Pakistan’s incomes could triple by 2050 if the country ensures faster implementation of structural reforms, according to the World Bank Group’s latest Pakistan Development Update, titled Attaining Escape Velocity.
The report says that following progress on macroeconomic stabilisation, Pakistan has an opportunity to achieve faster and sustained economic growth and create more jobs.
Sound macroeconomic policies in recent years have helped stabilise the economy and preserve growth despite the impact of the Middle East conflict.
Real gross domestic product (GDP) growth increased to 3.7 per cent in FY26 from 3.2pc in FY25.
Revenue growth and expenditure restraint supported record primary fiscal surpluses, which reached 2.9pc of GDP in FY26, while strong remittances enabled the country to rebuild its foreign exchange reserves.
These improvements were recognised through upgrades by two major international rating agencies, S&P and Moody’s, and enabled Pakistan to return to international debt markets with the issuance of a $3 billion Eurobond.
“Pakistan has made real progress in restoring stability, and markets have taken notice,” World Bank Country Director Bolormaa Amgaabazar said.
“But real per capita growth – the rate at which the income of the average Pakistani increases – remains stuck at around 1.6pc. Reforms to drive faster growth are now urgently needed,” she added. The report finds that higher growth is possible if Pakistan follows the path taken by other successful countries in pursuing ambitious economic reforms. Upgrading policies and institutions to the standards of the average middle-income country could drive sustained annual growth of 6.2pc to 6.9pc, allowing Pakistan to reach Vietnam’s current income level by 2050. “With macro stabilisation achieved but fiscal resources and foreign exchange still tightly constrained, structural reform to encourage private investment is the necessary next step towards higher living standards,” said Sebastian Essl, the report’s lead author. “Achieving this kind of private-sector-led growth requires a plan, coordination, and committed reform implementation,” he added.
Meanwhile, the International Monetary Fund (IMF) on Thursday forecast a sharp drop in economic output in Pakistan, the Middle East and North Africa this year due to the US-Israeli-led war against Iran, followed by a rebound to 6.6 per cent growth in 2027, while warning that further energy production disruptions could worsen the outlook.
The IMF said the region’s output was expected to contract by 1.3pc as a result of the war’s impact on energy production, shipping, tourism, trade and confidence. Economic output would increase sharply in 2027, but output in those economies would generally stay below pre-war projections. The war’s impact had been substantial, but uneven, with oil-exporting economies directly affected by disruptions to energy production and shipping hit harder, and oil importers proving to be more resilient, the IMF said in its regional outlook released Thursday in Dubai.
The IMF said its baseline assumed that the conflict would abate in early 2027 and that trade would gradually normalise during the year, but it said the outlook remained clouded by “exceptionally high uncertainty.”
“The main risks derive from further disruption to energy production and trade routes that could drive energy prices higher,” the IMF said in a statement outlining its key messages, noting external financial conditions could also tighten. External financial conditions could also tighten if investors reassess AI-driven productivity gains and interest rates rise further amid heightened concerns about inflation and fiscal positions, it said.
Oil importers had proven more resilient, with domestic demand supported by remittances and tourism flows, favourable financial conditions, and prompt policy responses that safeguard consumers from higher commodity prices, the IMF said. Growth in the Caucasus and Central Asia was moderating toward a more sustainable pace, the IMF said, forecasting a 5.2pc rise in economic output in 2026 and 5pc in 2027.
The IMF underscored the mantra it delivered during last week’s annual meetings, urging policymakers to prioritise maintaining price stability, while preserving fiscal sustainability, maintaining central bank independence and enacting structural reforms to boost productivity and create jobs.