World Bank projects 2.7 percent growth for Pakistan in FY2025

A man walks with sacks of supplies on his shoulder to deliver to a nearby shop at a market in Karachi, Pakistan June 11, 2024. (Reuters/File)

• Pakistan must convert stabilization into durable growth, says World Bank director
• Inflation drop to 1.5 percent in February supports signs of Pakistan’s economic recovery

ISLAMABAD: Pakistan’s economy is projected to grow by 2.7 percent in the fiscal year ending June 2025, the World Bank said on Wednesday, indicating signs of stabilization amid easing inflation and improved financial conditions.
The World Bank, in its latest report titled “Reimagining a Digital Pakistan,” said the real GDP growth is expected to benefit from a rebound in private consumption and investment, driven by easing inflation, lower interest rates and improving business confidence.
This improvement in Pakistan’s economy is supported by declining inflation, which fell to 1.5 percent in February, prompting the central bank to reduce its policy rate to 12 percent after a series of cuts totaling 1,000 basis points since June 2024.
Despite these positive indicators, the country faces significant external financing challenges, including over $22 billion in external debt repayments, highlighting the need for continued structural reforms and fiscal consolidation.
“Pakistan’s economy continues to stabilize and is expected to grow by 2.7 percent in the current fiscal year ending June 2025, up from 2.5 percent in the previous year,” the World Bank said.
It added that agricultural growth remained modest due to unfavorable weather conditions and pest outbreaks while industrial activity weakened due to rising input costs, increased taxation and cuts in government expenditure.
The report said growth in Pakistan’s services sector remained “muted” due to spillover effects from weak agricultural and industrial activity, which will make it challenging for the government to create jobs and reduce poverty.
“Pakistan’s key challenge is to transform recent gains from stabilization into economic growth that is sustainable and adequate for poverty reduction,” World Bank Country Director for Pakistan, Najy Benhassine, said.
“High-impact reforms to prioritize an efficient and progressive tax system, support a market-determined exchange rate, reduce import tariffs to boost exports, improve the business environment and streamline the public sector would signal strong reform commitment, build confidence, and attract investment.”
The report said real GDP growth was expected to rise to 3.1 percent in FY26 and 3.4 percent in FY27 due to the predicted ongoing macroeconomic stabilization and the implementation of key economic reforms.
“The April 2025 edition, Taxing Times, projects regional growth to slow to 5.8 percent in 2025 — 0.4 percentage points below October projections — before ticking up to 6.1 percent in 2026,” the World Bank said. “This outlook is subject to heightened risks, including from a highly uncertain global landscape, combined with domestic vulnerabilities including constrained fiscal space.”