Pakistan’s economy is showing signs of recovery. The World Bank projects a 2.7% growth for the fiscal year ending in June 2025. This is slightly above the IMF’s latest forecast of 2.6% and better than last year’s 2.5% growth rate.
The improvement is supported by rising private consumption and investment. Lower inflation, falling interest rates, and renewed business confidence are also helping the recovery. The World Bank shared these findings in its latest Pakistan Development Update, titled Reimagining a Digital Pakistan.
Inflation has begun to ease. Financial conditions are improving. Both the current account and the primary fiscal balance are in surplus. These indicators show that Pakistan’s economy is stabilising.
However, the first half of the fiscal year still showed weak performance. Growth in agriculture remained limited. Weather conditions and pest attacks were key challenges. The industrial sector also struggled. Higher production costs, increased taxes, and reduced government spending slowed down activity.
The services sector did not perform strongly either. This was due to weak demand from agriculture and industry. So, while recovery is expected, growth will still be slow. That makes job creation and poverty reduction more difficult, especially with the country’s fast-growing population.
Najy Benhassine, the World Bank’s Country Director for Pakistan, stressed the need for deep reforms. He highlighted the importance of a fair tax system and a flexible exchange rate. Reducing import tariffs and improving the business climate are also crucial. Strong reforms will attract investment and boost confidence in the financial situation of the country.
Looking ahead, the World Bank predicts a GDP growth of 3.1% in 2026 and 3.4% in 2027. But these gains will be limited by tight fiscal and monetary policies. The country needs to rebuild its financial reserves and avoid new economic imbalances. Risks remain high.
Lead author Anna Twum said that Pakistan’s economy has stabilised, but it still faces many challenges. If structural reforms are delayed, the fragile recovery could reverse. External pressures could grow again.
High debt, policy changes, global trade uncertainty, and climate-related risks all threaten the economic outlook. The World Bank also focused on the need for digital reform. Unlocking private investment is key to improving digital infrastructure.
Internet access and service quality vary by region. Fixed broadband is expensive. The country also lags in providing digital services to citizens and businesses. Progress in building Digital Public Infrastructure (DPI) is underway. But it needs strong leadership and better coordination among all levels of government.
Shahbaz Khan, a co-author of the report, said legal and regulatory reforms are vital. Private investment must increase. The digital ID system should be stronger. Payment platforms need upgrading. Coordination between provincial and federal bodies is essential for an inclusive digital ecosystem.
Meanwhile, the IMF downgraded its growth forecast for Pakistan’s economy. It now expects 2.6% growth this year, down from 3%. The change comes after new US tariffs of up to 29%, which affected many developing nations.
However, the IMF forecasts that Pakistan’s economic performance will improve next year. Growth could rise to 3.6% in 2025–26. Inflation, which was 23.4% in 2024, is projected to fall to 5.1% this year but may climb to 7.7% next year.
The IMF also revised its forecast for the current account deficit. It now expects a deficit of just 0.1% of GDP—or $400 million. This is far better than the previous estimate of $3.7 billion. But the gap may rise to 0.4% of GDP in 2026.
Unemployment is expected to fall slowly. It should drop from 8.3% in 2024 to 8% in 2025 and 7.5% in 2026.
The IMF’s World Economic Outlook notes that recent U.S. trade policies have weakened growth across many developing economies. That has affected Pakistan’s financial situation as well.
