KARACHI: The World Bank has expressed concern over Pakistan’s current economic growth rate of 3%, deeming it insufficient to significantly reduce poverty or unemployment, despite early indications of a gradual recovery within the country.
In its recently published Pakistan Development Update Report 2025, the global financial institution forecasts Pakistan’s GDP growth to increase from 2.6% in the previous fiscal year to 3% in the present one, with a slight uptick to 3.4% projected for the next fiscal year. Nevertheless, the report warns that this growth remains inadequate to address the demands of a rapidly expanding population and labor market.
Highlighting challenges in job creation, the report noted that approximately 1.6 million young individuals enter Pakistan’s labor force annually, while employment generation continues to lag far behind. This mismatch between workforce demand and employment opportunities is identified as a key contributor to persistent poverty and inequality. The poverty rate is estimated to decline modestly from 22.2% to 21.5%, reiterating the urgency for accelerated and inclusive economic progress to improve living conditions.
Concerning inflation, the World Bank estimates average consumer price growth at 7.2% for the ongoing fiscal year, with a mild decrease to 6.8% expected in the following year. Although inflationary pressures have eased compared to past years, the report cautions that climate shocks and disruptions related to floods could again destabilize prices and supply chains.
The report underscores the crucial importance of investment-driven growth to curb inflation, generate employment opportunities, and enhance real incomes nationwide. Structural reforms are highlighted as imperative for unlocking Pakistan’s growth potential. These include strategies to increase tax collection, enforce fiscal discipline, and address the country’s historically low tax-to-GDP ratio.
It also emphasizes reducing trade barriers and excessively high tariffs that undermine export competitiveness. Other key recommendations include fostering an improved investment climate, maintaining a stable exchange rate system, and fortifying governance within the public sector—all considered essential steps towards achieving long-term economic resilience.
Additionally, the report warns that climate change is an escalating threat to Pakistan’s economic stability, noting that recurrent disasters such as severe floods jeopardize developmental progress and disrupt agricultural and industrial productivity. Policymakers are urged to prioritize climate adaptation measures within national development frameworks to secure sustainable economic growth.
Despite these pressing concerns, the World Bank acknowledges improvements in fiscal management and economic discipline under challenging circumstances in Pakistan. It suggests that if structural reforms continue and private sector involvement is strengthened, the country can steadily move towards achieving more sustainable, inclusive, and resilient growth in the years ahead.
