World Bank cuts Pakistan’s growth forecast to 2.6 percent amid flood devastation

A man and workers are seen at a spice and grocery shop in a market in Karachi, Pakistan, on June 10, 2025. (REUTERS/File)
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Updated 08 October 2025
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World Bank cuts Pakistan’s growth forecast to 2.6 percent amid flood devastation

  • Monsoon floods in Pakistan have damaged crops, homes and infrastructure while affecting millions
  • Bank says economic recovery will depend on agricultural rebound and lower inflation in coming years

ISLAMABAD: The World Bank on Tuesday projected Pakistan’s economy to grow by 2.6 percent in the ongoing fiscal year (FY2025/26), lowering its earlier estimate due to the recent monsoon floods that inundated large parts of Punjab and Khyber Pakhtunkhwa, damaging homes, infrastructure and farmland.

The monsoon season, which began in late July, has claimed at least 1,037 lives in incidents including roof collapses, landslides and flash floods.

Punjab, the country’s agricultural heartland, experienced one of its worst floods in years after neighboring India released excess water into three major rivers, affecting millions of people across the province.

“In Pakistan, real GDP at factor cost is expected to have grown by 2.7 percent year-on-year in FY 2024/25, slightly above FY 2023/24’s 2.5 percent expansion,” the World Bank said in its Regional Economic Outlook for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP). “For FY 2025/26, real GDP growth is projected to remain around 2.6 percent, as ongoing catastrophic floods have damped the forecast.”

Earlier this year, the Bank had projected 3.1 percent growth for Pakistan before the monsoon season.

“Early estimates suggest a drop of at least 10 percent in agricultural output in Punjab, affecting major crops such as rice, sugarcane, cotton, wheat, and maize,” the report said. “For FY 2026/27, growth is expected to accelerate to 3.4 percent, supported by higher agricultural output, lower inflation and interest rates, recovering consumer and business confidence, and a rebound in private consumption and investment.”

Pakistan has been striving to recover from a prolonged economic crisis that brought it to the verge of default in mid-2023, when it secured a short-term $3 billion International Monetary Fund (IMF) loan.

Since then, the country has undertaken stringent reforms recommended by the Fund, with global credit rating agencies acknowledging progress amid improving macroeconomic indicators.

An IMF mission is currently in Islamabad for talks with the government under the Extended Fund Facility (EFF) of $7 billion agreed last September.

Prime Minister Shehbaz Sharif said during his visit to New York in September that the recent flood damages should be “factored in” as the IMF reviews Pakistan’s fiscal performance, arguing that the scale of the disaster underscores the need for flexibility in the assessment process.

The World Bank added in its report that Pakistan, which has historically maintained high tariffs with a complex structure, stands to benefit in terms of exports and growth from a newly approved five-year reform plan (2025–2030) to cut tariffs by half.


Pakistan joins regional talks on Afghanistan in Iran as Kabul stays away

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Pakistan joins regional talks on Afghanistan in Iran as Kabul stays away

  • China, Pakistan, Pakistan, Tajikistan, Uzbekistan, Turkmenistan all joined talks organized by Iran, as did Russia
  • Afghanistan was invited but decided not to attend, Taliban-led government was tight-lipped on the reasons

TEHRAN, Iran: Afghanistan’s neighbors met in Iran and agreed to deepen regional coordination to address political, economic and security challenges, as well as calling for sanctions on Afghanistan to be lifted. 

The only absent party? Afghanistan itself.

China, Pakistan, Pakistan, Tajikistan, Uzbekistan and Turkmenistan all joined the talks organized by Iran, as did Russia, according to a statement released after the meeting on Sunday.

Afghanistan was invited but decided not to attend. Its Taliban-led government was tight-lipped on the reasons, with the foreign ministry saying only that it would not participate because Afghanistan “currently maintains active engagement with regional countries through existing regional organizations and formats, and has made good progress in this regard.”

The statement from the talks in Iran stressed the importance of maintaining economic and trade ties with Afghanistan to improve living conditions and called for the country’s integration into regional political and economic processes.

The Taliban were isolated after they retook power in Afghanistan in August 2021, but in the past year, they have developed diplomatic ties. They now raise several billion dollars every year in tax revenues to keep the lights on.

However, Afghanistan is still struggling economically. Millions rely on aid for survival, and the struggling economy has been further impacted by the international community not recognizing the Taliban government’s seizure of power in the wake of the chaotic withdrawal of US-led troops in 2021. Natural disasters and the flow of Afghans fleeing Pakistan under pressure to return home have underlined Afghanistan’s reliance on foreign aid to meet essential needs.

The countries at the talks also voiced security concerns and pledged cooperation in combating terrorism, drug trafficking and human smuggling, while opposing any foreign military presence in Afghanistan. They underscored the responsibility of the international community to lift sanctions and release Afghanistan’s frozen assets, and urged international organizations to support the dignified return of Afghan refugees from neighboring countries.

The participants backed efforts to reduce tensions between Afghanistan and Pakistan, which have been particularly strained, with border clashes between the two sides killing dozens of civilians, soldiers and suspected militants and wounding hundreds more.

The violence followed explosions in Kabul on Oct. 9 that Afghan authorities blamed on Pakistan. A Qatar-mediated ceasefire has largely held since October, although there have been limited border clashes. The two sides failed to reach an overall agreement in November despite three rounds of peace talks.

Asif Durrani, Pakistan’s former special representative for Afghanistan, said the Taliban government’s decision to skip the meeting reflected a “lack of political maturity.” 

Writing on X, Durrani said the move reinforced concerns that the Taliban were unwilling to negotiate, instead adopting an “I don’t accept” stance that he said would do little to resolve serious regional problems.

Mohammad Sadiq, the current Pakistani special representative for Afghanistan who attended the talks, wrote on X that the Afghan people had already suffered enough and deserved better.

Only an Afghanistan that does not harbor militants would inspire confidence among neighboring and regional countries to engage meaningfully with Kabul and help unlock the country’s economic and connectivity potential, he wrote.

Participants agreed to hold the next meeting of foreign ministers of Afghanistan’s neighboring countries as soon as possible in Ashgabat, Turkmenistan, and welcomed Pakistan’s offer to host the next round of special envoys’ talks in Islamabad in March.

Iran’s foreign ministry spokesman, Esmail Baghaei, on Sunday said that the meeting had not been held for about two years and marked the first such gathering attended by special envoys on Afghanistan from neighboring countries as well as Russia. Russia and Uzbekistan sent the special envoys of their presidents, while Pakistan was represented by a delegate from the prime minister’s office.

Landlocked Afghanistan is sandwiched between the Middle East, Central Asia, and South Asia, making it strategically located for energy-rich and energy-hungry nations.