Pakistan

Pakistan’s economic development has long been undermined by policy and institutional weaknesses. Periods of rapid growth have been short-lived, and dependent on unsustainable debt accumulation or other external inflows. Associated debt accumulation and trade imbalances have necessitated painful subsequent adjustments, slowing growth and undermining confidence and investment. Per capita output has increased by only around 2.2 percent on average over the past two decades. Progress with reducing poverty, which was rapid between 2000 and the mid-2010s, has stalled. Around 22 percent of the population live below the national poverty line, amid slow growth, repeated macroeconomic shocks and natural disasters, and continued weaknesses in service-delivery.

Pakistan’s pattern of low and volatile growth reflects important underlying constraints to productivity, investment, and exports. These constraints have included protectionist trade policies, unpredictable macro-fiscal policies, a heavy state presence in the economy, and a challenging business environment. Weak human capital has also constrained growth, with over one-third of school-age children out of school and stunting rates of 40 percent.

Stabilization and Reform

Policy efforts over recent years have stabilized the economy and laid the groundwork for faster growth. Fiscal consolidation efforts have delivered primary surpluses, helping moderate debt sustainability risks. Appropriate monetary and exchange rate policies have reduced inflation and supported modest accumulation of foreign exchange reserves. Reflecting improved confidence, real GDP growth reached three percent in FY25. Lower food inflation and stronger growth saw the estimated poverty rate at the national poverty line decline from 25.3 percent in FY24 to 22.5 percent in FY25.

Government is now taking important measures to address longer-term investment and productivity constraints. The FY25 budget included major trade liberalization reforms, and efforts are underway to reform the business environment, privatize state-owned enterprises, and reform the business regulatory environment.

Priorities

Amid global policy uncertainty and the continued impact of natural disasters (including recent flooding), Pakistan must now sustain macroeconomic stabilization gains and push forward with deep structural reforms. Priorities include broadening the tax base while strengthening tax administration, simplifying regulations, continuing implementation of the National Tariff Policy, reducing the presence of the state in the economy through state-owned enterprise divesture, addressing high electricity costs, and rationalizing the public sector. Building on ongoing initiatives, such as the Prime Minister’s Economic Transformation Agenda and Uraan Pakistan, timely implementation of these measures can restore investor confidence, boost growth, support employment, and protect recent poverty reduction gains against flood-related disruptions.

Last Updated: Nov 19, 2025

Read More

Read Less

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: Nov 19, 2025

Read More

Read Less

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

Read More

Read Less