ASIATODAY.ID, ISLAMABAD — Pakistan’s economy stands at a critical juncture. Despite posting a 3.0 percent growth in the fiscal year ending June 2025 — up from 2.6 percent the previous year — the World Bank has warned that this fragile recovery cannot be sustained without comprehensive economic reforms.
In its latest report, Pakistan Development Update: Staying the Course for Growth and Jobs, the World Bank noted that the rebound was driven by industrial and services sector expansion, though growth in agriculture lagged due to widespread flooding and pest infestations.
Economic growth is projected to remain at 3 percent in FY2026 before gradually picking up in the medium term, contingent upon continued macroeconomic stability and reform momentum.
“The recent floods have imposed significant human and economic costs, dampening growth prospects and straining macroeconomic stability,” said Bolormaa Amgaabazar, World Bank Country Director for Pakistan on October 28, 2025.
“Staying the course on reforms, accelerating job creation, and strengthening social protection and infrastructure are critical for sustainable, inclusive growth.”
The report highlights that fiscal tightening and prudent monetary policy have helped anchor inflation and maintain fiscal and current account surpluses. However, long-term challenges persist due to the impacts of the floods, global uncertainty, and climate risks.
“Sustaining progress will require a balanced mix of revenue and expenditure measures,” said Mukhtar Ul Hasan, the report’s lead author. “Broadening the tax base, improving tax administration, and reducing the state’s footprint through SOE divestiture are essential to rebuild buffers and drive growth.”
Exports Seen as Engine for Long-Term Recovery
The World Bank emphasized the critical role of exports in Pakistan’s future growth. The country’s export share has fallen from 16 percent of GDP in the 1990s to about 10 percent in 2024, leaving its economy heavily reliant on debt and remittance-fueled consumption.
High tariffs, complex regulations, and costly energy and logistics have stifled competitiveness. While recent tariff reforms mark a “historic step” toward openness, the World Bank called for additional measures — including a market-determined exchange rate, enhanced trade finance, improved logistics and compliance, and stronger digital and energy infrastructure to support export-led growth, particularly in emerging IT and digital services.
“The government has rightly placed export growth at the center of its development strategy,” said Anna Twum, co-author of the report. “The National Tariff Policy is an important milestone, but tariff reforms alone are not enough. Broader structural measures are needed to strengthen trade finance, streamline procedures, and expand access to global markets.”
World Bank and IFC Support in Pakistan
Pakistan has been a member of the World Bank since 1950 and has received over $48.3 billion in assistance to date. The current portfolio includes 54 active projects with total commitments of $15.7 billion.
Since 1956, the International Finance Corporation (IFC) has invested about $13 billion in Pakistan, supporting renewable energy, financial inclusion, infrastructure, agribusiness, manufacturing, housing, healthcare, and trade. (AT Network)
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