The Asian Development Bank (ADB) has warned that Pakistan’s recent floods could fuel inflation and slow recovery, even as economic improvements continue.
In its Asian Development Outlook report, the bank said that disasters like floods pose serious risks to stability and growth. It projected GDP growth of around 3% for FY2026, with inflation expected to average 6%. This is due to supply chain disruptions, food price hikes, and higher gas tariffs.
The ADB noted that Pakistan’s economy improved in 2025 under the IMF reform program. Policy reforms and macroeconomic stability have strengthened reserves and supported higher investment inflows. A possible Pakistan–US trade agreement in FY2026 is also expected to improve business confidence.
ADB Country Director Emma Fan said Pakistan’s medium-term growth outlook remains positive, though challenges remain. She cautioned that repeated disasters could disrupt agriculture, infrastructure, and food supplies. Still, reforms and incentives are helping maintain recovery momentum.
The report added that budgetary measures supporting the construction sector may soften the economic impact of floods. Meanwhile, the State Bank of Pakistan is expected to continue cautious monetary policies to control inflation.
Fan stressed that while Pakistan’s growth outlook remains positive, resilience will depend on disaster preparedness and stronger policy execution. She added that consistent reforms and international support can help sustain progress despite climate-related risks.
Overall, the ADB believes Pakistan’s economy is on a recovery path, but sustained efforts are needed. With foreign exchange reserves improving and investment confidence rising, the growth outlook remains positive, though vulnerable to shocks.
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