Pakistan Political Economy

Pakistan Political Economy

Energy crisis

The energy crisis in Pakistan is one of the greatest challenges that the country must master if it is to prosper in the future. It has devastating effects on the country’s economic development, as the textile industry, for example, has suffered increased losses in recent years. It affects not only the industrial sector, but also large parts of society and the everyday life of people in Pakistan (schools, small businesses, etc.). More than half of the Pakistani population has access to electricity for less than eight hours a day. The Pakistan Economic Survey 2017-18 describes increasing demand for electricity with increasing population and consumer numbers in the next few years.

The causes of the energy problem are extremely complex and cannot only be traced back to the lack of energy resources (falling gas production, high dependency on oil supplies, low coal mining and low exhaustion of fossil and alternative energy resources). Other significant factors are the lack of good governance and political will.

Youth unemployment

According to homosociety, unemployment in Pakistan is currently officially around 6.1% (2018). The real unemployment rate should be set much higher, since the Pakistani economy is also heavily involved in the informal economy. The situation of young unemployed / unemployed men between the ages of 15 and 30, who make up around 28% of the total population, is particularly critical. The lack of prospects for unemployed young men harbors an increased potential for conflict and a potentially increased susceptibility to extremism. The large number of young people could, however, also be seen as a resource from which the country, the region and globally can be drawn in terms of manpower and expertise. One speaks of a “demographic dividend”that could be harvested in the next 40 years if Pakistan succeeds in investing enough in the younger generation and especially in their education.

Labor migration and remittances

As a result of this high unemployment coupled with a shortage of natural resources, especially in rural areas, there is increased labor migration not only to the big cities, but traditionally also to the Gulf States. Pakistan is one of the most important countries of origin for unskilled and semi-skilled workers on the global market (source: Schetter / Mielke, 2009). Remittances from migrant workers and guest workers currently amount to around 5% of GDP (around 14 billion) and are therefore considered very significant by the Pakistani government.

For example, the Pakistan Remittance Initiative (PRI) was founded as a joint initiative by the State Bank of Pakistan, the Ministry of Finance and the Ministry of Pakistani Abroad. The aim is to simplify the flow of remittances by allowing them to be transferred free of charge and tax.


Pakistan’s budget deficit has fallen to 4.5% of GDP (2016-17) compared to 5% in 2014-15. The deficits are mainly due to the high government subsidies for the energy sector as well as government spending on reconstruction after the flood disasters, disproportionately high military spending (4.2% of GDP) and high debt repayment (6.7% of GDP). The total debt is 67% of GDP (2017). These expenditures place a heavy burden on the public budget, not least because of the low tax rate of around 9% of GDP. Important investments that would be necessary to stimulate the economy or basic social investments in health and education are severely neglected (source including: Foreign Office).

Research on other topics of political economy is carried out in leading Pakistani think tanks such as the Sustainable Development Policy Institute (SDPI), Islamabad, and the Social Policy and Development Center, Karachi.

Pakistan Political Economy


The agricultural sector with the processing of agricultural products is still the most important industry in Pakistan. More than two fifths of all employed people are employed there. Agriculture is essentially based on the largest contiguous irrigation system in the world, which mainly extends over Punjab and Sindh. This was laid out under British rule in the 19th century.

The main agricultural products are cotton, wheat, rice and sugar cane. Other products include rapeseed, onions, citrus fruits and mangoes, as well as legumes. Fisheries and forestry also contribute to GDP. In particular, livestock and dairy farming, which are less weather-related and generate high added value, are becoming increasingly important.

Despite the generally not unfavorable conditions, the Pakistani landscape has to contend with great challenges. The flood disasters in 2010/11 made large areas of land uncultivable. In addition to the devastating weather influences, such as floods on the one hand and drought on the other, the lack of modern technological field management and processing options lead to a relatively low productivity in this sector. Coupled with other socio-political factors, this also leads to food insecurity in the country.

Despite these challenges, Pakistani agricultural production is said to have high potential.

Detailed technical information can be found on the following websites:

  • Ministry for National Food and Research (MNFR)
  • Pakistan Agricultural Research Council (PARC)
  • Pakkissan – a website that offers interdisciplinary analysis and assessment of the subject
  • Food and Agriculture Organization of the United Nations (FAO) – Pakistan Profile

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