Pakistan is a nation with a diverse economy that includes 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.

1. POVERTY STATUS Poverty in Pakistan is a growing concern. Nearly one-quarter of the population is classified poor. The declining trend in poverty as seen in the country during the 1970s and 1980s was reversed in the 1990s by poor federal policies and rampant corruption.This phenomenon has been referred to as the poverty bomb. The government of Pakistan, with help from the International Monetary Fund (IMF), has prepared an “Interim Poverty Reduction Strategy Paper” that suggests guidelines to reduce poverty in the country. According to the World Bank, the program has had tangible success, with the World Bank stating that poverty has fallen by 5 % since 2000. According to UN Millennium Development Goals (MDGs), Pakistan is required to reduce poverty by half by 2015 from the level of 1990. According to a UNDP report, 65.5 % population of Pakistan earns less than $2 per day. According to the Social Policy Development Centre (SPDC), 88% of Balochistan’s population, 51% of NWFP, 21% of Sindh and 25% of Punjab’s population is prey to poverty and deprivation. According to the Economic Survey 2007-08, the inequality was accompanied by a decline in absolute poverty. The previous government did not release figures relating to poverty since 2005. 2. HEALTH AND LIFE EXPECTANCY Pakistan's health indicators are among the worst in the world. For every 100,000 children born, 35 mothers die; and over 72 infants die for every 1,000 live births. Communicable diseases such as tuberculosis remain a serious concern. US AID upgrades 40 hospitals and trains 3,000 health staff to improve care for pregnant women and newborns. It increases the availability of quality reproductive health products, so families can space births. US AID helps to eradicate polio, reach communities vulnerable to HIV/AIDS and

659 • Education = 1(school enrollment) +2 (adult literacy) 3 3 . HUMAN DEVELOPMENT INDEX (HDI). The life expectancy rate. Female illiteracy will be an important contributor to this population increase.decrease the incidence of tuberculosis. 4. In addition it plays a very crucial role in securing economic and social progress and improving income distribution. EDUCATION Education in every sense is one of the fundamental factors of development. Lack of skills and high illiteracy levels are barriers to economic development as inadequate infrastructure. No country can achieve sustainable economic development without substantial investment in human capital. Education raises people’s productivity and creativity and promotes entrepreneurship and technological advances. labor force participation rates increase.370) – log (100) log (40. It improves the quality of their lives and leads to broad social benefits to individuals and society. The population of Pakistan is estimated to grow to 250 million in twenty years and the country does not have the resources to sustain this increase. fertility rates are lowered.log (100) = log (2. Low investment in girl’s education also imposes a high cost on society. according to World Health Organization (WHO). is 62-63 years.Quality Of Life: • Living Standard = log (income) – log (100) log (40. Education enriches people’s understanding of themselves and world.6-25 60 = 0.000) – log (100) = 0.000) . 3. This will become increasingly evident as Pakistan is forced to compete in world markets where most developing countries already have more skilled workers. their children are better nourished and educated. When women are more educated. and of utmost importance to Pakistan.528 • Longevity = (life expectancy –25) 85-25 = 64.

and other services. fishing. construction. electricity and gas. banking and insurance. Compared to the previous "old methodology" (1968 SNA base).466) 3 3 3 = 0.0) + 2 (49. ownership of dwellings. and communications. .9) 3 3 =0. It serves as a powerful tool for policy formulation and economic analysis.466 HDI = 1 (income index) + 1 (life expectancy index) + 1 (education index) 3 3 3 = 1(0. wholesale and retail trade. mining and quarrying. NATIONAL INCOME National income constitutes a formal framework for the classification of information about the economic performance of a country. GDP at factor cost is the sum of value added from eleven sectors -. storage. Pakistani national incomes statistics are consistently estimated in production accounts only.agriculture. public administration and defense. the new methodology has widened the coverage of direct estimation as well as improved estimation procedures. transportation. The current series of Pakistan's national income statistics are based on the "new methodology" (1968 SNA base) adopted in fiscal 1988-89.551 “MACRO ECONOMIC INDICATORS” 1.= 1 (40.659) + 1(0. and forestry.528) + 1(0. manufacturing.

Agriculture 2.4 47.2 6.5 9.2 6.2 25.9 52.2.6 3.9 47.3 24.5 17.2 3. Energy Distribution Services (6+7+8+9+10+11) 6.9 6.0 9.5 3.1 19. Mining 3.4 3.3 2. ECONOMIC DEVELOPMENT AND PLANNING (A) Major Sectors of economy Share of Various Sectors in GDP Sector Goods (1+2+3+4+5) 1.4 18. Source: Economic Survey of Pakistan 2005 .1 3.4 3.6 2. & Defense 6. Figures are in percentage.3 3.3 15. Public Admin.9 2.0 3.1 3.7 10.4 18.9 47. Manufacturing 4.5 52.5 18.5 9.4 23.1 1. Finance & Insurance 9.5 16.7 11.0 47.1 24.6 10.4 2.3 1.8 11.0 52.6 11.7 52. Other Services 2000-01 2001-02 2002-03 2003-04 2004-05 48. 7.5 18.7 18.9 11.7 2. Construction 5.0 2. Ownership of Dwellings 11.2 9.4 1.2 1.4 51.3 3.3 Note: GDP is estimated at constant factor cost.1 2.4 16.1 2.1 3.4 11. Transportation & Comm. Trade 8.6 23.1 1.1 6.4 2.

3.203 . Cotton textile production and apparel manufacturing are Pakistan's largest industries. VALUE OF MONEY: (A) Inflation or deflation Pakistan experienced high economic growth over six per cent during 2004-06. Pakistan ranks forty-first in the world and fifty-fifth worldwide in factory output. 3. The sector directly supports threequarters of the country's population. The average Consumer Price Index (CPI) inflation was 9. sugar. and eggs. (B) Purchasing Power Parity Purchasing Power Parity (PPP) – a theory of exchange rate determination and a way to compare relative purchasing power of different countries’ currencies over the same types of goods and services The purchasing power parity of Pakistan is 443. fruits. beef. 654 companies were listed with a market capitalization of Rs. mutton. fertilizer. accounting for about 66% of the merchandise exports and almost 40% of the employed labour force. (C) Stock Exchange Karachi Stock Exchange is the biggest and most liquid exchange in Pakistan and was declared as the “Best Performing Stock Market of the World for the year 2002”. according to government estimates. Pakistan depends on one of the world's largest irrigation systems to support production. 2008. sugarcane. As on May 30.Pakistan's industrial sector accounts for about 24% of GDP. chemicals. wheat.9% of GDP in 1999-2000. Other major industries include cement.286 (8. employs half the labor force. in addition to milk. tobacco. and vegetables. However. and contributes a large share of foreign exchange earnings.3 per cent in 2004-2005 and around eight per cent in 2005-06. prices also started increasing at a rapid pace and the headline inflation remained above eight per cent during the last two years. The main agricultural products are cotton. and food processing. rice.13 %). steel. edible oil. machinery.746.(B) Agriculture and industry Agriculture is a vital sector of Pakistan's economy and accounted for 25.

705. By 2000.334 billion) having listed capital of Rs. and other manufactures such as leather. as the cost of oil imports have risen while prices for the country's main exports have declined on the international market. and machinery. growing at 8. Only about 25% of these jobs had been regained a year after the end of the conflict. Export growth in 2000/01 was primarily due to higher exports of primary commodities such as rice. An increase in liquid foreign exchange reserves in 2001 was due in part to outright purchases from the kerb market and inflows from international financial institutions. Exports fell 2. Since the oil sector boom began subsiding in the early 1980s. Similarly the US newspaper. Nevertheless. Increased imports and softer demand for Pakistan's textiles and apparel in major markets also caused the current account deficit to further increase. raw cotton.615 billion). KSE has been well into the 4th year of being one of the best performing markets of the world as declared by the international magazine “Business Week”. Imports increased in 2000/01 primarily due to higher imports of petroleum and petroleum products. termed Karachi Stock Exchange as one of the best performing stock exchanges in the world. USA Today.3% and 19%. This trend especially accelerated during the Gulf War.000 Pakistanis in Kuwait and Iraq lost their jobs. carpets. foreign reserves fell to around $800 million by mid-1997. Pakistan's commerce ministry estimates that up to $1. 5. and fish. respectively. The rupee was devalued by 11% during 1995 and 1996 to encourage exports. when nearly 80.873 billion (US$ 10. however. but by 2000 they were back on the upswing. FINANCE (Foreign Aid and External Debts) Another major problem is Pakistan's huge external debt and its continued dependence on financial aid. Foreign loans and grants provide approximately 25% of government . with the cost of oil imports primarily responsible for the trade imbalance. Pakistan moved to a dual exchange rate system in 2000. sporting goods. remittances dropped to $1 billion from 1999 to 2001.5 billion of unregistered trade occurs annually. The growth of exports and remittances from Pakistanis working abroad (mostly in the Middle East) helped Pakistan to keep the payments deficit in check. (B) Balance of Payments Pakistan's payments problems have been chronic since the 1970s.5% and imports dropped 20% in 1998. 4. and surgical instruments. INTERNATIONAL TRADE (A) Foreign Trade Pakistan has suffered a weak trade position since the early 1970s. The government took steps in the early 2000s to liberalize and deregulate the exchange and payments regime.billion (US$ 56. The balance of payments position weakened in 1995/96 as imports grew by 16% and exports by only 6%. foreign debt equaled 100% of GDP. mostly from smuggled imports.

and improve its balance of trade position. benefits. POPULATION AND DEMOGRAPHIC FACTORS Pakistan had an estimated population of 172. or almost all revenues from federal taxes. ROLE OF EMPLOYMENT IN ECONOMIC DEVELOPMENT The slower economic growth together with freezing the employment in the public sector and privatization during the 1990s restrained the economy’s capacity to generate employment and has resulted in high unemployment rates. and government bureaucrats. Commitment to these reforms.2% in 2007.88% in 1992-93 to 9. a large figure for a nation with annual exports of less than US$9 billion and very little foreign exchange reserves.8% in 1993-94. In the case of the provinces. privatize public sector assets. Urban unemployment rose rapidly from 5.000 as of July 2008. almost equivalent to Pakistan's annual GDP. Increase in population is the major cause of unemployment.12% in 1996-97. 6. and debt service obligations total nearly 50% of government expenditure. disease and restlessness . with a fertility rate of 34 per thousand. Pakistan’s population is increasing day by day and it is one of the major threats the development of the country. faced US$32 billion in external debt. General Musharraf's ambitious economic agenda included measures to widen the tax net. 7. It is estimated that the country needs at least US$21 billion of aid up to 2004 just for debt repayment. a death rate of 10 per thousand. The population was estimated at 162.82% in 1999-00 and finally10 to 8.Increased population creates a lot of problems for developing countries. interest payments.4%. However. Our resources are too little as compared to the population of the country . landlords.400. hunger. Improving tax collection in the medium-to long-term is crucial if Pakistan is to maintain repayments on its combined foreign and domestic debt of about US$62 billion. and the rate of natural increase at 2.800. and subsidies. then rose to 6.2% in 1990-91 to 4. had to withstand strong opposition from interest groups such as employees of state-owned corporations. making it the world's sixth largest population and placing it higher than Russia and lower than Brazil. the bulk of expenditure is taken up by establishment costs (civil servants' salaries. Pakistan is expected to have a population of around 208 million by the year 2020 because of the high growth rate.8% in 2007. and pensions). The government under General Pervez Musharraf. private traders. which overthrew the government under Nawaz Sharif in 1999. Defense and debt service together absorb more than two-thirds of total federal expenditure. which means that as much as half of all government expenditures are used to repay loans. urban unemployment is more seriously affected than the rural unemployment over the past ten years. 7. The overall unemployment rate declined initially from 6.revenue.000 on 1 July 2005. however.

. Therefore. TERRORISM AND ITS EFFECTS ON ECONOMIC DEVELOPMENT Pakistan is under the effect of terrorism since a long time and this phenomenal has affected the country very badly. investors take the money out of business and invest it somewhere else.8. all the suicide bombings in Pakistan have lead towards a very adverse effect on its economic development. It is one of the major hurdles in the development of our country. and new investors do not like to invest in a country where law and order situation is not up to the mark. It stops business activities.

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