Pakistan Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

Economical overview

Pakistan is South Asia’s second largest economy after India. Since the nation’s inception in 1947, the economy has mainly been based on three pillars: agriculture, textile industry and remittances (money that Pakistani workers abroad send home). The Pakistani economy has been described as “growth without development”.

Pakistan has had long periods of good economic growth, but it has not benefited the residents in the form of increased wealth to the extent that one would expect. The gap between a small rich elite and the large poor majority is deep.

Countryaah.com: Major imports by Pakistan, covering a full list of top products imported by the country and trade value for each product category.

Governments’ inability to collect enough tax (less than one percent of the population pays tax) and the large appropriations to the military have created constant budget deficits. Much of the assistance the country has received over the years has gone to the military, not least the US support.

A indebted country

Both government and foreign debt are large (especially the debt to China) and the payments devolve huge sums each year. Foreign exchange reserves are small; in autumn 2018 they were reported to be able to pay imports for two months. A payment crisis was threatened and the government went to Saudi Arabia and China for help, as well as to the IMF. In October, Pakistan received a $ 12 billion aid package from the Saudis in the form of debt relief, loans and deferral of oil import payments. Two months later, the central bank received a billion dollars in support from the Saudis.

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including PAK which represents the country of Pakistan. Check findjobdescriptions to learn more about Pakistan.

In April 2019, Pakistan agreed with the IMF on a $ 8 billion rescue package to reduce the $ 15 billion gap in the Pakistani state budget. The package concerned, among other things, energy prices, tax intakes and exchange rates. A month later, a series of tax exemptions worth $ 2.5 billion was abolished each year. At the same time, prices for electricity and gas were raised.

Qatar and the United Arab Emirates also provided financial support to the Pakistani government that year.

In addition to seeking outside help, Pakistan also sought to reduce imports, devalue the currency several times to make exports cheaper, and offer benefits to those working abroad to increase remittances.

There are also political reasons for the economic problems. Many shifts between civilian and military governments, often in violent forms, have hampered the emergence of a stable state administration and frightened investors. Regional contradictions have hampered development projects, including irrigation facilities, and hampered trade. Decades of political violence in the port and industrial city of Karachi have also slowed development. Nationalizations during the 1970s and a rigid and corrupt bureaucracy that emerged during the military regimes are other causes.

The inclusion on the US side of the “war on terror” from 2001 brought a financial boost as Washington shed debts and increased its assistance to cover Pakistan’s increased military costs. The IMF in turn approved financial aid packages, renegotiated old loans and granted new credits. One caveat to the support was that Pakistan implemented comprehensive reforms. For example, a number of state-owned companies and banks were privatized in the early 2000s, giving the Treasury major contributions. But all in all, the “war on terror” has entailed huge costs. In 2016, the central bank stated that it had so far cost the country just over $ 118 billion, which corresponded to more than a third of the country’s GDP that year.

Many young people without a job

Pakistan’s economic base is quite narrow. More than 40 percent of the population is dependent on agriculture for their livelihoods, and the industry is largely focused on textiles.

An important challenge for the power holders is also to be able to create jobs for all the young people who might otherwise be tempted to join extremist movements. Many travel abroad to work. The redundancies in 2017 had more than quadrupled in ten years. The size of the black economy is estimated to correspond to about half of the legal.

Previously high inflation has been subdued in recent years. Direct investment from abroad has declined since a peak around 2007/2008. The largest investments come from China, followed by the United States, the United Kingdom and the United Arab Emirates. In recent years, Chinese investments have been made within the framework of the China-Pakistan Economic Corridor (CPEC) infrastructure project.

The country is drawn with chronic deficits in the trade and balance of payments with abroad. The main reason is the large oil import. The deficit in the balance of payments is generally covered by referrals and assistance and credits.

FACTS – FINANCE

GDP per person

US $ 1,473 (2018)

Total GDP

US $ 312 570 M (2018)

GDP growth

5.4 percent (2018)

Agriculture’s share of GDP

22.6 percent (2018)

Manufacturing industry’s share of GDP

12.1 percent (2018)

The service sector’s share of GDP

53.5 percent (2018)

Inflation

7.3 percent (2019)

Government debt’s share of GDP

71.7 percent (2018)

External debt

US $ 84,523 million (2017)

Currency

Pakistani rupee

Merchandise exports

US $ 24,827 million (2018)

Imports

US $ 57,435 million (2018)

Current account

– US $ 19,191 million (2018)

Commodity trade’s share of GDP

27 percent (2018)

Main export goods

textiles (bedding, towels, clothing, cotton fabrics, cotton yarn), basmati rice, leather and leather goods, jewelry (2017)

Largest trading partner

Exports: USA, UK, China, Afghanistan, Germany. Imports: China, United Arab Emirates, USA, Indonesia (2017)

2009

November

UN personnel are taken home

The UN calls home some of its staff for security reasons.

October

New army offensive begins

The military launches an offensive against the Taliban in South Waziristan. The army is deploying 30,000 men to the districts controlled by new Taliban leader Hakimullah Mehsud. Already after four days, 100,000 civilians are reported to have moved.

Taliban revenge, war state

Taliban attack UN Food Program office in Islamabad and kill six relief workers in revenge for Baitullah Mehsud’s death. During the autumn, there are so many terrorist attacks that the government describes it as being in a state of war.

August

Taliban leader killed

Taliban leader Baitullah Mehsud, his wife and several bodyguards are killed in an American rocket attack against their house in the clan area of South Waziristan.

June

“The offensive in Swat Valley is over”

Authorities say that the offensive in Swat Valley is over and that the Taliban there are basically harmless. Refugees begin to return to the area.

May

Army offensive in Swat Valley

The army puts 15,000 men in a counter-offensive against the Taliban in Swat Valley. Hard fighting erupts and about 1.5 million people panic. The world’s worst refugee crisis is emerging.

April

Armistice with Taliban

Pakistan enters a ceasefire with Taliban who have taken control of the Swat Valley in the northwestern border province. Shortly thereafter, contrary to what they promised, the Taliban move into neighboring districts and begin moving south.