World Bank sees Pakistan growth at 3.8% in FY27, says reforms could triple incomes by 2050
The World Bank's new Pakistan Development Update says growth rose to 3.7% in FY26 and will edge up to 3.8% this year, but warns high oil prices from the Middle East war and El Niño are key risks.
At a glance
- The World Bank's Pakistan Development Update, 'Attaining Escape Velocity', released on Thursday, October 22, says real GDP growth rose to 3.7% in FY2025-26 from 3.2% the year before.
- It forecasts growth of 3.8% in FY27 and 4.2% in FY28, with average inflation of 8.2% this fiscal year and a fiscal deficit of 3.5% of GDP.
- Pakistan posted a record primary surplus of 2.9% of GDP in FY26, and energy subsidies fell to 0.8% of GDP.
- With faster reforms, the bank says Pakistan could grow 6.2–6.9% a year and triple incomes by 2050, reaching today's income level of Vietnam.
- High energy prices from the Middle East conflict, a poor El Niño season and costly fertiliser are the main risks.
Pakistan's economy grew 3.7% in the fiscal year that ended in June and is expected to expand by 3.8% in 2026-27, the World Bank said on Thursday, October 22, in its latest Pakistan Development Update. The report, titled "Attaining Escape Velocity", praised Pakistan's progress in restoring stability but warned that growth remains too slow to lift living standards, and that faster reforms could triple incomes by 2050.
The key numbers
| Indicator | FY25 | FY26 | FY27 (forecast) | FY28 (forecast) |
|---|---|---|---|---|
| Real GDP growth | 3.2% | 3.7% | 3.8% | 4.2% |
| Average inflation | — | 7.1% | 8.2% | 7.0% |
| Energy subsidies (% of GDP) | 1.1% | 0.8% | — | — |
| Primary fiscal balance (% of GDP) | — | +2.9% (record surplus) | — | — |
| Overall fiscal deficit (% of GDP) | — | — | 3.5% | — |
Real per-capita growth was only about 1.6% in FY26, the bank said, because population growth absorbs much of the expansion. It expects growth to reach around 4.5% by FY31 as commodity prices normalise and farm input costs fall, with inflation staying around 7–7.5% through the rest of the decade.
What drove the recovery
The report credits strong remittances from Pakistanis abroad with rebuilding foreign exchange reserves. Credit rating upgrades from S&P and Moody's allowed Pakistan to return to international debt markets with a $3 billion Eurobond. On the fiscal side, the government delivered a record primary surplus of 2.9% of GDP, while timely power tariff adjustments cut energy subsidies.
Reforms already under way include the National Tariff Policy to open up trade and the privatisation of Pakistan International Airlines.
The reform scenario
The bank's most eye-catching finding is a long-term scenario. If Pakistan matched the policies and institutions of an average middle-income country, it could sustain growth of 6.2% to 6.9% a year and triple per-capita incomes by 2050 — roughly the income level of Vietnam today. Priorities include improving the business climate, reforming the tax system, shrinking the state's role in the economy and widening access to finance.
What officials said
"Pakistan has made real progress in restoring stability, and markets have taken notice," said Bolormaa Amgaabazar, the World Bank's country director for Pakistan. Sebastian Essl, the report's lead author, said structural reform to encourage private investment is the necessary next step towards higher living standards.
Risks
The forecast assumes energy prices return to pre-conflict levels only late in FY27. The war involving Iran and the closure of the Strait of Hormuz have pushed oil above $110 a barrel, feeding fuel costs and inflation in Pakistan — monthly inflation reached 10.3% in September. Poor El Niño conditions and expensive fertiliser could also cut crop output, and the forecasts do not include a harsher drought or extreme weather. Industry is expected to pick up only slightly, led by manufacturing and construction.
Background
Pakistan has been under an IMF programme since 2024, and the IMF's April forecast put FY27 growth at 3.5% with inflation of 8.4%. The State Bank of Pakistan raised its policy rate to 11.5% in April as oil prices climbed. A separate World Bank poverty report says about 48% of people living on less than $3 a day in the Middle East, North Africa, Afghanistan and Pakistan region are in Pakistan.
Why it matters
The forecast suggests that Pakistan's stabilisation is holding, but that growth below 4% is not enough to create jobs for a fast-growing young population or to cut poverty quickly. For households, the main concern is inflation: the bank expects prices to keep rising at around 8% this year, driven by petrol, diesel and electricity costs.
What happens next
The government will present the figures to the IMF during the next programme review, and the federal budget for FY28 will be the next test of tax and spending reforms. Fuel prices, which the government now revises regularly, will remain the biggest swing factor for inflation in the months ahead.
Questions people are asking
What is the World Bank's growth forecast for Pakistan for 2026-27?
The World Bank expects Pakistan's economy to grow 3.8% in fiscal year 2026-27, up slightly from an estimated 3.7% in 2025-26, and forecasts 4.2% growth in 2027-28.
What inflation does the World Bank expect in Pakistan in FY27?
The World Bank projects average inflation of 8.2% in FY27, up from 7.1% in FY26, mainly because of higher fuel and energy costs linked to the Middle East conflict.
What is the World Bank 'Attaining Escape Velocity' report?
It is the October 2026 edition of the World Bank's Pakistan Development Update. It reviews the economy and says faster structural reforms could lift growth to 6.2–6.9% a year and triple Pakistanis' incomes by 2050.
