Pakistan structural reforms could triple incomes by 2050, World Bank says

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Pakistan reforms could triple incomes

Highlights

World Bank projects Pakistan's real GDP growth rising to 3.2 percent in FY25 and 3.7 percent in FY26, supported by sound macroeconomic policies and fiscal surplus.
Reforms elevating policies to middle-income country standards could drive annual growth to 6.2–6.9 percent, tripling incomes and matching Viet Nam's income level by 2050.
Key reforms include reducing energy subsidies to 0.8 percent of GDP, trade liberalization, privatization, improved business climate, tax reforms, and increased private sector investment.

World Bank growth outlook and reform path

As reported by the World Bank, its latest Pakistan Development Update says the country can achieve faster and more sustained growth if it pushes ahead with broad structural reforms after recent macroeconomic stabilization.

The report says sound macroeconomic policies over recent years help stabilize the economy and preserve growth despite the impact of the Middle East conflict. Real GDP growth rises to 3.7 percent in FY26 from 3.2 percent in FY25, while revenue growth and expenditure restraint support a record primary fiscal surplus of 2.9 percent of GDP in FY26. Strong remittances also allow the re-accumulation of foreign exchange reserves and help Pakistan return to international debt markets with a U.S.$3 billion Eurobond issuance.

World Bank Country Director for Pakistan Bolormaa Amgaabazar says Pakistan makes real progress in restoring stability, but per capita growth remains stuck at around 1.6 percent. The report says reforms that lift policies and institutions to the quality of the average middle-income country could support sustained annual growth of 6.2 percent to 6.9 percent, enough for Pakistan to reach Viet Nam's current income level by 2050.

Implications for investment, fiscal policy and business climate

Sebastian Essl, the report's lead author, says structural reform to encourage private investment is the necessary next step as fiscal resources and foreign exchange remain tightly constrained. He says achieving private sector-led growth requires planning, coordination and committed implementation.

The update highlights reforms that could help Pakistan reach by 2050 the per capita income levels of countries currently at the upper-middle income threshold. These include steps already under way such as timely power sector tariff adjustments, which help cut energy subsidies to 0.8 percent of GDP in FY26 from 1.1 percent in FY25, continued trade liberalization under the National Tariff Policy, and the recent privatization of Pakistan International Airlines.

The World Bank says further gains depend on strengthening the business environment, reforming the tax system, reducing the state's presence in the economy and expanding access to finance. That agenda places the focus on long-term productivity and private capital formation rather than short-term stabilization alone.

In our earlier article on Pakistan’s push to expand priority-sector lending, we covered the government’s plan to widen credit access for households, farmers and small businesses as a lever for stronger economic growth. The piece detailed targets to raise farm and SME lending by June 2027 and outlined measures to speed up housing finance, supported by regulatory tweaks, risk-sharing tools and public-private partnerships to reduce structural barriers to formal credit.

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