ISLAMABAD: Pakistan’s finance minister said on Monday this year’s climate-driven floods are expected to shave 0.5% off the country’s GDP growth forecast, warning that the economic cost of extreme weather is now eroding Pakistan’s recovery prospects.
Pakistan has suffered repeated climate disasters in recent years, most notably the 2022 super-floods that submerged one-third of the country, displaced millions and caused an estimated $30 billion in losses. This year’s floods killed over 1,000 people and caused at least $2.9 billion damage to agriculture and infrastructure. Scientists say Pakistan remains among the world’s most climate-vulnerable nations despite contributing less than 1% of global greenhouse-gas emissions.
“The flooding this year is going to shave off roughly point 5% from our GDP growth forecast, so it’s real,” Aurangzeb said as he addressed a population summit in Islamabad.
Pakistan’s GDP forecast for the 2025-26 fiscal year is around 3.0% to 3.6 percent, with conflicting projections from different international organizations. The World Bank forecasts 3.0 percent, citing a rebound in industry and services but with negative impacts from floods on agriculture. In contrast, the IMF projects 3.6% growth for FY2026, up from 2.7% in FY2025, with expectations of declining unemployment. The Asian Development Bank (ADB) forecasts 2.7% GDP growth for 2025 and 3.0% for 2026.
Aurangzeb also stressed the economic drag caused by rapid population expansion:
“Wherever we grow, whichever nominal GDP number we get to, [it] is clearly going to be a damp now, if we don’t manage it and if we don’t control it.”
Demographically, Pakistan’s population, now above 240 million, is one of the fastest-growing in Asia. Development agencies warn that high fertility rates, widespread stunting, and low female labor-force participation are major obstacles to achieving sustainable, inclusive economic growth.
The minister said that Pakistan’s demographic challenge was not just about numbers but about long-term productivity. He cited two critical indicators: the 40% national stunting rate among children under five, which he called “intellectual poverty,” and persistently high levels of learning poverty, particularly among girls.
Aurangzeb argued that Pakistan will not realize its economic potential or meet World Bank-estimated pathways to a $3 trillion economy by 2047 without addressing climate adaptation, population management, and human-capital investment simultaneously. He underscored that both climate and population policy must be embedded into fiscal planning, not treated as “academic discussions.”
He also highlighted Pakistan’s need to mobilize resources for climate adaptation and population reform through both multilateral support and domestic reprioritization.
“For everything we cannot run to our multilateral partners,” he said, stressing the need for nationwide consensus, including through the upcoming discussions on the National Finance Commission (NFC), Pakistan’s constitutionally mandated mechanism that determines how federal tax revenues are shared between the central government and the provinces.
The NFC is a politically sensitive process that shapes funding for public services, development spending and disaster response. Aurangzeb said the new fiscal arrangements must reflect Pakistan’s demographic pressures and climate vulnerabilities, arguing that self-reliance in financing is now essential.
The finance minister added that public–private partnerships, outcome-linked financing and skills-focused initiatives, including the Pakistan Skills Impact Bond, will be essential to preparing Pakistan’s workforce, 64% of which is under the age of 30.
The Skills Impact Bond is a results-based financing model through which donors and private investors fund technical and vocational training programs upfront. The government repays those investors only if agreed learning and employment outcomes are achieved. Pakistan launched its first such bond with support from development partners to expand training in digital and technical fields, aiming to align the country’s large youth population with jobs in a modern, technology-driven economy.
Aurangzeb also linked Pakistan’s youthful population to the country’s fast-growing participation in digital finance, noting that Pakistan now ranks among the world’s leading jurisdictions for crypto activity. He argued that the government must regulate, not ignore, this shift:
“We are now as a country number three in terms of crypto participation… and it’s very important in the context of population, in the context of youth,” the minister said, adding that younger Pakistanis are already deeply engaged in virtual assets.
He said Islamabad’s move to establish a Virtual Asset Regulatory Authority aims to bring this activity “into a regulated way,” ensuring consumer protection while enabling the sector to develop legally.
