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Pakistan’s Economy Faces Growth Challenges, Poverty Reduction Remains Elusive: World Bank Report

Pakistan’s economic outlook appears challenging as the World Bank forecasts a meager growth of 1.8 percent for the current fiscal year, ending in June 2024. The latest Pakistan Development Update from the World Bank highlights persistent hurdles to growth and poverty reduction in the country.

Pakistan's Economy Faces Growth Challenges, Poverty Reduction Remains Elusive: World Bank Report

Key Points:

  • Growth Prospects: The World Bank projects Pakistan’s GDP growth to remain below 3 percent over the next three years, with growth rates of 1.8 percent in FY24, 2.3 percent in FY25, and 2.7 percent in FY26. However, agricultural growth is anticipated to decline to 2.2 percent by FY26.
  • Poverty Challenges: Despite efforts, poverty reduction remains stagnant, with approximately 40 percent of Pakistanis living below the poverty line. The report emphasizes that weak growth and high inflation contribute to the inability to alleviate poverty, projecting no significant reduction in poverty rates over the medium term.
  • Fiscal Impact: The report underscores the high fiscal costs associated with federal state-owned enterprises (SOEs) and the urgent need for reforms to enhance their performance and governance, including potential privatizations.
  • Macroeconomic Risks: Pakistan faces macroeconomic risks due to a large debt burden, limited foreign exchange reserves, and persistent trade deficits. Without substantial economic reforms, the country is likely to continue grappling with foreign exchange liquidity issues.
  • Investment and Confidence: Investment and confidence are expected to remain subdued without a credible economic reform plan. While agricultural output is anticipated to grow, industrial growth is projected to remain muted due to tight macroeconomic policies.
  • Inflationary Pressures: High inflation rates, driven by domestic energy price adjustments, pose challenges to economic stability. The State Bank of Pakistan (SBP) is expected to maintain a tight monetary policy stance to address inflationary pressures.
  • Fiscal Deficit: The fiscal deficit is projected to increase to 8.0 percent of GDP in FY24, primarily due to higher interest payments. Fiscal consolidation measures are deemed essential to restore fiscal and debt sustainability.


The World Bank report underscores the need for Pakistan to implement bold economic reforms to address structural challenges and foster sustainable growth. Urgent attention to fiscal consolidation, privatization of state-owned enterprises, and investment in human development is crucial to navigating the current economic landscape effectively.

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As Pakistan navigates economic headwinds, concerted efforts by policymakers, supported by international institutions like the World Bank, are essential to overcome challenges, stimulate growth, and uplift the socio-economic conditions of its populace. Addressing fiscal imbalances, enhancing investment climate, and prioritizing poverty alleviation measures are imperative for Pakistan’s sustainable development journey.

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