Faster structural reforms could triple Pakistan’s incomes by 2050, the World Bank Group said in its latest Pakistan Development Update: Attaining Escape Velocity.
Following progress with macroeconomic stabilisation, Pakistan now has the opportunity for faster and sustained economic growth and job creation, the global lender said on Thursday.
According to the World Bank, sound macroeconomic policies over recent years have helped stabilise the economy and preserve growth, despite the impacts of the Middle East conflict.
“Real GDP growth increased to 3.7% in FY26 from 3.2% in FY25. Revenue growth and expenditure restraint supported record primary fiscal surpluses, reaching 2.9% of GDP in FY26, while strong remittances allowed for the re-accumulation of foreign exchange reserves,” said the World Bank.
These improvements were recognised with upgrades from two major international rating agencies (S&P and Moody’s), and allowed Pakistan’s return to international debt markets, with the issuance of a US$3 billion Eurobond.
“Pakistan has made real progress in restoring stability, and markets have taken notice,” said Bolormaa Amgaabazar, World Bank Country Director for Pakistan. “But real per capita growth - the rate at which the income of the average Pakistani increases - remains stuck at around 1.6%. Reforms to drive faster growth are now urgently needed.”
The report finds that such growth is possible if Pakistan follows the path taken by other successful countries in pursuing ambitious economic reforms.
“Reforms that upgrade policies and institutions to the quality seen in the average middle-income country could drive sustained growth of up to 6.2–6.9% /annum, sufficient for Pakistan to reach Viet Nam’s current level of income by 2050,” it said.
“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, lead author of the report.
“Achieving this kind of private-sector led growth requires a plan, coordination, and committed reform implementation.”
The report highlighted a set of ambitious reforms that could help Pakistan reach, by 2050, the per capita incomes of countries currently at the upper-middle income threshold.
Many of these build on measures already under way, including timely power sector tariff adjustments that helped cut energy subsidies from 1.1% of GDP in FY25 to 0.8% in FY26, continued implementation of trade liberalisation under the National Tariff Policy, and the recent privatisation of Pakistan International Airlines.
“Building on these foundations, sustained progress will depend on continued reforms to strengthen the business environment, reform the tax system, reduce the state’s presence in the economy, and expand access to finance,” the World Bank said.