Pakistan’s fragile economy faces the risk of prolonged stagnation, as economists sound the alarm over a sharply dimming growth outlook. The latest update by World Bank projects economic growth at just 2.6 percent for FY25-26, marking what experts describe as one of the most challenging four-year economic stretches in the country’s history.
Economist Asad Ali Shah, a former president of the Institute of Chartered Accountants of Pakistan, highlighted the bleak outlook in a post on X, pointing to the sustained period of weak performance. “The World Bank’s latest Pakistan Development Update has revised down the FY25-26 growth forecast to just 2.6 percent, compared to the government’s more optimistic projection of around 4 percent. This follows three years of dismal performance — -0.2 percent in FY23, 2.5 percent in FY24, and 2.7 percent in FY25,” he noted.
These figures reflect what analysts are calling an unprecedented four-year stretch of low growth, persistent inflationary pressures, high interest rates, and a severe collapse in investment confidence.
According to the World Bank, Pakistan’s economic performance continues to be weighed down by structural weaknesses and climate-driven shocks. Flooding has caused major disruptions in the agriculture sector, while inflationary pressures are expected to persist over the medium term. The report noted that although inflation had fallen to single digits in FY24-25 due to easing food and energy prices, supply chain disruptions caused by catastrophic floods are expected to push inflation up again through 2027.
Former finance minister Miftah Ismail echoed these concerns, describing FY22-23 to FY25-26 as “the worst four years in Pakistan’s history in terms of growth.” He criticised the government’s economic management, saying authorities have avoided crucial reforms such as privatisation, downsizing federal ministries, and empowering local governments. “Instead of pushing for structural change, the government is purchasing stability through low growth by keeping interest rates, taxes, and utility tariffs high. The result is increased unemployment, rising poverty, and growing political alienation,” he warned.
Asad Ali Shah also underlined that Pakistan’s economic conditions may appear stable on the surface but lack signs of real recovery. He said industrial output remains weak, agriculture is struggling amid climate shocks and policy distortions, and job creation has largely stalled. “Stability is not success,” he stressed. “Without credible reforms to restore investor confidence, strengthen governance, and reallocate resources toward productivity and exports, Pakistan risks turning stagnation into its new normal.”
Economic observers argue that unless the government accelerates its reform agenda and addresses bottlenecks in investment and governance, the country may face a prolonged period of slow growth and rising socio-economic pressures.
This warning comes at a time when Pakistan is under increasing pressure to meet fiscal and structural reform commitments under the program with International Monetary Fund.
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