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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Pakistan has achieved steady growth since 2013 in the aftermath of a credit facility agreement with the IMF. Economic growth slowed in recent years due to measures taken by the authorities to address macroeconomic imbalances and turned negative in the aftermath of the COVID-19 pandemic. According to the IMF's estimates, growth resumed in 2021, reaching 3.9%, and should follow an upward trend over the forecast horizon, at 4% this year and 4.5% in 2023. Private consumption (around four-fifths of GDP) has benefited from the fiscal support plan for households and from foreign remittances. Furthermore, the industrial sector performed above expectation in the period Apr-June.

Concerning public finances, the planned rebalancing of the public deficit that followed the conclusion of the agreement with the IMF worth USD 6 billion over 39 months has been halted by the crisis due to falling revenues and rising public expenditure. The federal budget deficit increased by 29% y-o-y to PKR 1.8 trillion (3.3% of GDP) in the first half of FY2022 (July-December 2021), despite a double-digit increase in revenues and a slowdown in public spending. Current expenditure accounted for 92% of total expenditure, of which 40% was spent on interests on loans. Public debt declined to 83.4% of GDP in 2021, and is expected to follow a downward trend over the forecast horizon (80.9% in 2022 and 75.8% next year – IMF). Massive rupee depreciation, persistent increase in the rates of agriculture commodities, and high prices of petroleum products were the main causes of high inflation, at 8.9% in 2021. The government has set the average inflation target for the FY2021-22 within the range of 7-9%, with the IMF forecasting a rate of 8.5% in 2022 followed by 7.6% in 2023.

Pakistan's unemployment rate increased slightly to 5% in 2021, from 4.1% before the pandemic, due to the negative economic impact of the COVID-19 pandemic. The IMF estimates that the rate will decrease to 4.8% this year and 4.7% in 2023. The number of people no longer actively seeking work is increasing. The level of underemployment remains very high and much of the economy is informal. While the poverty rate has fallen by 40% over the last two decades, it is still high:  using the lower-middle-income poverty rate of USD 3.2 per day, in fact, the World Bank calculated that Pakistan's poverty ratio stood at 39.3% in 2020-21.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 276.94261.73e0.000.000.00
GDP (Constant Prices, Annual % Change) 2.1-0.53.94.04.5
GDP per Capita (USD) 1,3531,255000
General Government Gross Debt (in % of GDP) 85.387.683.480.975.8
Inflation Rate (%) 6.710.78.98.57.6
Unemployment Rate (% of the Labour Force) 4.14.55.04.84.7
Current Account (billions USD) -13.43-4.450.000.000.00
Current Account (in % of GDP) -4.9-1.7-0.6-3.1-3.0

Source: IMF – World Economic Outlook Database , October 2021

Note: (e) Estimated Data

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector is the main pillar of the Pakistani workforce. It contributes to 22.7% of the GDP and employs 36.9% of the active population. Wheat, rice, cotton, sugarcane, fruits, vegetables and tobacco are among the major crops. Cattle livestock farming remains important as the country is among the top 10 beef and veal producers in the world. However, its contribution to exports remains limited after years of export ban. Pakistan is the 4th largest cotton producer in the world and has abundant natural resources, mainly copper, oil and gas. The Pakistan Bureau of Statistics estimates 2020-21 rice production at 8419.7 thousand tonnes (+13.5% y-o-y), whereas wheat production stood at 27464.1 thousand tonnes (+8.7% y-o-y).

The industrial sector contributes to 18.3% of the GDP and employs 25.8% of the population. The major industries are textile production (the largest source of foreign exchange revenue), oil refining, metal processing, and the production of cement and fertilisers. Maritime transport is also a significant activity; however, the market is dominated by foreign shipping companies and the state-owned Pakistan National Shipping Corporation (PNSC). The manufacturing sector accounts for 11.5% of GDP (World Bank). Total industrial manufacturing production increased by 4.2% year-on-year in the first eleven months of 2021 (data Pakistan Bureau of Statistics).

The tertiary sector contributes to 52.8% of the GDP and employs more than one-third of the workforce (38.1%). The IT sector is growing rapidly, contributing around 1% of GDP and accounting for 3.5% of exports. Remittances from Pakistanis working abroad represent a considerable financial income for the country. During the period July-March of FY2021, the services sector grew 4.4% (Ministry of Finance).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 36.9 25.0 38.1
Value Added (in % of GDP) 22.7 17.7 52.8
Value Added (Annual % Change) 2.7 -2.6 -0.6

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Pakistani Rupee (PKR) - Average Annual Exchange Rate For 1 USD 104.77105.46121.82136.50158.24

Source: World Bank - Latest available data.

 

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Foreign Trade

The share of foreign trade in Pakistan's GDP continues to be low, at 29% (World Bank, latest data available). Despite economic and political difficulties, Pakistan has taken steps to liberalise its trade and investment framework as part of commitments made with the WTO, IMF and the World Bank. Textile products accounted by far for the largest share of exports (around 60%, mostly comprising linen, clothing and cotton), followed by rice (9.4%). In regards to imports, the largest item was petroleum products, followed by palm oil, telephones and ferrous waste (Comtrade).

The United States is the top destination for Pakistani exports (18.6%, mainly textile), followed by China (8.4%), the United Kingdom (7.8%), and Germany (6.3%). China is by far the largest supplier of goods and services in Pakistan (27.3%), followed by the United Arab Emirates (9.8%), the United States (5.6%), Indonesia (5.3%), and Saudi Arabia (4.1%). The free trade agreement (FTA) with China has been detrimental to Pakistani manufacturing exports, which have declined continuously in recent years, and local businesses worry the completion of China–Pakistan Economic Corridor would further increase the share of Chinese products in the domestic market. As talks with the GCC stalled, Pakistan is now pursuing individual trade agreements with Saudi, the UAE and Oman. Moreover, Pakistan and Qatar have agreed in principle on a preferential trade agreement (PTA) and a free trade agreement (FTA) to enhance bilateral trade.

Pakistan's trade structure has been structurally in deficit, with exports remaining sluggish on the back of low global demand for Pakistani crops. Imports of goods reached USD 45.8 billion in 2020, while exports were only USD 21.9 billion. Concerning the trade of services, imports were USD 7.3 billion, whereas exports amounted to USD 4.3 billion. Overall imports decreased at a faster pace than exports, resulting in a reduced trade deficit of 7.4% of GDO (from 10.1% one year earlier – World Bank). The latest figures from the Bureau of Statistics show that in the first six months of FY2022 (Jul-Dec 2021), exports of goods reached USD 15.1 billion (+24.9% y-o-y), against USD 40.6 billion of imports (+66.2% y-o-y, driven by rising global fuel and food prices and purchases of COVID-19 vaccines).

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 47,15557,74660,07850,33245,804
Exports of Goods (million USD) 20,43521,72523,42523,32921,961
Imports of Services (million USD) 7,9539,85811,1309,7247,306
Exports of Services (million USD) 4,9493,9144,6954,6564,378

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 25.325.929.030.426.2
Trade Balance (million USD) -20,380-29,594-31,911-22,881-21,589
Trade Balance (Including Service) (million USD) -25,037-35,007-37,648-27,306-23,779
Imports of Goods and Services (Annual % Change) 16.021.217.64.3-11.1
Exports of Goods and Services (Annual % Change) -1.6-0.612.714.51.6
Imports of Goods and Services (in % of GDP) 16.217.620.120.316.6
Exports of Goods and Services (in % of GDP) 9.18.39.010.19.6

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 9.27.28.59.43.4
Volume of imports of goods and services (Annual % change) 4.7-5.98.38.65.5

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Pakistan does not belong to any Customs Union.

It is a member of the South Asian Association for Regional Cooperation (SAARC)

Pakistan has signed Bilateral Investment Treaties (BITs) with nearly 40 countries. It has also signed ‘Double Taxation Agreements’ with nearly 50 countries.

The country has signed a trade agreement with 21 other countries in the São Paulo Round of the Global System of Trade Preferences among Developing Countries (GSTP).

For more details, visit:

Pakistani Government

Pakistani state

Federal Board of Revenue

 

Main Partner Countries

Main Customers
(% of Exports)
2020
United States 18.6%
China 8.4%
United Kingdom 7.8%
Germany 6.3%
United Arab Emirates 4.9%
See More Countries 54.0%
Main Suppliers
(% of Imports)
2020
China 27.3%
United Arab Emirates 9.8%
United States 5.6%
Indonesia 5.3%
Saudi Arabia 4.1%
See More Countries 47.9%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Arif ALVI (since 9 September 2018)
Prime Minister: Imran KHAN (since 18 August 2018)
Next Election Dates
Presidential: 2023
Senate: March 2024
National Assembly: July 2023
Main Political Parties
Pakistan has a multi-party system in which no party has a chance of gaining power alone, and parties work with each other to form coalition governments to direct the National Assembly. Political alliances in Pakistan shift very frequently. Some of the major political parties in the country are:

- Pakistan Peoples Party Parliamentarians (PPPP): a mainstream political party derived out of Pakistan People's Party
- Pakistan Tehreek-e-Insaf (PTI): centre-left
- Muttahida Qaumi Movement (MQM): self-proclaimed liberal
- Muttahida Majlis-e-Amal (MMA): far-right
- Jamiat Ulama-e-Islam (JUI-F): far right
- Jamaat-e Islami Pakistan(JI): far right
- Awami National Party (ANP): Democratic socialism
- Pak Sarzameen Party (PSP)
- Awami Workers Party (AWP): Left Wing
- Tehreek-e-Labbaik Pakistan (TLP): far right

Executive Power
The President is the chief of state and is elected by an Electoral College composed of the members of the Senate, the National Assembly and the provincial assemblies, for a five-year term. The President is the commander-in-chief of the armed forces. The President is supposed to have a largely ceremonial role; however, Presidents with an army background have played an influential role in mainstream politics throughout Pakistan's history. The Prime Minister is elected by the lower house of the parliament through a vote for a five-year term. The Prime Minister is the head of the government and enjoys the executive powers which include implementation of the law and running the day-to-day affairs of the country. The council of ministers (cabinet) is appointed by the President on the advice of the Prime Minister.
Legislative Power
The legislature in Pakistan is bicameral. The parliament consists of: The Senate (the upper house) having 100 seats, with its members indirectly elected by provincial assemblies to serve six-year terms; and the National Assembly (the lower house) having 342 seats, with its members elected by popular vote to serve five-year terms. The President can be impeached and removed from his office by a two-thirds majority vote of the National Assembly, but the Constitution of the country also grants the President the unique power to dissolve the National Assembly and also to dismiss the Prime Minister. The Prime Minister cannot dissolve the parliament.
 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Pakistan, please visit the Pakistan government’s Know About COVID-19 website with the official data.

For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Pakistan and the current sanitary measures in vigour, please consult the COVID-19 page.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), refer to the Federal Board of Revenue’s reports on imports and exports. Actions include: exemption of customs duties on 61 medical goods,  lifting the ban on the export of textile masks and sanitizers and a temporary export ban on certain personal protective equipment.

For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Pakistan on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the Pakistani government to address the impact of the COVID19 pandemic on the Pakistani economy, refer to KPMG Pakistan’s Government and institution measures in response to COVID-19 webpages.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Pakistani government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Pakistan in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Pakistani government to help small and medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, refer to ResearchGate’s report  COVID-19 (Coronavirus) on Small and Medium Enterprises (SMEs) in Pakistan.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
There are no specific support plans for exporters in Pakistan so far. For future possible up-to-date information please visit the website of the Pakistani Ministry of Commerce.
 

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