Where Is Pakistan Again?

The change took effect last July, when the bank lifted Pakistan out of its South Asia column and dropped it into a new regional grouping called MENAAP, for Middle East and North Africa, Afghanistan and Pakistan. The recategorization ties Pakistan’s economic future to the war it is trying to end.

The bank’s most recent forecast for MENAAP, published this month, has the region (excluding Iran) growing at 1.8 percent this year—a 2.4 percentage-point downgrade from January that is the direct result of this war. The forecast for South Asia, by contrast, has the region growing at 6.3 percent—the fastest of any emerging-market region in the world, and more than three times the MENAAP rate.

Until last year, Pakistan was viewed with reference to the second number. Now it will be viewed in reference to the first.

The bank has offered no meaningful explanation for the change. Some Pakistani commentators have concluded that it is merely administrative. Four of the bank’s statisticians, explaining the move in a year-end blog post wrote that the new categories were “for analytical purposes only.” But the same post conceded that regional classifications have real-world impact because they help to “structure programs, guide analytical work, and shape the narratives used to assess progress.”

This means that the next time Pakistan goes to international debt markets, it will be benchmarked against a region in recession rather than one growing faster than any other emerging market. On a single 10-year, billion-dollar Eurobond—Pakistan is a frequent issuer—the difference could be in tens of basis points, translating into tens of millions of dollars in debt service over the life of the instrument.

Pakistan’s $40 billion World Bank partnership running through 2035 won’t be repriced by the reclassification, but the analytical frame around it will change dramatically. From now on, every country review, every program design, and every benchmark will draw from MENA experience rather than South Asian.

Pakistani columnists are, predictably, split, with half calling the change a strategic catastrophe, half waving it off as bureaucratic housekeeping. The more sanguine analysts may think they’ve seen this movie before: In April 2013, the International Monetary Fund (IMF) pulled Pakistan and Afghanistan into a grouping it called MENAP. That move came and went without much consequence.

But the IMF and the World Bank do very different things. The IMF is a crisis lender and a surveillance shop; its regional groupings are essentially chapter headings in a semiannual outlook. Pakistan was handled by the fund’s Middle East and Central Asia department for years before 2013—the move that year simply renamed a chapter in the Regional Economic Outlook, coining the MENAP label. Nothing operational changed.

The World Bank’s regions are something else entirely: They have vice presidencies with budgets, country directors, sector teams, regional trust funds, donor coordination architectures, and the partnership frameworks that decide what actually gets built. When the bank moves Pakistan into MENAAP, it moves all of that. That $40 billion program—supported by the World Bank, signed last year and running through 2035—now sits inside a regional structure dominated by Gulf priorities and Gulf money, managed out of an office in Riyadh. Egypt, for example, has spent 15 years getting good at drawing on MENA’s trust funds cofinanced by the Gulf Cooperation Council (GCC). Pakistan starts from scratch.

Another important difference: The IMF doesn’t propagate, but the World Bank does. The bank publishes the World Development Indicators, or WDI, the canonical dataset that is cross-referenced by every other institution that counts—the United Nations, the OECD, rating agencies, bond-index providers. The IMF’s MENAP designation has been sitting there since 2013 and has not spread; the WDI still had Pakistan under South Asia, and so did everyone downstream. The bank’s call, by contrast, will spread. Within a few years, the Asian Development Bank, the Islamic Development Bank, MSCI, and Bloomberg will all quietly retag Pakistan. The IMF reclassified Pakistan inside one institution. The bank is reclassifying Pakistan inside the world’s data infrastructure.

Who you are compared with shapes how you are seen. Pakistan was the chronic underperformer of South Asia, dragged along behind Indian and Bangladeshi growth rates. Drop it into MENAAP, alongside Egypt and Jordan and Tunisia, and suddenly it is in the middle of a much less impressive pack. That may seem cosmetic, but sovereign credit lives and dies in the cosmetics, and rating agencies read regional aggregates the way priests read scripture.

Pakistan today carries S&P and Fitch ratings of B-, and a Moody’s rating of Caa1—six and seven notches, respectively, below investment grade, deep in junk territory. Egypt, its new MENAAP neighbor, sits at B and Caa1, virtually identical, and got there on the back of an IMF program, a currency liberalization, and big Gulf inflows—exactly the playbook Pakistan is running now. The next time Pakistan goes to market, the analysts setting the price will be reaching for the closest comparable. That used to be Sri Lanka or Bangladesh; now it is Egypt.

The change in category also means the outlook for Islamabad is attended by much more uncertainty: Every refinery strike in the Gulf, every tanker incident off the coast of Yemen, every Houthi missile that closes a shipping lane will, going forward, mark down Pakistan’s neighborhood the way a Bangladeshi factory fire used to mark down its old one. That is not a small thing for a country that lives one bad headline away from its next IMF bailout and is currently mid-stride in a $7 billion Extended Fund Facility.

Adding 250 million Pakistanis also changes the host region. Pakistan overtakes Egypt as the demographic anchor of MENAAP. According to the December 2025 World Bank Data Blog by four of the institution’s statisticians, the region’s population jumps from 519 million to 813 million; per-capita GDP drops by more than 30 percent; the young-age dependency ratio rises by roughly 15 percent.

The closest historical parallel is the OECD admitting Mexico in 1994. That move did more to change the OECD than to change Mexico. The club had to invent new categories for emerging members, accept ugly new averages on poverty and informality, and live with a self-image that kept shifting. The bank’s MENA region now faces a smaller version of the same shift. The bank’s most recent MENAAP Economic Update on female labor force participation, published in October, is already analyzing Pakistan, Egypt, and Jordan as a single analytical cohort,. That would have been unimaginable three years ago.

The bank did not push Pakistan into the Middle East but followed it there. Pakistan received a record $38.3 billion in remittances in fiscal 2025, exceeding the country’s roughly $32 billion in exports and dwarfing foreign direct investment of $2.5 billion by a factor of 15. Saudi Arabia and the United Arab Emirates together sent $17.2 billion of that. Add the rest of the GCC, and the Gulf accounts for $20.9 billion—more than half the total. Saudi and Emirati central-bank deposits prop up the State Bank of Pakistan’s reserves on a rolling basis. A long-stalled Pakistan-GCC free-trade agreement is finally approaching the finish line. Whatever you call this economy, it is not a South Asian one.

The recategorization formally recognizes that Pakistan’s economic life now runs through the Gulf. This does open up some real opportunities for Islamabad. Riyadh and Abu Dhabi have money, ambition, and an emerging appetite to underwrite south-south development. The bank’s new Riyadh hub will channel some of that. Pakistan stands to benefit—if its government can show itself to be deserving of more consideration than other borrowers among its new cohort.

But the cost is also real. Pakistan has traded the discomfort of being graded against fast-growing neighbors for the more acute discomfort of being graded against neighbors at war. It has traded a regional grouping where the dominant narrative was India’s rise for one where the dominant narrative is the Strait of Hormuz.

The opportunity, Pakistan can pursue; the exposure, it has to live with.