Fiscal Discipline and Export Reforms Key to Sustaining Pakistan’s Recovery
The World Bank has projected Pakistan’s economy to grow by 3% in the current fiscal year (FY26), highlighting that lingering flood impacts continue to weigh on agriculture. The Pakistan Development Update: Staying the Course for Growth and Jobs credits moderate growth to a rebound in industry and services, backed by improved confidence, fiscal tightening, and monetary discipline. The report emphasized that macroeconomic stability and continued reform efforts will be vital to sustaining growth in the medium term.
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World Bank forecasts Pakistan’s economy to grow by 3% in FY26, driven by industrial and service sector rebounds, while calling for stronger reforms, fiscal discipline, and export diversification to ensure long-term stability.
According to the report, floods have imposed heavy human and economic costs, limiting recovery potential. The Bank projects real GDP to remain around 3% in FY26 before inching up to 3.4% in FY27, contingent upon fiscal discipline and structural reforms. It urged Pakistan to broaden its tax base, strengthen revenue administration, and reduce the government’s role in state-owned enterprises to maintain fiscal consolidation and resilience against climate and global uncertainties.
A dedicated chapter of the report stresses the importance of boosting exports for sustainable growth. Pakistan’s exports have dropped to 10% of GDP from 16% in the 1990s, reflecting structural weaknesses in tariffs, energy costs, regulations, and logistics. While recent tariff reforms are seen as a positive step, the World Bank called for a more comprehensive strategy involving a market-driven exchange rate, improved trade finance, and digital infrastructure investments.
Meanwhile, Pakistan’s Ministry of Finance reported a Rs. 1.5 trillion fiscal surplus in the first quarter of FY26, driven by a 231% increase in net federal revenues despite temporary inflationary pressures from floods and border disruptions.
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