Islamabad(The COW News Digital)The World Bank has warned that Pakistan is among the world’s most vulnerable economies, facing severe risks from climate shocks, regional instability and tightening global financial conditions. The warning was issued in the World Bank’s Global Economic Prospects – January 2026 report, which highlights growing uncertainty for emerging and developing economies despite relatively better growth performance in 2025.
According to the report, escalating regional conflicts, geopolitical tensions, extreme weather events, volatile energy and commodity prices, and restrictive global monetary policies pose serious threats to economic recovery across the Middle East, North Africa, Afghanistan and Pakistan region. Among these, Pakistan has been identified as one of the most heavily affected economies due to its high exposure to climate-related risks and structural economic weaknesses.
The World Bank noted that Pakistan has suffered repeated climate shocks in recent years, including devastating floods, prolonged heatwaves and erratic weather patterns. These events have caused significant damage to agriculture, infrastructure and public finances, undermining growth prospects and increasing fiscal pressures. The report emphasized that the frequency and intensity of climate disasters are rising, increasing the risk of higher inflation, slower economic growth and deeper financial stress.
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While Pakistan has not been officially classified as a conflict-affected country, the report underlined that instability in neighboring Afghanistan continues to pose indirect risks. These include cross-border security concerns, refugee pressures, trade disruptions and higher security-related expenditures, all of which place additional strain on Pakistan’s already fragile economic conditions.
The World Bank further warned that global financial tightening could limit access to external financing for vulnerable economies like Pakistan. Higher interest rates and reduced capital flows may increase debt servicing costs, constrain public spending and weaken investment, making economic stabilization more challenging.
Despite these risks, the report suggested that targeted reforms, climate-resilient investment, improved fiscal management and regional cooperation could help mitigate some of the pressures. Strengthening social protection systems and investing in disaster preparedness were highlighted as critical steps to reduce the economic impact of future climate shocks.
The findings underscore the urgency for Pakistan to address climate vulnerability and macroeconomic imbalances as global and regional risks intensify. Without timely policy action and international support, the World Bank cautioned that economic recovery could remain fragile in the coming years.
