Economy

A view of the skyline in Karachi’s financial district.
Islamabad Photo.

Buildings in the main financial area of Islamabad

Pakistan has a semi-industrialized economy. The growth poles of the Pakistani economy are situated along the Indus River. Diversified economies of Karachi and Punjab’s urban centres, coexist with lesser developed areas in other parts of the country. Despite being a very poor country in 1947, Pakistan’s economic growth rate has been better than the global average during the subsequent four decades, but imprudent policies led to a slowdown in the late 1990s.

Recently, wide-ranging economic reforms have resulted in a stronger economic outlook and accelerated growth especially in the manufacturing and financial services sectors. Since the 1990s, there has been great improvement in the foreign exchange position and rapid growth in hard currency reserves.

The 2005 estimate of foreign debt was close to US$40 billion. However, this has decreased in recent years with assistance from the International Monetary Fund and significant debt-relief from the United States. Pakistan’s gross domestic product, as measured by purchasing power parity, is estimated to be $475.4 billion while its per capita income stands at $2,942. The poverty rate in Pakistan is estimated to be between 23% and 28%.

GDP growth was steady during the mid-2000s at a rate of 7%; however, slowed down during the Economic crisis of 2008 to 4.7%.  A large inflation rate of 24.4% and a low savings rate, and other economic factors, continue to make it difficult to sustain a high growth rate. Pakistan’s GDP is US$167 billions, which makes it the 48th-largest economy in the world or 27th largest by purchasing power adjusted exchange rates. Today, Pakistan is regarded as to having the second largest economy in South Asia.

The structure of the Pakistani economy has changed from a mainly agricultural base to a strong service base. Agriculture now only accounts for roughly 20% of the GDP, while the service sector accounts for 53% of the GDP. Significant foreign investments have been made in several areas includingtelecommunications, real estate and energy. Other important industries include apparel and textiles (accounting for nearly 60% of exports), food processing, chemicals manufacture, and the iron and steel industries. Pakistan’s exports in 2008 amounted to $20.62 billion (USD). Pakistan is a rapidly developing country.

However, the economic crisis of 2008 led Pakistan to seek more than $100 billion in aid in order to avoid possible bankruptcy. This was never given to Pakistan and it had to depend on a more aggressive fiscal policy, backed by the IMF. A year later, Asian Development Bank reported that the Pakistan economic crisis was easing. Furthermore it is projected that in 2010 Pakistan economy would grow at least 4% and could grow more with strong international economic recovery.

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