Economy of Pakistan

2007 Schools Wikipedia Selection. Related subjects: Economics

Pakistan is a developing country with the world's sixth-largest population, and an economic growth rate that has been consistently positive since a 1951 recession. At purchasing power parity, Pakistan GDP in 2006 was estimated at approximately $439.7 billion, larger than that of Saudi Arabia, but slightly smaller than the GDP of the Philippines.

Economy Of Pakistan
Currency 100 Pakistani Rupee (PKR)
= 60.37 US dollar
= 77.48 Euro
Fiscal year July 1— June 30
Current fiscal year (2006—2007)
Central bank The State Bank of Pakistan (SBP)
Trade organizations and treaties SAFTA, ASEAN, WIPO and WTO
Fiscal Budget $19.8 billion (revenue)
$25.07 billion (expenditure)
Inflation rate (monthly) (FY05 - 06 est.)
President Pervez Musharraf
Finance Minister Shaukat Aziz
Commerce Minister Humayun Akhtar Khan
SBP Governor Dr. Shamshad Akhtar
SECP Razi ur Rehman Khan
Corruption Perceptions Index 144th (2005)
Index of Economic Freedom 110th (mostly unfree) (2006)
UN Human Development Index 134th (2006)
Gross Domestic Product (GDP)
GDP at PPP $439.707 billion (2006 est.)
GDP at current exchange rates
GDP real growth rate (at PPP) 6.9%

(2006 est.)

GDP growth rate 6.6% (2006 est.)
GDP per capita $2,706 (2006 est.)
GDP by sector agriculture: 21.6% industry: 25.1% services: 53.3% (2006 est.)
Population 165,803,560 (2006 est.)
Population below poverty line 25% (2006)
Labor force 46.84 million
Unemployment rate 6.6% (2006 est.)
Agricultural products cotton, wheat, rice, sugarcane, fruits, vegetables; milk, beef, mutton, eggs, shrimp, poultry, tea
Main industries textiles, chemicals, food processing, steel, transport equipment, machinery, beverages, construction, materials, clothing, paper products.
International trade
Imports (2006 est.) $28.58 billion

f.o.b (57th) (2006 est.)

Major imported commodities Petroleum, Petroleum products, Machinery, Plastics, Transportation equipment, Edible oils, Paper and paperboard, Iron and steel, Tea
Main import partners (2006) China 14.7%, Saudi Arabia 10.1%, UAE 8.7%, Japan 6.5%, United States 5.3%, Germany 5%, Kuwait 4.9% (2006 est.)
Exports $16.47 billion (2006 est.)

(67th) (2006 est. )

Major exported commodities textile goods ( garments, bed linen, cotton cloths, and yarn), rice, leather goods, sports goods, chemicals manufactures, carpets and rugs.
Main export partners United States 22.4%, UAE 8.3%, UK 6%, China 5.4%, Germany 4.7% (2006 est.)
Overall balance of payments (2006) -$1.753 billion
  1. Data is for 2004-05, unless specified otherwise.
  2. Pakistan's ranking, where applicable, are specified in brackets, and linked to the source data.
  3. CIA Pakistan Section from The World Factbook, dated November 1, 2005.
  4. Pakistan Government Website

Economic history

First five decades

This is a chart of trend of gross domestic product of Pakistan at market prices estimated by the International Monetary Fund with figures in millions of Pakistani Rupees. See also

Year Gross Domestic Product US Dollar Exchange Inflation Index (2000=100)
1960 20,058 4.76 Pakistani Rupees
1965 31,740 4.76 Pakistani Rupees
1970 51,355 4.76 Pakistani Rupees
1975 131,330 9.91 Pakistani Rupees
1980 283,460 9.90 Pakistani Rupees 21
1985 569,114 16.28 Pakistani Rupees 30
1990 1,029,093 21.41 Pakistani Rupees 41
1995 2,268,461 30.62 Pakistani Rupees 68
2000 3,826,111 51.64 Pakistani Rupees 100
2005 6,581,103 59.30 Pakistani Rupees 126

For purchasing power parity comparisons, the US Dollar is exchanged at 17.93 Pakistani Rupees only.

At the time of its independence in 1947 from the British Empire, Pakistan was a very poor and predominantly agricultural country. Pakistan's average economic growth rate since independence has been higher than the average growth rate of the world economy during the period. Average annual real GDP growth rates were 6.8% in the Sixties, 4.8% in the Seventies, and 6.5% in the Eighties. Average annual growth fell to 4.6% in the Nineties, with significantly lower growth in the second half of that decade.

Industrial-sector growth, including manufacturing, was also above average. In the late 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. 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. Two wars with India in 1965 and 1971 adversely affected economic growth – in particular, the latter war brought the economy close to recession, although economic rebounded sharply until the nationalizations of the mid-1970s.

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 —

  • the Asian financial crisis;
  • economic sanctions — according to Colin Powell, Pakistan was "sanctioned to the eyeballs";
  • global recession;
  • severe rioting in the port city of Karachi;
  • 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.

Recent economic history

A view of the I. I. Chundrigar Rd skyline of Karachi
A view of the I. I. Chundrigar Rd skyline of Karachi

Pakistan's nominal gross domestic product (GDP) in 1997 was US$ 75.3 billion. Six years later in 2002, the country's nominal GDP came down to US$ 71.5 billion. During this six-year period, the real GDP grew by a meagre 3.0 per cent on an average. Pakistan government's debt was 82 per cent of its GDP in 2002. Over one-third of the government's revenue was being used up in making interest payments on the national debt. The near stagnant economy suddenly started showing miraculous growth in 2002 after lifting of economic sanctions imposed after Pakistan's 1998 nuclear tests . The economy grew at 5.1 per cent in 2003, 6.4 per cent in 2004 and 7.0 per cent in 2005. The US$ 72 billions economy of 2002 has swelled into a US$ 108 billion economy in 2005. During 1997-2002 Pakistan's average export growth has been 1.2 per cent per year and increased to 13 per cent per year during 2003-05. Pakistan's debt as a percentage of the GDP came down to 59 per cent in 2005 from 82 per cent in 2002. Pakistan government's interest payment as a percentage of revenue collection came down to 23 per cent in 2005 as compared to 35 per cent in 2002.

Pakistan's economic outlook has brightened in recent years in conjunction with rapid economic growth and a dramatic improvement in its foreign exchange position as a result of its current account surplus and a consequent rapid growth in hard currency reserves. Pakistan's nuclear tests in May 1998 triggered the imposition of economic sanctions by the G-7. International default was narrowly averted by the partial waiver of sanctions and the subsequent reinstatement of Pakistan's IMF ESAF/EFF in early 1999, followed by Paris Club and London Club rescheduling. The Sharif government had difficulty meeting the conditionality of the IMF program, which was suspended in July 1999, and resumed later during Musharraf's administration. Having improved its finances, the government stated in 2004 that it would no longer require IMF assistance, and the assistance program ended in that year.

The administration of President Pervez Musharraf has sought and received debt relief from international lenders, reducing its external debt from $32 billion to a discounted present value less than half of that. The government is using Pakistan's surplus to prepay expensive debt and replace it with commercial debt, which it has been able to obtain at low interest rates as a result of its improved credit rating.

Musharraf's economic agenda includes measures to widen the tax net, privatize public sector assets, and improve its balance of trade. Pakistan has made governance reforms, privatization, and deregulation the cornerstones of its economic revival .

Although it received a positive endorsement from international financial institutions such as the World Bank, the International Monetary Fund and the Asian Development Bank, as well as improved credit ratings from Standard & Poor's and Moody's, Pakistan has experienced a costly dearth of foreign direct investment.

Pakistan's Finance Minister, Shaukat Aziz, who has been credited with Pakistan's economic turnaround, was elected to the office of Prime Minister on 28 August 2004.

Pakistan's current account surplus put upward pressure on the Pakistani rupee, which rose from 64 rupees per dollar to 57 rupees per dollar. The State Bank of Pakistan (the central bank) stabilized the rise by lowering interest rates and buying dollars.

After short-term Pakistani T-bond rates fell below 2%, with government borrowing having declined, banks greatly expanded their lending to businesses and consumers. Construction activity, sales of durable goods such as trucks and automobiles, and housing purchases have all jumped to record levels. Private sector credit expanded by 28.5% in 2003.

Despite rapid growth in domestic automobile manufacturing, imports have also risen to meet the increased demand. Major automakers, such as BMW, Toyota, and Honda have invested in manufacturing facilities in the country.

According to the Asian Development Bank, the first half of FY2006 was marked by a slowdown in both industry and agriculture in Pakistan. Output of cotton declined by an estimated 10.9 per cent from an all-time high of 14.6 million bales harvested in FY2005. Production of sugarcane, another major summer crop, is also estimated lower than last year. The growth of large-scale manufacturing slowed to 8.7 per cent in the first quarter of FY2006 from 24.9 per cent in the same period of last year, primarily due to capacity constraints and the high-base effect. Among individual industries in the first quarter, growth of textiles tumbled to 7.2 per cent from 29.6 per cent year on year. Automobile assembly and electronics, which have shown the fastest expansion among sub-sectors in the last 2-3 years, also decelerated. Inflation accelerated in FY2005 after five years of price stability. Annual inflation, based on the consumer price index, more than doubled to 9.3 per cent from 4.6 per cent, mainly because of higher food prices and rising house rents. Due to a sharp increase in domestic oil prices, transport costs also jumped. Core -- nonfood, non-oil -- inflation also doubled, from 3.7 per cent to 7.4 per cent .

Dr. Salman Shah, economic advisor to the President Pervez Musharraf said that the GDP in the last seven years had almost doubled and had expanded to $130 billion and that the per capita income had also increased to $847 in 2006.

Macroeconomic reform and prospects

Islamabad Business Offices
Islamabad Business Offices

According to many sources, the Pakistani government has made substantial economic reforms since 2000, and medium-term prospects for job creation and poverty reduction are the best in nearly a decade.

Government revenues have greatly improved in recent years, as a result of economic growth, tax reforms - with a broadening of the tax base, and more efficient tax collection as a result of self-assessment schemes and corruption controls in the Central Board of Revenue - and the privatization of public utilities and telecommunications. Pakistan is aggressively cutting tariffs and assisting exports by improving ports, roads, electricity supplies and irrigation projects. Islamabad has doubled 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.

Liberalization in the international textile trade has already yielded benefits for Pakistan's exports, and the country also expects to profit from freer trade in agriculture. As a large country, Pakistan hopes to take advantage of significant economies of scale, and to replace China as the largest textile manufacturer as the latter China moves up the value-added chain. These industries play to Pakistan's relative strengths in low labor costs.

Growing stability in the nation's monetary policies has contributed to a reduction in money-market interest rates, and a great expansion in the quantity of credit, changing consumption and investment patterns in the nation. Pakistan's domestic natural gas production, and its significant use of CNG in automobiles, has cushioned the effect of the oil-price shock of 2004-2005. Pakistan is also moving away from the doctrine of import substitution which some developing countries (such as Iran) dogmatically pursued in the twentieth century. The Pakistani government is now pursuing an export-driven model of economic growth successfully implemented by South East Asia and now highly successful in China.

In 2005, the World Bank reported that

"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."

In addition, reduced tensions with India and the ongoing peace process raise new hopes for a prosperous and stable South Asia, with more intra-regional trade.

Shahid Javed Burki, former vice president of World Bank and who was in charge of the bank’s Latin American division when Mexico was hit by the crisis in 1994, said Pakistan is facing symptoms that preceded the Mexican financial crisis more than 10 years ago. He points to the nation’s current account deficit, ‘excessive’ speculative business activity and weak banking system.

The economy today

Stock market

In the first four years of the twenty-first century, Pakistan's KSE 100 Index was the best-performing stock market index in the world as declared by the international magazine “Business Week”.

As a result, the corporate sector of Pakistan has grown dramatically in significance in recent times.

Karachi - the financial capital of Pakistan
Karachi - the financial capital of Pakistan

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.

Growing middle class

Measured by purchasing power, Pakistan has a 30 million strong middle class enjoying per capita incomes of $8000-$10,000, according to Dr. Ishrat Husain, Ex-Governor ( 2nd December, 1999 - 1st December, 2005) of the State Bank of Pakistan . In addition, Pakistan has a growing upper class with relatively high per capita incomes. However, Pakistan has no individual with as much as a billion US dollars, according to Forbes magazine and has the distinction of being (by population) the largest nation to have no billionaires. Among countries that have never had billionaires, Pakistan has the largest economy.

On measures of income inequality, the country ranks slightly better than the median. In late 2006, the Central Board of Revenue estimated that there were almost 2.8 million income-tax payers in the country.

Poverty alleviation expenditures

Pakistan government spent over 1 trillion Rupees (about $16.7 billion) on poverty alleviation programs during the past four years, cutting poverty from 32.1 percent in 2000-01 to 25.4 percent in 2004-05. The rural poverty has declined from 39 percent to 31.8 percent and urban poverty from 22.7 percent to 17.1 percent.


For main article : Demographics of Pakistan

With a per capita GDP of about $2,080 ( PPP, 2003) the World Bank considers Pakistan a low-income country, although it is recorded as a "Medium Development Country" on the Human Development Index 2005. Pakistan has a large informal economy, which the government is trying to document and assess. Approximately 50% of adults are literate, and life expectancy is about 64 years or less. The population, about 155 million in 2004, is growing at about 1.96%.

Relatively few resources have been devoted to socio-economic development or infrastructure projects. Inadequate provision of social services and very high birth rates in the past have contributed to a persistence of poverty. An influential recent study concluded that the fertility rate peaked in the 1980s, and has since fallen sharply. Pakistan has a family-income Gini index of 41, close to the world average of 39.


The high population growth in the past few decades has ensured that a very large number of young people are now entering the labor market. Among the seven most populous Asian nations, Pakistan has a lower population density than Bangladesh, Japan, India, and the Philippines. In the past, excessive red tape made firing, and consequently hiring, difficult. Significant progress in taxation and business reforms has ensured that many firms now are not compelled to operate in the underground economy.

In late 2006, the government launched a ambitious nationwide service employment scheme aimed at disbursing almost $2 billion over five years.


The Board of Revenue has collected nearly Rs. 700 billion ($11.6 billion ) in taxes in the 2005-2006 financial year.

Currency System

For main article : Pakistani Rupee


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. Currently the newly printed 5,000 rupee note is the largest denomination in circulation.

Foreign exchange rate

1 Pakistani Rupee (PKR) = 100 Paise
Dollar-Rupee exchange rate
Dollar-Rupee exchange rate

The Pakistani rupee depreciated against the US dollar until the turn of the century, when Pakistan's large current-account surplus pushed the value of the rupee up versus the dollar. Pakistan's central bank then stabilized by lowering interest rates and buying dollars, in order to preserve the country's export competitiveness

  • Exchange rates: Pakistani rupee (PKR) per US$1
    • 58 (2004)
    • 57.752 (2003)
    • 59.7238 (2002)
    • 61.9272 (2001)
    • 53.6482 (2000)
    • 51.90 (1999)
    • 44.550 (1998}
    • 40.185 (1997)
    • 35.266 (1996)
    • 30.930 (1995)

Foreign exchange reserves

In August 2006, Pakistan's foreign exchange reserves were $12.745 billion - a twelve-fold rise since 2001.

Structure of economy

From modest beginnings, Pakistani economy has moved successfully to a low-inflation high-growth trajectory since 2000. The central bank has controlled inflation at around 3% per annum in recent years - a record since 1980.

Over 1,081 patent applications were filed by non-resident Pakistanis in 2004 revealing a new found confidence.

Sectoral contribution to GDP Growth
Most of the recent acceleration in GDP growth has come from the industrial and service sectors.
GDP growth by sector, as a percentage of GDP
Sector 2001-02 2002-03 2003-04 2004-05
Agriculture 0.03 1.01 0.53 1.74
Service 2.47 2.75 3.16 4.16
Real GDP (fc) 3.1% 4.8% 6.4% 8.4%
Source: Economic Survey of Pakistan 2005

In 1947, when Pakistan became independent, agriculture accounted for about 53% of its GDP. While per-capita agricultural output has grown since then, it has been outpaced by the growth of the non-agricultural sectors, and the share of agriculture has dropped to roughly one-fifth of Pakistan's economy.

In recent years, the country has seen rapid growth in industries (such as apparel, textiles, and cement) and services (such as telecommunications, transportation, advertising, and finance).

Structure of production
Share of Various Sectors in GDP
Sector 2000-01 2001-02 2002-03 2003-04 2004-05
Goods (1+2+3+4+5) 48.2 47.3 47.1 47.4 47.6
  1. Agriculture 25.1 24.4 24.2 23.3 23.1
  2. Mining 1.3 1.4 1.5 1.5 1.4
  3. Manufacturing 15.9 16.1 16.4 17.6 18.3
  4. Construction 2.4 2.4 2.4 2.1 2.0
  5. Energy Distribution 3.4 3.0 2.5 2.9 2.7
Services (6+7+8+9+10+11) 51.8 52.7 52.9 52.6 52.4
  6. Transportation & Comm. 11.7 11.5 11.5 11.4 11.1
  7. Trade 18.1 18.0 18.2 18.5 19.1
  8. Finance & Insurance 3.1 3.6 3.3 3.3 3.7
  9. Ownership of Dwellings 3.2 3.2 3.2 3.1 2.9
  10. Public Admin. & Defense 6.3 6.5 6.7 6.5 6.0
  11. Other Services 9.4 9.9 10.0 9.9 9.6
Note: GDP is estimated at constant factor cost. Figures are in percentage.
Source: Economic Survey of Pakistan 2005


Pakistan's service sector accounts for about 51% of GDP. Transport, storage, communications, finance, and insurance account for 24% of this sector, and wholesale and retail trade about 30%. Pakistan is trying to promote the information industry and other modern service industries through incentives such as long-term tax holidays.

The government is acutely conscious of the immense job growth opportunities in service sector and has launched aggressive privatisation of telecommunications, utilities and banking despite union unrest.


Pakistan Telecom has emerged as a successful Forbes 2000 conglomerate with over $1 billion in sales in 2005. Cellphone market has exploded twelve-fold since 2000 to reach a subscriber base of over 41.5 million in 2006. In addition, there are about 6 million landlines in the country. . As a result, Pakistan won the prestigious Government Leadership award of GSM Association in 2006.

The World Bank estimates that it takes about 25 days only to get a phone connection in Pakistan (86 days in India).


Pakistan International Airlines, the flagship airline of Pakistan's civil aviation industry, has turnover exceeding $1 billion in 2005. The government announced a new shipping policy in 2006 permitting banks and financial institutions to mortgage ships. A massive rehabilitation plan worth $1 billion over 5 years for Pakistan Railways has been announced by the government in 2005.

Financial services

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.

Credit card market continued its strong growth with sales crossing the 1 million mark in mid-2005.

Investments & Securities


Since 2000, Pakistani banks have begun aggressive marketing of consumer finance to the emerging middle class, allowing for a consumption boom (more than a 7-month waiting list for certain car models) as well as a construction bonanza.

Tax Incentives & 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. This in recent years has resulted in impressive growth in that sector. Pakistan saw an increase in IT export cash inflows of 50% from 2003-4 to 2004-5, with total export cash inflows standing at $48.5 million. This year the government has set a goal of $72 million. Exports account for 11% of the total revenues of the IT sector in Pakistan. Compared to India, Pakistan's IT sector is still in the infantile stage, but recent trends have led economists to be optimistic about the IT industries future prospects in Pakistan. A dramatic revaluation by an independent study estimated global IT exports from Pakistan to have exceeded $1 billion in 2006. It was revealed that only about 50% of the cash inflows were registered with Pakistan Software Export Board and that at least 75% of the contract value was retained in overseas escrow accounts by several software houses.

Paging and mobile (cellular) telephone 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.

  • Pakistan has more than 20 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, organizations and institutions have their own websites.
  • The use of search engines and instant messaging 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 cell phone companies operating in the country with nearly 28 million mobile phone users in the country.
  • Wireless local loop and the landline telephony sector has also been liberalized and private sector has entered thus increasing the teledensity rate from less than 3% to more than 10% in span of two years.

Agriculture and Livestock

The Valley of Hunza in Pakistan.  —  Agricultural and scenic
The Valley of Hunza in Pakistan. — Agricultural and scenic

Pakistan ranks fifth in the Muslim world and twentieth worldwide in farm output. It is the world's fifth largest milk producer.

Pakistan's principal natural resources are arable land and water. About 25% of Pakistan's total land area is under cultivation and is watered by one of the largest irrigation systems in the world. In fact Pakistan irrigates three times more acres than Russia now. Agriculture accounts for about 23% of GDP and employs about 44% of the labor force.


The most important crops are wheat, sugarcane, cotton, and rice, which together account for more than 75% of the value of total crop output.

Pakistan's largest food crop is wheat. In 2005, Pakistan produced 21,591,400 metric tons of wheat, more than all of Africa (20,304,585 metric tons) and nearly as much as all of South America (24,557,784 metric tons), according to the FAO


According to Economic Survey of Pakistan, the livestock sector contributes about half of the value added in the agriculture sector, amounting to nearly 11 per cent of Pakistan's GDP, which is more than the crop sector.

According to Jang,

The national herd consists of 24.2 million cattle, 26.3 million buffaloes, 24.9 million sheep, 56.7 million goats and 0.8 million camels. In addition to these there is a vibrant poultry sector in the country with more than 530 million birds produced annually. These animals produce 29.472 million tons of milk (making Pakistan the 5th largest producer of milk in the world), 1.115 million tons of beef, 0.740 million tons of mutton, 0.416 million tons of poultry meat, 8.528 billion eggs, 40.2 thousand tons of wool, 21.5 thousand tons of hair and 51.2 million skins and hides.

The Food and Agriculture Organization reported in June 2006 that

In Pakistan, the world's fifth largest milk producing country, government initiatives are being undertaken to modernize milk collection and to improve milk and milk product storage capacity.

Pakistan is a net food exporter, except in occasional years when its harvest is adversely affected by droughts. Pakistan exports rice, cotton, fish, fruits, and vegetables and imports vegetable oil, wheat, cotton, pulses and consumer foods. The country is Asia's largest camel market, second-largest apricot and ghee market and third-largest cotton, onion and milk market.

Growth and share of GDP

The economic importance of agriculture has declined since independence, when its share of GDP was around 53%. Following the poor harvest of 1993, the government introduced agriculture assistance policies, including increased support prices for many agricultural commodities and expanded availability of agricultural credit. From 1993 to 1997, real growth in the agricultural sector averaged 5.7% but has since declined to about 4%. Agricultural reforms, including increased wheat and oilseed production, play a central role in the government's economic reform package.

Use of agricultural products by domestic food industry

Much of the Pakistan's agriculture output is utilized the country's growing processed-food industry. The value of processed retail food sales has grown 12 percent annually during the Nineties and was estimated at over $1 billion in 2000 though supermarkets accounted for just over 10% of the outlets.


Pakistan ranks thirteenth in the Muslim world and fifty-fifth worldwide in factory output.

Pakistan's industrial sector accounts for about 24% of GDP. Cotton textile production and apparel manufacturing are Pakistan's largest industries, accounting for about 66% of the merchandise exports and almost 40% of the employed labour force. Other major industries include cement, fertilizer, edible oil, sugar, steel, tobacco, chemicals, machinery, and food processing.

The government is privatizing large-scale parastatal units, and the public sector accounts for a shrinking proportion of industrial output, while growth in overall industrial output (including the private sector) has accelerated. Government policies aim to diversify the country's industrial base and bolster export industries.

Pakistan's 2 leading companies, as per Forbes Global 2000 ranking for 2005.
Company Name
1,284 Oil & Gas Development
1,316 PTCL
Forbes Global 2000


Pakistan has extensive energy resources, including fairly sizable natural gas reserves, some proven oil reserves, coal (Pakistan has the fourth-largest coal reserves in the world ), and a large hydropower potential. However, the exploitation of energy resources has been slow due to a shortage of capital and domestic political constraints. Domestic petroleum production totals only about half the country's oil needs, and the need to import oil has contributed to Pakistan's trade deficits and past shortages of foreign exchange.

The current government has announced that privatization in the oil and gas sector is a priority, as is the substitution of indigenous gas for imported oil, especially in the production of power. Pakistan is a world leader in the use of compressed natural gas (CNG) for personal automobiles.

The short-term national energy demand has expanded significantly since 2001 due to massive rise in sales of durable goods like refrigerators, washing machines, split air conditioners, et al.

In 2004, Access Group International announced plans to invest $1 billion over the next 5 years in solar cell manufacture and wind farms. MOUs have been signed with Alternate Energy Development Board. In early 2005, the government approved a 25-year Energy Security Plan to boost electric capacity eight-fold.

The Canadian conglomerate Cathy Oil and Gas signed a memorandum of understanding in late 2006 to invest $5 billion in oil and gas exploration, development, production and commercialisation in Pakistan.

The World Bank estimates that it takes about 32 days only to get a electrical connection in Pakistan (81 days in India).


Important minerals found in Pakistan are gypsum, limestone, chromites, iron ore, rock salt, silver, gold, precious stones, gems, marble, copper, coal, graphite, sulphur, fire clay, silica. The salt range in Punjab Province has large deposits of pure salt. Balochistan province is a mineral rich area having substantial mineral, oil and gas reserves which have not been exploited to their full capacity. The province has significant quantities of copper, chromite and iron, and pockets of antimony and zinc in the south and gold in the far west. Natural gas was discovered near Sui in 1952, and the province has been gradually developing its oil and gas projects over the past fifty years.

Major reserves of copper and gold in Balochistan's Rekodiq area have been discovered in early 2006. The Rekodiq mining area has proven estimated reserves of 2 billion tons of copper and 20 million ounces of gold. According to the current market price, the value of the deposits has been estimated at about $65 billion, which would generate thousands of jobs.

The discovery has ranked Rekodiq among the world's top seven copper reserves. The Rekodiq project is estimated to produce 200,000 tons of copper and 400,000 ounces of gold per year, at an estimated value of $1.25 billion at current market prices. The copper and gold are currently traded at about $5,000 per ton and $600 per ounce respectively in the international market.

North West Frontier Province accounts for atleast 78% of the marble production in Pakistan.


In FY 2002-03, real growth in manufacturing was 7.7%. In the twelve months ending 30 June 2004, large-scale manufacturing grew by more than 18% compared to the previous twelve-month period. The textile and garment industry's share in the economy along with its contribution to exports, employment, foreign-exchange earnings, investment and value added make it Pakistan’s single largest manufacturing sector. The industry is comprised of 453 textile mills: 50 integrated units; and 403 spinning units, with 9.33 million spindles and 148,000 rotors, The capacity utilization was 83% for spindles and 47% for rotors during 2003.


After the devastating 2005 Kashmir earthquake Pakistan has instituted stricter building codes. The cost of construction in Pakistan will increase 30 to 50% due to implementation of a new building code which requires strengthening of structures to withstand earthquake of 8 to 8.5 magnitude. The demand for cement has increased due to reconstruction after the earthquake. The prices of cement has increased by 50% and Pakistan government banned export of cement to lower the prices and the reconstruction costs.

Dubai Ports World, announced on June 1st, 2006 that it will spend $10 billion to develop transport infrastructure and real estate in Pakistan. Dubai Ports World is also discussing the possibility of the company taking over operational management of Gwadar port in Balochistan.

Emaar Properties, announced on May 31, 2006 three real estate developments in the cities of Islamabad and Karachi in Pakistan. The projects, with a total investment of $2.4 billion, will include a series of master planned communities that will set new benchmarks in commercial, residential and retail property within Pakistan.

In addition the conglomerate signed a unprecedented $43 billion deal to develop two island resorts - Bundal Island and Buddo Island - over the next decade.

The property sector has expanded twenty-three fold since 2001, particularly in metropolises like Lahore. Nevertheless, the Karachi Chamber of Commerce and Industry estimated in late 2006 that the overall production of housing units in Pakistan has to be increased to 0.5 million units annually to address 6.1 million backlog of housing in Pakistan for meeting the housing shortfall in next 20 years. The report noted that the present housing stock is also rapidly ageing and an estimate suggests that more than 50 percent stock is over 50 years old. It is also estimated that 50 percent of the urban population now lives in slums and squatter settlements. The report said that meeting the backlog in housing, besides replacement of out-lived housing unit is beyond the financial resources of the government. This necessitates putting in place of framework to facilitate financing in the formal private sector and mobilise non-government resources for a market-based housing finance system.


Fishery plays an important role in the national economy. It provides employment to about 400,000 fishermen directly. In addition, another 500,000 people are employed in ancillary industries. It is also a major source of export earning. In July-May 2002-03 fish and fishery products valued at US $ 117 million were exported from Pakistan. Federal Government is responsible for fishery of Exclusive Economic Zone of Pakistan.

The major fish harbours of Pakistan are:

  • Karachi Fisheries Harbour is being operated by Provincial Government of Sindh.
  • Karachi Fish Harbour handles about 90% of fish and seafood catch in Pakistan and 95% of fish and seafood exports from Pakistan.
  • Korangi Fish Harbour is being managed by Federal Ministry of Food, Agriculture and Livestock.
  • Pasni Fish Harbour being operated by Provincial Government of Balochistan.
  • Gwadar Fish Harbour being operated by Federal Ministry of Communication.

Economic aid

Pakistan receives economic aid from several sources as loans and grants. The International Monetary Fund (IMF), World Bank (WB), Asian Development Bank (ADB), etc provides long term loans to Pakistan. Pakistan also receives bilateral aid from developed and oil-rich countries.

The Asian Development Bank will provide close to $6 billion development assistance to Pakistan during 2006-9. The World Bank unveiled a lending program of up to $6.5 billion for Pakistan under a new four-year, 2006-2009, aid strategy showing a significant increase in funding aimed largely at beefing up the country's infrastructure. Japan will provide $500 million annual economic aid to Pakistan.


The remittance of Pakistanis living abroad has played important role in Pakistan's economy and foreign exchange reserves. The Pakistanis settled in Western Europe and North America are important sources of remittance to Pakistan. Since 1973 the Pakistani workers in the oil rich Arab states have been sources of billions dollars of remittance. Pakistan received nearly $4 billion dollars in remittance in 2005.

An IMF research paper has revealed that workers’ remittances contribute 4% to the GDP of Pakistan and are equivalent to about 22 percent of annual exports of goods and services.

Remittances from overseas Pakistanis between July and August 2006 increased to $812 million, compared with $661 million the same period last year.


The Foreign direct investment (FDI) in Pakistan soared by 180.6 per cent year-on-year to US$2.22 billion and portfolio investment by 276 per cent to $407.4 million during the first nine months of fiscal year 2006, the State Bank of Pakistan (SBP) reported on April 24. During July-March 2005-06, FDI year-on-year increased to $2.224 billion from only $792.6 million and portfolio investment to $407.4 million, whereas it was $108.1 million in the corresponding period last year, according to the latest statistics released by the State Bank.

Pakistan is now the most investment-friendly nation in South Asia. Business regulations have been profoundly overhauled along liberal lines, especially since 1999. Most barriers to the flow of capital and international direct investment have been removed. Foreign investors do not face any restrictions on the inflow of capital, and investment of up to 100% of equity participation is allowed in most sectors (local partners must be brought in within 5 years and contribute up to 40% of the equity in the services and agriculture sectors). Unlimited remittance of profits, dividends, service fees or capital is now the rule. Business regulations are now among the most liberal in the region. On these grounds, Pakistan appears much more investor friendly than its larger neighbour, India. This was confirmed by a World Bank report published in late 2006 ranking Pakistan (at 74th) well ahead of neighbours like China (at 93rd) and India (at 134th) based on ease of doing business.

Tariffs have been reduced to an average rate of 16%, with a maximum of 25% (except for the car industry). The privatisation process, which started in the early 1990s, has gained momentum, with most of the banking system privately owned, and the oil sector targeted to be the next big privatisation operation.

The recent improvements in the economy and the business environment have been recognised by international rating agencies such as Moody’s and Standard and Poor’s (country risk upgrade at the end of 2003).

Foreign trade

Pakistan is a member of the World Trade Organization, and has bilateral and multilateral trade agreements with many nations and international organizations.

Fluctuating world demand for its exports, domestic political uncertainty, and the impact of occasional droughts on its agricultural production have all contributed to variability in Pakistan's trade deficit. In the six months to December 2003, Pakistan recorded a current account surplus of $1.761 billion, roughly 5% of GDP. Pakistan's exports continue to be dominated by cotton textiles and apparel, despite government diversification efforts. Exports grew by 19.1% in FY 2002-03. Major imports include petroleum and petroleum products, edible oil, chemicals, fertilizer, capital goods, industrial raw materials, and consumer products.

Past external imbalances left Pakistan with a large foreign debt burden. Principal and interest payments in FY 1998-99 totaled $2.6 billion, more than double the amount paid in FY 1989-90. Annual debt service peaked at over 34% of export earnings before declining.

With a current account surplus in recent years, Pakistan's hard currency reserves have grown rapidly. Improved fiscal management, greater transparency and other governance reforms have led to upgrades in Pakistan's credit rating. Together with lower global interest rates, these factors have enabled Pakistan to prepay, refinance and reschedule its debts to its advantage. Despite the country's current account surplus and increased exports in recent years, Pakistan still has a large merchandise-trade deficit. The budget deficit in fiscal year 1996-97 was 6.4% of GDP. The budget deficit in fiscal year 2003-04 is expected to be around 4% of GDP.

In the late 1990s, Pakistan received about $2.5 billion per year in loan/grant assistance from international financial institutions (e.g., the IMF, the World Bank, and the Asian Development Bank) and bilateral donors. Increasingly, the composition of assistance to Pakistan shifted away from grants toward loans repayable in foreign exchange. All new U.S. economic assistance to Pakistan was suspended after October 1990, and additional sanctions were imposed after Pakistan's May 1998 nuclear weapons tests. The sanctions were lifted by president George W. Bush after Pakistani president Musharraf allied Pakistan with the U.S in its war on terror. Having improved its finances, the government refused further IMF assistance, and consequently the IMF program was ended. The government is also reducing tariff barriers with bilateral and multilateral agreements.

While the country has a current account surplus and both imports and exports have grown rapidly in recent years, it still has a large merchandise-trade deficit. The budget deficit in fiscal year 2004-2005 was 3.4% of GDP. The budget deficit in fiscal year 2005-06 is expected to be over 4% of GDP. Economists believe that the soaring trade deficit would have an adverse impact on Pakistani rupee by depreciating its value against dollar (1 US $ = 60 Rupees (March 2006) ) and other currencies.

One of the main reasons that contributed to the increase in trade deficit is the increased imports of earthquake relief related items, especially tents, tarpaulin and plastic sheets to provide temporary shelter to the survivors of earthquake of October 8th, 2005 in Azad Jammu and Kashmir and parts of the NWFP, an official said. The rise in the trade gap was also fuelled by high oil import prices, food items, machinery and automobiles.

The Petroleum Ministry says that this year the bill of oil imports was expected to reach $6.5 billion against $4.6 billion in the last fiscal year, which is the main reason behind the all-time high trade deficit.

The EU is the single largest trading partner of Pakistan absorbing over one-third of the exports in 2003.


Pakistan's exports stood at $4.27 billion in the first two months current financial year (July 2006 - June 2007), up by 2.88 percent from last financial year's exports of $4.15 billion in the same period.

The exports in the 2006 financial year (July 2005 to June 2006) were $16.47 billion showing an increase of 14.40% compared to $14.39 billion last fiscal year.

Pakistan exports rice, furniture, cotton fibre, cement, tiles, marble, textiles, clothing, leather goods, sports goods (renowned for footballs/soccer balls), surgical instruments, electrical appliances, software, carpets, and rugs, ice cream, livestock meat, chicken, powdered milk, wheat, seafood (especially shrimp/prawns), vegetables, processed food items, Pakistani assembled Suzukis (to Afghanistan and other countries), defense equipment (submarines, tanks, radars), salt, marble, onyx, engineering goods, and many other items. Pakistan now is being very well recognized for producing and exporting cements in Asia and Mid-East.


Pakistan's imports stood at $7.43 billion in the first two months of current financial year (July 2006 - June 2007), up by 13.38 percent from last financial year's imports of $6.5 billion in the same period.

The imports in the 2006 financial year (July 2005 to June 2006) amounted to $28.58 billion showing an increase of 38.80% compared to $20.60 billion during the previous fiscal year.

Pakistan's single largest import category is petroleum and petroleum products. Other imports include: industrial machinery, construction machinery, trucks, automobiles, computers, computer parts, medicines, pharmaceutical products, food items, civilian aircraft, defense equipment, iron, steel, toys, electronics, and other consumer items.

Sales tax is levied at 15 percent both on imports and domestically produced products. The income withholding tax is levied at 6 percent on imports and at 3.5 percent on the sales of domestic taxpayers.


Pakistan’s trade deficit jumped to $2.844 billion during first two months of current fiscal year July-August 2006 from $2.075 billion in corresponding period of previous fiscal year.

Pakistan's trade deficit was $12.112 billion in last fiscal year 2005-2006, almost 10 percent of Gross Domestic Product (GDP), due to its high import bill and the rise in prices.

Economists believe that the soaring trade deficit would depreciate the Pakistani rupee against dollar and other currencies. The demand by local importers for dollars in the coming months would increase to finance their surplus imports. The rise in the trade gap has been attributed to high oil import bill, and rise in the prices of food items, machinery and automobiles.


Pakistan is expected to sell a dual-tranche sovereign bond worth $750 million on March 23, 2006 that analysts said should ensure a favorable reception in the bond market. The 10-year tranche would be $500 million and the 30-year portion $250 million. Pricing is expected during New York trading hours on March 23, 2006. The sources said that the 10-year tranche was expected to be priced at around 7.125 percent, while the longer-dated tranche was expected to be sold at around 7.875 percent, the top end of the indicative yield range of 7.75 to 7.875 percent.

The bonds, comprising 10-year and 30-year tranches, had generated $1.5 billion in orders and a total size of as much as $1.25 billion had been anticipated for what is Pakistan’s third foray into the international debt market since 2004.

Fiscal budget

  • Fiscal year: 1 July - 30 June
  • Revenues: $19.8 billion
  • Expenditures: $25 billion (2006 est.)
  • Debt - external: $39.94 billion (2005 est.)
  • Economic aid - recipient: $2 billion (FY97/98)

Industrial sector

  • Industries: textiles (8.5% of the GDP), food processing, beverages, construction materials, clothing, paper products, shrimp
  • Industrial production growth rate: 10.7% (2005)
  • Large-scale manufacturing growth rate: 18% (2003)

Income distribution

  • Gini Index: 41
  • Household income or consumption by percentage share:
    • lowest 10%: 4.1%
    • highest 10%: 27.7% (1996)
    • lowest 20% : 27.7% (2006)


Electricity production

  • Electricity - production: 76.92 billion kWh (2003)
  • Electricity - production by source (2002)
    • fossil fuel: 63.05%
    • hydro: 36.31%
    • nuclear: 0.64%

Electricity consumption

  • Electricity - consumption: 72.54 billion kWh (2003)
  • Electricity - exports: 0%
  • Electricity - imports: 0%
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