The World Bank report on Pakistan’s economy revealed that the country’s GDP expanded by 3% during the fiscal year 2025 (FY25), up from 2.6% the previous year. However, it cautioned that growth is likely to remain subdued in the next fiscal year as the devastating floods continue to impact the agriculture sector.
Released under the title “Staying the Course for Growth and Jobs,” the World Bank report on Pakistan’s economy projected that GDP growth will remain around 3% in FY26 before recovering in the medium term, supported by ongoing reforms and stability measures. Earlier this month, the bank had trimmed its growth forecast to 2.6% for FY25 due to flood-related damages and rising inflation pressures.
The report stated that fiscal tightening and prudent monetary policy helped control inflation while improving current account and fiscal balances in a challenging environment. It noted that industrial and service sectors showed resilience, although agriculture underperformed due to extreme weather conditions and pest attacks.
The World Bank Country Director for Pakistan, Bolormaa Amgaabazar, said, “Pakistan’s recent floods have caused significant human and economic losses, adding pressure on macroeconomic stability.”
She emphasized the need to maintain reform momentum, accelerate job creation, and strengthen social safety nets to build long-term resilience.
For FY27, the World Bank projects 3.4% growth, assuming continued macroeconomic discipline and structural reforms. However, it warned that expansion will remain constrained by tight fiscal policies, climate vulnerabilities, and global uncertainty.
Lead author of the report, Mukhtar Ul Hasan, stressed that sustaining progress would require balancing revenue and expenditure while addressing flood impacts. He underscored the importance of urgent fiscal reforms, including broadening the tax base, improving tax administration, and reducing state control through divestment of public enterprises.
On the trade front, the report noted that Pakistan’s exports have declined from 16% of GDP in the 1990s to about 10% in 2024. It urged policymakers to promote export-led growth through a market-based exchange rate, better trade finance, improved logistics, and investment in digital and energy infrastructure.
Co-author Anna Twum added, “Tariff reforms are an important first step, but must be complemented by broader measures to enhance trade facilitation and expand access to export markets.”
The Asian Development Bank (ADB) previously upheld its projection of a three per cent growth rate for Pakistan this year but raised its inflation estimate to six per cent, attributing the revision to flood-related damage to agriculture and infrastructure.