Key Points
- Pakistan’s real per capita growth remains at around 1.6 per cent despite macroeconomic stabilisation
- Reforms could lift sustained annual growth to 6.2–6.9 per cent and match Vietnam’s current income level by 2050
- Business climate improvements, tax reform, privatisation and wider access to finance are key to faster growth
ISLAMABAD: Pakistan could triple incomes by 2050 through ambitious structural reforms that encourage private investment, strengthen economic institutions and sustain annual growth of up to 6.9 per cent, the World Bank Group said on Thursday.
In its latest Pakistan Development Update, titled Attaining Escape Velocity, the global lender said macroeconomic stabilisation had created an opportunity for faster, sustained growth and job creation.
However, further reforms were needed to translate economic stability into substantial improvements in living standards.
Prudent macroeconomic policies helped stabilise the economy and preserve growth despite the negative impact of Middle East conflict, the report said.
“Real GDP growth increased to 3.7 per cent in FY26 from 3.2 per cent in FY25. Revenue growth and expenditure restraint supported record primary fiscal surpluses, reaching 2.9 per cent of GDP in FY26. Growing remittances allowed for the re-accumulation of foreign exchange reserves,” the World Bank said.
S&P and Moody’s have recognised Pakistan’s return to international debt markets with a $3 billion Eurobond.
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However, the lender cautioned that macroeconomic stability has not yet transformed into sufficiently strong income growth for ordinary Pakistanis.
“Pakistan has made real progress in restoring stability, and markets have taken notice,” said Bolormaa Amgaabazar, World Bank Country Director for Pakistan.
“But real per capita growth — the rate at which the income of the average Pakistani increases — remains stuck at around 1.6 per cent. Reforms to drive faster growth are now urgently needed.”
The report said Pakistan could achieve sustained annual growth of 6.2–6.9 per cent if it upgraded its policies and institutions to levels comparable with those of the average middle-income country.
Such growth could bring Pakistan’s income levels to those Vietnam enjoys, presently, by 2050.
It observed that more ambitious reforms could help the country attain the per capita income levels of economies currently at the upper-middle-income threshold.
Private investment is key to sustained growth
The World Bank said encouraging private investment was the necessary next step after macroeconomic stabilisation, particularly because fiscal resources and foreign exchange remained constrained.
“With macro stabilisation achieved but fiscal resources and foreign exchange still tightly constrained, structural reform to encourage private investment is the necessary next step towards higher living standards,” said Sebastian Essl, lead author of the report.
“Achieving this kind of private-sector led growth requires a plan, coordination, and committed reform implementation.”
The report identified several areas where sustained policy changes could help unlock investment, improve productivity and generate employment.
These include strengthening the business environment, reforming the tax system, reducing the state’s presence in the economy and expanding access to finance.
The recommendations build partly on measures already under way.
Timely adjustments to power-sector tariffs helped reduce energy subsidies from 1.1 per cent of gross domestic product in fiscal year 2025 to 0.8 per cent in FY26.
Continued implementation of trade liberalisation under the National Tariff Policy and the recent privatisation of Pakistan International Airlines were also cited as steps supporting economic reform.
The World Bank stressed that maintaining progress in these areas would be essential to creating a more competitive economy in which private businesses could invest, expand production and create jobs.
Tax reform would also be central to improving economic efficiency and strengthening public finances, while reducing the state’s role in commercial activities could create more room for private-sector participation.
Wider access to finance would help businesses secure the capital needed to expand operations, invest in technology and improve productivity.
From stabilisation to higher living standards
The report’s central message is that Pakistan must move beyond containing economic instability to reforms delivering sustained increases in productivity and household incomes.
While stronger revenues, spending restraint and remittances have helped restore macroeconomic stability, the World Bank’s assessment suggests that maintaining this progress will not deliver the growth needed to raise living standards substantially.
Achieving the projected growth rates would require consistent implementation across several policy areas, supported by coordination among government institutions and a business environment that encourages long-term investment.
The potential gains are significant: sustained annual growth of 6.2–6.9 per cent could put Pakistan on a path towards Vietnam’s current income level by 2050.
Reaching the income levels of ‘countries with upper-middle-income threshold’ would require continued and ambitious reforms over the coming decades.
Pakistan’s challenge is to turn recent economic gains into a durable expansion of incomes, investment and employment.
