Can Pakistan’s Economy Survive Another Wave of Inflation?

The World Bank, in its Pakistan Development Report 2025, has warned that inflation in Pakistan is likely to increase due to the severe economic impact of the recent floods.

According to the report, inflation is projected at 7.2% for the current fiscal year and 6.8% for the next, while the poverty rate is estimated to remain at 21.5%.

The World Bank emphasized that while Pakistan’s economy showed signs of moderate recovery — with GDP growth rising to 3% in 2025 from 2.6% last year — significant challenges remain, particularly in agriculture and export competitiveness.

The report noted that tariff reforms alone are insufficient to drive export growth and called for full implementation of the National Tariff Policy announced in the federal budget. It further recommended measures to boost remittances to bridge the trade gap and sustain external stability.

Growth in the industrial and services sectors helped support overall output, while fiscal discipline contributed to maintaining macroeconomic stability. The World Bank projects the economy to grow by 3.4% in 2027 if reforms continue.

The report also highlighted that 1.6 million youth enter Pakistan’s job market every year, underscoring the urgent need for faster economic growth, employment opportunities, and private sector expansion.

The World Bank urged Pakistan to expand its tax base, implement structural reforms, promote investment, and create a business-friendly environment to reduce poverty and improve living standards.