Pakistan’s Economy

 Islamic Republic ( form of govt that enforces sharia law)

 Pakistan is a developing country
 GDP growth 2.4%
 Low standard of living (per capita income is 1588 Us $ or 36,650PKR
per month)
 Agriculture share 24% of GDP
 Labour force in Agri. sector 37.4%
 Manufacturing sector share in GDP 13.6 %
Fiscal development indictors (% of GDP)
• Total revenue 11.5 %
• Current expenditures 17 %
• Development expenditure 2.2 %
• Fiscal deficit 7%
Total debt 75% of GDP
Inflation 11.8 % (double digit)
• Food inflation 24.2 %
Trade deficit $ 17.7 billion
Source: Pakistan economic survey 2023- 2024
Economic performance of
Pakistan
an overview of past 70 years
1947 – 1958 ( establishment /settlement period)
 Newly independent, agrarian underdeveloped country with little
industry , few services and no infrastructure .
 main focus was on survival, provision of basic necessities and to stand
Pakistan on it’s feet.
 Economic indicators :
Agriculture sector share in GDP 53% , with 65% of labor force indulge in it.
Manufacturing 7.8%
99 % of exports were based on primary products.
• Korean war in 1952 broke out which paved the way for foundation
of industries in Pakistan.
Due to war , demand of goods especially wheat, cotton and jute
increased world wide Pak benefited as GDP grew from 3%
to 9.4%.
(1958 – 1968) Decade of
development
Ayyub khan’s era :
 If we see growth wise, 1960s was the decade of best performance ( aid-led growth)
 Economic indicators : (average, annual)
GDP growth rate 7%
Agriculture sector grew 6%
Manufacturing sector grew 10%
Services sector grew 7%
Source : Akbar Zaidi book issues in pak economics

Agriculture and industrial sector showed significant growth

Rapid industrialization that at the end of this era we were on taking off stage.
 Spent over 21% of GDP on infrastructure and dams
 25% of GDP was indebted (aid-led growth)
 Financial systems were set up
 Planning commission was set up
 Land reforms
 Composition of GDP changed substantially :
Share of agriculture sector decline whereas share of industrial
(doubled) and services sector increased.
Pakistan was considered as model capitalist economy (in which private sector play significant
role ) but it it was directed capitalism as it was guided and bureaucratically

governed .
 Fruits of economic growth :
growth did not distribute evenly
Income & regional disparities increased significantly
 On rich
• Subsidy and tax More Industry More employment generation

• But in case of Pakistan income remained in hands of few business

empires (22 families) Income inequalities
• Two sectors Punjab and Karachi enjoyed growth of agriculture and
industrial sector (respectively) on the expense of the rest of the
economy.
 Trade was highly controlled and closed Exchange rate overvalued (imports
cheaper & exports expensive )
Local market distorted .
(1971 – 1977) Zulifqar’s Ali
Bhutto’s Era
Supporter of socialism
:
 Nationalization ( govt control of institutions , industries i.e. iron ,
steel, manufacturing of motor vehicles & cement industries).
 Economic indicators : (average, annual)
GDP growth rate 5%
Agriculture sector grew 2%
Manufacturing sector grew 5.5 %
Source : Akbar Zaidi book issues in pak economics

 Separation of east Pakistan in 1972

 Devaluation of Pakistani’s currency in 1972 ,by 120%

Exports increase Despite the loss of

exportable produce

 In 1973 , OPEC (organization of petroleum exporting countries ) raised

the prices that leads to increase import bill of Pakistan as
a result BOP (money flowing in & out of the country) deteriorated
drastically.
 After 1973 world wide recession (due to oil crisis) Pakistan’s
exports effected negatively.
 1973 – 1976 , pest attack, floods causes crops failure
exports decline , Growth rate decline , inflation raises.
 So his era is considered as bad luck years.
1977 – 1988 Gen.Zia-ul- Haq
Era :
 Liberal in economic terms
Decrease tariff and privatization (selling of state owned enterprises)
Tariff decline cause imports to increase , leads to
deterioration of industries , that leads to unemployment to
raise .
Unemployment + increased taxes lead to increase inflation
that leads to increase burden on public.
 Economic indicators : (average, annual)
GDP growth rate 6.5%
Agriculture sector grew 5.5%
Manufacturing sector grew 8 %
Source : Akbar Zaidi book issues in pak economics

 Soviet union invasion in Afghanistan as a result refugees

came to Pakistan , so U.S helped Pakistan to feed refugees by
sending aid.
Aid + increased remittances economic growth.
 Gen. Zia implemented sharia law so closed banks, hafeez
pasha & Ayesha pasha were against this.
 It is viewed that he promoted Taliban, MQM, jamiyat e Islami.
1988 – 1999 Period of return of
democracy
& Era of structural Adjustment
program
During this period , 4 general elections were held PPP Benazir (1988-
90, 1993-96) and PML-N Nawaz govts came twice & both could not
complete their term.
 Economic indicators : (average, annual)
GDP growth rate 4 %
Agriculture sector grew 4 %
Manufacturing sector grew 5 %
Source : Akbar Zaidi book issues in pak economics

 Poor law & order condition so could not attract foreign inflow of
capital
IMF & world bank control
 Pakistan’s economy remained under the control of IMF & world bank
in the form of SAP since 1988, any decision taken by govt was pre
decided by them.
 SAP main focus was on
i. Reducing fiscal deficit (revenue – expenditures )
ii. Trade reforms to increase BOP (money flowing in & out of the country)
Steps taken to decrease F.D :
Impose high tax & decrease in public expenditure
 Pakistan increased tax rate not tax base and large cut in expenditure was in
the area of development expenditure.
 Impact
indirect tax increase cause salaried person to suffer as his purchasing
power decline.
Social sector development expenditures decreases(health + education )
Lead to poor become poorer.
Removed subsidy on utilities & food lead to further increase
in inflation.
Increased food prices causes huge inflation in LDCs as major portion of their
income is spent on food & food is used as raw material for many industries
which leads to cost push inflation
As farmer gets industrial output (fertilizers etc ) on higher prices further raise
prices of agriculture produce (Trap).
Steps taken for trade reforms
• Decline in tariff
Tariff decline leads to increase imports that leads to
deindustrialization which causes unemployment in the
economy
• Privatization
It causes unemployment to further increase.
• Devaluation of currency to promote exports but imports become
expensive lead to inflation.
More imports lead to depreciation of currency.
Result of SAP
• Inflation
• Unemployment
• Fiscal deficit aimed to bring down to 4.8 % of GDP by 1990-91, shot
up to 8.7% in 1991.
Consequences of such policies has been a serious economic crisis at
macroeconomic and individual level throughout 1990s.
We were about to bank croupt in 1999-2000 due to debt 99% of GDP.
1999 – 2007 Gen. Musharraf
Era :
 Liberlization
 Privitization
 Event of 9/11 (11 sep, 2001) , attack on world trade centre
 4.5 billion PKR loan was waived off
 Rescheduling was done
 Hard loans turned into soft loans
 Installments & debt servicing substantially gown down
 Remittances & grants came in Pakistan
 Economic growth 5%
 Record investment of 17.3 % of GDP
 Greater access to US & EU markets lead to significant increase in exports.
Major issues of Pakistan’s
economy
• Poverty
• Unemployment
• Debt
• Sustainable growth
• Illiteracy