World Bank
The World Bank has revised its GDP growth forecast for Pakistan upwards to 2.7% for the fiscal year ending June 2025, slightly above the International Monetary Fund’s (IMF) projection of 2.6%.
According to the World Bank’s latest Pakistan Development Update, the economy is stabilizing with easing inflation, improving financial conditions, and current account and primary fiscal surpluses. Real GDP growth is expected to be supported by recovering private consumption and investment driven by subdued inflation, lower interest rates, and recovering business confidence.
Despite the positive outlook, the World Bank notes that economic growth has been weak during the first half of the fiscal year. Agriculture saw limited growth due to adverse weather and pest infestations, while industrial activity declined due to higher input costs and taxes, and reduced government spending. The services sector also experienced muted growth due to limited spillovers from weak agriculture and industrial activity.
The World Bank projects that economic growth will remain tepid, making job creation and poverty reduction challenging amid high population growth. To achieve sustainable economic growth, Pakistan needs to implement high-impact reforms, including an efficient and progressive tax system, a market-determined exchange rate, reduced import tariffs to boost exports, and improved business environment.
Najy Benhassine, World Bank Country Director for Pakistan, emphasized that Pakistan’s key challenge is to transform recent gains from stabilization into economic growth that is sustainable and adequate for poverty reduction. He added that strong reform commitment, building confidence, and attracting investment are crucial for achieving this goal.
The World Bank projects that real GDP growth will strengthen to 3.1% in FY26 and 3.4% in FY27, but will likely remain constrained amid tight monetary and fiscal policies aimed at rebuilding buffers and containing risks of imbalances. However, significant downside risks persist, including elevated debt levels, policy and global trade uncertainties, and exposure to climatic shocks.
In contrast, the IMF has downgraded Pakistan’s economic growth projection for the current fiscal year from 3% to 2.6% in its World Economic Outlook report. The revised forecast follows US President Donald Trump’s fresh tariff hikes, which have led the IMF to cut growth estimates for several developing economies.
The IMF projects Pakistan’s GDP growth to rise to 3.6% in the next fiscal year and expects inflation to stand at 5.1% for the current fiscal year, rising to 7.7% in the next fiscal year.
The IMF also revised its forecast for Pakistan’s current account deficit, expecting it to stand at 0.1% of GDP, compared to its earlier estimate of 1%. The unemployment rate is projected to remain at 8% in 2025, down from 8.3% in 2024, with a further expected decrease to 7.5% in 2026.
Overall, both the World Bank and IMF acknowledge that Pakistan’s economy is stabilizing, but significant challenges remain. The country needs to implement structural reforms to unlock opportunities for private capital mobilization, improve digital infrastructure, and enable a conducive environment for the digital economy.
