Urdu Report Desk
The World Bank has warned that Pakistan continues to face rising poverty, unemployment and a shortage of quality jobs despite improvements in economic stability. According to the Pakistan Development Update 2026, the country’s poverty rate increased by seven percentage points over six years, while 3.6 million young people enter the labour market annually in search of employment.
The report stresses that structural reforms, greater private-sector job creation and improved workers’ incomes are essential to ensure that the benefits of economic growth reach ordinary citizens.
Poverty Rate Rises from 22% to 29%
According to the World Bank, Pakistan’s poverty rate increased from 22% in 2018-19 to 29% in 2024-25, representing a seven-percentage-point rise over six years.
The report attributes the increase to declining real labour incomes, persistently high inflation and slow productivity growth. Unemployment is also particularly high among women and young people.
Unemployment and the Jobs Challenge
Pakistan recorded an unemployment rate of 7% in 2024, according to the report. With approximately 3.6 million young people entering the labour market every year, the country faces mounting pressure to create sufficient employment opportunities.
The World Bank estimates that 17.7 million jobs have been created in Pakistan since 2018. However, many of these jobs have been concentrated in low-wage, low-productivity sectors.
Labour productivity grew by an average of just 0.4% annually between 2014 and 2024. The report warns that weak productivity growth and declining real wages are contributing to the worsening poverty situation.
Economic Growth and Inflation Outlook
Pakistan’s gross domestic product (GDP) grew by 3.7% in the previous fiscal year, while economic growth is projected to reach 3.8% in the current fiscal year.
The World Bank expects average inflation to stand at 8.2% during the current fiscal year. Persistently high inflation could further weaken household purchasing power and reduce real incomes.
The report projects that Pakistan’s economic growth could reach 4.5% by the medium-term period leading up to 2030-31. However, achieving annual growth of 6% will require faster structural reforms and stronger job creation through the private sector.
Four Major Risks to Pakistan’s Economy
The World Bank has identified four major risks to Pakistan’s economic outlook: the conflict in the Middle East, El Niño, external financing requirements and limited fiscal resources.
The report warns that the ongoing Middle East crisis could increase Pakistan’s energy import bill by as much as 30%, placing additional pressure on imports, debt repayments and external financing needs.
Pakistan will require external financing equivalent to 15% of its annual GDP to meet its external financial requirements, according to the report.
World Bank Calls for Structural Reforms
The World Bank has urged Pakistan to accelerate economic reforms, particularly in the energy sector, public service delivery and workforce skills development.
The report recommends creating a business-friendly environment, broadening the tax base and implementing the National Finance Commission (NFC) Award. It also calls for eliminating unnecessary subsidies in the energy sector.
According to the World Bank, effective implementation of fundamental economic reforms could raise Pakistan’s GDP growth rate to between 6.2% and 6.9%.
Achieving this growth would require increased private investment, stronger business activity and improvements in productivity.
Remittances and External Financing
Remittances from overseas Pakistanis provided significant support to the economy, reaching $41.6 billion in the previous fiscal year. However, Pakistan’s trade deficit stood at $33.7 billion during the same period.
Pakistan also issued $4 billion in Eurobonds for the first time in four years. The report additionally refers to the issuance of a $250 million Panda bond and Eurobonds worth $750 million and $3 billion.
The World Bank noted that rating upgrades by Moody’s and S&P, along with bond issuances, helped Pakistan manage external financing pressures.
Reforms Needed to Achieve Upper-Middle-Income Status
The report states that Pakistan must implement sustained economic reforms and establish a foundation for long-term growth to achieve upper-middle-income country status by 2050.
Expanding productive employment, improving labour incomes, strengthening the business environment and increasing economic productivity will be critical to achieving this objective.
