Pakistan’s economic recovery remains fragile, with growth too slow to deliver meaningful progress in reducing poverty or unemployment, according to the World Bank’s latest Pakistan Development Update Report 2025. While acknowledging signs of gradual stabilization, the global lender emphasized that the country’s growth rate of 3% is not enough to meet the demands of its rapidly expanding population and workforce.
The World Bank projected Pakistan’s gross domestic product (GDP) to rise from 2.6% in the previous fiscal year to 3% in the current one, and further to 3.4% in FY2027. However, it noted that this modest expansion still falls short of the level required to generate broad-based prosperity or create sufficient jobs for the growing labor force.
According to the report, around 1.6 million young people enter Pakistan’s job market each year, yet employment opportunities have not kept pace with this influx. The resulting imbalance continues to fuel poverty and social inequality. The Bank estimated that the national poverty rate will likely decline only marginally—from 22.2% to 21.5%—reflecting limited improvement in living conditions despite macroeconomic recovery.
On inflation, the World Bank projected consumer prices to average 7.2% during the current fiscal year, before easing to around 6.8% next year. Although inflationary pressures have moderated compared to the past two years, the Bank warned that natural disasters and climate disruptions could again destabilize prices and supply chains, undermining real incomes.
The report underscored the need for investment-led growth to maintain economic stability, generate employment, and raise income levels. It stated that sustained reforms are essential to move Pakistan toward a more productive and resilient economic model.
To achieve this, the World Bank called for structural measures to strengthen fiscal discipline, expand tax revenues, and improve the country’s low tax-to-GDP ratio. It noted that Pakistan’s revenue base remains far below that of its regional peers, constraining public investment in infrastructure, health, and education.
Additionally, the Bank urged policymakers to remove trade barriers, lower high import tariffs, and simplify export procedures to enhance competitiveness. Improving the investment climate, maintaining exchange rate stability, and strengthening governance in public institutions were identified as critical priorities to restore investor confidence and stimulate private sector growth.
The report also cautioned that climate change poses an escalating threat to Pakistan’s economic stability. Frequent natural disasters—such as floods, droughts, and heatwaves—are disrupting agricultural production and industrial supply chains. Without comprehensive adaptation strategies, these challenges could reverse years of development progress and worsen fiscal pressures.
The World Bank emphasized that climate resilience must become a central pillar of Pakistan’s long-term development agenda. Investing in sustainable infrastructure, climate-smart agriculture, and disaster preparedness was highlighted as crucial to mitigating future risks.
Despite the challenges, the report acknowledged that Pakistan has shown progress in improving fiscal management and adhering to policy discipline under difficult circumstances. It credited the government for maintaining macroeconomic stability while implementing reform-oriented measures aimed at restoring investor confidence.
The World Bank concluded that Pakistan’s path to recovery depends on consistent reform execution, enhanced private sector participation, and targeted policies that promote inclusive, sustainable growth. If pursued effectively, these measures could transform the country’s fragile recovery into a stable foundation for long-term development.
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