ISLAMABAD: Growth in Pakistan is projected to strengthen to 2.8 percent in fiscal year 2024-25 and 3.2 percent in fiscal year 2025-26 — upgraded by 0.5 percentage point in both fiscal years since the June forecasts, says the World Bank.
The Bank kin its latest report “Global Economic Prospects” stated that moderating inflation will support growth in industrial activity, while reduced uncertainty is expected to improve business and investor confidence, bolstering investment. Despite further stabilization of macroeconomic conditions, fiscal and monetary policies are expected to remain tight, keeping growth below potential over the forecast horizon. Growth turned positive in Pakistan and Sri Lanka after recent periods of contraction. In Pakistan, growth is estimated to have picked up to 2.5 percent in fiscal year 2023-24 (July 2023 to June 2024). Agricultural output strengthened on account of improved weather conditions. Industrial production also increased, reflecting the earlier lifting of import controls and reduced political uncertainty following the general election in February.
It further stated in Pakistan headline inflation fell to single digits in August 2024 for the first time since late 2021, mainly reflecting tight fiscal and monetary policies. As inflationary pressure waned central bank started cutting policy rates.
The report noted that in Bangladesh, Pakistan, and Sri Lanka, per capita income growth is expected to be weaker in 2025-26 than in the decade preceding the pandemic, implying a slower pace of poverty reduction and, in some countries, a projected slowdown in income catch-up to economies with higher income levels.
The report noted that excluding India, growth in SAR is estimated to have picked up to 3.9 percent last year from 3 percent in 2023, mainly reflecting recoveries in Pakistan and Sri Lanka, supported by improved macroeconomic policies aimed at addressing earlier economic difficulties.
Region-wide fiscal deficits, particularly when India is excluded, are forecast to be stable, mainly reflecting the impact of fiscal adjustments offset by expected increases in interest payments in Pakistan and infrastructure investment in Bangladesh.
The report noted that despite a recent moderation in hunger in several countries, including India, food insecurity has worsened since the decade preceding the pandemic in Afghanistan and Pakistan.
In several countries, including Maldives, Pakistan, and Sri Lanka, delays in implementing policy reforms, including under programs supported by the International Monetary Fund, could worsen investor confidence, causing capital outflows, increasing vulnerabilities, and dampening economic activity. Uncertainty about governments’ resolve to maintain fiscal discipline could also damage confidence and increase fiscal and financial pressures, raising borrowing costs for the private sector and the government, with adverse consequences for private investment.
Copyright Business Recorder, 2025