ADB forecasts Pak GDP growth at 2.5%

ISLAMABAD: The Asian Development Bank (ADB) has maintained Pakistan’s GDP growth forecast at 2.5 per cent for the current fiscal year (CFY) but cautioned that any premature easing of macroeconomic policies could trigger a renewed balance-of-payments crisis. The GDP growth rate stood at 2.5pc in last fiscal year and the ADB kept its projection unchanged at 2.5pc for FY2025. The government has projected GDP growth rate target of 3.6pc for current fiscal year (CFY). “The economic outlook faces significant downside risks. An improved external position and a quicker-than-anticipated drop in inflation could encourage the government to relax macroeconomic policies, possibly triggering a re-emergence of balance-of-payments pressures and jeopardising Pakistan’s hard-earned macroeconomic stability,” the ADB stated in Asian Development Outlook on Pakistan report, issued on Wednesday.

The ADB further states that deviation from projected fiscal consolidation due to revenue underperformance or pressures from recurrent expenditures could boost government debt, thereby increasing borrowing costs, possibly crowding out private borrowing and undermining exchange rate stability. Policy lapses could also jeopardise disbursements from multilateral and bilateral partners, cutting financial inflows and intensifying pressure on the exchange rate. The ongoing recovery in business confidence might wane if political tensions were to escalate, curtailing private investment and consumption and weakening growth.

Insufficient rain and the potential for drought could undermine food security, also threatening growth. Externally, the main risks to the outlook stem from a rise in global food and commodity prices and changes in global trade policies that might adversely impact global interest rates and exchange rate stability.

Pakistan has made significant progress on economic reforms under the IMF’s Extended Fund Facility initiated in October 2024, leading to improved macroeconomic stability. Notable milestones include the nationwide taxation of agricultural income following the passage of the Agriculture Tax Bill, 2025. The reform agenda has also advanced in areas such as fiscal consolidation to reduce public debt, tight monetary policy to curb inflation, energy sector improvements, and broader structural reforms to spur growth.