ISLAMABAD: Pakistan’s economy is expected to grow by 3 percent in the current fiscal year, as recent floods weigh on agriculture and overall recovery, the World Bank said on Tuesday, urging the government to sustain economic reforms to ensure stability and inclusive growth.
In its “Pakistan Development Update: Staying the Course for Growth and Jobs,” the Washington-based lender said growth prospects remain subdued despite a rebound in industry and services, with ongoing fiscal tightening and monetary discipline helping anchor inflation and maintain current account and primary fiscal surpluses.
It noted the current economic outlook has been primarily been tempered by recent floods, which have resulted in significant impact on people and damage to urban areas and agricultural land.
“Pakistan’s recent floods have imposed significant human costs and economic losses, dampening growth prospects and adding pressure on macroeconomic stability,” said Bolormaa Amgaabazar, the World Bank’s Country Director for Pakistan. “Staying the course on reforms and accelerating job creation is critical to maintaining growth along with strengthening social safety nets and infrastructure that protects the most vulnerable.”
The report projected real GDP growth to stay at 3 percent in FY26 before edging up to 3.4 percent in FY27, supported by continued macroeconomic stability and structural reforms.
“Sustaining progress will require a balanced mix of revenue and expenditure measures to manage flood impacts while maintaining progress toward fiscal consolidation,” said Mukhtar Ul Hasan, the report’s lead author.
The World Bank urged Pakistan to broaden its tax base, strengthen revenue administration and reduce the state’s footprint through privatization of state-owned enterprises, while prioritizing climate-resilient infrastructure to mitigate disaster risks.
The report also highlighted that Pakistan’s export share had fallen from 16 percent of GDP in the 1990s to around 10 percent in 2024, leaving the economy heavily dependent on debt and remittance-driven consumption.
It called for deeper trade agreements, stronger trade finance and logistics and expanded digital and energy infrastructure to support export-led growth.
“The government has placed export growth at the center of its development agenda,” said co-author Anna Twum.
“However, tariff reforms alone will not suffice and must be complemented by broader measures to expand access to export markets.”
Pakistan has been a World Bank member since 1950, receiving over $48.3 billion in assistance to date.
The current World Bank portfolio comprises 54 projects worth $15.7 billion, while the International Finance Corporation (IFC), the bank’s private sector arm, has invested about $13 billion across renewable energy, infrastructure and financial inclusion.
