The World Bank has slightly lowered its GDP growth projection for Pakistan to 2.7% for the fiscal year 2025, down from its earlier forecast of 2.8%.
In its newly released report, Pakistan Development Update: Reimagining a Digital Pakistan, the World Bank emphasized that Pakistan’s economic challenges—particularly poverty and sluggish growth—will continue into the medium term unless structural reforms are urgently implemented.
The World Bank’s analysis suggests that despite signs of economic stabilization, long-term growth remains fragile. This outlook is contingent on Pakistan maintaining fiscal discipline, securing external financing, and progressing with reforms under the IMF’s Extended Fund Facility (EFF) and the national URAAN Pakistan strategy. The report highlights the importance of encouraging private sector investment and enhancing export competitiveness, both of which are crucial for sustaining economic momentum.
The report also emphasizes that macroeconomic progress in fiscal year 2025 will largely be driven by private consumption and investment. This forecast is buoyed by reduced inflation, improved access to credit, and a modest recovery in business confidence. Nevertheless, tight monetary and fiscal policies—implemented to stabilize the economy and rebuild buffers—are likely to constrain growth in the near term.
The World Bank projects inflation to ease to 5.0% in fiscal year 2025, supported by lower global commodity prices and a relatively stable, market-based exchange rate. However, inflation is expected to rise again in subsequent years due to increased domestic demand and energy reforms. The report stresses that sustaining a market-driven exchange rate system is essential to bolstering economic credibility and avoiding short-term disruptions that hinder investment.
While Pakistan’s current account is projected to record a small surplus of 0.2% of GDP in FY2025—mainly due to strong remittances—the World Bank warns that rising imports driven by recovering demand could push the account back into deficit over the medium term. Exchange rate fluctuations will play a critical role in managing this delicate external balance.
The World Bank’s report further flags Pakistan’s growing public debt, which is expected to peak at 77% of GDP in FY2026 before gradually declining. The institution also warns of stagnating poverty, which affects over a quarter of the population, exacerbated by weak growth in agriculture and low-income service sectors.
In a statement, Najy Binhassine, World Bank Country Director for Pakistan, said: “Pakistan’s key challenge is to transform recent stabilization efforts into inclusive, sustainable growth. This requires reforms to boost tax efficiency, support a market-based exchange rate, reduce trade barriers, and encourage private sector development.”
The World Bank reiterated that addressing structural inefficiencies, especially those linked to the state-owned enterprises and protectionist policies, is critical to unleashing Pakistan’s economic potential. A stronger commitment to these reforms, combined with resilience-focused investment, could help Pakistan overcome current vulnerabilities and achieve long-term economic sustainability.