Pakistan

Economy

Main article: Economy of Pakistan

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Overview

Pakistan, a developing country, is the sixth most populous in the world and is faced with a number of challenges on the political and economic fronts. At the time of its independence in 1947 it was poor, but in 1960s was seen as as a model of economic development around the world. In each of its first four decades, Pakistan's economic growth rate was better than the global average, but imprudent policies led to a slowdown in the 1990s. Since then, the Pakistani government has instituted wide-ranging reforms, and economic growth has accelerated in the current century. Pakistan's economic outlook has brightened and its manufacturing and financial services sectors have experienced rapid expansion. The growth of the non-agricultural sectors has changed the structure of the economy, and agriculture now only accounts for roughly one-fifth of the GDP. There has been a great improvement in its foreign exchange position and a rapid growth in hard currency reserves as a result of its current account surplus.

Related Topics:
Developing country - Sixth most populous in the world - 1960s - Manufacturing - Financial services - Sector - Foreign exchange - Hard currency - Current account

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In 2004 Pakistan's GDP growth rate was 8.4% which is (after China) the second-highest among the ten most populous countries in the world.

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Macroeconomic reform and prospects

According to the CIA World Factbook, the government has made substantial inroads in macroeconomic reform since 2000, and medium-term prospects for job creation and poverty reduction are the best in nearly a decade. Islamabad has raised development spending from about 2% of GDP in the 1990s to 4% in 2003, a necessary step towards reversing the broad underdevelopment of its social sector. Reduced tensions with India and the ongoing peace process raise new hopes for a prosperous and stable South Asia.

Related Topics:
CIA World Factbook - 1990s - South Asia

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In 2005, the World Bank reported that

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:Pakistan was the top reformer in the region and the number 10 reformer globally — making it easier to start a business, reducing the cost to register property, increasing penalties for violating corporate governance rules, and replacing a requirement to license every shipment with two-year duration licenses for traders.

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Middle class

Measured by purchasing power, Pakistan has a 30 million strong middle class enjoying per capita incomes more than $8000-$10,000, according to Dr. Ishrat Husain, Governor of the State Bank of Pakistan http://www.pabe.org/us-chamber-press-article/PressArticlesOctober18_2004.doc. In addition, Pakistan has a growing upper class with relatively high per capita incomes. However, Pakistan has no individuals with as much as a billion US dollars, according to Forbes magazine, and has the distinction of being the most populous nation to have no billionaires.

Related Topics:
State Bank of Pakistan - US dollar - Billionaire

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Economic history

First five decades

Pakistan was a very poor and predominantly agricultural country at the time of its independence in 1947 from British India. Agriculture accounted for 53% of its GDP. In each of its first four decades, Pakistan's economic growth rate was better than the global average. Industrial-sector growth, including manufacturing, was also above average. In the early 1960s, Pakistan was seen as a model of economic development around the world, and there was much praise for the way its economy was progressing. Many countries sought to emulate Pakistan's economic planning strategy and one of them, South Korea, copied its Second Five Year Plan, 1960-65. Not just that But World financial center in Seoul was modeled after Karachi. Later, economic mismanagement in general, and fiscally imprudent economic policies in particular, caused a large increase in the country's public debt and led to slower growth in the 1990s.

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Economic resilience

Historically, Pakistan's overall economic output (GDP) has grown every year since a 1951 recession. Despite this record of sustained growth, Pakistan's economy had, until a few years ago, been characterized as unstable and highly vulnerable to external and internal shocks. However, the economy proved to be unexpectedly resilient in the face of multiple adverse events concentrated into a four-year period —

Related Topics:
GDP - Recession - Shocks

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• the Asian financial crisis;
• economic sanctions — according to Colin Powell, Pakistan was "sanctioned to the eyeballs";
• global recession;
• a severe drought — the worst in Pakistan's history, lasting four years;
• heightened perceptions of risk as a result of military tensions with India — with as many as a million troops on the border, and predictions of impending (potentially nuclear) war; and
• the post-9/11 military action in neighboring Afghanistan, with a massive influx of refugees from that country.

Despite these adverse events, Pakistan's economy kept growing, and economic growth accelerated towards the end of this period. This resilience has led to a change in perceptions of the economy, with leading international institutions such as the IMF, World Bank, and the ADB praising Pakistan's performance in the face of adversity.

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Recent history

Since about the turn of the century, the Pakistani government has instituted wide-ranging reforms, and economic growth has accelerated in the current century. Pakistan's economic outlook has brightened and its manufacturing and financial services sectors have experienced rapid expansion. The growth of the non-agricultural sectors has changed the structure of the economy, and agriculture now only accounts for roughly one-fifth of the GDP. There has been a great improvement in its foreign exchange position and a rapid growth in hard currency reserves as a result of its current account surplus.

Related Topics:
Manufacturing - Financial services - Sector - Foreign exchange - Hard currency - Current account

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In the fiscal year ending June 30, 2005, Pakistan's GDP growth rate was 8.4% which is (after China) the second-highest among the ten most populous countries in the world. Its exports grew by as much as 17% and the country also saw increasing foreign investments in the IT sector, thanks to cheap labor, a low tax rate and a large pool of English speakers.

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Stock market

In the first three years of the current century, Pakistan's KSE-100 stock market index (Karachi Stock Exchange) was the best-performing major market index in the world, driven in part by profit growth, high dividend yields and greater transparency in publicly traded companies as a result of reforms enacted by the Securities and Exchange Commission of Pakistan.

Related Topics:
KSE-100 - Stock market index - Karachi Stock Exchange - Major market index - Dividend yield - Transparency - Publicly traded - Securities and Exchange Commission of Pakistan

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Currency

The basic unit of currency is the Rupee, which is divided into 100 paisas. Since the turn of the century, a strengthening economy and large current-account surplus has caused the rupee's exchange rate to rise in value. In response, Pakistan's central bank has prevented the rupee from rising too much, by lowering interest rates and buying dollars, in order to preserve the country's export competitiveness. As of 2005, one US dollar is approximately equal to 60 rupees.

Related Topics:
Rupee - Central bank - As of 2005

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Manufacturing and finance

Pakistan's manufacturing sector has experienced double-digit growth in recent years, with large-scale manufacturing growing by 18% in 2003. A reduction in the fiscal deficit has resulted in less government borrowing in the domestic money market, lower interest rates, and an expansion in private sector lending to businesses and consumers. Foreign exchange reserves continued to reach new levels in 2003, supported by robust export growth and steady worker remittances.

Related Topics:
Fiscal - Deficit - Money market - Interest rates - Private sector - Export

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Tax incentives for IT industry

The Government of Pakistan has, over the last few years, granted numerous incentives to technology companies wishing to do business in Pakistan. A combination of decade-plus tax holidays, zero duties on computer imports, government incentives for venture capital and a variety of programs for subsidizing technical education, are intended to give impetus to the nascent Information Technology industry.

Related Topics:
Government of Pakistan - Tax holiday - Duties - Venture capital - Information Technology

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Technology and the Internet

Paging and mobile (cellular) telephony were adopted early and freely. Cellular phones and the Internet were adopted through a rather laissez-faire policy with a proliferation of private service providers that led to fast adoption. Both have taken off and in the last few years of the 1990s and first few years of the 2000s. With a rapid increase in the number of internet users and ISPs, and a large English-speaking population, Pakistani society has seen major changes.

Related Topics:
Paging - Cellular phone - Internet - Laissez-faire - 1990s - 2000s - ISP

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• Pakistan has more than 10 million internet users as of 2005. The country is said to have a potential to absorb up to 50 million mobile phone Internet users in the next 5 years thus a potential of nearly 1 million connections per month.
• Almost all of the main government departments, organisations and institutions have their own websites.
• The use of search engines and messenger services is also booming. Pakistanis are some of the most ardent chatters on the internet, communicating with users all over the world. Recent years have seen a huge increase in the use of online marriage services, for example, leading to a major re-alignment of the tradition of arranged marriages.
• As of 2005 there were 6 mobile companies operating in the country with nearly 10.5 million mobile phone users in the country.
• Wireless local loop and Landline telephony sector also has been liberalised and private sector has entered thus increasing the teledensity from less than 3% to more than 10% in span of two years.

Agriculture, energy, and natural resources

Pakistan's principal natural resources are arable land, water, and extensive natural gas and petroleum reserves.

Related Topics:
Natural gas - Petroleum

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Agriculture

About 28% of Pakistan's total land area is under cultivation and is watered by the largest irrigation systems in the world. Water resources include several major rivers, fed by meltwater from snow and glaciers in some of the highest mountains ranges of the world — the Karakorams, Himalayas, and the Hindukush . Other important sources are tube-wells tapping into large aquifers. The most important crops are cotton, wheat, and rice. Other important crops are sugarcane, maize, sorghum, millets, pulses, oil seeds, barley, fish, fruits and vegetables.

Related Topics:
Irrigation - Glaciers - Karakoram - Himalaya - Tube-well - Aquifer - Cotton - Wheat - Rice - Sugarcane - Maize - Sorghum - Millet - Pulse - Oil seed - Barley - Fish - Fruit

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Pakistan is a net exporter of foodgrains.

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Energy

Pakistan has extensive energy resources, including fairly sizable natural gas reserves, oil reserves and coal. It also has a large potential for the further development of hydroelectric power. Domestic petroleum production totals only about half the country's oil needs. Pakistan is operating, constructing or planning to construct several nuclear reactors to meet its rapidly growing electricity requirements.

Related Topics:
Hydroelectric - Nuclear reactor

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Minerals

Other important minerals are gypsum, limestone, chromites, iron ore, rock salt, silver, gold, precious stones, gems, marble, copper, sulphur, fire clay, silica. The Salt range in Punjab Province has large deposits of pure salt.

Related Topics:
Gypsum - Limestone - Chromite - Iron ore - Silver - Gold - Gem - Copper - Sulphur - Silica - Salt range

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Trade

Exports

Pakistan exports rice, cotton fiber, cement, tiles, marble, textiles, leather goods, sports goods, surgical instruments, electrical appliances, carpets, and rugs, and many other items.

Related Topics:
Rice - Cotton - Fiber - Cement - Tile - Marble - Textile - Leather - Surgical instrument - Appliance - Carpet - Rug

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Imports

Pakistan's single largest import category is petroleum. Other imports include trucks, automobiles, and industrial machinery.

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