- WB says real growth must be supported by recovery of private consumption.
- Investment motivated by disinflation, drop in interest rates to increase GDP.
- The report indicates that growth remained low during the first half of the 201025 financial year.
Pakistan’s economy stabilizes and should grow 2.7% during the financial year ending in June 2025, compared to 2.5% last year and slightly higher than 2.6% of the International Monetary Fund (IMF), the World Bank said on Wednesday.
According to the latest update of the development of World Bank Pakistan: the reinvention of a digital Pakistan, the real growth of GDP will be supported by the recovery of private consumption and investments focused on moderate inflation, the drop in interest rates and the recovery of business confidence.
The economy of the South Asian country is stabilized with the softening of inflation, the improvement of financial conditions, the current account and primary budgetary surpluses.
In the midst of continuous macroeconomic policy, economic growth was low during the first half of the exercise. Agriculture has experienced limited growth, partly due to unfavorable bad weather and pest infestations.
Industrial activity has decreased, affected by higher costs and taxes, and a reduction in public spending. Similarly, the growth of the service sector has been silent, with limited spinoffs of low agriculture and industrial activity.
Although we expected to strengthen, economic growth will remain lukewarm, which makes job creation and poverty reduction in a context of high population growth.
“Pakistan’s main challenge is to transform recent stabilization gains in economic growth that is sustainable and adequate for poverty reduction,” said Najy Benhassine, Director of the World Bank for Pakistan.
“Reforms with a high impact to prioritize an effective and progressive tax system, support a exchange rate determined by the market, reduce import prices to stimulate exports, improve the commercial environment and rationalize the public sector would signal a strong reform commitment, strengthen confidence and attract investments.”
Based on continuous macroeconomic stabilization and key economic reforms, the real growth of GDP should be strengthened at 3.1% during fiscal year 26 and 3.4% during fiscal year 27, but will probably remain constrained in the middle of monetary and tax policies aimed at rebuilding buffers and containing the risks of moves. In addition, significant drop risks persist.
“Pakistan’s economy has turned the corner and has stabilized. However, the economic prospects remain fragile, and any delay in implementation in structural reforms or changes in economic stabilization could reduce the emerging recovery and intensify external pressures,” said Anna Twum, the main author of the report.
“The risks remain high due to the high levels of debts, policies and uncertainties of world trade and exposure to climate shocks.”
This edition of the development of Pakistan development also underlines the need for structural reforms to unlock opportunities for mobilizing private capital to improve Pakistan’s digital infrastructure and an environment for the digital economy.
The quality of connectivity varies considerably from one province to another, while high costs make the wide strip fixed less accessible. In addition, Pakistan has the possibility of improving its ability to provide digital services to its citizens and companies through the continuous development of its digital public infrastructure (DPI).
However, DPI dividends depend on several regulatory and institutional catalysts and require ownership of management and a strong coordination framework among federal, provincial and local governments.
“The closure of the digital division and access to the expansion of digital services require targeted legal and regulatory reforms, an increase in private investments and the development of a key digital infrastructure. The strengthening of secure digital identification systems, the improvement of digital payment platforms and the improvement of coordination between federal and provincial authorities are crucial to create an inclusive digital ecosystem And effective, “said Shahbaz Khan, co-authoror of the report report report.
IMF growth forecasts reduce
Meanwhile, the IMF has lowered Pakistan’s economic growth projection for the current year from 3% to 2.6% in its report on global economic prospects published this week.
Revised forecasts follow new pricing increases from US President Donald Trump up to 29%, which led the IMF to reduce growth estimates for several development economies.
The report, however, noted that Pakistan GDP growth for the next financial year (2025-2026) is expected to reach 3.6%.
Inflation in Pakistan, which amounted to 23.4% in 2024, is scheduled for 5.1% for the current financial year, the IMF providing more at 7.7% in the next fiscal year.
The IMF has also revised its forecasts for the deficit in the current account of Pakistan. It now expects the deficit to amount to 0.1% of GDP, compared to its previous estimate of 1%. In nominal terms, the current account difference should be only $ 400 million, instead of the previously projected $ 3.7 billion.
For 2026, the lender expects the current account deficit to increase even to 0.4% of GDP.
The unemployment rate is expected to remain 8% in 2025, compared to 8.3% in 2024, with a new decrease scheduled for 7.5% in 2026, according to the report.
IMF’s global economic prospects have stressed that the recent tariff climbing of the United States has led to a general weakening of growth forecasts in emerging markets and developing economies.