing macroeconomic stabilization and reforms. Nonetheless, the economic outlook remains fragile, with risks from high debt levels, policy uncertainties, and climate shocks.
Lead author Anna Twum cautioned that delays in reform implementation could hinder recovery and increase external pressures. The report also stresses the importance of structural reforms to enhance Pakistan’s digital infrastructure and economy, which currently face challenges such as connectivity disparities and high broadband costs.
Shahbaz Khan, a co-author, highlighted the need for legal and regulatory reforms, investment in digital infrastructure, and improved coordination between government levels to build an inclusive digital ecosystem.
The Pakistan Development Update accompanies the South Asia Development Update, which projects regional growth to slow to 5.8 percent in 2025. The report identifies inefficiencies in tax policy as a challenge and suggests measures to boost revenues and resilience in the face of a challenging global economic environment.