Economy of Pakistan
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|
 Karachi, the financial hub of Pakistan | |
| Currency | Pakistani rupee (₨) (PKR) |
|---|---|
| 1 July – 30 June | |
Trade organisations | ECO, SAFTA, WTO, AIIB, ADB, SAARC OIC |
Country group | |
| Statistics | |
| Population | 254,400,000 (2024) |
| GDP | |
| GDP rank | |
GDP growth | |
GDP per capita | |
GDP per capita rank | |
GDP by sector |
|
GDP by component |
|
| |
 12.00% (Jan 2025)[10] | |
Population below poverty line | |
| 31.6 medium (2018, World Bank)[17] | |
Labour force |
|
Labour force by occupation |
|
| Unemployment |
|
Main industries |
|
| External | |
| Exports |  $38.9 billion (FY 2024)[22] |
Export goods |
|
Main export partners |
|
| Imports | $63.3 billion (FY 2024)[22] |
Import goods | |
Main import partners |
|
FDI stock |
|
| -2.557 billion US$ (FY 2023)[28] | |
Gross external debt |  $131 billion (2025)[29] |
| Public finances | |
| 61.4% of GDP (Jun 2024)[30] | |
| $15.5 billion (Feb 2025)[31] | |
| −6.8% of GDP (FY 2024)[32] | |
| Revenues | 12.5% of GDP; 13,269 billion PKR or $47 billion (FY 2024)[32] |
| Expenses | 19.3% of GDP; 20,476 billion PKR $72 billion (FY 2024)[32] |
| Economic aid | $2.6983 billion (2021)[33] |
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 43rd largest in terms of nominal GDP. With a population of 254.4 million people as of 2024, 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;[38][39] 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.[38] In recent decades, regional connectivity initiatives such as the China-Pakistan Economic Corridor (CPEC) have emerged as pivotal contributors to infrastructure and energy development, with long-term implications for economic stability. Pakistan was classified as a semi-industrial economy for the first time in the late 1990s, albeit an underdeveloped country[40] with a heavy dependence on agriculture, particularly the textile industry relying on cotton production.[41][38][42] Primary export commodities include textiles, leather goods, sports equipment, chemicals, and carpets/rugs.[43][44]
Pakistan is presently undergoing economic liberalization, including the privatization of all government corporations, aimed at attracting foreign investment and reducing budget deficits.[45] However, the country continues to grapple with challenges such as rapid population growth, widespread illiteracy, political instability, hostile neighbors 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.[46]
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.[46]
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.[46]
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.[46]
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.[46]
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.[46]
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 2008 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.[46]
Data
Gross domestic product (GDP)
The table below displays key economic indicators from 1980 to 2024. 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 | 74.9 | 950.0 | 38.6 | 418.9 | 6.9% | 11.9% | n/a | n/a |
| 1981 | 87.1 | 1,072.8 | 45.7 | 481.3 | 6.2% | 11.9% | n/a | n/a |
| 1982 | 99.5 | 1,190.0 | 49.9 | 511.0 | 7.6% | 5.9% | n/a | n/a |
| 1983 | 110.4 | 1,283.6 |  46.6 | 463.7 | 6.8% | 6.4% | 3.9% | n/a |
| 1984 | 118.9 | 1,345.3 | 50.6 | 489.8 | 4.0% | 6.1% | 3.8% | n/a |
| 1985 | 133.3 | 1,468.4 |  50.6 | 476.7 | 8.7% | 5.6% | 3.7% | n/a |
| 1986 | 144.7 | 1,551.3 | 51.8 | 475.3 | 6.4% | 3.5% | 3.3% | n/a |
| 1987 | 156.9 | 1,638.5 | 54.2 | 483.9 | 5.8% | 4.7% | 3.1% | n/a |
| 1988 | 172.8 | 1,759.4 | 62.4 | 543.1 | 6.4% | 8.8% | 3.1% | n/a |
| 1989 | 188.3 | 1,868.3 | 65.0 | 552.0 | 4.8% | 7.9% | 3.1% | n/a |
| 1990 | 204.3 | 1,970.1 | 65.3 | 538.4 | 4.6% | 9.1% | 3.1% | n/a |
| 1991 | 222.0 | 2,094.8 | 74.2 | 598.4 | 5.4% | 12.6% | 5.9% | n/a |
| 1992 | 244.3 | 2,211.1 | 79.3 | 614.2 | 7.6% | 4.8% | 5.9% | n/a |
| 1993 | 255.3 | 2,252.4 | 83.4 | 633.6 | 2.1% | 9.8% | 4.7% | n/a |
| 1994 | 272.1 | 2,341.1 | 84.6 | 622.8 | 4.4% | 11.3% | 4.8% | 64.8% |
| 1995 | 291.9 | 2,449.6 | 98.9 | 709.9 | 5.1% | 13.0% | 5.4% | 58.0% |
| 1996 | 316.9 | 2,594.8 | 103.3 | 723.5 | 6.6% | 10.8% | 5.4% | 58.2% |
| 1997 | 327.8 | 2,620.8 | 101.8 | 696.4 | 1.7% | 12.8% | 6.1% | 58.5% |
| 1998 | 343.1 | 2,678.9 | 101.4 | 677.0 | 3.5% | 6.8% | 5.9% | 59.5% |
| 1999 | 362.5 | 2,765.6 | 96.0 | 626.5 | 4.2% | 5.7% | 5.9% | 67.2% |
| 2000 | 385.2 | 2,855.1 | 99.4 | 630.3 | 3.9% | 3.6% | 7.8% | 68.4% |
| 2001 | 408.2 | 2,916.7 | 96.8 | 602.0 | 3.7% | 4.4% | 7.8% | 72.2% |
| 2002 | 425.4 | 2,995.0 | 98.2 | 593.9 | 2.4% | 3.5% | 8.3% | 67.6% |
| 2003 | 456.2 | 3,119.8 | 112.5 | 666.1 | 5.6% | 3.1% | 8.3% | 62.7% |
| 2004 | 504.5 | 3,376.5 | 132.2 | 767.8 | 7.7% | 4.6% | 7.7% | 56.3% |
| 2005 | 561.9 | 3,722.9 | 145.2 | 842.0 | 7.5% | 9.3% | 7.7% | 52.3% |
| 2006 | 612.1 | 3,986.8 | 161.9 | 961.4 | 5.6% | 7.9% | 6.2% | 48.4% |
| 2007 | 660.8 | 4,244.6 | 184.1 | 1,048.4 | 5.5% | 7.8% | 5.2% | 47.1% |
| 2008 | 703.5 | 4,362.9 | 202.2 | 1,124.0 | 5.0% | 12.0% | 5.2% | 51.9% |
| 2009 | 715.3 | 4,240.5 | 187.1 | 1,186.5 | 0.4% | 19.6% | 5.5% | 52.8% |
| 2010 | 740.4 | 4,283.3 | 196.7 | 1,122.7 | 2.6% | 10.1% | 6.0% | 54.5% |
| 2011 | 779.9 | 4,403.0 | 230.6 | 1,325.8 | 3.6% | 13.7% | 6.0% | 52.8% |
| 2012 | 819.8 | 4,516.4 | 250.1 | 1,364.8 | 3.8% | 11.0% | 6.0% | 56.7% |
| 2013 | 865.9 | 4,655.3 | 258.7 | 1,378.6 | 3.7% | 7.4% | 6.0% | 57.9% |
| 2014 | 912.3 | 4,786.2 | 271.4 | 1,428.4 | 4.1% | 8.6% | 6.0% | 57.1% |
| 2015 | 955.9 | 4,893.3 | 299.9 | 1,550.5 | 4.1% | 4.5% | 5.9% | 57.0% |
| 2016 | 1,004.3 | 5,016.6 | 313.6 | 1,566.6 | 4.6% | 2.9% | 5.9% | 60.8% |
| 2017 | 1,069.4 | 5,212.2 | 339.2 | 1,653.4 | 4.6% | 4.1% | 5.8% | 60.9% |
| 2018 | 1,130 | 5,387.2 | 356.2 | 1,698.0 | 6.1% | 3.9% | 5.8% | 64.8% |
| 2019 | 1,162.7 | 5,434.3 | 321.1 | 1,500.7 | 3.1% | 6.7% | 6.9% | 77.5% |
| 2020 | 1,186.3 | 5,435.7 | 300.4 | 1,376.5 | -0.9% | 10.7% | 6.6% | 79.6% |
| 2021 | 1,285.3 | 5,774.5 | 348.5 | 1,565.6 | 5.8% | 8.9% | 6.3% | 73.5% |
| 2022 | 1,462.1 | 6,440.9 | 374.8 | 1651.3 | 6.2% | 12.2% | 6.2% | 76.2% |
| 2023 | 1,511.6 | 6,530.9 | 337.5 | 1,458.0 | -0.2% | 29.2% | 8.5% | 77.3% |
| 2024 | 1,584.5 | 6,715.3 | 374.6 | 1,587.6 | 2.4% | 23.4% | 8.0% | 69.2% |
Stock market
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".[47][citation needed] The stock market capitalization of listed companies in Pakistan was valued at $5,937 million in 2005 by the World Bank.[48] 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.[49]
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.[50] 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.[51]
PSX 100 index growth rate[52]
| 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 | FY 2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PSX 100 index growth % | -10.8 | -41.7 | 35.7 | 28.5 | 10.4 | 52.2 | 41.2 | 16.0 | 9.8 | 23.2 | -10.0 | -19.1 | 1.5 | 37.6 | -12.3 | -0.2 | 61.6 |
The sales of all non-financial companies surged to Rs 16,815 billion in the fiscal year 2023, marking a substantial increase of Rs 1,864 billion compared to the preceding year. However, the net profit margin of all companies declined to 5.98% in FY23 from 6.34% in FY22. Return on assets (ROA) and return on equity (ROE) of all companies also dropped to 6.05 percent and 17.76 percent respectively in FY23. The key statistics for the last six years of all public and private non-financial companies listed at the Pakistan Stock Exchange are provided in the following table:[53]
| List | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|---|
| Total assets | 8,811 | 10,097 | 10,755 | 12,201 | 15,685 | 17,549 |
| Total liabilities | 5,574 | 6,610 | 7,029 | 7,869 | 10,568 | 11,346 |
| Total sales | 7,662 | 8,811 | 7,999 | 9,437 | 14,568 | 16,815 |
| Profit before tax | 608 | 612 | 480 | 1,011 | 1,439 | 1,624 |
| Profit after tax | 427 | 413 | 320 | 749 | 924 | 1,005 |
| % | ||||||
| Net profit margin | 5.57 | 4.68 | 4.00 | 7.93 | 6.34 | 5.98 |
| Return on assets | 5.19 | 4.36 | 3.07 | 6.52 | 6.63 | 6.05 |
| Return on equity | 13.65 | 12.27 | 8.87 | 18.59 | 19.56 | 17.76 |
| Earnings per share | 4.43 | 4.17 | 3.15 | 7.07 | 8.31 | 8.32 |
Middle class
As of 2017[update], according to the 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.[54] Official figures also show that the proportion of households that own a motorcycle and washing machines has grown impressively over the past 15 years.[55] 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.[54][56]
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.[57] 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.[58] Significant progress in taxation and business reforms has ensured that many firms are no longer compelled to operate in the underground economy.[59]
Government revenues and expenditures
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. 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.[60]
| 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 | FY2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total revenue | 1,499 | 1,851 | 2,078 | 2,253 | 2,567 | 2,982 | 3,637 | 3,931 | 4,447 | 4,937 | 5,228 | 4,901 | 6,272 | 6,903 | 8,035 | 9,634 | 13,269 |
| Tax revenue | 1,065 | 1,317 | 1,473 | 1,699 | 2,053 | 2,199 | 2,565 | 3,018 | 3,660 | 3,969 | 4,467 | 4,473 | 4,748 | 5,272 | 6,755 | 7,819 | 10,085 |
| FBR taxes | 1,008 | 1,161 | 1,327 | 1,558 | 1,883 | 1,946 | 2,255 | 2,590 | 3,113 | 3,368 | 3,842 | 3,830 | 3,998 | 4,764 | 6,143 | 7,169 | 9,311 |
| Total expenditure | 2,277 | 2,531 | 3,007 | 3,447 | 3,936 | 4,816 | 5,026 | 5,388 | 5,796 | 6,801 | 7,488 | 8,346 | 9,649 | 10,307 | 13,295 | 16,155 | 20,476 |
| Fiscal deficit | 777 | 680 | 929 | 1,194 | 1,370 | 1,834 | 1,389 | 1,457 | 1,349 | 1,864 | 2,260 | 3,445 | 3,376 | 3,403 | 5,260 | 6,521 | 7,207 |
| As % of GDP | |||||||||||||||||
| Total Revenue | 14.1 | 14.0 | 14.0 | 12.3 | 12.8 | 13.3 | 14.5 | 14.3 | 13.6 | 13.9 | 13.3 | 11.2 | 13.2 | 12.4 | 12.0 | 11.4 | 12.5 |
| Tax revenue | 9.9 | 9.1 | 9.9 | 9.3 | 10.2 | 9.8 | 10.2 | 11.0 | 10.4 | 10.4 | 10.8 | 9.7 | 9.3 | 9.4 | 10.1 | 9.2 | 9.5 |
| Total expenditure | 21.4 | 19.2 | 20.2 | 18.9 | 21.4 | 21.5 | 20.0 | 19.6 | 17.7 | 19.1 | 19.1 | 19.1 | 20.3 | 18.5 | 19.9 | 19.1 | 19.3 |
| Fiscal deficit | 7.3 | 5.2 | 6.2 | 6.5 | 8.8 | 8.2 | 5.5 | 5.3 | 4.1 | 5.2 | 5.8 | 7.9 | 7.1 | 6.1 | 7.9 | 7.7 | 6.8 |
Currency system
Rupee
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.[61][62][63]
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.
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 282.91 |
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.
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.[65] 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.[66]
| 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 | Jun 2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total reserves | 11.4 | 12.4 | 16.8 | 18.2 | 15.3 | 11.0 | 14.1 | 18.7 | 23.1 | 21.4 | 16.4 | 14.5 | 18.9 | 24.4 | 15.5 | 9.2 | 14.0 |
| 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 | 9.4 |
| 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 | 4.6 |
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.
| Sectors | FY 2000 | FY 2005 | FY 2010 | FY 2015 | FY 2020 | FY 2024 |
|---|---|---|---|---|---|---|
| Agricultural | 31.75 | 28.15 | 25.89 | 24.83 | 23.53 | 24.04 |
| Industrial | 16.73 | 19.01 | 19.04 | 19.11 | 18.53 | 18.22 |
| Services | 51.52 | 52.84 | 55.07 | 56.06 | 57.94 | 57.74 |
Major sectors
Agriculture
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.[70] 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.[71] In the market year of 2018/19, Pakistan exported a record 4.5 million tonnes of rice.[72]
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.[73] The economic importance of agriculture has declined since independence when its share of GDP was around 53%.
| 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 | FY 2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Agriculture sector | 0.81 | 3.41 | 0.31 | 2.71 | 3.23 | 3.14 | 2.42 | 1.78 | 0.41 | 2.22 | 3.88 | 0.94 | 3.91 | 3.52 | 4.21 | 2.27 | 6.25 |
| Production of important crops (million tonnes) | |||||||||||||||||
| Wheat | 20.9 | 24.0 | 23.3 | 25.2 | 23.5 | 24.2 | 26.0 | 25.1 | 25.6 | 26.7 | 25.1 | 24.3 | 25.2 | 27.5 | 26.2 | 28.2 | 31.6 |
| Rice | 5.6 | 6.9 | 6.9 | 4.8 | 6.2 | 5.6 | 6.8 | 7.0 | 6.8 | 6.8 | 7.5 | 7.2 | 7.4 | 8.4 | 9.3 | 7.3 | 9.9 |
| Sugarcane | 63.9 | 50.0 | 49.4 | 55.3 | 58.4 | 63.8 | 67.5 | 62.8 | 65.5 | 75.5 | 83.3 | 67.2 | 66.4 | 81.0 | 88.7 | 88.0 | 87.6 |
| Cotton * | 11.7 | 11.8 | 12.9 | 11.5 | 13.6 | 13.0 | 12.8 | 14.0 | 9.9 | 10.7 | 11.9 | 9.9 | 9.1 | 7.1 | 8.3 | 4.9 | 10.2 |
| Maize / corn | 3.6 | 3.6 | 3.3 | 3.7 | 4.3 | 4.2 | 5.0 | 4.9 | 5.3 | 6.1 | 5.9 | 6.8 | 7.9 | 8.9 | 9.5 | 11.0 | 9.7 |
* 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
Pakistan's industrial sector accounts for approximately 19.12% of GDP.[69] In 2021, it recorded a growth of 7.81%, compared to the negative 5.75% in 2020.[74] 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.[75] 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.
| 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 | FY 2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Industrial sector | 8.78 | -4.15 | 3.95 | 4.87 | 2.33 | 1.16 | 4.34 | 5.40 | 6.01 | 4.61 | 9.18 | 0.25 | -5.75 | 8.20 | 7.01 | -3.74 | 1.21 |
| Manufacturing | 6.14 | -3.94 | 1.73 | 2.61 | 2.01 | 5.37 | 5.76 | 4.12 | 4.03 | 4.87 | 7.08 | 4.52 | -7.80 | 10.52 | 10.86 | -5.29 | 2.42 |
| Mining | 3.70 | -1.04 | 2.42 | -4.04 | 5.26 | 1.77 | 1.02 | 3.95 | 5.64 | -0.89 | 7.26 | 0.54 | -7.17 | 1.72 | -6.66 | -3.31 | 4.85 |
| Construction | 13.37 | -6.70 | 7.27 | -7.97 | 2.17 | 5.40 | 3.19 | 8.33 | 14.37 | 10.20 | 19.55 | -18.14 | -3.08 | 2.39 | 1.83 | -9.25 | 5.86 |
Manufacturing
Manufacturing is the largest of Pakistan's industrial sectors, accounting for approximately 12.13% of GDP.[76] 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.[77] Major sectors in industries include cement, fertiliser, edible oil, sugar, steel, tobacco, chemicals, machinery, food processing, and medical instruments, primarily surgical.[78][79][80] Pakistan is one of the largest manufacturers and exporters of surgical instruments.[81][82]
| Manufactured goods | Unit of quantity | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|---|---|---|---|---|
| Cotton yarn | Metric tonne (000) | 3,406 | 3,428 | 3,430 | 3,431 | 3,060 | 3,442 | 3,459 | 2,695 | 2,477 |
| Jute goods | 55 | 60 | 74 | 67 | 65 | 70 | 58 | 63 | 41 | |
| Cooking oil | 380 | 390 | 391 | 406 | 442 | 460 | 510 | 567 | 642 | |
| Sugar | 5,115 | 7,049 | 6,566 | 5,260 | 4,881 | 5,694 | 7,921 | 6,709 | 6,796 | |
| Cement | 35,432 | 37,022 | 41,148 | 39,924 | 39,121 | 49,797 | 48,011 | 41,448 | 39,566 | |
| Paper & board | 610 | 669 | 731 | 704 | 707 | 730 | 825 | 792 | 787 | |
| Caustic soda | 225 | 224 | 270 | 247 | 342 | 394 | 405 | 476 | 497 | |
| Hydrogen chloride | 172 | 177 | 251 | 425 | 361 | 417 | 510 | 525 | 507 | |
| Sulphuric acid | 75 | 56 | 49 | 49 | 40 | 72 | 111 | 71 | 64 | |
| Vegetable ghee | 1,241 | 1,280 | 1,347 | 1,392 | 1,454 | 1,455 | 1,393 | 1,554 | 1,493 | |
| Cotton cloth | Million meters | 1,039 | 1,043 | 1,044 | 1,046 | 935 | 1,048 | 1,051 | 921 | 871 |
| Cigarettes | Billion | 54 | 34 | 59 | 61 | 46 | 52 | 60 | 43 | 33 |
| Nitrogenous fertilizers | NT (000) | 3,018 | 3,063 | 2,758 | 2,990 | 3,139 | 3,324 | 3,391 | 3,163 | 3,483 |
| Phosphatic fertilizers | 664 | 683 | 619 | 633 | 631 | 748 | 804 | 616 | 756 | |
| Cycle tyres & tubes | Numbers (000) | 11,490 | 11,507 | 11,470 | 14,491 | 13,496 | 10,314 | 10,876 | 10,702 | 10,943 |
| Motor tyres & tubes | 34,202 | 34,345 | 35,057 | 36,321 | 35,678 | 31,906 | 30,296 | 30,515 | 31,107 | |
| Motorcycles | 2,071 | 2,501 | 2,825 | 2,460 | 1,813 | 2,476 | 2,190 | 1,289 | 1,235 | |
| Bicycles | 199 | 200 | 200 | 174 | 141 | 79 | 141 | 146 | 159 | |
| Electric transformers | 33 | 37 | 47 | 31 | 23 | 29 | 35 | 32 | 22 | |
| Refrigerators | 1,477 | 1,834 | 1,348 | 1,084 | 716 | 1,351 | 1,389 |