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.
