GDP Growth
The World Bank has projected Pakistan’s real GDP growth to recover to 1.7% in fiscal year 2024 and 2.4% in fiscal year 2025. However, it anticipates annual inflation to remain high at 26.5% in the ongoing fiscal year.
The World Bank stated in its latest report, “Pakistan Development Update: Restoring Fiscal Sustainability,” that real GDP growth is expected to rebound to 1.7% in FY24 and 2.4% in FY25, assuming robust implementation of the IMF Stand-By Arrangement (SBA), new external financing, and continued fiscal restraint.
The report noted that economic growth is likely to stay below potential in the medium term, with some improvements in investment and exports. The poverty headcount in Pakistan reached an estimated 39.4% in FY23, with 12.5 million more people falling below the Lower-Middle Income Country poverty threshold (US$3.65/day 2017 PPP per capita) compared to 34.2% in FY22.
The World Bank emphasized the need for reforms to create fiscal space and public resources for inclusive, sustainable, and climate-resilient development.
The report warned that Pakistan’s economy would remain vulnerable to domestic and external shocks without substantial fiscal adjustments and comprehensive reforms. It also noted that Pakistan’s economy contracted by an estimated 0.6% in FY23 due to various factors, including floods, import restrictions, political uncertainty, global commodity price hikes, and tighter global financing.
Moreover, World Bank Country Director for Pakistan Najy Benhassine emphasized the importance of careful economic management and deep structural reforms to ensure macroeconomic stability and growth.
The World Bank recommended reforms to reduce tax exemptions, broaden the tax base by increasing taxes on agriculture, property, and retailers, enhance the quality of public spending by reducing subsidies, improve the energy sector’s financial viability, and promote private participation in state-owned enterprises.
