World Bank warns of slower growth, rising inflation in Pakistan

The World Bank has released a report on Pakistan’s economic outlook, warning that the country’s economic growth may slow down and inflation may rise due to the recent devastating floods.

According to the report, Pakistan’s GDP growth rate for the current fiscal year (2025–26) is projected to remain limited to 2.6%, significantly lower than the government’s target of 4.2%. The economy is expected to grow by 3.6% in the next fiscal year, the report added.

The World Bank noted that flood-related damages are likely to slow the pace of economic recovery, keeping real GDP growth at around 2.6% in FY2025–26. Inflation is projected to exceed 7% during the current fiscal year.

The report highlighted a 10% decline in agricultural output in Punjab, with key crops such as rice, sugarcane, cotton, wheat, and maize severely affected.

The floods have disrupted food supply chains, while the fiscal deficit is expected to widen to 5.5%.

The country’s overall growth, it said, will depend heavily on the recovery of the agriculture sector. The World Bank also estimated that poverty levels in Pakistan may decline slightly by 1% next year, from 44% in the current fiscal year to 43% in FY2026–27.

The report further stated that fiscal reforms, increased revenue collection, expenditure control, and agricultural recovery could help stabilize the economy.

Under the five-year reform plan, a reduction in tariffs is expected to boost exports. Although flood-related losses may temporarily dampen export performance, remittances and lower oil prices could help maintain external balance.