A day after the International Monetary Fund (IMF) projected Pakistan’s economy to grow by 2.6% in fiscal year 2024-25, the World Bank forecast the country’s GDP growth at 2.7% on the back of economic stabilization.
In its Pakistan Development Update: Reimagining a Digital Pakistan report, the World Bank said real GDP growth will be supported by recovering private consumption and investment, driven by subdued inflation, lower interest rates, and recovering business confidence.
Despite the country’s economy stabilizing with easing inflation, improving financial conditions, and current account and primary fiscal surpluses, the report noted economic growth has been weak in the first half of FY25. It said the country had limited agricultural growth due to climate change; declining industrial activity due to higher input costs and taxes; reduced government spending; and muted services sector growth. Anticipating this situation to improve, it predicted economic growth to remain tepid, making job creation and poverty reduction amid high population growth challenging.
“Pakistan’s key challenge is to transform recent gains from stabilization into economic growth that is sustainable and adequate for poverty reduction,” said Najy Benhassine, World Bank Country Director for Pakistan. “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,” he added.
The World Bank has forecast the country’s real GDP growth to strengthen to 3.1% in FY26 and 3.4% in FY27. However, it cautioned, growth will remain constrained due to tight monetary and fiscal policies aimed at rebuilding buffers and containing risks of imbalances. Additionally, significant downside risks persist. “Pakistan’s economy has turned the corner and stabilized. Yet, the economic outlook remains fragile and any implementation delays in structural reforms or shifts in economic stabilization could dampen the nascent recovery and intensify external pressures,” said Anna Twum, lead author of the report. “Risks remain high due to elevated debt levels, policy and global trade uncertainties, and exposure to climatic shocks,” she added.
The report emphasizes structural reforms to unlock opportunities of private capital mobilization for improving Pakistan’s digital infrastructure and enabling environment for the digital economy. It notes that connectivity quality varies widely across provinces, with high costs making fixed broadband less accessible. It said Pakistan could improve its capability for digital delivery through its Digital Public Infrastructure, but these dividends depend on several regulatory and institutional enablers and require ownership of the leadership and strong coordination between all governments.
“Closing the digital divide and expanding access to digital services require targeted legal and regulatory reforms, increased private investment, and the development of key digital infrastructure. Strengthening secure digital identification systems, enhancing digital payment platforms, and improving coordination between federal and provincial authorities are crucial in building an inclusive and efficient digital ecosystem,” said Shahbaz Khan, co-author of the report.
The Pakistan Development Update is a companion piece to the South Asia Development Update, a biannual World Bank report examining economic developments and prospects in South Asia. It projects regional growth to slow to 5.8% before ticking up to 6.1% in 2026.