The World Bank (WB) on Thursday acknowledged that Pakistan had achieved macroeconomic stability under the International Monetary Fund (IMF) programme, but cautioned that stability alone was not enough to curb rising poverty and unemployment. Inflation is projected to rise from 7.1pc in FY26 to 8.2pc in FY27.
Commodity prices are expected to stay high through the end of 2026, feeding into transport costs and core inflation in the first half of the fiscal year. Food inflation is likely to stay elevated due to wheat and perishable prices, and El Niño poses a further risk to the agricultural outlook.
Inflation should ease gradually, helped by favourable base effects in the fourth quarter, moderate demand, and better wheat availability. Structural reforms are needed to create jobs and reduce poverty, the bank said in its Pakistan Development Update (PDU), released at a press briefing at its Islamabad office.
"Growth is not generating jobs and creating only low-paid opportunities, and poverty has risen in Pakistan as 3.6 million reach working age every year," the report stated. It highlighted that one in six new entrants into the job market has been left without work since 2018.
The report further emphasized that the current economic trajectory requires a shift toward private sector-led growth. Without significant policy interventions, the youth bulge could become a liability rather than an asset for the national economy.
The World Bank noted that while fiscal consolidation is underway, the burden of taxation remains skewed, impacting the purchasing power of the middle and lower-income classes. This, combined with high utility costs, continues to dampen domestic consumption.
Furthermore, the bank suggested that Pakistan must prioritize energy sector reforms to reduce the circular debt, which remains a major drag on the fiscal health of the country. Addressing these inefficiencies is critical for long-term sustainability.
The report also pointed out that climate resilience is becoming a central pillar of economic planning. With Pakistan being highly vulnerable to climate shocks, investments in climate-smart agriculture are essential to stabilize food prices.
In conclusion, the World Bank urged the government to maintain the momentum of reforms initiated under the IMF framework while expanding social safety nets to protect the most vulnerable segments of society from the impact of rising inflation. The findings serve as a stark reminder that while macroeconomic indicators may show improvement, the real-world impact on the common citizen remains challenging, necessitating a more inclusive approach to economic policy-making.