The Asian Development Bank (ADB) has forecast that Pakistan’s economy will improve gradually, with GDP growth expected to reach 3% in 2025-26.
According to the latest Asian Development Outlook report, reforms under the IMF program have helped stabilize the economy. However, challenges such as persistent inflation, structural issues, and risks from natural disasters remain.
The government of Pakistan has set a higher growth target of 4.2% for the current year. Yet, ADB cautioned that frequent floods and other natural disasters may slow momentum by damaging crops, disrupting supply chains, and weakening infrastructure.
The report noted that foreign exchange reserves and investment inflows are likely to improve gradually. Medium-term prospects remain positive if reforms are implemented consistently.
Inflation and monetary policy
Inflation is expected to average 6% this year, driven by higher gas tariffs, supply chain problems, and food price increases following floods. To address these pressures, the State Bank of Pakistan is likely to adopt a cautious monetary policy. The goal will be to balance inflation control with efforts to support growth.
Structural challenges and reforms
Despite signs of recovery, Pakistan continues to face deep structural challenges. These include high import dependency, limited fiscal space, and repeated exposure to natural disasters.
ADB Country Director Emma Fan emphasized that steady reforms and consistent policies are essential to sustain investor confidence and economic progress. She pointed out that trade agreements, such as the recent US-Pakistan deal, could boost business activity and improve sentiment.
Flood-related damages are expected to weigh heavily on agriculture and infrastructure, slowing growth. However, budgetary support for the construction sector could help absorb some of the losses and protect jobs in urban areas.
With reforms and resilience measures, the ADB believes Pakistan can maintain gradual progress toward stability and long-term growth.
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