| Date - Field | Pakistan - Economy - overview |
2010 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and declining exports of manufactures. Faced with untenable budgetary deficits, high inflation, and hemorrhaging foreign exchange reserves, the government agreed to an International Monetary Fund Standby Arrangement in November 2008. Between 2004-07, GDP growth in the 6-8% range was spurred by gains in the industrial and service sectors, despite severe electricity shortfalls. Poverty levels decreased by 10% since 2001, and Islamabad steadily raised development spending in recent years. In 2008 the fiscal deficit - a result of chronically low tax collection and increased spending - exceeded Islamabad's target of 4% of GDP. Inflation remains the top concern among the public, jumping from 7.7% in 2007 to 20.8% in 2008, primarily because of rising world fuel and commodity prices. In addition, the Pakistani rupee has depreciated significantly as a result of political and economic instability. |
2009 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, since 2001, IMF-approved reforms - most notably, privatization of the banking sector - bolstered by generous foreign assistance and renewed access to global markets, have generated macroeconomic recovery. Pakistan experienced GDP growth in the 6-8% range in 2004-07, spurred by gains in the industrial and service sectors. Poverty levels decreased by 10% since 2001, and Islamabad steadily raised development spending in recent years. In 2008 the fiscal deficit - a result of chronically low tax collection and increased spending - exceeded Islamabad's target of 4% of GDP. Inflation remains the top concern among the public, jumping from 7.7% in 2007 to 20.8% during 2008, primarily because of rising world fuel and commodity prices. In addition, the Pakistani rupee has depreciated significantly as a result of political and economic instability. A balance of payment crisis forced the Pakistani government to turn to the IMF for a conditional loan program in late November 2008. |
2008 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since 2001, have generated solid macroeconomic recovery the last five years. The government has made substantial macroeconomic reforms since 2000, most notably privatizing the banking sector. Poverty levels have decreased by 10% since 2001, and Islamabad has steadily raised development spending in recent years, including a 52% real increase in the budget allocation for development in FY07, a necessary step toward reversing the broad underdevelopment of its social sector. The fiscal deficit - the result of chronically low tax collection and increased spending, including reconstruction costs from the October 2005 earthquake - appears manageable for now. GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-07. Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 6.9% in 2007. The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit - driven by a widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP growth in the medium term. |
2007 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since 2001, have generated solid macroeconomic recovery the last five years. The government has made substantial macroeconomic reforms since 2000, most notably privatizing the banking sector. Poverty levels have decreased by 10 percent since 2001, and Islamabad has steadily raised development spending in recent years, including a 52-percent real increase in the budget allocation for development in fiscal year 2007, a necessary step toward reversing the broad underdevelopment of its social sector. The fiscal deficit - the result of chronically low tax collection and increased spending, including reconstruction costs from the October 2005 earthquake - appears manageable for now. GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06. Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in 2006. The central bank is pursuing tighter monetary policy - raising interest rates in 2006 - while trying to preserve growth. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit - driven by a widening trade gap as import growth outstrips export expansion - could draw down reserves and dampen GDP growth in the medium term. |
2006 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since 2001, have generated solid macroeconomic recovery the last three years. The government has made substantial macroeconomic reforms since 2000, although progress on more politically sensitive reforms has slowed. For example, in the third and final year of its $1.3 billion IMF Poverty Reduction and Growth Facility, Islamabad has continued to require waivers for energy sector reforms. While long-term prospects remain uncertain, given Pakistan's low level of development, medium-term prospects for job creation and poverty reduction are the best in nearly a decade. Islamabad has raised development spending from about 2% of GDP in the 1990s to 4% in 2003, a necessary step towards reversing the broad underdevelopment of its social sector. GDP growth, spurred by double-digit gains in industrial production over the past year, has become less dependent on agriculture. Foreign exchange reserves continued to reach new levels in 2004, supported by robust export growth and steady worker remittances. |
2005 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since 2001, have generated solid macroeconomic recovery the last three years. The government has made substantial macroeconomic reforms since 2000, although progress on more politically sensitive reforms has slowed. For example, in the third and final year of its $1.3 billion IMF Poverty Reduction and Growth Facility, Islamabad has continued to require waivers for energy sector reforms. While long-term prospects remain uncertain, given Pakistan's low level of development, medium-term prospects for job creation and poverty reduction are the best in nearly a decade. Islamabad has raised development spending from about 2% of GDP in the 1990s to 4% in 2003, a necessary step towards reversing the broad underdevelopment of its social sector. GDP growth, spurred by double-digit gains in industrial production over the past year, has become less dependent on agriculture. Foreign exchange reserves continued to reach new levels in 2004, supported by robust export growth and steady worker remittances. |
2004 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since late 2001, have generated solid macroeconomic recovery the last two years. The government has made substantial inroads in macroeconomic reform since 2000, although progress on more politically sensitive reforms has slowed. For example, in the third and final year of its $1.3 billion IMF Poverty Reduction and Growth Facility, Islamabad has continued to require waivers for energy sector reforms. While long-term prospects remain uncertain, given Pakistan's low level of development, medium-term prospects for job creation and poverty reduction are the best in nearly a decade. Islamabad has raised development spending from about 2% of GDP in the 1990s to 4% in 2003, a necessary step towards reversing the broad underdevelopment of its social sector. GDP growth is heavily dependent on rain-fed crops, and last year's end to a four-year drought should support moderate agricultural growth for the next few years. Foreign exchange reserves continued to reach new levels in 2003, supported by robust export growth and steady worker remittances. |
2003 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, suffers from internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. Pakistan's economic prospects, although still marred by poor human development indicators, continued to improve in 2002 following unprecedented inflows of foreign assistance beginning in 2001. Foreign exchange reserves have grown to record levels, supported largely by fast growth in recorded worker remittances. Trade levels rebounded after a sharp decline in late 2001. The government has made significant inroads in macroeconomic reform since 2000, but progress is beginning to slow. Although it is in the second year of its $1.3 billion IMF Poverty Reduction and Growth Facility, Islamabad continues to require waivers for politically difficult reforms. Long-term prospects remain uncertain as development spending remains low, regional tensions remain high, and political tensions weaken Pakistan's commitment to lender-recommended economic reforms. GDP growth will continue to hinge on crop performance; dependence on foreign oil leaves the import bill vulnerable to fluctuating oil prices; and efforts to open and modernize the economy remain uneven. |
2002 January
Economy - overview | Pakistan, an impoverished and underdeveloped country, suffers from internal political disputes, lack of foreign investment, and a costly confrontation with neighboring India. Pakistan's economic prospects, marred by poor human development indicators, low levels of foreign investment, and reliance on international creditors for hard currency inflows, were nonetheless on an upswing through most of 2001. The MUSHARRAF government made significant inroads in macroeconomic reform - it completed an IMF short-term loan program for the first time and improved its standing with international creditors by increasing revenue collection and restraining the fiscal deficit in the 2001/02 budget. While Pakistan has capitalized on its international standing after the 11 September terrorist attacks on the US by garnering substantial assistance from abroad - including $1.3 billion in IMF Poverty Reduction and Growth Facility aid and $12.5 billion in Paris Club debt rescheduling - long-term prospects remain uncertain. GDP growth will continue to hinge on crop performance; dependence on foreign oil leaves the import bill vulnerable to fluctuating oil prices; and foreign and domestic investors remain wary of committing to projects in Pakistan. Pakistani trade levels - already in decline due to the global economic downturn - worsened in the aftermath of the September 11 attacks. |
2001 January
Economy - overview | Pakistan is a poor, heavily populated country, suffering from internal political disputes, lack of foreign investment, and a costly confrontation with neighboring India. Pakistan's economic outlook continues to be marred by its weak foreign exchange position, which relies on international creditors for hard currency inflows. The MUSHARRAF government will face an estimated $21 billion in foreign debt coming due in 2000-03, despite having rescheduled nearly $2 billion in debt with Paris Club members. Foreign loans and grants provide approximately 25% of government revenue, but debt service obligations total nearly 50% of government expenditure. Although Pakistan successfully negotiated a $600 million IMF Stand-By Arrangement, future loan installments will be jeopardized if Pakistan misses critical IMF benchmarks on revenue collection and the fiscal deficit. MUSHARRAF has complied largely with IMF recommendations to raise petroleum prices, widen the tax net, privatize public sector assets, and improve the balance of trade. However, Pakistan's economic prospects remain uncertain; too little has changed despite the new administration's intentions. Foreign exchange reserves hover at roughly $1 billion, GDP growth hinges on crop performance, the import bill has been hammered by high oil prices, and both foreign and domestic investors remain wary of committing to projects in Pakistan. |
2000 January
Economy - overview | Pakistan is a poor, heavily populated country, suffering from internal political disputes, lack of foreign investment, and a costly confrontation with neighboring India. Pakistan's economic outlook continues to be marred by its weak foreign exchange position, notably its continued reliance on international creditors for hard currency inflows. The MUSHARRAF government faces $32 billion in external debt and has nearly completed rescheduling with Paris Club members and other bilateral creditors. Foreign loans and grants provide approximately 25% of government revenue, but debt service obligations total nearly 50% of government expenditure. The IMF has remained silent on future disbursements from its $1.56 billion bailout package initiated in 1999, and other international financial institutions are gauging the current administration's resolve to implement necessary fiscal reforms. MUSHARRAF's ambitious economic agenda includes measures to widen the tax net, privatize public sector assets, and improve its balance of trade position. Pakistan has made privatization a cornerstone of economic revival, but may have difficulty attracting new investors until it receives positive endorsement from the World Bank. The Bank has withheld its approval pending resolution of the pricing dispute between the government and independent power producers. |
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This page was last updated on 26 January, 2010 |
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