GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06 due to economic reforms in the year 2000 by the Musharraf government. In 2005, the World Bank named Pakistan the top reformer in its region and in the top 10 reformers globally. 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.
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 reached as high as 25.0%. 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.
Doing Business
The World Bank (WB) and International Finance Corporation's flagship report Ease of Doing Business Index 2010 ranked Pakistan 85 among 181 countries around the globe. Pakistan comes highest in South Asia but also ranks higher than China, Russia and India which is at 133. The top five countries are Singapore, New Zealand, the United States, Hong Kong and United Kingdom.The Government of Pakistan has 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 there.
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| GDP Growth Rate 1981-2009 |
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”. The stock market capitalization of listed companies in Pakistan was valued at $5,937 million in 2005 by the World Bank. But in 2008, after the General Elections, uncertain political environment, rising militancy along western borders of the country, and mounting inflation and current account deficits resulted in the steep decline of the Karachi Stock Exchange. As a result, the corporate sector of Pakistan has declined dramatically in recent times.Manufacturing and finance
Pakistan's manufacturing sector has experienced double-digit growth in recent years, from 2000 to 2007, with large-scale manufacturing growing from a minimal 1.5% in 1999 to a record 19.9% in 2004-05 and averaged 8.8% by end of 2007.The Federal Bureau of Statistics valued the finance and insurance sector at Rs.311,741 million in 2005 thus registering over 166% growth since 2000. A reduction in the fiscal deficit had 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 rate
- 1 Pakistani Rupee (PKR) = 100 Paisa
- Exchange rates: Pakistani rupee (PKR) per US$1
| Year | Highest ↑ | Lowest ↓ | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Date | Rate | Date | Rate | ||||||||||
| 1995 | PKR 30.930 | ||||||||||||
| 1996 | PKR 35.266 | ||||||||||||
| 1997 | PKR 40.185 | ||||||||||||
| 1998 | PKR 44.550 | ||||||||||||
| 1999 | PKR 51.90 | ||||||||||||
| 2000 | PKR 53.6482 | ||||||||||||
| 2001 | PKR 61.9272 | ||||||||||||
| 2002 | PKR 59.7238 | ||||||||||||
| 2003 | PKR 57.752 | ||||||||||||
| 2004 | PKR 58.000 | ||||||||||||
| 2007 | Aug 05 | PKR 60.75 | Nov 01 | PKR 60.50 | |||||||||
| 2008 | October 10 | PKR 80.00 | Apr 01 | PKR 63.50 | |||||||||
| Source: PKR exchange rates in USD, SBP | |||||||||||||
Foreign exchange reserves
By October 2007, at the end of Prime Minister Shaukat Aziz’s tenure, Pakistan raised back its Foreign Reserves to $16.4 billion. Pakistan's trade deficit was at $13 billion, exports grew to $18 billion, revenue generation increased to become $13 billion and the country attracted foreign investment of $8.4 billion.On October 11, 2008 State Bank of Pakistan reported that country's foreign exchange reserves had gone down by $571.9 Million to $7749.7 Million.] The foreign exchange reserves had declined more by $10 billion to an alarming rate of $6.59 billion. In September 2010 According the State Bank Of Pakistan Pakistan's Foreign Reserves Stood at $16.99 Billion.
Industry
Manufacturing by Province
| Global ranking | Company Name |
|---|---|
| 1,284 | Oil & Gas Development |
| 1,316 | PTCL |
| Forbes Global 2000 |
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.
- Industries: textiles (8.5% of the GDP), fertilizer, cement, oil refineries, dairy products,food processing, beverages, construction materials, clothing, paper products, shrimp
- Industrial production growth rate: 6% (2005)
- Large-scale manufacturing growth rate: 19.9% (2005)
SME Sector
In Pakistan SMEs have a significant contribution in the total GDP of Pakistan, according to SMEDA and Economic survey reports, the share in the annual GDP is 40% likewise SMEs generating significant employment opportunities for skilled workers and entrepreneurs. Small and medium scale firms represent nearly 90% of all the enterprises in Pakistan and employ 80% of the non-agricultural labour force. These figures indicate the potential and further growth in this sector.Automobile industry
Pakistan is an emerging market for automobiles and automotive parts offers immense business and investment opportunities. The total contribution of Auto industry to GDP in 2007 is 2.8% which is likely to increase up to 5.6% in the next 5 years. Auto sector presently, contributes 16% to the manufacturing sector which also is expected to increase 25% in the next 7 years. Car ownership in Pakistan has risen by 40% per annum since 2001.CNG industry
As of 2010, Pakistan is one of the largest users of CNG (compressed natural gas) in the world. Presently, more than 3,000 CNG stations are operating in the country in 99 cities and towns, and 1000 more would be set up in the next two years. It has provided employment to over 50,000 people in Pakistan.Cement industry
In 1947, Pakistan had inherited four cement plants with a total capacity of 0.5 million tons. Some expansion took place in 1956–66 but could not keep pace with the economic development and the country had to resort to imports of cement in 1976-77 and continued to do so till 1994-95. The cement sector consisting of 27 plants is contributing above Rs 30 billion to the national exchequer in the form of taxes.IT industry
Pakistan’s IT industry has been rising steadily since the last three years. A marked increase in software export figures are an indication of this booming industry’s potential. The total number of IT companies increased to 1306 and the total estimated size of IT industry is $2.8 billion. In 2007, Pakistan was for the first time featured in the Global Services Location Index by A.T. Kearney and was rated as the 30th best location for offshoring. By 2009, Pakistan had improved its rank by ten places to reach 20th.Textiles
The Textile Industry is dominated by Punjab. 3% of United States imports regarding clothing and other form of textiles is covered by Pakistan.] Textile exports in 1999 were $5.2 billion and rose to become $10.5 billion by 2007. Textile exports managed to increase at a very decent growth of 16% in 2006. In the period July 2007 – June 2008, textile exports were US$10.62 billion. Textile exports share in total export of Pakistan has declined from 67% in 1997 to 55% in 2008, as exports of other textile sectors grew.Mining
Pakistan is endowed with significant mineral resources and emerging as a very promising area for prospecting/exploration of mineral deposits. Bases on available information, the country's more than 6,00,000 km² of outcrops area demonstrates varied geological potential for metallic and non-metallic mineral deposits. Except oil, gas and nuclear minerals regulated at federal level, Minerals are a provincial subject, under the constitution of Islamic Republic of Pakistan. Provincial governments are responsible for development and exploitation of minerals, besides, enforcing regulatory regime. In line with the constitutional framework the federal and provincial governments have jointly set out Pakistan first National Mineral Policy in 1995, duly implemented by the provinces, providing appropriate institutional and regulatory framework and equitable and internationally competitive fiscal regime.In the recent past, exploration by government agencies as well as by multinational mining companies presents ample evidence of the occurrences of sizeable minerals deposits. Recent discoveries of a thick oxidized zone underlain by sulphide zones in the shield area of the Punjab province, covered by thick alluvial cover have opened new vistas for metallic minerals exploration. Pakistan has large base for industrial minerals. The discovery of coal deposits having over 175 billion tones of reserves at Thar in the Sindh province has given an impetus to develop it as an alternate source of energy. There is vast potential for precious and dimension stones.
The enforcement of Mineral Policy (1995) has paved way to expand mining sector activities and attract international investment in this sector. International mining companies have responded favorably to the NMP and presently at least four are engaged in mineral projects development.
Currently about 52 minerals are under exploitation although on small scale. The major production is of coal, rock salt and other industrial and construction minerals. The current contribution of mineral sector to the GDB is about 0.5% and likely to increase considerably on the development and commercial exploitation of Saindak & Reco Diq copper and gold deposits (world largest gold mine), Duddar zinc lead, Thar coal and gemstone deposits.
Services
Service Sector by Province
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.
Communication
After the deregulation of the telecommunication industry, the sector has seen an exponential growth. Pakistan Telecommunication Company Ltd has emerged as a successful Forbes 2000 conglomerate with over US $1 billion in sales in 2005. The mobile telephone market has exploded fourteen-fold since 2000 to reach a subscriber base of 91 million users in 2008, one of the highest mobile teledensities in the entire world. In addition, there are over 6 million landlines in the country with 100% fibre-optic network and coverage via WLL in even the remotest areas. As a result, Pakistan won the prestigious Government Leadership award of GSM Association in 2006.The contribution of the telecom sector to the national exchequer increased to Rs 110 billion in the year-end 2007-08 on account of the general sales tax, activation charges and other steps as compared to Rs 100 billion in the year-end 2006-07.
The World Bank estimates that it takes about 3 days to get a phone connection in Pakistan.
In Pakistan, the following are the top mobile phone operators:
- Mobilink (Parent: Orascom Telecom Holding, Egypt)
- Ufone (Parent: PTCL (Etisalat), Pakistan/UAE)
- Telenor (Parent: Telenor, Norway)
- Warid (Parent: Abu Dhabi Group / SingTel, UAE/Singapore)
- Zong (Parent: China Mobile, China)
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| PTCL's One Stop Shop in Islamabad |
Pakistan is on the verge of a telecom revolution and is by far the most attractive sector in Pakistan in terms of Foreign Direct Investment coming into the country. Since liberalisation, over the past four years, the Pakistani telecom sector has attracted more than $9 billion in foreign investments. During 2007-08, the Pakistani communication sector alone received $1.62 billion in Foreign Direct Investment (FDI) – about 30% of the country’s total foreign direct investment.
Present growth of state-of-the-art infrastructures in the telecoms sector during the last four years has been the result of the PTA's vision and implementation of the deregulation policy. Paging and mobile (cellular) telephones 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 the fast adoption. With a rapid increase in the number of Internet users and ISPs, and a large English-speaking population, Pakistani society has seen an unparalleled revolution in communications.
According to the PC World, a total of 6.37 billion text messages were sent through Acision messaging systems across Asia Pacific over the 2008/2009 Christmas and New Year period. Pakistan was amongst the top five ranker with one of the highest SMS traffic with 763 million messages.
Pakistan is ranked 4th in terms of broadband Internet growth in the world, as the subscriber base of broadband Internet has been increasing rapidly. The rankings are released by Point Topic Global broadband analysis, a global research centre.
- Pakistan has more than 20 million Internet users in 2009. The country is said to have a potential to absorb up to 50 million mobile phone Internet users in the next 5 years thus a potential of nearly 1 million connections per month.
- Almost all of the main government departments, organisations and institutions have their own websites.
- The use of search engines and 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 2007 there were six cell phone companies operating in the country with nearly 90 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. In mid-2008, the Local Loop installed capacity reached around 5.5 million.
- Telecom industry created of 80,000 jobs directly and 500,000 jobs indirectly.
Railways
Main article: Pakistan Railways
A massive rehabilitation plan worth $1 billion over five years for Pakistan Railways has been announced by the government in 2005. A new rail link trial has been established from Islamabad-Pakistan via Teharan-Iran Via Istanbul-Turkey .Furthermore it would promote trade, tourism, and would also would serve as an effective link for the exports to Europe (as Turkey part of Europe and Asia].Aviation
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| A PIA B747-367 at the Domestic Satellite of Jinnah International Airport |
Private sector airlines in Pakistan include Airblue, which serves the main cities within Pakistan in addition to destinations in the Gulf and Manchester in the United Kingdom. The other private carrier is Shaheen Air International whose network covers the main cities of Pakistan and the Gulf.
Wholesale and retail trade
The Federal Bureau of Statistics provisionally valued this sector at Rs.1,358,309 million in 2005 thus registering over 96% growth since 2000.Finance and insurance
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 2007, supported by robust export growth and steady worker remittances.Pakistan has been ranked 34 out of 52 countries in the World Economic Forum's first Financial Development Report, which was released in Pakistan through the Competitiveness Support Fund (CSF) in December, 2008. Under Factors, Policies and Institutions pillar, Pakistan ranks 49th in institutional environment, 50th in business environment and 37th in Financial Stability. In the Financial Intermediation Pillar Pakistan ranks 25th in banks, 42nd in non banks and 17th in Financial Markets. Under Capital Availability and Access, Pakistan ranks 33rd.
Pakistan's banking sector has remained remarkably strong and resilient during the world financial crisis in 2008–09, a feature which has served to attract a substantial amount of FDI in the sector. Stress tests conducted on June 2008 data indicate that the large banks are relatively robust, with the medium and small-sized banks positioning themselves in niche markets. Banking sector turned profitable in 2002. Their profits continued to rise for the next five years and peaked to Rs 84.1 ($1.1 billion) billion in 2006.
The credit card market continued its strong growth with sales crossing the 1 million mark in mid-2005.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.
The Federal Bureau of Statistics provisionally valued this sector at Rs.311,741 million in 2005 thus registering over 166% growth since 2000.
Ownership of dwellings
The property sector has expanded twenty-threefold 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 aging and an estimate suggests that more than 50% of stock is over 50 years old. It is also estimated that 50% 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 units, is beyond the financial resources of the government. This necessitates putting in place a framework to facilitate financing in the formal private sector and mobilise non-government resources for a market-based housing finance system.The Federal Bureau of Statistics provisionally valued this sector at Rs.185,376 million in 2005 thus registering over 49% growth since 2000.
Public administration and defence
The Federal Bureau of Statistics provisionally valued this sector at Rs.389,545 million in 2005 thus registering over 65% growth since 2000.Social, community and personal services
The Federal Bureau of Statistics provisionally valued this sector at Rs.631,229 million in 2005 thus registering over 78% growth since 2000.Electricity
For years, the matter of balancing Pakistan's supply against the demand for electricity has remained a largely unresolved matter. Pakistan faces a significant challenge in revamping its network responsible for the supply of electricity. While the government claims credit for overseeing a turnaround in the economy through a comprehensive recovery, it has just failed to oversee a similar improvement in the quality of the network for electricity supply. Some officials even go as far as claiming that the frequent power cuts across Pakistan today are indicative of an emerging prosperity as there is fast-rising demand for electricity. And yet, the failure to meet the demand is indeed indicative of a challenge to that very prosperity.This is despite Pakistan having tremendous potential to generate wind power. Apart from this, most cities in Pakistan receive substantial sunlight throughout the year, which would suggest good conditions for investment in solar energy.Recently, the Minister for Water and Power, Raja Pervez Ashraf, has claimed that load-shedding will end by December 2009 through employing rental power generation units and that the country will be self-sufficient by the year 2011. Critics argue that this is overly optimistic.
Power cuts continue by May 2011, despite the minister's claims.
