Economy of Pakistan

Economy of Pakistan

Pakistan is a nation with a diverse economy that include textiles, chemicals, food processing, agriculture and other industries. It is the 25th largest economy in the world.

The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by foreign investment and renewed access to global markets, have generated solid macroeconomic recovery the last decade. Substantial macroeconomic reforms since 2000, most notably at privatizing the banking sector have helped the economy. Pakistan has seen a growing middle class population since then and poverty levels have decreased by 10% since 2001.

GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06. In 2005, the World Bank named Pakistan the top reformer in its region and in the top 10 reformers globally. [cite web| url=,,contentMDK:20643510~menuPK:158937~pagePK:146736~piPK:146830~theSitePK:223547,00.html| title=Pakistan Among Top 10 Reformers| date=September 12, 2005| accessdate=2006-06-03]

Islamabad has steadily raised development spending in recent years, including a 52% real increase in the budget allocation for development in FY07, a necessary step toward reversing the broad underdevelopment of its social sector. The fiscal deficit - the result of chronically low tax collection and increased spending, including reconstruction costs from the devastating Kashmir earthquake in 2005 was manageable. Development in urban areas of Pakistan has remained high but is low in rural areas.

Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in 2006. In 2008, following the surge in global petrol prices inflation in Pakistan has reached as high as 12.0%. The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit - driven by a widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP growth in the medium term. [ [,,contentMDK:20421402~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html#Low_income World Bank Country Classification Groups] , (July 2006 data)]

Economic history

First five decades

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

Commodity producing sector


:"Main Article: Agriculture in Pakistan"

Pakistan is one of the world's largest producers and suppliers of the following according to the 2005 Food and Agriculture Organization of The United Nations and FAOSTAT given here with ranking:

*Chickpea (2nd)
*Apricot (4th)
*Cotton (4th)
*Sugarcane (4th)
*Milk (5th)
*Onion (5th)
*Date Palm (6th)
*Mango (7th)
*Tangerines, mandarin orange, clementine (8th)
*Rice (8th)
*Wheat (9th)
*Oranges (10th)

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. Pakistan irrigates three times more acres than Russia. Agriculture accounts for about 23% of GDP and employs about 44% of the labor force.


:"Main Article: Industry of Pakistan"

Pakistan ranks forty-first in the 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.

ervices sector

Pakistan's service sector accounts for about 53.3% 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.

Transport, storage and communication

Pakistan Telecommunication Company Ltd has emerged as a successful Forbes 2000 conglomerate with over $1 billion in sales in 2005. Cellphone market has exploded fourteen fold since 2000 to reach a subscriber base of 78.7 million in 2008. [Mahgul Rind, Hina. [ Cellular subscribers hit 78.7m] . The News International. Retrieved on February 16, 2008] In addition, there are over 6 million landlines in the country. [ [ IT sector export about $600 million a year: minister] . Business Recorder. Retrieved on February 16, 2008] . As a result, Pakistan won the prestigious Government Leadership award of GSM Association in 2006. [ [ Pakistan Recognised by GSMA for Exceptional Work in Developing Mobile Communications] . GSM World. Retrieved on February 16, 2008]

The World Bank estimates that it takes about 50 days only to get a phone connection in Pakistan. [ [ Pakistan: Growth and Export Competitiveness] , World Bank Document No. 35499-PK, Table 6.7, page 116. Issued 25 April 2006]

In Pakistan, following are the top mobile phone operators:
#Mobilink (Parent: Orascom, Pakistan/Egypt)
#Ufone (Parent: PTCL, Pakistan/UAE)
#Telenor (Parent: Telenor, Norway)
#Warid (Parent: Dhabi Group, UAE}
#Instaphone (*Operations discontinued due to nonpayment of license fees*)(Parent:Milicom,South.A)
#Paktel (recently been acquired by China Mobile for US$ 450 million)

The cellular base in Pakistan is growing at around 14% per year and already the cellular customer has outpaced the fixed line customers. Wireless revolution has swept Pakistan, and competition among the mobile operators is pulling the prices down. Its as cheap as Rs.2 to call to USA per minutes (that is 3-4 cents per minutes). Sony Ericsson, Nokia and Motorola along with Samsung and LG remain to be the popular brands among customers. Though Nokia has a strong market presenceFact|date=November 2007, this has been somewhat taken over by Sony Ericsson, through aggressive marketing and advertisement.Fact|date=November 2007

Pakistan is on the verge of Telecom revolution and it is by far the most attracted sector in Pakistan in terms of Foreign Direct investment coming in Pakistan. It s estimated alone that this year 2006-07, FDI attracted by Telecom will be US$ 2 Billion out of the total FDI of US$ 6 Billion, the highest in Pakistan history.

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. []

Private sector airlines in Pakistan include Airblue, Aeroasia and Shaheen Air International. Many private airlines are in pipeline including Air Mahreq, Dewan Air and Pearl Air.

Airblue is using the state of the art A-320 and A-321 aircraft for flying across Pakistan and will soon commence UK operation. Airblue has recently ordered 6 New A-321 aircraft, while 2 aircraft will be taken on lease which will be added to the existing fleet of 4-5 aircraft, making it the second biggest fleet behind PIA which has 42 aircraft.

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. In 2005-6 export cash inflows increased to greater than $73 million. This year the government has set a goal of $108 million. Exports account for 11% of the total revenues of the IT sector in Pakistan. Compared to India, Pakistan's IT sector is relatively small, but recent growth has been extremely high leading economists to be optimistic about the IT industries future prospects in Pakistan. Gartner, one of the world’s leading information technology research and advisory companies has placed Pakistan amongst the top countries of the world in terms of suitability for offshore outsourcing. [Daily Times [

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