The World Bank, in its latest Pakistan Development Update: Reimagining a Digital Pakistan released on April 23, 2025, has highlighted the importance of structural reforms to convert Pakistan’s current phase of economic stabilization into long-term, inclusive, and sustainable growth. According to the report, Pakistan’s economy is expected to grow modestly by 2.7% in the fiscal year ending June 2025, a slight increase from 2.5% in the previous year, driven primarily by recovering private consumption and investment in response to subdued inflation, improving financial conditions, and recovering business confidence.
While Pakistan’s macroeconomic indicators show signs of stabilization—evidenced by easing inflation, a primary fiscal surplus, and improvements in the current account—the report cautions that economic growth remains fragile and uneven. The agriculture sector has struggled due to adverse weather conditions and pest outbreaks, while the industrial sector continues to face headwinds from high input costs, increased taxation, and reduced public spending. The services sector has also experienced muted growth due to spillovers from underperforming agriculture and industry.
Despite these constraints, the World Bank projects that if Pakistan sustains its current economic policies and commits to deeper structural reforms, GDP growth could gradually improve to 3.1% in FY26 and 3.4% in FY27. However, this optimistic outlook is contingent on Pakistan’s ability to avoid delays in reform implementation and to withstand persistent risks including high public debt, policy volatility, global trade uncertainties, and climate-related shocks.
Najy Benhassine, World Bank Country Director for Pakistan, emphasized the urgent need to transition from short-term stabilization to structural reforms that fuel long-term progress. “Pakistan’s key challenge is to transform recent gains from stabilization into economic growth that is sustainable and adequate for poverty reduction,” he stated. He called for reforms focused on creating an efficient and progressive tax system, supporting a market-driven exchange rate, reducing import tariffs to enhance export competitiveness, and improving the overall business environment.
The report also casts a spotlight on the vital role of digital transformation in Pakistan’s economic future. As part of its broader development agenda, the World Bank calls for the mobilization of private capital to strengthen the country’s digital infrastructure and enable a more inclusive digital economy. It highlights significant disparities in digital connectivity across provinces, high costs of broadband access, and the need for robust digital public infrastructure (DPI) to support service delivery to citizens and businesses alike.
Co-author of the report, Mr. Shahbaz Khan, stressed that “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.” He noted the importance of strengthening digital identification systems, improving digital payment platforms, and fostering coordination between federal and provincial governments to build an inclusive and efficient digital ecosystem.
Lead author Ms. Anna Twum added, “Pakistan’s economy has turned the corner and stabilized. Yet, the outlook remains fragile, and any setbacks in structural reform implementation could undermine recovery and worsen external vulnerabilities.”
The report is part of the biannual South Asia Development Update series, with the April 2025 edition titled Taxing Times. It projects South Asia’s regional growth to slow to 5.8% in 2025 before rising to 6.1% in 2026, amid global uncertainty and domestic fiscal constraints. It also addresses challenges in tax mobilization across the region, where despite high tax rates, revenue collection remains below the average for emerging and developing economies.
Pakistan’s pathway to sustained prosperity, the World Bank concludes, lies in embracing reform with urgency—both in traditional fiscal policy and in unlocking the digital economy’s potential.