The World Bank's 2026 Pakistan Development Update, presented at the Serena Hotel in Islamabad on Saturday morning by the institution's country director Najy Benhassine, paints a sharply two-sided picture of an economy that has stabilised at the macro level but is steadily losing ground on its capacity to export. The current account swung into a $1.2 billion surplus in the first nine months of fiscal year 2026, the report notes, but exports have grown only 2.4 per cent in dollar terms over the same period, well below the 6 per cent regional average.
The bank attributes the lagging export performance to three connected forces. Effective tariff protection, particularly on intermediate inputs used by domestic manufacturers, has stayed near twelve per cent — twice the South Asian average — making Pakistani goods uncompetitive in cost terms. Transport and logistics costs add a further eight to ten per cent to the price of finished goods at the gates of Karachi port. And electricity tariffs, despite four upward revisions since 2024, remain more than thirty per cent above industrial-input prices in Bangladesh.
Prime Minister Muhammad Shehbaz Sharif, who attended the Saturday launch alongside Finance Minister Muhammad Aurangzeb, accepted the broad diagnosis but pushed back on the bank's headline recommendation for a "comprehensive cut in import duties on intermediates". The prime minister said in his remarks that any tariff cuts would be "phased and targeted" and conditional on protection of revenue under the IMF programme that began in October 2024.
The bank revised its growth forecast for fiscal year 2026 to 3.1 per cent, down from a 3.4 per cent projection in October, and said inflation was on track to average 7.4 per cent over the year. Headline inflation has surprised on the upside in March and April, when food and transport prices both accelerated, ending an eleven-month disinflation that had taken the consumer-price index to a four-year low.
Pakistan has been one of the indirect winners of the broader regional re-routing of supply chains caused by the Iran war: textile orders that would normally have flowed to Egypt and Jordan have been re-routed via Karachi, and remittance receipts from Saudi Arabia have stayed near record levels. The bank cautioned that those tailwinds were unlikely to outlast a settlement in the Gulf and that Islamabad needed to use the breathing room to address the structural problems before they did.