Islamabad, April 23, 2025 – Pakistan’s economy is on a steady path toward stabilization, with growth projected at 2.7 percent for the current fiscal year ending in June 2025, up from 2.5 percent last year, according to the latest Pakistan Development Update: Reimagining a Digital Pakistan by the World Bank. The growth is largely attributed to recovering private consumption and investment, fueled by subdued inflation, lower interest rates, and improved business confidence.
Despite ongoing tight macroeconomic policies, the country has witnessed progress in stabilizing its economy with easing inflation, improving financial conditions, and achieving both current account and primary fiscal surpluses. However, the first half of the fiscal year saw weak economic growth, particularly in agriculture, which faced challenges due to adverse weather conditions and pest infestations. Industrial activity also declined due to higher input costs and taxes, while the services sector showed muted growth.
Najy Benhassine, World Bank Country Director for Pakistan, emphasized that while the country has made progress in stabilization, the real challenge lies in translating these gains into sustainable economic growth. “Pakistan’s key challenge is to transform recent gains from stabilization into economic growth that is sustainable and adequate for poverty reduction,” he said. He highlighted the importance of reforms in tax policy, the exchange rate, import tariffs, and the business environment to bolster economic confidence and attract investment.
Looking ahead, the World Bank projects real GDP growth to strengthen to 3.1 percent in FY2026 and 3.4 percent in FY2027. However, the outlook remains constrained by tight monetary and fiscal policies aimed at rebuilding economic buffers and managing risks of imbalances. The report also underscores the ongoing risks due to high debt levels, policy uncertainty, global trade challenges, and vulnerability to climate-related shocks.
The Pakistan Development Update also highlights the need for structural reforms, particularly in the digital sector, to unlock private capital and improve the country’s digital infrastructure. The report calls for improved connectivity, better access to digital services, and stronger public-private partnerships to bridge the digital divide. Shahbaz Khan, co-author of the report, noted that enhancing digital public infrastructure is essential for building a more inclusive and efficient digital ecosystem in Pakistan.
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As part of its recommendations, the report stresses the importance of legal and regulatory reforms, increased private investment, and stronger coordination between federal and provincial authorities to foster an environment conducive to the growth of Pakistan’s digital economy.
The Pakistan Development Update is part of the World Bank’s twice-yearly South Asia Development Update, which examines regional economic prospects and challenges. The April 2025 edition of the South Asia Development Update, Taxing Times, projects a slowdown in regional growth to 5.8 percent in 2025, with increased risks due to global uncertainties and domestic fiscal vulnerabilities.
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