Pakistan’s economic growth story is seeing a positive turn, as highlighted by the Asian Development Bank (ADB) in its latest report. The nation”s improved macroeconomic conditions have contributed to an uptick in growth for fiscal year 2025, driven by increased investments resulting from ongoing policy reforms and a stable economic environment. ADB”s Asian Development Outlook (ADO) September 2025 report projects that Pakistan”s economic growth is set to continue in the medium term, with a real GDP growth forecast of 3.0% for FY2026, contingent on sustained reforms that address structural vulnerabilities.
The ADB has underscored the significance of policy consistency and climate resilience as crucial components to maintain growth momentum. Emma Fan, ADB”s Country Director for Pakistan, emphasized the importance of consistent reforms and policy execution to reinforce policy credibility and sustain economic momentum, especially in the aftermath of recurring disasters like the recent floods.
Looking ahead to FY2026, economic activity is expected to gain strength, bolstered by improved external buffers and increased business confidence following the US-Pakistan trade agreement. However, the recent flooding has inflicted damage on infrastructure and farmland, posing potential challenges to growth. Recovery and rehabilitation efforts, supported by fiscal incentives for the construction sector outlined in the FY2026 budget, are anticipated to mitigate some of the adverse impacts.
Inflation is projected to rise to 6.0% in FY2026, driven by supply chain disruptions from the floods affecting food prices and an increase in gas tariffs. In response, the central bank is likely to adopt a cautious stance on easing monetary policy, aiming to stabilize inflation within a target range of 5% to 7% over the medium term.
The ADB continues to play a pivotal role as a multilateral development bank, supporting inclusive, resilient, and sustainable growth across Asia and the Pacific. With a focus on innovative financial tools and strategic partnerships, ADB remains dedicated to transforming lives, building quality infrastructure, and safeguarding the planet. Founded in 1966, the bank is owned by 69 members, with 50 from the region.