(October 8, 2025) — The World Bank has sounded the alarm over Pakistan’s fragile economic outlook, warning of mounting inflationary pressures and a slowdown in growth amid the lingering impact of recent floods that have severely disrupted key sectors, particularly agriculture.
In its latest report on Pakistan’s economy, the World Bank projected that the country’s GDP growth would remain subdued at 2.6% for the current fiscal year (2025–26) far below the government’s ambitious target of 4.2%. The Bank expects growth to pick up modestly to 3.6% next year, but cautions that recovery will remain vulnerable to climate shocks, weak fiscal management, and supply chain disruptions.
According to the report, flood damage has significantly undermined Pakistan’s agricultural output, with Punjab the nation’s largest food-producing province witnessing a 10% decline in production. Major crops such as rice, sugarcane, cotton, wheat, and corn have been hit hard, leading to supply shortages and putting upward pressure on food prices. The report warns that inflation could climb beyond 7% during the current fiscal year as a result.
The World Bank also noted that Pakistan’s fiscal deficit is projected to widen to 5.5%, driven by lower revenues and increased spending on flood recovery and social protection. It emphasized that a sustainable economic rebound will depend heavily on revitalizing the agricultural sector, improving governance, and ensuring fiscal discipline.
Despite the challenges, the Bank expressed cautious optimism about Pakistan’s poverty outlook. It estimated that the poverty rate could decline slightly from 44% this year to 43% next year, provided that remittance inflows remain stable and inflation is contained.
The report further highlighted that economic improvement is achievable through enhanced revenue collection, expenditure rationalization, and reforms in trade policy. Under Pakistan’s five-year economic reform plan, tariff reductions are expected to make exports more competitive. Although export volumes may temporarily decline due to flood-related disruptions, the World Bank noted that remittances and lower oil prices could help maintain external balance in the near term.
Overall, the Bank’s findings paint a cautious but realistic picture of Pakistan’s economic trajectory one that hinges on effective policy implementation, agricultural recovery, and resilience against climate-driven shocks.
