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- ECONOMY

Pakistan - The Economy

Pakistan

PAKISTAN'S CULTIVATION OF THE RICH alluvial soil of the Indus River basin is its single most important economic activity. Because of
and improvements to the irrigation system, waters of the Indus River and its tributaries flow to the fields, a necessity because of scant rain
Indus irrigation system is the world's largest, but there are many problems because of inadequate water management and use. Farmers co
employ traditional cultivation practices, and support services, such as research and development, are inadequate, although high-yield see
e fairly widely used. Yields of most crops, with the significant exception of cotton, are low by international standards and substantially below
any farms are too small to support a family using existing agricultural practices. The landless often sharecrop or work as agricultural laborer
1992 temporarily displaced as many as 3 million people and destroyed many irrigation networks. Its effects are expected to limit agricultura
cotton, in the 1990s.

tan became independent in 1947, its leaders have generally sought to increase the role of industry in the nation's economy. They achieved
degree of success toward this end. A broad industrial base is now in place, producing a wide range of products for both consumer and indu
ation, however, has failed to create sufficient jobs for the rapidly expanding urban population. Construction and service-sector activities, esp
portation, and government, have expanded and now provide more employment than industry. Nonetheless, underemployment remains prev
the economy. An outdated infrastructure is another problem facing the economy. Frequent electricity shortages, for example, hamper indust
nt and production.

l government administrations have sought to raise the majority of the population's low standard of living through economic growth rather tha
ution of wealth. The gross domestic product (GDP) in constant prices increased an average of 5.3 percent per year between 1950 and 1993
year faster than population growth. In fiscal year (FY) 1993, GDP amounted to the equivalent of US$50.8 billion, or roughly US$408 on a p
me, however, has never been evenly distributed. Furthermore, the unequal income distribution pattern has been a political issue since the la
to remain controversial throughout the 1990s. Social development indicators reflect long-standing problems in providing basic health and e
nly just over one third of all children of primary school age attended school in 1989, a rate well below the average for low-income countries).
n 1992 that 28 percent of the population lived below the official poverty line, which is based on the government's estimate of an income suffi
ic minimum needs.

problem facing the economy is the government's chronically high budget deficit, which has adverse implications for the nation's balance of p
d exchange rates, capital formation, and overall financial stability. The government has been attempting to restore fiscal balance through a m
djustment program designed to increase revenues, control spending, and stabilize monetary growth. In addition, the government has privatiz
strial enterprises, financial institutions, and utilities; eliminated state monopolies in banking, insurance, shipping, telecommunications, airline
and liberalized investment and foreign exchange regulations. As of early 1994, not all these programs had been implemented as quickly as
nd the deficit and the associated structural problems persisted.

TURE OF THE ECONOMY

STRUCTURE OF THE ECONOMY

ained nationhood under difficult circumstances. At the partition of British India in 1947 resulting in the creation of the independent nations o
akistan was an agrarian economy in which a small number of powerful landowners with large holdings dominated the countryside. The majo
consisted of tenant farmers who cultivated small plots for a meager existence. Scant rainfall in West Pakistan (present-day Pakistan) forced
extensive irrigation system developed by the British. The headwaters of the Indus River and its main tributaries, however, were under Indian
ose between the two nations and were not settled until the Indus Waters Treaty of 1960 was signed.

d almost no industry in 1947. Under British rule, the area that became Pakistan supplied agricultural products for processing to the territory
dent India. Energy sources were rudimentary, with wood and animal dung furnishing the bulk of the energy consumed. Ports, transportation
uch as banking and government, were underdeveloped. More than 1,600 kilometers of Indian territory separated the East Wing and West W
til the former became independent Bangladesh in 1971. In 1949 a dispute over exchange rates halted the flow of goods between Pakistan a
he complementary nature of their economies that had developed under British colonial rule.

midable problems, Pakistan achieved rapid economic expansion. From FY 1951 to FY 1986, the GDP growth rate measured at a constant F
aged 5.2 percent. Rates of growth averaged 3.1 percent in the 1950s--when agriculture stagnated--but rose to 6.8 percent in the 1960s. The
ween FY 1971 and FY 1977 but rebounded to 6.8 percent between FY 1978 and FY 1986. From FY 1987 to FY 1991, growth averaged 5.8
8 percent was achieved in FY 1992. Provisional data indicate that GDP grew only 2.6 percent in FY 1993. This decline is mainly a result of th
1992, which reduced agricultural output.

th substantially altered the structure of the economy. Agriculture's share (including forestry and fishing) declined from 53 percent of GDP in
n FY 1993. A substantial industrial base was added as industry (including mining, manufacturing, and utilities) became the fastest growing s
ndustry's share of GDP rose from 8 percent in FY 1950 to 21.7 percent in FY 1993. Various services (including construction, trade, transpor
tions, and other services) accounted for the rest of GDP.

s an important "parallel," or "alternative," economic sector, but it is not well documented in official reports or most academic studies. This se
ack market, a large illicit drug industry, and illegal payments to politicians and government officials to ensure state contracts. Corruption ros
y as a result of the massive infusion of United States aid, some of which went to the Pakistani government to pay the cost of supporting Afg
eing after the 1979 Soviet invasion and to enhance Pakistani military capability, and some of which was funneled directly to Afghan resistan
based in Pakistan. Much of this money reportedly was diverted illegally and invested in arms and drug enterprises.

egations of corruption are routinely made in the Pakistani press, and politicians often accuse their opponents of corrupt practices. Asif Ali Za
Prime Minister Benazir Bhutto, was accused of corruption after the fall of Benazir's first government in 1990, and former President Ghulam
e government of former Prime Minister Mian Nawaz Sharif and especially its privatization program of corruption when dismissing his governm
94 allegations of corruption were routinely traded between Benazir's government and the opposition headed by Nawaz Sharif. Political mane
ption has an altogether real and pervasive effect on Pakistani society. Industrialists consider bribery and other handouts a routine cost of pr
tors and businessmen interviewed on television openly state that a significant percentage of their revenue is paid to government officers wh
cts. Corruption is alleged to be prevalent in almost all official institutions, including the police, the judiciary, the revenue department, the pas
d excise offices, telecommunication organizations, and electricity and gas boards. In each of these departments, the personnel involved ran
yees to top management. Some scholars believe that the low salaries of civil servants, compared with earnings from jobs of similar status in
y, explain the magnitude of corruption. In the mid-1980s, Mahbubul Haq, a former minister of finance, estimated that illegal payments to gov
e equivalent to about 60 percent of the total taxes collected by the government.
ROLE OF GOVERNMENT IN THE ECONOMY

elopments since Independence

Pakistani officials have sought a high rate of economic growth in an effort to lift the population out of poverty. Rapid industrialization was vie
ssity and as a vehicle for economic growth. For more than two decades, economic expansion was substantial, and growth of industrial outpu
he 1960s, the country was considered a model for other developing countries. Rapid expansion of the economy, however, did not alleviate
he 1970s and 1980s, although a high rate of growth was sought, greater attention was given to income distribution. In the early 1990s, a mo
of income remained an important but elusive goal of government policy.

in 1947, the new government lacked the personnel, institutions, and resources to play a large role in developing the economy. Exclusive pu
was reserved only for military armaments, generation of hydroelectric power, and manufacture and operation of railroad, telephone, telegrap
uipment--fields that were unattractive, at least in the early years of independence, to private investors. The rest of the economy was open to
lopment, although the government used many direct and indirect measures to stimulate, guide, or retard private-sector activities.

ons caused by partition, the cessation of trade with India, the strict control of imports, and the overvalued exchange rate necessitated the st
stry. Government policies afforded liberal incentives to industrialization, while public development of the infrastructure complemented privat
Some public manufacturing plants were established by government holding companies. Manufacturing proved highly profitable, attracting in
stments and reinvestment of profits. Except for large government investments in the Indus irrigation system, agriculture was left largely alon
nated in the 1950s. The broad outline of government policy in the 1950s and early 1960s involved squeezing the peasants and workers to fi
evelopment.

economy, and particularly industry, was eventually dominated by a small group of people, the muhajirs, who were largely traders who migr
cities, especially Karachi, at partition. These refugees brought modest capital, which they initially used to start trading firms. Many of these fi
y in the 1950s as a response to government policies. Largely using their own resources, they accounted for the major part of investment and
uring during the first two decades after independence.

1960s, there was growing popular dissatisfaction with economic conditions and considerable debate about the inequitable distribution of inc
mic power-- problems that had always plagued the country. Studies by economists in the 1960s indicated that the forty big industrial groups
percent of the nation's industrial assets and more than 50 percent of private domestic assets. Eight of the nine major commercial banks were
y these same industrial groups. Concern over the concentration of wealth was dramatically articulated in a 1968 speech by Mahbubul Haq,
of the Planning Commission. Haq claimed that Pakistan's economic growth had done little to improve the standard of living of the common p
ckle- down approach to development" had only concentrated wealth in the hands of "twenty-two industrial families." He argued that the gove
ntervene in the economy to correct the natural tendency of free markets to concentrate wealth in the hands of those who already possessed

aq exaggerated the extent of the concentration of wealth, his speech struck a chord with public opinion. In response, the government enacte
etween 1968 and 1971 to set minimum wages, promote collective bargaining for labor, reform the tax structure toward greater equity, and r
tures. However, implementation was weak or nonexistent, and it was only when the government of Zulfiqar Ali Bhutto (father of Benazir) cam
there was a major shift in government policy.

mised a new development strategy more equitable than previous policies. Yet he downplayed economic analysis and planning and relied ins
ns that created many inconsistencies. In May 1972, he promulgated a major act that devalued the rupee by 57 percent and abolished the m
ate system. This act greatly stimulated exports and indicated that the removal of price distortions could spur the economy. But devaluation a
altered the cost and price structure for industry and affected the level and composition of industrial investment and the terms of trade betwe
nd agricultural sectors. Devaluation helped agriculture, particularly larger farms that had marketable surpluses. Mechanization increased but
e effect of displacing farm laborers and tenants, many of whom migrated to cities seeking industrial jobs.
utto's government nationalized thirty-two large manufacturing plants in eight major industries. The industries affected included iron and steel
vy engineering, motor vehicle and tractor assembly and manufacture, chemicals, petrochemicals, cement, and public utilities. Subsequently
y owned life insurance companies, privately owned banks, domestic shipping companies, and firms engaged in oil distribution, vegetable oil
g, and cotton ginning were nationalized. The result was a drop of nearly 50 percent in private investment in large-scale manufacturing betwe
3. By FY 1978 such investments were little more than one-third (in constant prices) of those in FY 1970. Private capital fled the country or w
manufacturing and real estate. Between 1970 and 1977, industrial output slowed considerably.

sector expanded greatly under the Bhutto government. In addition to the nationalization of companies, plants were built by the government a
ublic companies were created for various functions, such as the export of cotton and rice. Able managers and technicians were scarce, a si
rse after 1974, when many persons left to seek higher salaries in Middle East oil-producing states. Labor legislation set high minimum wage
hich boosted payroll costs for both public and private firms. Efficiency and profits in public-sector enterprises fell. Public industrial investmen
private industrial investment in FY 1976.

other economic measures undertaken by the Bhutto government were largely ineffective because of the power of vested interests and the
administration. Ceilings on the size of landholdings were lowered, tenants were given greater security of tenure, and measures were enacted
utto also supported large, but inadequately planned, long-term projects that tied up the country's development resources for long periods. Th
re an integrated iron and steel plant, a major highway on the west bank of the Indus River, and a highway tunnel in the mountainous north.

he government of Mohammad Zia ul-Haq (1977-88) began a policy of greater reliance on private enterprise to achieve economic goals, and
ts continued this policy throughout the late 1980s and early 1990s. Soon after Zia came to power, the government instituted constitutional m
ate investors that nationalization would occur only under limited and exceptional circumstances and with fair compensation. A demarcation o
ership was made that excluded the private sector from only a few activities. Yet government continued to play a large economic role in the 1
rprises accounted for a significant portion of large-scale manufacturing. In FY 1991, it was estimated that these enterprises produced about
output.

n of the economy was another policy innovation of the Zia government. In 1977 Zia asked a group of Islamic scholars to recommend measur
nomic system. In June 1980, the Zakat and Ushr Ordinance was promulgated. Zakat is a traditional annual levy, usually 2.5 percent, on wea
Ushr is a 5 percent tax on the produce of land, allowing some deductions for the costs of production, to be paid in cash by the landowner or
ed the former land tax levied by the provinces. Self-assessment by farmers is checked by local groups if a farmer fails to file or makes a ver
roceeds of ushr go to zakat committees to help local needy people.

ment of Prime Minister Nawaz Sharif (1990-93) introduced a program of privatization, deregulation, and economic reform aimed at reducing
s to sound economic development. Top priority was given to denationalizing some 115 public industrial enterprises, abolishing the governm
n the financial sector, and selling utilities to private interests. Despite resistance from officials and labor unions and criticism that the governm
quickly, by March 1992 control of twenty industrial units and two banks had been sold to private investors, and plans were under way to beg
zing several utilities. As of early 1994, proposals to end state monopolies in insurance, telecommunications, shipping, port operations, airline
and road construction were also in various stages of implementation. Private investment no longer requires government authorization, exce
dustries. Investment reforms eliminated government sanction requirements, eased restrictions on repatriable direct and portfolio investment
eign firms to issue shares in enterprises in Pakistan, and authorized foreign banks to underwrite securities on the same basis as Pakistani b

e Nawaz Sharif government made considerable progress in liberalizing the economy, it failed to address the problem of a growing budget d
o a loss of confidence in the government on the part of foreign aid donors. The caretaker government of July-October 1993 led by Moeen Q
d Bank vice president, asserted that the nation was near insolvency and would require a number of measures to impose fiscal discipline. Th
t thus included sharp increases in utility prices, new taxes, stiffer enforcement of existing taxes, and reductions in government spending. In e
ment of Benazir Bhutto, elected in October 1993, announced its intention to continue the policies of both deregulation and liberalization carri
rif and the tighter fiscal policies put in place by Qureshi. The government also said it intended to devote a greater proportion of the nation's r
education, especially for women.

ent Planning

economic development planning began in 1948. By 1950 a six-year plan had been drafted to guide government investment in developing the
re. But the initial effort was unsystematic, partly because of inadequate staffing. More formal planning--incorporating overall targets, assessi
and assigning priorities--started in 1953 with the drafting of the First Five-Year Plan (1955-60). In practice, this plan was not implemented, h
ause political instability led to a neglect of economic policy, but in 1958 the government renewed its commitment to planning by establishing
n.

d Five-Year Plan (1960-65) surpassed its major goals when all sectors showed substantial growth. The plan encouraged private entrepreneu
n those activities in which a great deal of profit could be made, while the government acted in those sectors of the economy where private b
operate. This mix of private enterprise and social responsibility was hailed as a model that other developing countries could follow. Pakistan
artially depended on generous infusions of foreign aid, particularly from the United States. After the 1965 Indo-Pakistani War over Kashmir,
stance declined. More resources than had been intended also were diverted to defense. As a result, the Third Five-Year Plan (1965-70), de
its immediate predecessor, produced only modest growth.

overnment of Zulfiqar Ali Bhutto came to power in 1971, planning was virtually bypassed. The Fourth Five-Year Plan (1970-75) was abando
came independent Bangladesh. Under Bhutto, only annual plans were prepared, and they were largely ignored.

vernment accorded more importance to planning. The Fifth Five-Year Plan (1978-83) was an attempt to stabilize the economy and improve t
he poorest segment of the population. Increased defense expenditures and a flood of refugees to Pakistan after the Soviet invasion of Afgh
1979, as well as the sharp increase in international oil prices in 1979-80, drew resources away from planned investments. Nevertheless, som
s were attained. Many of the controls on industry were liberalized or abolished, the balance of payments deficit was kept under control, and P
f-sufficient in all basic foodstuffs with the exception of edible oils. Yet the plan failed to stimulate substantial private industrial investment and
the expenditure on rural infrastructure development.

ive-Year Plan (1983-88) represented a significant shift toward the private sector. It was designed to tackle some of the major problems of th
ent and savings ratios; low agricultural productivity; heavy reliance on imported energy; and low spending on health and education. The eco
ted average of 6.5 percent during the plan period and would have exceeded the target if it had not been for severe droughts in 1986 and 19

h Five-Year Plan (1988-93) provided for total public-sector spending of Rs350 billion. Of this total, 38 percent was designated for energy, 18
on and communications, 9 percent for water, 8 percent for physical infrastructure and housing, 7 percent for education, 5 percent for industr
percent for health, and 11 percent for other sectors. The plan gave much greater emphasis than before to private investment in all sectors o
otal planned private investment was Rs292 billion, and the private-to- public ratio of investment was expected to rise from 42:58 in FY 1988
was also intended that public-sector corporations finance most of their own investment programs through profits and borrowing.

991, the government established a working group on private investment for the Eighth Five-Year Plan (1993-98). This group, which included
s, presidents of chambers of commerce, and senior civil servants, submitted its report in late 1992. However, in early 1994, the eighth plan h
unced, mainly because the successive changes of government in 1993 forced ministers to focus on short-term issues. Instead, economic po
eing guided by an annual plan.

FOREIGN ECONOMIC RELATIONS

endence Pakistan has had to depend on foreign assistance in its development efforts and to balance its international debt payments. In 196
ized the Aid-to-Pakistan Consortium to facilitate coordination among the major providers of international assistance. The consortium held 92
outstanding disbursed debt at the end of June 1991. The consortium's members include the United States, Canada, Japan, Britain, German
tional organizations such as the World Bank and the Asian Development Bank (ADB). The World Bank accounted for 26 percent of the outs
B, which was the largest lender in the early 1990s, accounted for 15 percent. Most nonconsortium funding comes from Saudi Arabia and oth
Middle Eastern countries. Most aid is in the form of loans, although the proportion of grants increased from around 12 percent in the late 197
n the 1980s, mainly because of food aid and other funds directed toward Afghan refugees. With the decline in this aid after 1988, the propo
eased to 16 percent in FY 1992.
 States has been a major provider of aid since independence and was the largest donor in the 1980s. All United States military aid and all ne
ts, however, ended in October 1990 after the United States Congress failed to receive certification that Pakistan was not developing a nucle
4, United States aid had not resumed, but Agency for International Development projects already under way in October 1990 continued to r

ade

de is important to the economy because of the country's need to import a variety of products. Imports have exceeded exports in almost ever
Pakistan had a deficit on its balance of trade each year from FY 1973 through FY 1992. In FY 1991, exports were US$5.9 billion, compared
billion, which resulted in a deficit of US$2.5 billion. In FY 1992, exports rose to an estimated US$6.9 billion, but imports reached an estimate
lting in a trade deficit of US$2.4 billion. Economists forecast a trade deficit of around US$2.5 billion for FY 1993. Pakistan's terms of trade (s
expressed in an index set at 100 in FY 1981, were 78.0 in FY 1991 and 82.7 in FY 1992.

nd refined products are significant imports. Their value varies with internal demand and changes in the world oil price. In FY 1982, oil produc
or around 30 percent of Pakistan's imports, falling to an annual average of 15 percent in FY 1987 to FY 1990, rising to over 21 percent in FY
ack to 15 percent in FY 1992. Other important categories of imports in FY 1992 included nonelectrical machinery (24 percent), chemicals (10
on equipment (9 percent), and edible oils (4 percent).

mport-substitution industrialization (see Glossary) policies favored domestic manufacturing of substitutes for imports, officials also encourage
ed exports in the 1950s and 1960s. In the early 1980s, incentives were again provided to industrialists to increase manufactured exports. No
1990s the export base remained primarily dependent on two agricultural products, cotton and rice, which are subject to great variations in o
FY 1992, raw cotton, cotton yarn, cotton cloth, and cotton waste accounted for 37 percent of all exports. Other important exports were read
15 percent), synthetic textiles (6 percent), and rice (6 percent). There was some diversification during the late 1980s as the share of manufa
hare of primary goods fell from 35 percent to 16 percent between FY 1986 and FY 1993. During the same period, the share of semimanufac
cent to 20 percent, and that of manufactured goods rose from 49 percent to 64 percent.

1990s, Pakistan's balance of trade remained particularly vulnerable to changes in the world economy and bad weather. Sharp increases in
h as those of 1979-81 and 1990, raised the nation's import bill significantly. Total exports, on the other hand, are more sensitive to agricultur
The decline in cotton production in FY 1993, for instance, seriously affected the export level.

imports and markets for exports are widely scattered, and they fluctuate from year to year. In the early 1990s, the United States and Japan
most important trading partners. In FY 1993, the United States accounted for 13.7 percent of Pakistan's exports and 11.2 percent of its impo
or 6.6 percent of exports and 14.2 percent of imports. Germany, Britain, and Saudi Arabia are also important trading partners. Hong Kong is
xport market and China a significant supplier of imports. Trade with the Republic of Korea (South Korea) and Malaysia is small but not unim
ndia is negligible.

Pakistani fears of protectionism in developed countries and the increasing importance of regional blocs in international trade, the governme
early 1990s placed new importance on developing trade links with nearby nations. In the early 1990s, new trading initiatives were being purs
p in two regional organizations, the Economic Co-operation Organization (ECO) and the South Asian Association for Regional Cooperation

as formed in 1985 with Pakistan, Iran, and Turkey as its only members, but Afghanistan, Azerbaijan, Kyrgyzstan, Tajikistan, Turkmenistan,
joined in 1992. Some politicians in the member nations see the ECO as a potential Muslim common market, but political rivalries, especially
rkey, limit its effectiveness. In 1994 most of the concrete measures being taken by the ECO concerned the improvement of transportation a
tions among the member nations, including the construction of a highway from Turkey to Pakistan through Iran.

s founded in the mid-1980s primarily as a vehicle to increase trade within South Asia by delinking the region's political conflicts from econom
. Its seven member states--Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka--adopted the principle of unanimity in sele
questions for debate. Despite frequent consultative committee meetings, progress toward increased trade remained limited in 1994. Pakista
or instance, is extremely limited. At the annual SAARC summit in April 1993, members agreed to negotiate a South Asian Preferential Trade
t would lower or abolish tariffs among members.

irst four decades after independence, controls on imports were used to ensure priority use of foreign exchange and to assist industrializatio
government maintained lists of permissible imports and also used quantitative restrictions and regulations on foreign exchange to control im
sive list covers consumer goods as well as raw materials and capital goods that can be imported by commercial and industrial users. A seco
w materials, can only be imported by industrial users. A third list covers commodities only the public sector can import.

d 1992, the government announced various measures to liberalize trade. Import licensing was ended for most goods, many products were re
estricted imports, and import duties were cut. In addition, foreign companies were allowed into the export trade. The government also promi
remaining nontariff barriers into tariffs, incorporate various ad hoc import taxes into customs duties, and reduce the numerous exemptions a
s on duties.

LABOR

dependence and the early 1990s, the labor force grew rapidly, reflecting the high population growth and the subsequently burgeoning propo
under twenty years of age. The data available concerning employment are only estimates because few concrete facts are available. Official
esent orders of magnitude and are not precise. Observers agree, however, that relatively few women participate in the formal nonagricultura

the civilian labor force was estimated at 33.8 million, compared with 26.3 million in FY 1982 and only 10.4 million in 1951. In FY 1993, abou
n labor force was engaged in agriculture, 13 percent in industry, 7 percent in construction, 13 percent in trade, 5 percent in transportation a
tions, and 14 percent in other services. Only about 25 percent of the official labor force are wage earners, which reflects the high levels of c
family businesses, and self-employment.

employment, although increasing, has expanded at a slower rate than the total labor force for most of the period since independence. In the
ers of mid-sized farms turned increasingly to managing their own holdings, displacing former tenants. Increased mechanization displaced a
dustry, the major growth sector of the economy, was unable to absorb sufficient workers. From the early 1960s until the early 1990s, the pro
rce employed in the industrial sector remained steady, while the proportion working in trade, construction, and transportation rose. Official e
mployment at around 3 percent in the late 1980s, but this rate rose in the early 1990s to around 6 percent. Underemployment is a greater pr
evident in agriculture, construction, and trade.

mployment partially compensates for the insufficient job market. Since the mid-1970s, a growing number of Pakistanis, mostly men, have go
l-exporting countries in the Middle East, where wages are much higher than at home. Estimates vary on the number of Pakistanis working o
90s, some observers put the number of Pakistanis working in the Middle East as high as 4 million. These workers range from unskilled labo
d professionals such as engineers, accountants, teachers, physicians, and nurses.

1990s, Pakistanis sent home remittances of between US$1.5 billion and US$2.0 billion a year, or over 30 percent of Pakistan's foreign-curr
d almost 5 percent of GNP. These remittances raise domestic purchasing power significantly. After the mid-1970s, wages of skilled and uns
Pakistan rose substantially, affected to a considerable degree by the competition for workers from abroad.

AGRICULTURE

Pakistan's largest economic activity. In FY 1993, agriculture, and small-scale forestry and fishing, contributed 25 percent of GDP and emplo
he labor force. Agricultural products, especially cotton yarn, cotton cloth, raw cotton, and rice, are important exports. Although there is agricu
l areas of Pakistan, most crops are grown in the Indus River plain in Punjab and Sindh. Considerable development and expansion of output
nce the early 1960s; however, the country is still far from realizing the large potential yield that the well-irrigated and fertile soil from the Indu
ld produce. The floods of September 1992 showed how vulnerable agriculture is to weather; agricultural production dropped dramatically in
 otal land area is about 803,940 square kilometers. About 48 million hectares, or 60 percent, is often classified as unusable for forestry or ag
ostly of deserts, mountain slopes, and urban settlements. Some authorities, however, include part of this area as agricultural land on the bas
ort some livestock activity even though it is poor rangeland. Thus, estimates of grazing land vary widely--between 10 percent and 70 percen
ad interpretation, for example, categorizes almost all of arid Balochistan as rangeland for foraging livestock. Government officials listed only
rgely in the north, as forested in FY 1992. About 21.9 million hectares were cultivated in FY 1992. Around 70 percent of the cropped area w
perhaps 20 percent in Sindh, less than 10 percent in the North-West Frontier Province, and only 1 percent in Balochistan.

endence, the amount of cultivated land has increased by more than one-third. This expansion is largely the result of improvements in the irr
make water available to additional plots. Substantial amounts of farmland have been lost to urbanization and waterlogging, but losses are m
ed for by additions of new land. In the early 1990s, more irrigation projects were needed to increase the area of cultivated land.

ainfall over most of the country makes about 80 percent of cropping dependent on irrigation. Fewer than 4 million hectares of land, largely in
the North-West Frontier Province, are totally dependent on rainfall. An additional 2 million hectares of land are under nonirrigated cropping,
n floodplains as the water recedes. Nonirrigated farming generally gives low yields, and although the technology exists to boost production s
ve to use and not always readily available.

1990s, irrigation from the Indus River and its tributaries constituted the world's largest contiguous irrigation system, capable of watering ove
he system includes three major storage reservoirs and numerous barrages, headworks, canals, and distribution channels. The total length o
eeds 58,000 kilometers; there are an additional 1.6 million kilometers of farm and field ditches.

aced portions of the Indus River and its tributaries under India's control, leading to prolonged disputes between India and Pakistan over the u
er nine years of negotiations and technical studies, the issue was resolved by the Indus Waters Treaty of 1960. After a ten-year transitional p
ded India use of the waters of the main eastern tributaries in its territory--the Ravi, Beas, and Sutlej rivers. Pakistan received use of the wate
and its western tributaries, the Jhelum and Chenab rivers.

aty was signed, Pakistan began an extensive and rapid irrigation construction program, partly financed by the Indus Basin Development Fu
lion contributed by various nations, including the United States, and administered by the World Bank. Several immense link canals were bu
western rivers to eastern Punjab to replace flows in eastern tributaries that India began to divert in accordance with the terms of the treaty. T
e Jhelum River, was completed in 1967. The dam provided the first significant water storage for the Indus irrigation system. The dam also co
l, to regulation of flows for some of the link canals, and to the country's energy supply. At the same time, additional construction was undert
nd canals.

hase of irrigation expansion began in 1968, when a US$1.2 billion fund, also administered by the World Bank, was established. The key to t
bela Dam on the Indus River, which is the world's largest earth-filled dam. The dam, completed in the 1970s, reduced the destruction of per
was a major hydroelectric generating source. Most important for agriculture, the dam increases water availability, particularly during low wa
mes at critical growing periods.

ssive expansion in the irrigation system, many problems remain. The Indus irrigation system was designed to fit the availability of water in th
argest area with minimum water needs, and to achieve these objectives at low operating costs with limited technical staff. This system desig
ow yields and low cropping intensity in the Indus River plain, averaging about one crop a year, whereas the climate and soils could reasona
almost 1.5 crops a year if a more sophisticated irrigation network were in place. The urgent need in the 1960s and 1970s to increase crop p
nd export markets led to water flows well above designed capacities. Completion of the Mangla and Tarbela reservoirs, as well as improvem
system, made larger water flows possible. In addition, the government began installing public tube wells that usually discharge into upper le
dd to the available water. The higher water flows in parts of the system considerably exceed design capacities, creating stresses and risks o
s, many farmers, particularly those with smallholdings and those toward the end of watercourses, suffer because the supply of water is unre

on system represents a significant engineering achievement and provides water to the fields that account for 90 percent of agricultural produ
s, serious problems in the design of the irrigation system prevent achieving the highest potential agricultural output.
agement is based largely on objectives and operational procedures dating back many decades and is often inflexible and unresponsive to cu
water use efficiency and high crop yields. Charges for water use do not meet operational and maintenance costs, even though rates more th
s and were again increased in the 1980s. Partly because of its low cost, water is often wasted by farmers.

management is not practiced by government officials, who often assume that investments in physical aspects of the system will automatica
production. Government management of the system does not extend beyond the main distribution channels. After passing through these ch
ected onto the fields of individual farmers whose water rights are based on long-established social and legal codes. Groups of farmers volun
e watercourses between main distribution channels and their fields. In effect, the efficiency and effectiveness of water management relies on
e the system.

mounts of water wasted have not been determined, but studies suggest that losses are considerable and perhaps amount to one-half of the
e system. Part of the waste results from seepages in the delivery system. Even greater amounts are probably lost because farmers use wate
omes even if the water application is detrimental to their crops. The attitude among almost all farmers is that they should use water when ava
may not be available at the next scheduled turn. Moreover, farmers have little understanding of the most productive applications of water du
cles because of the lack of research and extension services. As a result, improvements in the irrigation system have not raised yields and ou
Some experts believe that drastic changes are needed in government policies and the legal and institutional framework of water managemen
prove and that effective changes can result in very large gains in agricultural output.

ous expansion of the irrigation system over the past century significantly altered the hydrological balance of the Indus River basin. Seepage
percolation from irrigated fields caused the water table to rise, reaching crisis conditions for a substantial area. Around 1900 the water table
sixteen meters below the surface of the Indus Plain. A 1981 survey found the water table to be within about three meters of the surface in m
pped area in Sindh and more than one-third the area in Punjab. In some locations, the water table is much closer to the surface. Cropping is
er a wide area by poor drainage--waterlogging--and by accumulated salts in the soil.

ome drainage was installed before World War II, little attention was paid to the growing waterlogging and salinity problems. In 1959 a salinity
project was started in a limited area, based on public tube wells, to draw down the water table and leach out accumulated salts near the su
r for irrigation. By the early 1980s, some thirty such projects had been started that when completed would irrigate nearly 6.3 million hectare
ment had installed around 15,000 tube wells. Private farmers, however, had installed over 200,000 mostly small tube wells, mainly for irrigati
ower the water table. Private wells probably pumped more than five times as much water as public wells.

re aware of the need for additional spending to prevent further deterioration of the existing situation. Emphasis in the 1980s and early 1990s
n and maintenance of existing canals and watercourses, on farm improvements on the farms themselves (including some land leveling to co
on drainage and salinity in priority areas. Emphasis was also placed on short-term projects, largely to improve the operation of the irrigation
se yields. Part of the funding would come from steady increases in water use fees; the intention is gradually to raise water charges to cover
nance costs. Considerable time and money are needed to realize the full potential of the irrigation system and bring it up to modern standard

ership and Land Reform

dence Pakistan was a country with a great many small-scale farms and a small number of very large estates. Distribution of landownership w
ss than 1 percent of the farms consisted of more than 25 percent of the total agricultural land. Many owners of large holdings were absentee
little to production but extracting as much as possible from the sharecroppers who farmed the land. At the other extreme, about 65 percent
d some 15 percent of the farmland in holdings of about two hectares or less. Approximately 50 percent of the farmland was cultivated by ten
harecroppers, most of whom had little security and few rights. An additional large number of landless rural inhabitants worked as agricultural
ers and many tenants were extremely poor, uneducated, and undernourished, in sharp contrast to the wealth, status, and political power of t

endence the country's political leaders recognized the need for more equitable ownership of farmland and security of tenancy. In the early 19
overnments attempted to eliminate some of the absentee landlords or rent collectors, but they had little success in the face of strong opposi
was also legislated in the provinces, but because of their dependent position, tenant farmers benefited only slightly. In fact, the reforms crea
e of uncertainty in the countryside and intensified the animosity between wealthy landlords and small farmers and sharecroppers.
1959, accepting the recommendations of a special commission on the subject, General Mohammad Ayub Khan's government issued new la
that aimed to boost agricultural output, promote social justice, and ensure security of tenure. A ceiling of about 200 hectares of irrigated lan
nonirrigated land was placed on individual ownership; compensation was paid to owners for land surrendered. Numerous exemptions, inclu
family members, limited the impact of the ceilings. Slightly fewer than 1 million hectares of land were surrendered, of which a little more tha
ere sold to about 50,000 tenants. The land reform regulations made no serious attempt to break up large estates or to lessen the power or p
elite. However, the measures attempted to provide some security of tenure to tenants, consolidate existing holdings, and prevent fragmenta
erage holding of about five hectares was considered necessary for a family's subsistence, and a holding of about twenty to twenty-five hect
d as a desirable "economic" holding.

972, the Bhutto government announced further land reform measures, which went into effect in 1973. The landownership ceiling was officiall
ectares of irrigated land and about twelve hectares of nonirrigated land; exceptions were in theory limited to an additional 20 percent of land
ors and tube wells. The ceiling could also be extended for poor-quality land. Owners of expropriated excess land received no compensation
s were not charged for land distributed. Official statistics showed that by 1977 only about 520,000 hectares had been surrendered, and nea
d been redistributed to about 71,000 farmers.

measure required landlords to pay all taxes, water charges, seed costs, and one-half of the cost of fertilizer and other inputs. It prohibited evi
ong as they cultivated the land, and it gave tenants first rights of purchase. Other regulations increased tenants' security of tenure and presc
han had existed.

Bhutto government further reduced ceilings on private ownership of farmland to about four hectares of irrigated land and about eight hectar
d land. In an additional measure, agricultural income became taxable, although small farmers owning ten hectares or fewer--the majority of t
-were exempted. The military regime of Zia ul-Haq that ousted Bhutto neglected to implement these later reforms. Governments in the 1980
ded significant land reform measures, perhaps because they drew much of their support from landowners in the countryside.

t policies designed to reduce the concentration of landownership had some effect, but their significance was difficult to measure because of
most recent agricultural census was that of 1980, which was used to compare statistics with the agricultural census of 1960. Between 1960
of farms declined by 17 percent and farms decreased in area by 4 percent, resulting in slightly larger farms. This decline in the number of fa
marginal farms of two hectares or fewer, which in 1980 represented 34 percent of all farms, constituting 7 percent of the farm hectarage. At
e number of very large farms of sixty hectares or more was 14,000--both in 1960 and in 1980--although the average size of the biggest farm
980. The number of farms between two and ten hectares increased during this time. Greater use of higher-yielding seeds requiring heavier
, installations of private tube wells, and mechanization accounted for much of the shift away from very small farms toward mid-sized farms,
ndertook cultivation instead of renting out part of their land. Observers believed that this trend had continued in the 1980s and early 1990s.

4, land reform remained a controversial and complex issue. Large landowners retain their power over small farmers and tenants, especially
indh, which has a feudal agricultural establishment. Tenancy continues on a large-scale: one-third of Pakistan's farmers are tenant farmers,
half of the farmers in Sindh. Tenant farmers typically give almost 50 percent of what they produce to landlords. Fragmented holdings remain
and widespread problem. Studies indicate that larger farms are usually less productive per hectare or unit of water than smaller ones.

Patterns and Production

1990s, most crops were grown for food. Wheat is by far the most important crop in Pakistan and is the staple food for the majority of the po
aten most frequently in unleavened bread called chapati. In FY 1992, wheat was planted on 7.8 million hectares, and production amounted t
t in FY 1993 reached 16.4 million tons. Between FY 1961 and FY 1990, the area under wheat cultivation increased nearly 70 percent, while
21 percent. Wheat production is vulnerable to extreme weather, especially in nonirrigated areas. In the early and mid-1980s, Pakistan was
ut in the early 1990s more than 2 million tons of wheat were imported annually.

other major food grain. In FY 1992, about 2.1 million hectares were planted with rice, and production amounted to 3.2 million tons, with 1 mi
ice yields also have increased sharply since the 1960s following the introduction of new varieties. Nonetheless, the yield per hectare of arou
was low compared with many other Asian countries. Pakistan has emphasized the production of rice in order to increase exports to the Mid
oncentrates on the high-quality basmati variety, although other grades also are exported. The government increased procurement prices of b
nately to encourage exports and has allowed private traders into the rice export business alongside the public-sector Rice Export Corporati

rtant food grains are millet, sorghum, corn, and barley. Corn, although a minor crop, gradually increased in area and production after indepe
 expense of other minor food grains. Chickpeas, called gram in Pakistan, are the main nongrain food crop in area and production. A numbe
ding fruits and vegetables, are also grown.

1990s, cotton was the most important commercial crop. The area planted in cotton increased from 1.1 million hectares in FY 1950 to 2.1 mi
FY 1981 and 2.8 million hectares in FY 1993. Yields increased substantially in the 1980s, partly as a result of the use of pesticides and the
new high-yielding variety of seed. During the 1980s, cotton yields moved from well below the world average to above the world average. P
as 12.8 million bales, up from 4.4 million bales ten years earlier. Output fell sharply, however, to 9.3 million bales in FY 1993 because of the
and insect infestations.

crops include tobacco, rapeseed, and, most important, sugarcane. In FY 1992 sugarcane was planted on 880,000 hectares, and production
. Except for some oil from cottonseeds, the country is dependent on imported vegetable oil. By the 1980s, introduction and experimentation
was under way. Soybeans and sunflower seeds appear to be suitable crops given the country's soil and climate, but production was still neg
.

INDUSTRY

y some 5 percent of the large-scale industrial facilities in British India were located in what became Pakistan. The country started with virtua
ase and no institutional, financial, or energy resources. Three small hydroelectric power stations provided limited electricity to a few urban ar
nd dung were the main sources of energy; commercial energy sources supplied only about 30 percent of the energy consumed. Further, the
management personnel and skilled labor.

ring

f industrialization since independence has been rapid, although it has fluctuated in response to changes in government policy and to world e
During the 1950s, manufacturing expanded at about 16 percent annually; during the first half of the 1960s, it expanded at around 11 percen
d to under 7 percent a year in the second half of the 1960s. Between FY 1970 and FY 1977, the index of manufacturing output increased an
cent a year. Between FY 1977 and FY 1982, the index rose an average of 9.9 percent a year. Growth averaged 7.7 percent during the Sixth
88) and 5.4 percent from FY 1989 through FY 1992. In FY 1993, manufacturing accounted for 17.3 percent of GDP at current factor cost, o
facturing accounted for 61 percent and small-scale manufacturing for 39 percent. Manufactured goods accounted for 64 percent of all expor
but the bulk of these exports came in the relatively low-technology areas of cotton textiles and garments.

capital formation in manufacturing was estimated at Rs57 billion in FY 1993. During the 1980s, private investment became much more impo
tment. In FY 1982, private investment was 53.9 percent of the total, but in FY 1993 the proportion was 96.1 percent. Total investment in ma
cent of GNP in FY 1993.

1990s, the manufacturing sector was dominated by food processing and textiles. Provisional figures for FY 1992 indicated that sugar produ
, vegetable ghee 819,000 tons, cotton yarn 862,000 tons, and cotton cloth 234 million square meters. Other industrial products included mo
nits), cycle tires (2.2 million units), cement (6.1 million tons), urea (1.4 million tons), soda ash (147,000 tons), bicycles (364,000 units), and p
s).

s one steel mill, located near Karachi, with a production capacity of 1.1 million tons per year. A major undertaking, the mill required the bulk
vestment in the late 1970s and early 1980s, although the plant was designed and partly financed by the Soviet Union. It produced at 81 per
FY 1993, and it was dependent on imports of iron ore and coking coal. As of early 1994, the mill had not achieved sustained profitability, bu
pand it.

or firms produced about 40 percent of the total manufacturing value added in FY 1991, and they absorbed about 48 percent of gross fixed in
lue of publicsector industrial output in FY 1991 was Rs36 billion (in constant FY 1988 prices), but pretax profits were only Rs1.3 billion, refle
s and overstaffing prevalent in these enterprises.
 the efficiency and competitiveness of publicsector firms and end federal subsidies of their losses, the government launched a privatization p
ajority control in nearly all public-sector enterprises will be auctioned off to private investors, and foreign investors are eligible buyers. In Ma
s had been privatized, but by 1993 only about 30 percent of the government's target number of firms had been sold because some of the en
active for private investors. In 1994 the government led by Benazir Bhutto was committed to continuing the policy of privatization.

Energy

to the early 1990s, the economy made considerable progress in the transformation from a wood-burning base to modern energy sources. T
omplete. Bagasse (the woody residue left over from crushed sugarcane), dung, and firewood furnished about 32 percent of all energy in FY
d been denuded of firewood, forcing the local population to use commercial energy sources, such as kerosene or charcoal. Domestic sourc
energy accounted for 77 percent of all commercial energy in FY 1990. The major domestic energy resources are natural gas, oil, and hydro
remainder of energy requirements are met by imports of oil and oil products.

oduction increased sharply in the 1980s, from almost 4.0 million barrels in FY 1982 to 22.4 million barrels in FY 1992. This increase was the
nd development of new oil fields. Despite this expanded production, however, about 28 million barrels of crude oil were imported annually in
production from domestic oil refineries also rose in the 1980s, reaching 42 million barrels annually in the early 1990s. However, oil products
or about 30 percent of the value of all oil imports.

gorously pursued oil exploration in the 1980s and early 1990s and made a number of new discoveries. In the early 1990s, the most producti
rnal in Punjab, accounting for 21 percent of total output in FY 1993. The Badin area in southern Sindh was the site of a number of discoverie
its proportion of total output has continued to increase over the years. In the early 1990s, more favorable terms on pricing and repatriation o
he interest of foreign oil companies. About twenty foreign companies are engaged in oil exploration, but poor security for workers and prope
lochistan and Sindh remains a significant constraint on foreign investment.

ui natural gas field in Balochistan was discovered after independence. Production at Sui began in 1955 and peaked in 1985. In the early 19
he nation's most productive gas field, accounting for 46 percent of production in FY 1993. The second largest gas field, also located in Baloc
nted for 20 percent of all production. Twenty-five gas fields were operational in FY 1993. Natural gas recoverable reserves were estimated
meters, with an extraction rate in the early 1990s of around 14.0 billion cubic meters, up from 9.3 billion cubic meters in FY 1982 and 1.3 b
Y 1970.

pipelines, in which the government owns controlling shares, link the Sui gas field and a few others to the main population centers and the m
on areas. The southern pipeline leads from Sui to Hyderabad and Karachi, and a spur supplies Quetta. The northern pipeline branches at Fa
goes a little farther north of Lahore; the other branch is connected to the crude oil fields and supplies gas to Islamabad and Peshawar. The
as pipeline through which Iran would export natural gas to Pakistan.

es were boosted substantially in May 1992 when a large coal field was discovered in the Thar Desert in Sindh. In early 1993, these reserve
t 17 billion tons. However, much of Pakistan's coal has a low calorific value and a high ash and sulfur content, which limits its value. Output
in FY 1992, down from 1.8 million tons in FY 1982. The bulk of production is from small, privately owned mines whose owners generally lac
nd interest in expanding output. A public-sector firm, the Pakistan Mineral Development Corporation, accounted for about one-fifth of output
corporation has six operational mines--at Degari, Sor Range, and Sharigh in Balochistan; Lakhra and Meting in Sindh; and at the Makerwal
addling the border between Punjab and the North-West Frontier Province.

ic power is an important domestic primary energy resource, and hydroelectric potential is estimated at around 10,000 megawatts. A large nu
ites with major potential exist in the mountainous north, but the difficulty of access and the high cost of transmission to the populous south m
nt a distant prospect. A large proportion of hydrogenerators are located at two large multipurpose dams. The Tarbela Dam located on the In
West Frontier Province has an installed capacity of 2,164 megawatts, and the Mangla Dam situated on the Jhelum River in Azad Kashmir ha
800 megawatts.

kistani officials contracted with the Canadian government for the supply of a 125-megawatt pressurized, heavy-water nuclear reactor, which
erational near Karachi. This was Pakistan's only nuclear power plant in 1994, and its operating record is poor. In 1983 plans for a nuclear pl
on the Indus River in Punjab, about 240 kilometers south of Islamabad, were announced. The construction of this plant was delayed, in part
ce of foreign governments to supply needed fuel and technology because of concern over possible military use of the atomic energy progra
ficials expected the plant to open in 1997 with a capacity of 300 megawatts. China is providing the necessary technology and materials for t
tani officials expect that fuel for the plant will be provided by the uranium enrichment plant at Kahuta near Islamabad. Some observers, how
that the plant will be ready in 1997.

the country had a total installed generating capacity of 9,293 megawatts, of which approximately 62.7 percent was thermal, 35.9 percent hy
cent nuclear. In FY 1991, industry consumed 34.2 of percent of electricity, households 31.7 percent, agriculture 21.4 percent, commercial b
, and other users 8.3 percent. A rural electrification program increased the number of villages having electricity from around 14,000 in FY 19
Y 1992, leaving only about 5,000 villages without electricity. After the late 1970s, considerable improvement was made in transmission facili
ected generators and urban centers of the more populous areas, largely in Punjab and Sindh. Installations of high-voltage transmission lines
ped reduce power losses. Nonetheless, in 1993 the World Bank estimated that 28 percent of electricity generated in Pakistan was diverted
n and distribution, and even the government puts this figure at 12 percent.

government planned a rapid increase of generating capacity, in part through the expansion of existing hydroelectric and thermal units and i
construction of new plants. Nonetheless, observers expected shortages of electricity to continue in the early 1990s and probably longer. In
urban and rural areas experienced three power cuts a day lasting a total of around two hours. Industrial and commercial users are required
n by an even greater amount, and they risk being disconnected if they violate "agreed-on levels." Peak demand for electricity is estimated to
round 30 percent.

power sector was opened to private capital, both foreign and domestic. In that year, a World Bank consortium that included investors from B
the United States agreed to finance a project for a new US$1.3 billion, 1,292 megawatt oil-fired power station at Hub Chowki in Balochistan
west of Karachi. Construction began in September 1992. The consortium is responsible for the construction and operation of the power stati
ld to the national grid. In 1992 the government announced plans to privatize the Water and Power Development Authority's thermal plants a
oards, but in 1994 legal and political obstacles prevented implementation of this policy.

lopment of renewable energy sources has been undertaken, primarily for rural areas so isolated they would not otherwise have electricity in
future. The aim is to upgrade village life while lowering urban migration, reducing reliance on firewood, and providing power to pump water
ible. For example, a small family-owned biogas plant uses human and animal waste (from three or four water buffalo, for example) to produ
ubic meters of gas a day for heating and lighting. Larger biogas plants serve a number of homes or a village. Construction costs are too high
less the government underwrites installation.

Mining

e 1980s, development of mining was discouraged by the absence of venture capital and the limited demand for many minerals from domest
evelopment of mining was due in part to the remoteness of the areas where most minerals are found, which adds greatly to the costs of exp
and transportation. Moreover, some of these areas have a poor reputation for law and order. By the early 1990s, mining was of little importa
espite the presence of fairly extensive mineral resources. Foreign companies have been invited to bid for concessions for mineral extraction

clude antimony, bauxite, chromite, copper, gypsum, iron ore, limestone, magnesite, marble, molybdenum, rock salt, and sulfur. Much of the
und in Balochistan. In FY 1992, mineral production included 8.5 million tons of limestone, 833,000 tons of rock salt, 471,000 tons of gypsum
nesite. Some iron-ore deposits are of good enough quality for use in the country's steel plant, but in FY 1992 production was only 937,000 t
 k Integrated Mineral Project, managed by the stateowned Resource Development Corporation, was developed in the 1980s and early 1990
were as yet few results. Located in Balochistan, the project area contains three separate large deposits of copper ore, gold, iron ore, molybd
sulfur.

Tourism

1994, foreign tourism remained relatively undeveloped. Annual tourist arrivals averaged 442,136 for the period 1985-89 but fell to 284,779 in
uncertainties generated from the Persian Gulf War. The number of tourist arrivals rose to 415,529 in 1991. Many of the arrivals are visitors
have settled in Europe and North America. Pakistan has considerable tourist potential, but the generally poor law and order situation in the l
990s discouraged rapid growth. Hotels meeting international standards are concentrated in the larger cities, especially Islamabad, Karachi,
and Rawalpindi.

4, the immediate future of the economy appeared uncertain. Although the economy is responding well to the government's liberalization pro
rs appear poised to achieve healthy rates of growth, economic prospects are constrained by the government's large budget deficits, the con
of public expenditures by defense and interest payments, and the perception of widespread corruption. Pakistan remains heavily dependent
The failure to address more adequately the nation's low levels of education and health is also likely to act as a constraint on economic grow
of the 1990s.

mes from the Country Studies Program, formerly the Army Area Handbook Program. The Country Studies Series presents a description an
al setting and the social, economic, political, and national security systems and institutions of countries throughout the world.
ibrary of Congress

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