As Pakistan embarks on a decade-long economic partnership with the World Bank under the $20 billion Country Partnership Framework (CPF), the roadmap ahead is marked by opportunities and significant challenges.

The WB’s latest assessment identifies nine key risks, with political instability, governance inefficiencies, and macroeconomic vulnerabilities standing out as major obstacles. Despite these risks, the CPF aims to drive sustainable economic reforms, enhance institutional capacity, and foster long-term development. The World Bank has outlined nine potential risks associated with its $20 billion loan facility for Pakistan under the newly approved 10-year Country Partnership Framework (CPF). Among these, six have been classified as high-risk factors, including political instability, governance challenges, and macroeconomic fragility.

Drawing from its experience with the 2015–2024 CPF, the WB emphasized the importance of strategic resource allocation aligned with long-term national objectives. The report discourages short-lived, fragmented engagements that lack continuity and instead advocates for a sustained policy approach incorporating irreversible, long-term investments to ensure stability and reform sustainability.

A holistic, country-wide strategy is recommended, integrating various federating units and ensuring greater synergy with government initiatives and development partners. The disparities among regions also require attention, with an emphasis on leveraging past successes, such as the WB’s expanded initiatives in Khyber Pakhtunkhwa to enhance service delivery for underserved communities. The WB’s Board of Directors, in its latest report, flagged political volatility as a major impediment. Frequent government changes, policy reversals, and short-term political cycles have historically stalled reform implementation. This instability heightens the risk of unsustainable fiscal policies, particularly concerning energy subsidies and tax exemptions. Moreover, inefficiencies in federal-provincial coordination further exacerbate governance-related vulnerabilities.

To mitigate these risks, the CPF framework is highly selective, concentrating on a limited number of policy outcomes with broad-based political support. This selective focus aims to shield World Bank Group (WBG) engagements from the adverse effects of short-lived political administrations. Additionally, a rolling two-year business plan mechanism has been proposed, allowing for adaptive modifications based on evolving circumstances.

Should political or security challenges intensify—particularly in border provinces like KP and Balochistan—the WB may expand its engagement to reinforce institutional capacity and service delivery in these regions. Pakistan’s macroeconomic landscape is fraught with challenges, including a substantial debt burden, significant financial sector exposure to sovereign debt, and a precarious external financing situation. Investor confidence remains fragile, and while the government is actively pursuing structural economic reforms, the risk of policy inertia due to resistance remains a concern.

The WB intends to closely collaborate with the International Monetary Fund (IMF) and other international financial institutions (IFIs) to facilitate consistent reform implementation. However, external threats—such as deteriorating global economic conditions, commodity price volatility, and climate-related disasters—pose additional risks.

The effectiveness of sectoral policies depends heavily on political will, governance structures, and the availability of resources. A lack of financing, shifting priorities, and administrative bottlenecks could undermine key initiatives. Furthermore, macroeconomic uncertainties might deter private sector investments in critical industries, particularly public-private partnerships (PPPs) in infrastructure and export-driven enterprises—both of which are priority areas for the International Finance Corporation (IFC) and the WBG Guarantee Platform.

To navigate these uncertainties, the WB advocates for robust institutional mechanisms, strengthened public-private collaboration, and financial guarantees to foster a more resilient investment climate. Achieving progress in multisectoral domains—such as reducing child stunting—poses significant challenges due to its complex nature, requiring a blend of technical expertise, policy consensus, and cross-sectoral collaboration. Lessons from global best practices and successful implementation models from comparable contexts will be leveraged to mitigate these risks. Furthermore, funding constraints and potential shortfalls in co-financing agreements, such as for the Data and M&E Lab, necessitate ongoing engagement with development partners to secure financial commitments.

The effectiveness of reforms depends heavily on coordinated governance across federal, provincial, and ministerial levels. Weak intergovernmental coordination threatens implementation efficiency and the sustainability of policy reforms. To address this, the WB will sustain dialogue-driven engagements backed by analytical and advisory support, ensuring inclusive participation from key stakeholders.

Despite some progress in Pakistan’s Public Financial Management (PFM) framework, significant structural weaknesses persist. These include: Institutional inefficiencies and weak governance; perceptions of widespread corruption; limited transparency and citizen engagement; gaps in procurement regulations and fiscal planning.

A lack of integration between capital and recurrent expenditures has led to poor fiscal planning and suboptimal debt management. Additionally, outdated public procurement laws fail to align with modern best practices, neglecting emerging challenges such as sustainable procurement and climate resilience.

Pakistan’s federal structure presents unique challenges, as major political parties govern at both national and provincial levels, while various interest groups exert significant influence over policy direction and development outcomes. Security concerns, particularly in Khyber Pakhtunkhwa (KP) and Balochistan, have intensified, exacerbating already poor human development indicators. The WBG acknowledges that while these regions demand greater developmental focus, project implementation and oversight remain challenging.

At a time when the government aims to accelerate GDP growth beyond 6% over five years under the Uraan Pakistan initiative, the WB’s economic projections remain more conservative. According to WB estimates, Pakistan’s GDP growth rate is expected to reach 2.8% in FY2025 and 3.8% by FY2029, reflecting the structural challenges and macroeconomic risks that continue to shape the country’s economic trajectory.

While Pakistan’s economic aspirations remain ambitious, the road to sustained growth is fraught with challenges. Political uncertainty, fiscal constraints, and governance issues pose significant risks, but the World Bank’s strategic interventions, including technical assistance, policy reforms, and financial oversight, offer a structured path forward. By fostering institutional resilience, strengthening public financial management, and addressing regional disparities, the CPF framework aims to provide a foundation for sustainable growth and economic stability. However, the effectiveness of these initiatives will ultimately depend on consistent policy implementation, strong political will, and a commitment to long-term reforms.