Pakistan’s economy grew by 3.0 percent in the fiscal year ending June 2025, marking a slight improvement from 2.6 percent in the previous year. This growth was driven by stronger industrial and service sector performance, though agricultural output lagged behind due to floods, adverse weather, and pest infestations. According to the World Bank’s Pakistan Development Update: Staying the Course for Growth and Jobs, growth is expected to remain steady at 3.0 percent in fiscal year 2026 before accelerating in the medium term as reforms and stability take root.
The report highlights that fiscal tightening and prudent monetary policies helped anchor inflation and maintain fiscal and current account surpluses despite global and domestic pressures. However, recent floods have caused widespread human and economic losses, threatening growth and adding strain to macroeconomic stability. The World Bank emphasized that sustained reforms, stronger safety nets, and resilient infrastructure are essential to protect vulnerable communities and maintain progress toward inclusive development.
Economic growth is projected to remain at 3.0 percent in FY26, rising modestly to 3.4 percent in FY27, contingent on continued fiscal discipline and reform implementation. To ensure long-term sustainability, the report urges Pakistan to adopt balanced revenue and expenditure measures while advancing key fiscal reforms such as broadening the tax base, improving tax administration, and reducing state involvement through privatization and public sector rationalization.
A special focus of the report examines the pivotal role of exports in achieving stable, long-term growth. Pakistan’s export share has declined from 16 percent of GDP in the 1990s to around 10 percent in 2024, making the economy heavily reliant on debt and remittance-fueled consumption. High tariffs, complex regulations, and costly energy and logistics have hindered competitiveness. The World Bank noted that recent tariff reforms represent progress but called for additional measures—such as adopting a market-driven exchange rate, improving trade finance, expanding infrastructure, and deepening trade agreements—to boost export-led growth, including in emerging IT service sectors.
The World Bank also acknowledged Pakistan’s efforts to prioritize export growth through structural reforms like the National Tariff Policy, which reduces input costs for domestic industries. Still, the report stresses that comprehensive reforms and greater market openness are vital to achieving sustainable growth, economic resilience, and a stronger global trade presence.
