Pakistan

Prudent macroeconomic policy helped Pakistan sustain growth in FY26 and withstand the impact of the Middle East conflict. Real GDP growth reached 3.7 percent in FY26, up from 3.2 percent in FY25, led by services. Headline inflation rose to 7.1 percent as energy prices increased, and the State Bank of Pakistan raised the policy rate to 11.5 percent in April 2026. The consolidated fiscal deficit narrowed to 2.6 percent of GDP, with a primary surplus of 2.9 percent, and the current account recorded a small deficit of 0.1 percent of GDP. Sound macroeconomic management supported credit rating upgrades by S&P (to B in July) and Moody’s (to B3 in August), and the issuance of a US$3 billion Eurobond in September 2026.

Growth, however, has been too slow to create enough jobs for Pakistan’s growing workforce. About 3.5 million people enter the workforce every year, but job creation has fallen short, with one in six new entrants left without work, and unemployment reaching 7 percent in 2024. Most of the 17.7 million net new jobs created since 2018 have been informal, low-paid, or self-employed, and economy-wide labor productivity grew just 0.4 percent a year between 2014 and 2024.

Weak job creation and high inflation have eroded real incomes and pushed poverty up. Real GDP per capita grew by only around 1.6 percent in FY26 as population growth remained high at about 2.1 percent. Real wages fell by 3.4 percent a year between 2018/19 and 2024/25 as labor supply outpaced demand and nominal wages failed to keep pace with high inflation. As a result, the national poverty rate rose from 22 percent in 2018/19 to 29 percent in 2024/25, with about 70 million Pakistanis now living in poverty. More than half of the increase reflected a worsening distribution of consumption.

Real GDP growth is projected to remain modest at 3.8 percent in FY27, held back by continued high energy prices. Under current assumptions of sound macroeconomic management but limited structural reform progress, growth is expected to rise to around 4.5 percent over the medium term, and poverty is likely to decline only gradually. Headline inflation is expected to rise to 8.2 percent in FY27 before easing to around 7 percent. The current account deficit is expected to widen to around 1 percent of GDP by FY28 as demand recovers, partly offset by remittances and ICT services exports, and the fiscal deficit is projected to widen from 2.6 percent of GDP in FY26 to 3.5 percent in FY27 and 3.9 percent in FY28 as the primary surplus narrows.

Risks remain high, and turning stability into jobs and higher incomes will require faster structural reform implementation. A prolonged Middle East conflict, a strong El Niño, and high public debt and debt service costs against limited buffers pose significant downside risks to macroeconomic stability and growth. With the current IMF program ending in September 2027, a credible medium-term fiscal plan is critical, alongside deep reforms to improve revenue mobilization, trade liberalization, state’s economic presence, energy sector performance, and the business environment, which are needed to create jobs and lift incomes.

Last Updated: Oct 09, 2025

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Pakistan faces recurring disasters and health challenges. The World Bank supports disaster resilience through projects like DCRIP and SRP, benefiting millions by restoring infrastructure and building capacity, especially after the 2022 floods. The Bank’s CCDR and CPGA guide climate resilience and crisis preparedness.

In health, Pakistan has made progress on SDGs, but maternal and child mortality remain high, with regional disparities. Stunting rates have dropped but remain high. Immunization rates have improved but stunting and anemia persist. Health financing is low, and out-of-pocket costs are high. The World Bank has been supporting national and provincial projects, and reform advisory.

In education, the ASPIRE program enhances learning for out-of-school children and strengthens federal-provincial coordination. DARE improves data and policy, while HEDP reforms higher education. Provincial projects in Punjab, Sindh, Balochistan, and Khyber Pakhtunkhwa focus on early childhood education, school rehabilitation, and access for vulnerable groups, including refugees and girls. The Bank’s efforts aim to build resilience, human capital, and inclusive growth across Pakistan.

Last Updated: Oct 09, 2026

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After decades of volatile low growth and low investment, Pakistan has fallen behind its peers in key metrics of development. It now has an opportunity to take another course. The economy is recovering from the recent crisis as the government has launched an ambitious program of fiscal, energy, and business environment reforms that have the potential to sustain growth acceleration. These reforms can lead to a durable recovery made of stronger investment, productivity, and growth if they are duly implemented and sustained. The Country Partnership Framework (CPF) will run up to 10 years - with a Performance and Learning Review (PLR) in FY30 - and is anchored around six outcomes focused on Pakistan’s most critical development needs. This approach is a shift from the past, as it aims to focus less on short-term adjustment programs and on often small investments in scattered sectors, to more selective, stable, and larger investments in areas critical for sustained development and that require time and persistence for impact. This should also help shield the program from a volatile polity and a track record of frequent changes in priorities and short-lived initiatives while facilitating alignment with other development partners.

The CPF supports six key country outcomes:

-Reduced child stunting through increased access to clean water and sanitation services, basic health and nutrition and family planning services

-Reduced learning poverty through quality foundational education

-Increased resilience to floods and other climate-related disasters and better food and nutrition security in the face of climate impacts on the water-agriculture nexus

-Cleaner and more sustainable energy and better air quality

-Increased fiscal space and better management and more progressive public expenditures for development

-Increased productive and inclusive private investment, particularly to improve external trade balances and higher, more sustainable growth.

For more information on the CPF country-wide consultations, please visit the CPF Webpage

Last Updated: Nov 19, 2025

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