10 million Pakistanis at risk of food crisis during the fiscal year 2025, with rising poverty levels, the World Bank warned on Wednesday, 23 April 2025. The World Bank also revised Pakistan’s economic growth forecast downward to 2.7% because of tight economic policies that are suppressing national outputs. Additionally, the government is likely to miss its annual budget deficit target and the country’s debt burden is projected to intensify both as a proportion of GDP and in absolute terms.
According to the World Bank report, nearly 10 million people, especially in rural areas, are expected to experience high levels of food insecurity due to factors such as climatic conditions impacting agricultural production such as rice and maize in fiscal year 2025.
The report highlighted the main concerns like food insecurity, poverty, unemployment and reducing real wages, that are not discussed during official meetings constantly. Key sectors for the poor, for instance agriculture, construction and low-value-added services, have experienced negative and low growth, causing static real wages.
Combined with the population growth of 2%, it is expected that more than 1.9 million Pakistanis will fall into poverty in this fiscal year. Moreover, the employment-to-population ratio is at 49.7%, which highlights low labor market engagement, especially among women and youth. The report also underlined that social protection expenditures are not maintained due to inflation and limited resources available for poor people for food health and education , causing negative implications for human capital and labor productivity.
According to a Washington-based lender, 37% of youth and 62% of women are not getting education, employment or any training. Despite nominal daily wages nearly doubling for low-skilled workers, like masons, plumbers, painter and unskilled workers, real wages are still static and even slightly decreasing. As a result, at the official national poverty line, the poverty headcount would increase. The World Bank also stated that while using a headcount of PKR 3,030 per adult equivalent per month in 2013 to 2014 or PKR 8,231 in 2024, the projected poverty headcount rate is 25.45% for the current fiscal year.
The World Bank also cleared that the economic growth in this fiscal year is expected to remain 2.7%, which is also forecast by the IMF (International Monetary Fund) and the ADB (Asian Development Bank). It means the government missed the economic growth target of 3.6%, which Muhammad Aurangzeb, the minister of finance, had described in the budget as achievable.
According to Najy Benhassine, World Bank country director for Pakistan, a key challenge that Pakistan has to overcome is to transform recent gains from stabilization into economic growth that is sustainable and adequate for the reduction of poverty. He also emphasized that to improve the high-impact reforms for a progressive tax system, supporting market-determined exchange rates, reducing import tariffs to incresed exports and also improving the business market and streamlining the public sector to build confidence and attract investors are necessary.
The World Bank also forecasts that expected growth for next fiscal year is only 3.1%, and by 2027 it is 3.4%, which is even lower than the government growth projection of an annual target of 3.6% in this fiscal year. According to the report, inflation was also projected to decline to 5% this year due to factors such as subdued demand, lower commodity and energy prices and a stable exchange rate. Pakistan’s current account is projected to achieve a surplus of 0.2% of GDP or $800 million, driven by stronger worker remittances, said the World Bank.
Moreover, the World Bank said that the deficit is projected to remain at 6.8% of GDP against the government’s budget target of 5.9% of GDP in this fiscal year. It means that the government will spend more than PKR 1.1 trillion. According to the lenders, the primary budget is expected to reach a surplus of 1.9% of GDP in the current fiscal year. He also stated that gross financing needs will elevate throughout the forecast period, presenting maturing short-term debt, repayments to multilateral and bilateral creditors, and upcoming Eurobond maturities.
The World Bank persuaded Pakistan to restore the functioning of the foreign interbank exchange market along with a fully market-determined exchange rate. It also urged for taking further measures with government rightsizing, including the elimination of unproductive positions or agencies and looked for a review of public sector compensation. It also suggested that reformation of parametric pensions will extensively lower future liabilities and facilitate transition to a contribution-based system with the passage of time. Elimination of preferential treatments under income tax ordinance and conducting ex-ante assessments for new exemptions, evaluating past exemptions and instituting sunset clauses are the last instructions of the World Bank.
