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Pakistan Economic Overview

Viewed historically, the Pakistani economic development is characterized by instability and strongly fluctuating growth rates. In the 1950’s and 1960’s, Pakistan was still seen as a model for other developing and transition countries and was described as a potential “Asia Tiger” in the same breath as India, China, South Korea and Malaysia. While the other countries mentioned have fulfilled the associated expectation, the hope of Pakistan to become an Asian Tiger has not been fulfilled.

According to historyaah, Pakistan has failed to sustain solid growth over the decades, nor has it been able to diversify its economy to meet the needs of the global economy. This, combined with other socio-economic and political factors, has resulted in around a third of Pakistan’s population still living below the poverty line. In addition, the Pakistani economy suffers from the effects of various humanitarian disasters (earthquake 2005, flood disasters 2010/2011), a persistent energy crisis combined with a population growth of 2.0%, mismanagement and a lack of economic reforms (e.g. with regard to nepotism, corruption and low tax rate), as well as an extremely fragile security situation. This inevitably results in an overall poor economic and investment climate. The government is facing enormous economic challenges – only fundamental and sustainable economic reforms can free the country from this precarious situation.

Economic structure

Currently, the agricultural sector accounts for around one fifth of gross domestic product (GDP), the industrial sector accounts for a quarter of GDP, and the largest trade and services sector accounts for over 50% of GDP. Despite having the smallest share of GDP, the agricultural sector is still very important because more than 40% of the population is directly employed in this sector and the existence of more than 60% of the rural population depends directly or indirectly on this sector. Within the industrial sector, the textile branch is particularly involved, making up around 60% of export profits. However, the textile industry is also currently suffering due to the ongoing energy crisis.In the last few decades the service sector has developed and expanded significantly. Important sectors here are banks, insurance, transport and communication. It remains to be seen how economic development can progress in view of the great challenges.

Current economic situation

In Pakistan is a signal of economic upswing to discover: The economy has been growing by more than four percent for years. For 2018, the International Monetary Fund (IMF) even indicates an increase of 5.6 percent. The state budget has stabilized and the Karachi stock exchange has seen a boom in recent years. This was achieved through radical reforms, partly supported by the IMF. Energy subsidies, which mainly benefited the wealthy, were abolished, and tax revenues were increased significantly by eliminating exemptions. Parts of the economy that were previously excluded are now also covered by the tax authorities. This allows spending on investments and social support measures to be increased significantly. But the partial reduction in power failures also brought decisive success. As a result, the industry can produce better and the revenues of the state electricity suppliers increase. This in turn reduces the budget deficit – a single, small success leads to many more.

At 60 percent of gross domestic product, the debt ratio is still quite high, especially when compared to other emerging countries. However, the budget deficit has halved to around four percent in the past four years. In addition, Pakistan has recently been able to significantly expand its foreign exchange reserves, and the poverty rate has also decreased. International investors have also discovered the country. In the past four years, the prices on the stock exchange in Karachi have more than quadrupled, last year alone the increase was 43 percent. This made the Pakistani stock exchange the world’s fifth best stock market in 2017.

With just under 9% of GDP, Pakistan still has one of the lowest tax rates in the world. The state-owned companies such as Pakistan Railways, Pakistan International Airlines and Pakistan Steel burden the state budget. Since the Pakistani state has very little income of its own, it is dependent on external financial injections. Pakistan as the sixth most populous country in the world with its growing middle class is a sales market on the global market that should not be underestimated.

Qatar Investments usher in a new era in bilateral relations

The Prime Minister’s Special Assistant for Information and Broadcasting, Dr. Firdous Ashiq Awan, thanked the Emir of Qatar Sheikh Tamim bin Hamad Al Thani and his cabinet for announcing a $ 3 billion package for Pakistan in direct investments and deposits. Dr. Awan said this will create new business opportunities in Pakistan and strengthen the government’s investment initiative. This is a testament to the confidence that international leaders have in the government of PM Imran and a first step in further developing Qatar-Pakistan relations. Dr. Firdous Ashiq Awan said the amount will help Pakistan meet its economic challenges.

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