ISLAMABAD, Oct 22 (Focus Pakistan) - Pakistan income growth remains stuck at just 1.6% annually in real per capita terms, but ambitious economic reforms could triple average incomes by 2050, the World Bank warned Thursday. The international lender said Pakistan has stabilized its economy but must accelerate structural reforms, attract private investment and create better-paying jobs to deliver meaningful improvements in living standards.
In its latest report, Pakistan Development Update: October 2026 — Attaining Escape Velocity, the bank said policies and institutions on par with those of an average middle-income country could support sustained growth of 6.2% to 6.9% a year. That pace would allow Pakistan to reach Vietnam’s current income level by 2050, the report said.
Vietnam itself crossed into the World Bank’s upper-middle-income group only in July. Its income per person, measured as gross national income, hit $4,970 last year. The bar for upper-middle-income status now sits at $4,636.
Bolormaa Amgaabazar, who heads the World Bank’s Pakistan office, said investors had registered the turnaround. “Pakistan has made real progress in restoring stability, and markets have taken notice,” she said at the report’s launch. Real per capita growth, she added, “remains stuck at around 1.6 percent,” making reforms for faster growth urgent.
The arithmetic of 1.6%
The gap between those two growth paths is wide. Growth of 1.6% a year would need about 44 years to double average incomes, according to Focus Pakistan calculations. To triple them by 2050, per capita incomes would have to grow around 4.7% annually, close to three times today’s pace.
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The headline economy has picked up. The wider economy grew 3.7% in fiscal 2026, faster than the 3.2% recorded in fiscal 2025, even as the Middle East conflict weighed on activity, the report said. That outcome topped the bank’s own forecast of 3.0%, issued a year ago.
On the fiscal side, higher revenue and tighter spending delivered a primary surplus of 2.9% of GDP, a record. Strong remittances helped Pakistan rebuild its foreign exchange reserves.
S&P and Moody’s both upgraded Pakistan’s credit ratings, and the country returned to international debt markets with a $3 billion Eurobond, the report noted.
Reforms under way, and the harder ones ahead
The bank credited several measures already in motion. Timely power-tariff adjustments cut energy subsidies to 0.8% of GDP in fiscal 2026 from 1.1% a year earlier. The government has also pressed on with trade liberalisation under the National Tariff Policy and completed the privatisation of Pakistan International Airlines.
Pakistan GDP growth 2026 reached 3.7%, compared with 3.2% in FY25. However, stronger headline growth has yet to translate into comparable gains for individual households.
Sustained progress, the report said, will depend on a better business environment, an overhaul of the tax system, a smaller role for the state in the economy and wider access to finance.
Sebastian Essl, the report’s lead author, said macroeconomic stabilisation had left Pakistan with tight fiscal and foreign exchange resources, making private investment the necessary engine of growth.
“Achieving this kind of private-sector-led growth requires a plan, coordination, and committed reform implementation,” Essl said.
The warning carries weight given Pakistan’s record. The World Bank has said that after decades of volatile low growth and low investment, Pakistan has fallen behind its peers on key development measures.
The report frames the next phase as a choice between two trajectories. One keeps average incomes creeping up at 1.6% a year. The other, which depends on reforms Pakistan has repeatedly started and abandoned, would bring the country by 2050 to where Vietnam stands today.
