ISLAMABAD – The World Bank has warned that Pakistan’s economic growth could slow down while inflation may rise due to the devastating floods that hit the country earlier this year.
In its latest report on Pakistan’s economic outlook, the World Bank said the country’s GDP growth for the current fiscal year (2025–26) is expected to remain limited to 2.6 percent, significantly lower than the government’s target of 4.2 percent. The Bank projects a moderate recovery next fiscal year, with growth expected to reach 3.6 percent.
According to the report, post-flood damages are likely to hinder Pakistan’s economic recovery, with real GDP growth constrained to 2.6 percent and inflation possibly exceeding 7 percent. Punjab’s agricultural output has fallen by 10 percent, with major crops including rice, sugarcane, cotton, wheat, and maize severely affected. The disruption in food supply chains is expected to widen the fiscal deficit to around 5.5 percent.
The World Bank noted that Pakistan’s overall economic progress will depend heavily on the restoration of the agricultural sector. It also warned that the national poverty rate is likely to fall by just one percent next year — from 44 percent in the current fiscal year to 43 percent in 2026 — indicating limited improvement in living standards.
The report suggested that fiscal reforms, including improved revenue collection, reduced expenditure, and agricultural recovery, could support economic stabilization. It also emphasized that tariff reductions under the government’s five-year reform plan could boost exports.
Despite the decline in exports due to flood-related damages, the report added that remittance inflows and lower international oil prices might help maintain external balance.
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