Economy of Pakistan

Economy of Pakistan
Karachi, the financial hub of Pakistan
CurrencyPakistani rupee (₨) (PKR)
1 July – 30 June
Trade organisations
ECO, SAFTA, WTO, AIIB, ADB, and others
Country group
Statistics
PopulationIncrease 241,499,431 (5th, 2023 Census)[3]
GDP
GDP rank
GDP growth
  • Increase 6.1% (FY 2022)[4]
  • Decrease -0.5% (FY 2023)[4]
  • Increase 2.1% (FY 2024)[5][a]
GDP per capita
  • Decrease $1,471 (nominal; 2023)[4]
  • Increase $6,773 (PPP; 2023 est.)[4]
GDP per capita rank
GDP by sector
GDP by component
  • Positive decrease 28.3% (January 2024 YoY)[8]
Negative increase 22.00% (January 2024)[9]
Population below poverty line
31.6 medium (2018, World Bank)[14]
Labour force
  • Increase Total 71.76 million
  • Increase Employed 67.25 million (2021)[17]
Labour force by occupation
Unemployment
  • Negative increase 7% (2023)[18]
  • Negative increase 17.4 million unemployed (2023)[18]
Main industries
External
ExportsDecrease $35.210 billion (FY 2023)[19]
Export goods
Main export partners
ImportsDecrease $60.013 billion (FY 2023)[19]
Import goods
Main import partners
FDI stock
  • Decrease $31.540 billion
  • Decrease Abroad: $1.870 billion (31 Dec 2021)[23]
Increase -2.557 billion US$ (FY 2023)[24]
Positive decrease $125.7 billion (Mar 2023)[25]
Public finances
Negative increase 73.5% of GDP (Jun 2022)[26]
Negative increase −7.9% of GDP (FY 2022)[27]
RevenuesDecrease 12.0% of GDP; 8,035 billion PKR or $45 billion (FY 2022)[27]
ExpensesNegative increase 19.9% of GDP; 13,295 billion PKR $75 billion (FY 2022)[27]
Economic aidIncrease $2.6983 billion (2021)[28]

[33]

  • Outlook: Negative
Increase $8.27bn (January 2024)[34] (115th)
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.

The economy of Pakistan is categorized as a developing economy. It ranks as the 24th-largest based on GDP using purchasing power parity (PPP) and the 46th largest in terms of nominal GDP. With a population of 241.5 million people as of 2023, Pakistan’s position at per capita income ranks 161st by GDP (nominal) and 138th by GDP (PPP) according to the International Monetary Fund (IMF).[4]

In its early years, Pakistan's economy relied heavily on private industries. The nationalization of a significant portion of the sector, including financial services, manufacturing, and transportation, began in the early 1970s under Zulfikar Ali Bhutto. During Zia-ul Haq's regime in the 1980s, an "Islamic" economy was adopted, outlawing economic practices forbidden in Sharīʿah and mandating traditional religious practices. The economy started privatizing again in the 1990s.

The economic growth centers in Pakistan are located along the Indus River;[35][36] these include the diversified economies of Karachi and major urban centers in Punjab (such as Faisalabad, Lahore, Sialkot, Rawalpindi, and Gujranwala), alongside less developed areas in other parts of the country.[35] Pakistan was classified as a semi-industrial economy for the first time in the late 1990s, albeit an underdeveloped country[37] with a heavy dependence on agriculture, particularly the textile industry relying on cotton production.[38][35][39] Primary export commodities include textiles, leather goods, sports equipment, chemicals, and carpets/rugs.[40][41]

Pakistan is presently undergoing economic liberalization, including the privatization of all government corporations, aimed at attracting foreign investment and reducing budget deficits.[42] However, the country continues to grapple with challenges such as a rapidly growing population, high illiteracy, political instability, a hostile neighborhood, and heavy foreign debt.

Economic history

Inception

In the late 1940s, upon its establishment, Pakistan had an agrarian-based economy. Agriculture constituted 53% of the country's GDP in 1947 and slightly increased to 53.2% in 1949-50. With a population of approximately 30 million, including around 6 million residing in urban areas, about 65% of the labor force was engaged in agriculture. The agricultural sector played a crucial role, contributing to 99.2% of exports and making up nearly 90% of foreign exchange earnings.

Despite possessing significant land and mineral resources in both East and West Pakistan, including natural gas, crude oil, coal, limestone, and marble, Pakistan faced numerous challenges. In 1950, its per capita income was around $360 (in 1985 international dollars), and the literacy rate was only 10%. The nation encountered a lack of economic infrastructure, financial resources, and an industrial foundation, particularly with poverty rates ranging from 55% to 60% in the West Pakistan region.

Due to limited capital in the small private sector, the government opted to focus on the public sector to foster economic and industrial development. In the fiscal year 1949-50, Pakistan recorded a national savings rate of 2%, a foreign savings rate of 2%, and an investment rate of 4%. Manufacturing contributed 7.8% to the GDP, while services, trade, and other sectors accounted for a significant 39%, reflecting a policy centered around import-substituting industrialization. The trade balance of payments indicated a deficit of 66 million Rupees (Rs) during the period spanning 1949/50 to 1950/51.[43]

1950s

The 1950s marked the initiation of planned development in Pakistan, with the introduction of the Colombo Plan in 1951 leading to a series of Five-Year Plans from 1955 to 1998. Concurrently, a Ten-Year Perspective Plan was implemented, complemented by a rolling Three-Year Development Plan.

During the 1950s, Pakistan pursued a policy of import-substituting industrialization. Notably, the Korean War (1950-1953) brought substantial merchant profits to Pakistan's public and emerging private sectors, fueling industrialization.

In 1952, Pakistan imposed bans on the imports of cotton textiles and luxury goods, followed by comprehensive import regulations in 1953, propelling the country into the ranks of the fastest-growing nations. However, biased policies against agriculture and unfavorable trade terms between agriculture and industry led to a decline in the annual growth rate of agriculture.

By the late 1950s, Pakistan achieved self-sufficiency in cotton textiles, emphasizing export development. The influx of US military and economic aid amounting to US$500 million during 1955-58 contributed to Pakistan's growth reliant on foreign aid.

In 1959, after a military coup d'état in 1958, the martial law regime introduced export bonus vouchers as import licenses and exempted certain goods from licensing. During this period, Pakistan faced a worsening trade balance, with deficits increasing from -831 million Rupees in 1950/51 to -1043 million Rupees in 1959/60.

Economically, agriculture grew at an annual rate of 1.6%, while manufacturing expanded impressively at 7.7% per annum during the 1950s. In the fiscal year 1959-60, the Per Capita Gross National Product (GNP) stood at Rs. 355 in West Pakistan and Rs. 269 in East Pakistan, indicating a growing economic disparity between the two regions.[43]

1960s

In the 1960s, amid a substantial influx of American aid, Pakistan enjoyed political stability, fostering robust economic growth. Poverty, measured by the poverty headcount ratio, fluctuated from nearly 50% in the early 1960s to 54% in 1963-64.

During the 1960s, Pakistan achieved an impressive annual agricultural growth rate of 5%, driven by substantial investments in water resources, increased farmer incentives, mechanization, greater use of fertilizers and pesticides, and expanded cultivation of high-yielding rice and wheat varieties in the Green Revolution.

Large-scale manufacturing experienced significant growth, expanding at a remarkable rate of 16% per annum from 1960/61 to 1964/65, fueled by protective measures for domestic industries, including export subsidies.

However, the Pakistan-India War of 1965 led to reduced foreign economic assistance, impacting the growth rate of large-scale manufacturing. From 1965-70, this sector grew at a comparatively lower rate of 10% per annum.

Despite challenges, Pakistan achieved an impressive average annual GDP growth rate of 6.7% throughout the 1960s. In the fiscal year 1969-70, the poverty incidence rate decreased to 46%. Per Capita GNP was Rs. 504 in West Pakistan and Rs. 314 in East Pakistan, indicating a widening regional economic disparity.[43]

1970s

The economic landscape in the early 1970s witnessed growing disparities between East and West Pakistan, leading to East Pakistan's declaration of independence and the emergence of Bangladesh in 1971. Subsequently, Pakistan underwent notable transformations in both its political and economic spheres.

Under martial law authorities, amidst challenging macroeconomic conditions, the socialist Pakistan People's Party gained empowerment. This period grappled with numerous economic challenges, including a surge in poverty incidence to 55% during 1971-72. Pakistan also confronted heightened import costs due to the global oil price shock in October 1973, a severe global recession from 1974 to 1977, cotton sector failures in 1974-75, pest infestations affecting crops, and massive floods in 1973, 1974, and 1976-77.

One significant economic issue during this time was high inflation, with prices increasing by an average of 15% per annum between 1972 and 1977. The fiscal deficit/GDP ratio averaged 8.1% during 1973-77, indicating substantial fiscal challenges. Trade imbalances were apparent, with trade deficits rising from US$337 million in 1970-71 to US$1,184 million in 1976-77.

The military coup d'état of 1977, leading to the establishment of a martial law regime that initiated denationalization, deregulation, and privatization policies. Agriculture experienced modest growth at a rate of 2.4% per annum, while large-scale manufacturing expanded at a rate of 5.5% per annum during the 1970s.

Large and medium-scale private manufacturing played a significant role, contributing 75% of the total value-added and investment in manufacturing during the 1970s. The remaining 25% of value-added came from small-scale manufacturing.

Overall, this period was marked by significant political and economic changes, driven by challenges posed by economic disparities, political shifts, and efforts to address issues such as inflation, fiscal deficits, and trade imbalances.[43]

1980s

The 1980s brought substantial changes to Pakistan's economic landscape, moving away from the nationalization policies of the 1970s and fostering private sector industrial investment, which greatly contributed to robust economic growth. Notable developments in this era included a drop in the poverty headcount ratio to 29.1% in 1986-87, showcasing a decline in poverty incidence. The unemployment rate exhibited a positive trend, decreasing from 3.7% in 1980 to 2.6% in 1990.

Between 1985 and 1988, the government endeavored to implement an Islamic interest-free banking system, introducing business partnerships based on profit and loss sharing. The national savings/GDP ratio reached a notable 16% in 1986-87, largely due to significant worker remittances from the Middle East. Despite this growth, challenges emerged, including negative public savings and a declining public investment/GDP ratio throughout the 1980s.

To address increasing budget deficits in the early 1980s, the government heavily relied on non-bank domestic borrowing, resulting in substantial domestic debt growth. Consequently, the public debt/GDP ratio surged to 77.1% in 1988, 81.9% in 1989, and 82.6% in 1990, leading to significant interest payments and persistent fiscal deficits.

In 1985, democracy was restored in Pakistan, marking a pivotal political development. The country experienced a commendable average annual GDP growth rate of 6.3% between 1980 and 1990. The 1980s saw a surge in manufacturing exports, with an annual large-scale manufacturing growth rate of 8.8%, and solid growth in agriculture, with an annual agricultural growth rate of 5.4%.

These highlights underscore a transformative and recovering economic period in the 1980s, characterized by a shift in economic policies, improved fiscal performance, and substantial progress in poverty reduction and employment. The era also witnessed efforts to align financial practices with Islamic principles and significant economic growth in the manufacturing and agricultural sectors.[43]

1990s

The 1990s posed a formidable economic landscape for Pakistan, marked by a series of challenges and developments. Declining worker remittances and escalating external deficits set the tone for economic strains. Simultaneously, the decade witnessed the second-worst inflation in Pakistan's history, driven by diminishing GDP growth rates. Unemployment surged, reaching 5.9% in 1991 and escalating further to 7.2% in 2000.

Pakistan's external debt tripled, soaring to US$30 billion by 1995. The external debt/GDP ratio rose from 42% to 50%, accompanied by increases in the external debt/exports ratio (from 209% to 258%) and the debt service ratio (from 18% to 27%). A deteriorating external debt profile led to a rise in domestic debt, reaching Rs. 909 billion, and a domestic debt/GDP ratio of 42%.

The late 1990s witnessed a severe debt crisis, with the public debt/GDP ratio skyrocketing from 57.5% in 1975-77 to 102% in 1998-99. The public debt/revenues ratio surged to 624%, and the interest payments/revenues ratio reached 42.6%, rendering Pakistan's public debt unsustainable. Concerns over external debt default emerged in 1996 and 1998, triggered by Western economic sanctions in response to Pakistan's nuclear tests in May 1998, causing massive capital flight.

Despite these challenges, Pakistan managed to sustain an agricultural growth rate of 4.4% per annum and a large-scale manufacturing growth rate of 4.8% per annum throughout the 1990s. However, the era witnessed a significant increase in poverty incidence, reaching 30.6% in 1998-99. The decade encapsulated a complex economic narrative, as Pakistan navigated external debt burdens, fiscal imbalances, inflation, and rising unemployment. Amid these difficulties, there were positive aspects, including growth in key sectors like agriculture and manufacturing. Nonetheless, the 1990s also brought forth a looming threat of debt default, magnified by economic sanctions in response to nuclear tests.[43]

2000s

The 2000s witnessed a period of substantial economic challenges and transformations for Pakistan. The impact of high public debt gained prominence, identified by the official Debt Reduction and Management Committee in 2001, contributing to a decline in the growth rate to less than 4% per annum. Despite an initial upturn in the growth rate, the decade unfolded with persistent macroeconomic crises. Although achieving a noteworthy growth rate of 8.6% in 2004-05, subsequent years were marred by a series of setbacks, including a growth slowdown, low growth, high inflation, an energy crisis, and worsening fiscal and balance of payments positions.

The economic landscape reflected the complexities faced by the population, illustrated by a rise in poverty incidence to 34.5% in 2000-01. However, a subsequent decrease to 22.3% in 2005-06 offered a nuanced perspective on the decade's economic trajectory. The unemployment rate saw fluctuations, rising to 7.8% in 2002 but later declining to 5% by 2008.

Efforts to enhance education and literacy rates were evident as adult literacy stood at 55% in 2007-08. Nevertheless, challenges persisted, and economic crises hit Pakistan in 2008, primarily influenced by the global financial crisis. Despite these adversities, economic growth in 2009-2010 reached a respectable 4.1%, with positive contributions from various sectors, including a 2% growth in agriculture, 4.9% growth in industrial output, 4.4% growth in large-scale manufacturing, and a 4.6% expansion in the services sector.

By March 2010, public debt had accumulated to Rs. 8,160 billion, with a total public debt/GDP ratio of 56% and a foreign-currency denominated debt/GDP ratio of 25%. Amid these economic dynamics, Pakistan underwent a structural transition. The GDP share of agriculture declined from 53% in 1947 to 21.2% in 2010, while the GDP share of industry rose from 9.6% in 1949-50 to 25.4% in 2010. Additionally, the GDP share of the services sector increased from 37.2% in 1950 to 53.4% in 2010. The 2000s encapsulated a multifaceted economic narrative for Pakistan, marked by challenges, crises, and significant structural shifts, reflecting the nation's resilience and adaptability.[43]

Data

Gross domestic product (GDP)

The table below displays key economic indicators from 1980 to 2022. Inflation rates below 5% are highlighted in green.[4]

Year GDP

(Billion US$ PPP)

GDP per capita

(US$ PPP)

GDP

(Billion US$ nominal)

GDP per capita

(US$ nominal)

GDP growth

(Real)

Inflation rate

(Percent)

Unemployment

(Percent)

Government debt

(% of GDP)

1980 79.0 950.0 34.8 418.9 Increase7.3% Negative increase11.9% n/a n/a
1981 Increase91.8 Increase1,072.8 Increase41.2 Increase481.3 Increase6.4% Negative increase11.9% n/a n/a
1982 Increase104.9 Increase1,190.0 Increase45.0 Increase511.0 Increase7.6% Negative increase5.9% n/a n/a
1983 Increase116.4 Increase1,283.6 Decrease42.0 Decrease463.7 Increase6.8% Negative increase6.4% 3.9% n/a
1984 Increase125.4 Increase1,345.3 Increase45.6 Increase489.8 Increase4.0% Negative increase6.1% Positive decrease3.8% n/a
1985 Increase140.6 Increase1,468.4 Steady45.6 Decrease476.7 Increase8.7% Negative increase5.6% Positive decrease3.7% n/a
1986 Increase152.5 Increase1,551.3 Increase46.7 Decrease475.3 Increase6.4% Increase3.5% Positive decrease3.3% n/a
1987 Increase165.4 Increase1,638.5 Increase48.8 Increase483.9 Increase5.8% Increase4.7% Positive decrease3.1% n/a
1988 Increase182.2 Increase1,759.4 Increase56.3 Increase543.1 Increase6.4% Negative increase8.8% Steady3.1% n/a
1989 Increase198.5 Increase1,868.3 Increase58.7 Increase552.0 Increase4.8% Negative increase7.9% Steady3.1% n/a
1990 Increase215.4 Increase1,970.1 Increase58.9 Decrease538.4 Increase4.6% Negative increase9.1% Steady3.1% n/a
1991 Increase234.1 Increase2,094.8 Increase66.9 Increase598.4 Increase5.4% Negative increase12.6% Negative increase5.9% n/a
1992 Increase257.5 Increase2,211.1 Increase71.5 Increase614.2 Increase7.6% Increase4.8% Steady5.9% n/a
1993 Increase269.2 Increase2,252.4 Increase75.7 Increase633.6 Increase2.1% Negative increase9.8% Positive decrease4.7% n/a
1994 Increase286.9 Increase2,341.1 Increase76.3 Decrease622.8 Increase4.4% Negative increase11.3% Negative increase4.8% 64.8%
1995 Increase307.8 Increase2,449.6 Increase89.2 Increase709.9 Increase5.1% Negative increase13.0% Negative increase5.4% Positive decrease58.0%
1996 Increase334.1 Increase2,594.8 Increase93.1 Increase723.5 Increase6.6% Negative increase10.8% Steady5.4% Negative increase58.2%
1997 Increase345.6 Increase2,620.8 Decrease91.8 Decrease696.4 Increase1.7% Negative increase12.8% Negative increase6.1% Negative increase58.5%
1998 Increase361.7 Increase2,678.9 Decrease91.4 Decrease677.0 Increase3.5% Negative increase6.8% Positive decrease5.9% Negative increase59.5%
1999 Increase382.2 Increase2,765.6 Decrease86.6 Decrease626.5 Increase4.2% Negative increase5.7% Steady5.9% Negative increase67.2%
2000 Increase406.1 Increase2,855.1 Increase89.7 Increase630.3 Increase3.9% Increase3.6% Negative increase7.8% Negative increase68.4%
2001 Increase423.4 Increase2,916.7 Decrease87.4 Decrease602.0 Increase3.7% Increase4.4% Steady7.8% Negative increase72.2%
2002 Increase443.4 Increase2,995.0 Increase87.9 Decrease593.9 Increase2.4% Increase3.5% Negative increase8.3% Positive decrease67.6%
2003 Increase473.5 Increase3,119.8 Increase101.1 Increase666.1 Increase5.6% Increase3.1% Steady8.3% Positive decrease62.7%
2004 Increase522.6 Increase3,376.5 Increase118.8 Increase767.8 Increase7.7% Increase4.6% Positive decrease7.7% Positive decrease56.3%
2005 Increase587.3 Increase3,722.9 Increase132.8 Increase842.0 Increase7.5% Negative increase9.3% Steady7.7% Positive decrease52.3%
2006 Increase640.6 Increase3,986.8 Increase154.5 Increase961.4 Increase5.6% Negative increase7.9% Positive decrease6.2% Positive decrease48.4%
2007 Increase694.4 Increase4,244.6 Increase171.5 Increase1,048.4 Increase5.5% Negative increase7.8% Positive decrease5.2% Positive decrease47.1%
2008 Increase743.0 Increase4,362.9 Increase191.4 Increase1,124.0 Increase5.0% Negative increase12.0% Steady5.2% Negative increase51.9%
2009 Increase750.5 Decrease4,314.4 Decrease189.0 Decrease1,186.5 Increase0.4% Negative increase19.6% Negative increase5.5% Negative increase52.8%
2010 Increase779.1 Increase4,386.4 Increase199.4 Decrease1,122.7 Increase2.6% Negative increase10.1% Negative increase6.0% Negative increase54.5%
2011 Increase824.1 Increase4,545.1 Increase240.4 Increase1,325.8 Increase3.6% Negative increase13.7% Steady6.0% Positive decrease52.8%
2012 Increase847.1 Increase4,577.9 Increase252.5 Increase1,364.8 Increase3.8% Negative increase11.0% Steady6.0% Negative increase56.7%
2013 Increase883.4 Increase4,679.4 Increase260.3 Increase1,378.6 Increase3.7% Negative increase7.4% Steady6.0% Negative increase57.9%
2014 Increase931.7 Increase4,838.4 Increase275.1 Increase1,428.4 Increase4.1% Negative increase 8.6% Steady6.0% Positive decrease57.1%
2015 Increase981.6 Increase4,998.5 Increase304.5 Increase1,550.5 Increase4.1% Increase4.5% Positive decrease5.9% Positive decrease57.0%
2016 Increase1,010.7 Increase5,048.9 Increase313.6 Increase1,566.6 Increase4.6% Increase2.9% Steady5.9% Negative increase60.8%
2017 Increase1,058.5 Increase5,159.0 Increase339.2 Increase1,653.4 Increase4.6% Increase4.1% Positive decrease5.8% Negative increase60.9%
2018 Increase1,150.0 Increase5,482.7 Increase356.2 Increase1,698.0 Increase6.1% Increase3.9% Steady5.8% Negative increase64.8%
2019 Increase1,207.1 Increase5,642.1 Decrease321.1 Decrease1,500.7 Increase3.1% Negative increase6.7% Negative increase6.9% Negative increase77.5%
2020 Increase1,211.4 Decrease5,550.6 Decrease300.4 Decrease1,376.5 Decrease-0.9% Negative increase10.7% Positive decrease6.6% Negative increase79.6%
2021 Increase1,338.8 Increase6,014.7 Increase348.5 Increase1,565.6 Increase5.8% Negative increase8.9% Positive decrease6.3% Positive decrease73.5%
2022 Increase1,520.0 Increase6,695.3 Increase374.7 Increase1650.3 Increase6.1% Negative increase12.1% Positive decrease6.2% Negative increase76.2%
2023 Increase1,568.4 Increase6,773.5 Decrease340.6 Decrease1,471.1 Decrease-0.5 Negative increase29.2% Negative increase8.5% Negative increase76.6%

Stock market

Statue of a bull outside the Islamabad Stock Exchange.

In the first four years of the twenty-first century, Pakistan's KSE 100 Index was declared the best-performing stock market index in the world by the international magazine "Business Week".[44][citation needed] The stock market capitalization of listed companies in Pakistan was valued at $5,937 million in 2005 by the World Bank.[45] On 11 January 2016, with the aim of reducing market fragmentation and creating a strong case for attracting strategic partnerships necessary for providing technological expertise, all three stock exchanges, including Karachi Stock Exchange, Lahore Stock Exchange, and Islamabad Stock Exchange, were inducted into a unified Pakistan Stock Exchange.[46]

In May 2017, the American provider of stock market indexes and analysis tools, MSCI, confirmed that the Pakistan Stock Exchange (PSX) had been reclassified from Frontier Markets to Emerging Markets in its semi-annual index review.[47] The Pakistan Stock Exchange also successfully navigated through the initial COVID-19 induced economic downturn and earned the title of being the ‘best Asian stock market and fourth best-performing market across the world in 2020.’ The PSE-100 index continued to climb throughout the year. Nearly 40 percent growth in the PSE-100 Index in FY 2021 was driven by the government's large stimulus package, the central bank's stable policy rate, an uptick in large scale manufacturing, improvement in external accounts, and reforms introduced by the Security and Exchange Commission of Pakistan (SECP) and PSX in the wake of the COVID-19.[48]

PSX 100 index growth rate[49]

List FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
PSX 100 index growth % Increase 34.1 Increase 37.9 Decrease -10.8 Decrease -41.7 Increase 35.7 Increase 28.5 Increase 10.4 Increase 52.2 Increase 41.2 Increase 16.0 Increase 9.8 Increase 23.2 Decrease-10.0 Decrease-19.1 Increase 1.5 Increase 37.6 Decrease -12.3

The sales of all non-financial companies surged to Rs 9,521 billion in the fiscal year 2021, marking a substantial increase of Rs 1,465 billion compared to the preceding year's decline of Rs 807 billion. EBIT (earnings before interest and tax) recorded an increase of Rs 433 billion (53.21 percent YoY growth) during FY21, as general, administrative, and other expenses witnessed a relatively smaller rise in the same period. Interest expenses dropped to Rs 224 billion in FY21 from Rs 299 billion in FY20, resulting in a massive YoY increase of Rs 514 billion in profit before taxation. Additionally, profit after tax of all companies rose by Rs 404 billion, posting a YoY growth of 125.06 percent during FY21 over FY20. The net profit margin of all companies jumped to 7.64 in FY21 from 4.01 in FY20, primarily due to exceptional improvement in private sector companies' net profit margin. Return on assets (ROA) and return on equity (ROE) of all companies rose to 6.37 percent and 17.93 percent in FY21 compared to 3.10 percent and 8.91 percent in the preceding year. Private sector companies were the prime contributors to the improvement of ROA and ROE, with public sector companies contributing marginally. The key statistics of all public and private non-financial companies listed at the Pakistan Stock Exchange are provided in the following table:[50]

Financial Analysis of Companies (Non-Financial) (Billion Rupees)
List 2016 2017 2018 2019 2020 2021
Total Assets 6,781 Increase 7,672 Increase 8,845 Increase 10,131 Increase 10,712 Increase 12,143
Total Liabilities 4,024 Negative increase 4,646 Negative increase 5,598 Negative increase 6,628 Negative increase 6,955 Negative increase 7,780
Shareholders' Equity 2,757 Increase 3,025 Increase 3,247 Increase 3,503 Increase 3,756 Increase 4,363
Total Sales 5,504 Increase 6,405 Increase 7,702 Increase 8,863 Decrease 8,056 Increase 9,521
Profit Before Tax 498 Increase 606 Increase 613 Decrease 612 Decrease 482 Increase 996
Profit After Tax 361 Increase 435 Decrease 431 Decrease 412 Decrease 323 Increase 728
%
Net Profit Margin 6.55 Increase 6.79 Decrease 5.59 Decrease 4.65 Decrease 4.01 Increase 7.64
Return on Assets 0.84 Increase 0.89 Increase 0.93 Steady 0.93 Decrease 0.77 Increase 0.83
Return on Equity 13.77 Increase 15.03 Decrease 13.76 Decrease 12.20 Decrease 8.91 Increase 17.93
earnings per share 3.91 Increase 4.49 Decrease 4.47 Decrease 4.17 Decrease 3.18 Increase 6.87

Middle class

The Dawood Centre in Karachi, M.T. Khan Road

As of 2017, according to Wall Street Journal, citing estimates largely based on income and the purchase of consumption goods, had suggested that as many as 42% of Pakistan's population may now belong to the upper and middle classes. If these numbers are correct, or even indicative in any broad sense, then 87 million Pakistanis belong to the middle and upper classes, a population size which is larger than that of Germany.[51] Official figures also show that the proportion of households that own a motorcycle and washing machines has grown impressively over the past 15 years.[52] Furthermore, the IBA-SBP Consumer Confidence Index recorded its highest-ever level of 174.9 points in January 2017, showing an increase of 17 points from July 2016.

Separately, consumer financing recorded at Rs. 179 billion during FY 2022. Auto finance continued to be the dominant segment, followed by house building, which showed remarkable growth after the Mera Pakistan Mera Ghar scheme initiated by the State Bank of Pakistan in December 2020. Under the scheme, 100 billion rupees have been disbursed by the banks until June 30, 2022. The total amount approved by banks reached Rs. 236 billion, while the requested amount crossed half a trillion rupees.[51][53]

Poverty alleviation expenditures

The Pakistan government spent over 1 trillion rupees (about $16.7 billion) on poverty alleviation programs during the past four years, reducing poverty from 35% in 2000–01 to 29.3% in 2013 and further to 17% in 2015.[54] Rural poverty remains a pressing issue, as development in those areas has been significantly slower than in major urban areas.

Employment

The high population growth in the past few decades has led to a significant number of young people entering the labor market. Although Pakistan is among the six most populous Asian nations, excessive red tape in the past made firing from jobs, and consequently hiring, difficult.[55] Significant progress in taxation and business reforms has ensured that many firms are no longer compelled to operate in the underground economy.[56]

Government revenues and expenditures

Clifton in Karachi.

Although the country is a Federation with constitutional division of taxation powers between the Federal Government and the four provinces, the revenue department of the Federal Government, the Federal Board of Revenue, collects more than 80% of the entire national tax collection. Pakistan's fiscal landscape is characterized by a dynamic interplay between revenues and expenditures, shaping the nation's economic trajectory. The government's revenue streams primarily stem from two sources: taxation and non-tax revenue. Taxation, which includes income tax, sales tax, and customs duties, constitutes a substantial portion of revenues, bolstering both federal and provincial government finances. Non-tax revenue sources, such as mark-up from state enterprises, surplus profits from the State Bank of Pakistan, and royalties on oil and gas, further contribute significantly to the fiscal framework.

Conversely, government expenditures are strategically allocated across multiple sectors, including defense, social services, infrastructure development, and debt servicing. Current expenditures, covering operational costs, interest payments, pensions, and other obligations, are carefully balanced against development expenditures aimed at fostering long-term growth and progress. The challenge of achieving equilibrium between revenue generation and expenditure allocation leads to budgetary deficits that can necessitate borrowing to bridge the gap.

The data has been sourced from the Ministry of Finance.[57]

Consolidated Federal and Provincial Fiscal Operations (Amounts in billion PKR)
List FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Total Revenue Increase 1,499 Increase 1,851 Increase 2,078 Increase 2,253 Increase 2,567 Increase 2,982 Increase 3,637 Increase 3,931 Increase 4,447 Increase 4,937 Increase 5,228 Decrease 4,901 Increase 6,272 Increase 6,903 Increase 8,035 Increase 9,634
Tax Revenue Increase 1,065 Increase 1,317 Increase 1,473 Increase 1,699 Increase 2,053 Increase 2,199 Increase 2,565 Increase 3,018 Increase 3,660 Increase 3,969 Increase 4,467 Increase 4,473 Increase 4,748 Increase 5,272 Increase 6,755 Increase 7,819
FBR Taxes Increase 1,008 Increase 1,161 Increase 1,327 Increase 1,558 Increase 1,883 Increase 1,946 Increase 2,255 Increase 2,590 Increase 3,113 Increase 3,368 Increase 3,842 Decrease 3,830 Increase 3,998 Increase 4,764 Increase 6,143 Increase 7,169
Total Expenditure Negative increase 2,277 Negative increase 2,531 Negative increase 3,007 Negative increase 3,447 Negative increase 3,936 Negative increase 4,816 Negative increase 5,026 Negative increase 5,388 Negative increase 5,796 Negative increase 6,801 Negative increase 7,488 Negative increase 8,346 Negative increase 9,649 Negative increase 10,307 Negative increase 13,295 Negative increase 16,155
Fiscal Deficit Negative increase777 Positive decrease680 Negative increase929 Negative increase1,194 Negative increase1,370 Negative increase1,834 Positive decrease1,389 Negative increase1,457 Positive decrease1,349 Negative increase1,864 Negative increase2,260 Negative increase3,445 Positive decrease3,376 Negative increase3,403 Negative increase5,260 Negative increase6,521
As % of GDP
Total Revenue Increase14.1 Decrease14.0 Steady14.0 Decrease12.3 Increase12.8 Increase13.3 Increase14.5 Decrease14.3 Decrease13.6 Increase13.9 Decrease13.3 Decrease11.2 Increase13.2 Decrease12.4 Decrease12.0 Decrease11.4
Tax Revenue Increase9.9 Decrease9.1 Increase9.9 Decrease9.3 Increase10.2 Decrease9.8 Increase10.2 Increase11.0 Decrease10.4 Steady10.4 Increase10.8 Decrease9.7 Decrease9.3 Decrease9.4 Increase10.1 Decrease9.2
Total Expenditure Negative increase21.4 Positive decrease19.2 Negative increase20.2 Positive decrease18.9 Negative increase21.4 Negative increase21.5 Positive decrease20.0 Positive decrease19.6 Positive decrease17.7 Negative increase19.1 Steady19.1 Steady19.1 Negative increase20.3 Positive decrease18.5 Negative increase19.9 Positive decrease19.1
Fiscal Deficit Negative increase7.3 Positive decrease5.2 Negative increase6.2 Negative increase6.5 Negative increase8.8 Positive decrease8.2 Positive decrease5.5 Positive decrease5.3 Positive decrease4.1 Negative increase5.2 Negative increase5.8 Negative increase7.9 Positive decrease7.1 Positive decrease6.1 Negative increase7.9 Positive decrease7.7

Currency system

Rupee

Pakistani Rupee banknotes.

The basic unit of currency is the rupee, ISO code PKR, and abbreviated Rs, which is divided into 100 paisas. Currently, the 5,000 rupee note is the largest denomination in circulation. From 13 August 2005, the SBP started introducing its fifth generation design of banknotes with additional security features, with the Rs. 20 note being the first issuance. New designs of Rs. 5 (July 2008, later replaced by a coin), 10 (May 2006), Rs. 20 (March 2008, new color scheme), Rs. 50 (July 2008), Rs. 100 (November 2006), Rs. 500 (January 2010), Rs. 1000 (February 2007), and Rs. 5000 (May 2006) were gradually introduced.[58][59][60]

The Pakistani rupee was pegged to the pound sterling until 1982, when the government of General Zia-ul-Haq, changed it to a managed float regime. As a result, the rupee devalued by 38.5% between 1982/83, and many of the industries built by his predecessor suffered a huge surge in import costs. After years of appreciation under Zulfikar Ali Bhutto and despite huge increases in foreign aid, the rupee depreciated.

Foreign exchange rate

The Pakistani rupee depreciated against the US dollar until around the start of the 21st 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.

US$ to PKR average exchange rates[61]
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
62.55 78.50 83.80 85.50 89.23 96.73 102.86 101.29 104.23 104.70 109.84 136.09 158.02 160.02 177.45 248.04

Foreign exchange reserves

Pakistan maintains foreign reserves with the State Bank of Pakistan. The currency of the reserves was solely the US dollar, incurring speculated losses after the dollar prices fell during 2005, forcing the then Governor SBP Ishrat Hussain to step down. In the same year, the SBP issued an official statement proclaiming diversification of reserves in currencies including Euro and Yen, withholding the ratio of diversification.

Karachi the economic capital of Pakistan.

Following the international credit crisis and spikes in crude oil prices, Pakistan's economy could not withstand the pressure, and on 11 October 2008, the State Bank of Pakistan reported that the country's foreign exchange reserves had gone down by $571.9 million to $7,749.7 million.[62] The foreign exchange reserves had declined by more than $10 billion to a level of $6.59 billion. In June 2013, Pakistan was on the brink of default on its financial commitments. The country's forex reserves were at a historic low, covering only two weeks' worth of imports. In January 2020, Pakistan's foreign exchange reserves stood at US$11.503 billion.[63]

Amounts in Billion US dollars[64][65]
List Jun 2008 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 Jun 2020 Jun 2021 Jun 2022 Jun 2023
Total Reserves Decrease 11.4 Increase 12.4 Increase 16.8 Increase 18.2 Decrease 15.3 Decrease 11.0 Increase 14.1 Increase 18.7 Increase 23.1 Decrease 21.4 Decrease 16.4 Decrease 14.5 Increase 18.9 Increase 24.4 Decrease 15.5 Decrease 9.2
SBP Reserves 8.6 9.1 13.0 14.8 10.8 6.0 9.1 13.5 18.1 16.1 9.8 7.3 12.1 17.3 9.9 4.5
Banks Reserves 2.8 3.3 3.8 3.5 4.5 5.0 5.0 5.2 5.0 5.3 6.6 7.2 6.8 7.1 5.6 4.7

Structure of economy

Agriculture accounted for about 53% of the GDP in 1947. 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.

Sectoral Shares % in GDP (at constant basic prices)[66]
Sectors FY 2000 FY 2005 FY 2010 FY 2015 FY 2020 FY 2023
Agricultural Decrease 31.75 Decrease 28.15 Decrease 25.89 Decrease 24.83 Decrease 23.53 Decrease 22.91
Industrial Increase 16.73 Increase 19.01 Increase 19.04 Increase 19.11 Decrease 18.53 Decrease 18.47
Services Increase 51.52 Increase 52.84 Increase 55.07 Increase 56.06 Increase 57.94 Increase 58.61

Major sectors

Agriculture

Yellow and green fields in Punjab.

The majority of the population, directly or indirectly, is dependent on this sector, contributing about 23.0% of the gross domestic product (GDP) and accounting for 37.4% of the employed labor force in 2021. It is the largest source of foreign exchange earnings.[67] The most important crops are wheat, sugarcane, cotton, and rice, accounting for more than 75% of the value of total crop output. Pakistan's largest food crop is wheat. In 2017, Pakistan produced 26,674,000 tonnes of wheat, almost equal to all of Africa (27.1 million tonnes) and more than all of South America (25.9 million tonnes), according to the FAOSTAT.[68] In the previous market year of 2018/19, Pakistan exported a record 4.5 million tonnes of rice compared to around 4 MMT during the corresponding period in the previous year.[69]

Pakistan is a net food exporter, except in occasional years when its harvest is adversely affected by droughts. Pakistan exports rice, cotton, fish, fruits (especially Oranges and Mangoes), and vegetables and imports vegetable oil, wheat, pulses, and consumer foods.[70] 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.

% growth[49][71][72]
List FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Agriculture sector Increase 0.81 Increase 3.41 Increase 0.31 Increase 2.71 Increase 3.23 Increase 3.14 Increase 2.42 Increase 1.78 Increase 0.41 Increase 2.22 Increase 3.88 Increase 0.94 Increase 3.91 Increase 3.52 Increase 4.27
Production of Important Crops (Million Tonnes)
Wheat Decrease 20.9 Increase 24.0 Decrease 23.3 Increase 25.2 Decrease 23.5 Increase 24.2 Increase 26.0 Decrease 25.1 Increase 25.6 Increase 26.7 Decrease 25.1 Decrease 24.3 Increase 25.2 Increase 27.5 Decrease 26.4
Rice Increase 5.6 Increase 6.9 Steady 6.9 Decrease 4.8 Increase 6.2 Decrease 5.6 Increase 6.8 Increase 7.0 Decrease 6.8 Steady 6.8 Increase 7.5 Decrease 7.2 Increase 7.4 Increase 8.4 Increase 9.3
Sugarcane Increase 63.9 Decrease 50.0 Decrease 49.4 Increase 55.3 Increase 58.4 Increase 63.8 Increase 67.5 Decrease 62.8 Increase 65.5 Increase 75.5 Increase 83.3 Decrease 67.2 Decrease 66.4 Increase 81.0 Increase 88.7
Cotton * Decrease 11.7 Increase 11.8 Increase 12.9 Decrease 11.5 Increase 13.6 Decrease 13.0 Decrease 12.8 Increase 14.0 Decrease 9.9 Increase 10.7 Increase 11.9 Decrease 9.9 Decrease 9.1 Decrease 7.1 Increase 8.3
Maize Increase 3.6 Steady 3.6 Decrease 3.3 Increase 3.7 Increase 4.3 Decrease 4.2 Increase 5.0 Decrease 4.9 Increase 5.3 Increase 6.1 Decrease 5.9 Increase 6.8 Increase 7.9 Increase 8.9 Increase 9.5

* Cotton production in million bales.

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. Pakistan agriculture also benefits from year-round warmth. Zarai Taraqiati Bank Limited is the largest financial institution geared towards the development of the agriculture sector through the provision of financial services and technical expertise.

Industry

Factory in Pakistan.

Pakistan's industrial sector accounts for approximately 19.12% of GDP.[66] In 2021, it recorded a growth of 7.81%, compared to the negative 5.75% in 2020.[71] The government is privatizing large-scale industrial 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. Large Scale Manufacturing is the fastest-growing sector in the Pakistani economy.[73] Major Industries include textiles, fertiliser, cement, oil refineries, dairy products, food processing, beverages, construction materials, clothing, paper products, and shrimp.

In Pakistan, SMEs have a significant contribution to the total GDP of Pakistan. According to SMEDA and Economic survey reports, the share in the annual GDP is 40%, with SMEs generating significant employment opportunities for skilled workers and entrepreneurs. Small and medium-scale firms represent nearly 90% of all enterprises in Pakistan and employ 80% of the non-agricultural labor force. These figures indicate the potential and further growth in this sector.

% growth[71]
List FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Industrial sector Increase 8.78 Decrease -4.15 Increase 3.95 Increase 4.87 Increase 2.33 Increase 1.16 Increase 4.34 Increase 5.40 Increase 6.01 Increase 4.61 Increase 9.18 Increase 0.25 Decrease -5.75 Increase 8.20 Increase 6.83
Manufacturing Increase 6.14 Decrease -3.94 Increase 1.73 Increase 2.61 Increase 2.01 Increase 5.37 Increase 5.76 Increase 4.12 Increase 4.03 Increase 4.87 Increase 7.08 Increase 4.52 Decrease -7.80 Increase 10.52 Increase 10.86
Mining Increase 3.70 Decrease -1.04 Increase 2.42 Decrease -4.04 Increase 5.26 Increase 1.77 Increase 1.02 Increase 3.95 Increase 5.64 Decrease -0.89 Increase 7.26 Increase 0.54 Decrease -7.17 Increase 1.72 Decrease -7.00
Construction Increase13.37 Decrease-6.70 Increase7.27 Decrease-7.97 Increase2.17 Increase5.40 Increase3.19 Increase8.33 Increase14.37 Increase10.20 Increase19.55 Decrease-18.14 Decrease-3.08 Increase 2.39 Increase 1.90

Manufacturing

It is the largest of Pakistan's industrial sectors, accounting for approximately 12.13% of GDP.[74] The manufacturing sub-sector is further divided into three components: large-scale manufacturing (LSM) with a share of 79.6% in the manufacturing sector, small-scale manufacturing with a share of 13.8% in the manufacturing sector, while slaughtering contributes 6.5% to manufacturing.[75] Major sectors in industries include cement, fertiliser, edible oil, sugar, steel, tobacco, chemicals, machinery, food processing, and medical instruments, primarily surgical.[76][77][78] Pakistan is one of the largest manufacturers and exporters of surgical instruments.[79][80]

Production of Selected Manufactured Goods[81]
Manufactured Goods Unit of quantity 2016 2017 2018 2019 2020 2021 2022 2023
Cotton Yarn Metric Tonne (000) 3,406 Increase3,428 Increase3,430 Increase3,431 Decrease3,060 Increase3,442 Increase3,459 Decrease2,695
Jute Goods 55 Increase60 Increase74 Decrease67 Decrease65 Increase70 Decrease58 Increase63
Cooking Oil 380 Increase390 Increase391 Increase406 Increase442 Increase460 Increase510 Increase567
Sugar 5,115 Increase7,049 Decrease6,566 Decrease5,260 Decrease4,881 Increase5,694 Increase7,921 Decrease6,709
Cement 35,432 Increase37,022 Increase41,148 Decrease39,924 Decrease39,121 Increase49,797 Decrease48,011 Decrease41,448
Paper & Board 610 Increase669 Increase731 Decrease704 Increase707 Increase730 Increase825 Decrease792
Caustic Soda 225 Decrease224 Increase270 Decrease247