Economic and Social Indicators of Pakistan
CURRENT ECONOMIC SITUATION AND
ECONOMIC INDICATORS
Pakistan is a developing country and is the world’s 27th
largest economy in terms of purchasing power. Endowed with
rich natural resources, strategic trade routes and a large
labour force, Pakistan was considered a model econ- omy in
the 60s. However, a history characterized by in- consistent
policy measures and corruption, complemented by fast-
growing population, poverty, costly border tensions and
unstable foreign investment has prevented Pakistan from
achieving its full economic potential.
In terms of structure of the economy, the commodity pro-
ducing sectors contribute about 45% of Pakistan’s GDP,
while services account for the remaining 55%. Agriculture
remains the single biggest sector with a contribution of
about 20% to the GDP, while manufacturing contributes a
little over 18%. Construction and the energy sector (elec-
tricity and gas distribution) contribute the rest of the share
of the commodity producing sectors.
The liberalization of Pakistan’s economy started in earnest
in 1991, during Nawaz Sharif’s first government. However,
economic growth remained weak in the 1990s due to policy
inconsistency and an unstable political environment. The
imposition of economic sanctions by the international com-
munity after the 1998 nuclear tests caused the economy to
crumble, with total debt standing at 99% of GDP in 1999.
Under Musharraf presidency, the economy underwent
structural and economic reforms, lowering the cost of doing
business in the country, and thereby positioning itself as one
of the four fastest growing Asian economies. During this
period, the national accounts were rebased, and the coun-
try’s GDP increased from $60 billion in 2000/01 to $170
billion in 2007/08 (fiscal year starts July 1st), with per
capita income doubling from under $500 to over $1,000.
During the same period, Pakistan’s tax base and govern-
ment revenue collection more than doubled from about Rs.
500b to over Rs. 1 trillion and the volume of international
trade increased from about $20 billion to nearly $60 billion.
The average annual GDP growth rate for the period from
FY2003 to FY2007 was 7%, and the period included two
years when growth topped 8% for the first time in Pakistan’s
history. In view of these positive developments, in 2005 the
Goldman Sachs Global Economic Group positioned Pakistan
in the Next 11, i.e. a group of countries with economies
that “might have the kind of potential for global impact that
the BRICs projections highlighted, essentially an ability to
match the G7 in size. 1 In the same year, the World Bank
named Pakistan the top reformer in the region, and in the
top ten globally.2
The period from 2008 to date has been characterized by
a marked deterioration in major economic indicators. By
November 2008, the country was facing a balance of pay-
ments crisis, prompted largely by international fuel price
increases, and had to negotiate a Standby Arrangement
worth $11.3 billion with the IMF. 3 GDP growth plunged to
1.7% in FY2009, as the large-scale manufacturing sec-
tor decelerated by 8% in the face of power shortages.
The economy made a mild recovery the next year, only to
be plunged in crisis once again, as devastating floods hit
the country in August 2010. Initial damage needs assess-
ments conducted by the IFIs under the aegis of the Plan-
ning Commission indicated that the country would require
up to $10.85 billion to fully rehabilitate the displaced (num-
bering up to 20 million at one time, many of whom then re-
turned to their homes as waters receded); and resurrect
their livelihoods, as well as rebuild essential infrastructure
which was destroyed (GOP/PC et. al., 2010).The flooding
further weakened the struggling economy, contributing to
the low growth rate of 2.4% in the fiscal year ending June
2011.
Pakistan’s average growth rate over the last four years
has remained just under 3%. The government has not of-
ficially released poverty incidence figures for the last six
years, but most independent analysts agree that poverty
has increased substantially. The economy has also suffered
due to the mounting costs associated with the deteriorat-
ing security situation. According to a recent assessment
by the government, the costs of combating militancy have
added up to $67.93 billion,4 or almost 40% of current
GDP, over the last decade. The deterioration in most of
Pakistan’s macroeconomic indicators is apparent from the
table I.
Pakistan’s current account balance has been in deficit for
much of the country’s history, and most of the past decade
was no exception. However, the current account did show
a surplus for the years from FY2002 to FY2004, largely
on account of the increase in current transfers following
the events of September 11. The fiscal deficit remained
above 4% of the GDP for most years, decreasing only in
the “boom” years from FY2002 to FY2005. In spite of
having an IMF program in place from FY2008 onwards,
the deficit has only increased in the last four years, as
the government has faced increasing pressures on the ex-
penditure account. Inflation has been a major issue since
FY2008, rising to a record high (for Pakistan) of over 20%
in FY2009. Remittances have been steadily increasing,
and have had a large part to play in stabilizing Pakistan’s
external accounts. This increase in remittances is thought
1
PA KI S tan: Co UN TR y P R o FILE

to be largely the result of the diversion of flows to bank-
ing channels. Once again, this use of the formal money
transfer systems was occasioned largely by the increased
scrutiny of financial transactions by international authori-
ties post 9/11.
Pakistan has had a persistent problem with low
of saving and investment, as shown in the table below.
Gross investment hit a maximum of 23.7% of GDP in the
FY2007, but has since regressed to a new low of 17.5%
in FY2010. Public investment has fallen steadily over the
last decade, as the government has struggled to find fiscal
space. Private investment picked up the slack in the mid-
dle of the last decade, but the economic troubles of the
last four years have acted as a dampener on private sec-
tor growth, and investment has consequently fallen from
a high of over 16% of GDP in FY2006 to just over 11%
in FY2010.
Recent fiscal policy in the country has been character-
ized by (largely unsuccessful) efforts to try and hold the
deficit down to below 5% of GDP. Pakistan’s tax to GDP
ratio has remained stagnant at the low level of about 10%
for the last five to six years, and the government has been
unable to either bring more taxpayers into the tax net,
or to impose a wide-ranging consumption tax in the form
of a value added tax (VAT) as suggested by the IMF. The
government’s domestic debt has almost doubled between
FY2009 and FY2011 – from Rs. 3.8 trillion to just over
Rs. 6 trillion. Domestic debt is now equivalent to 33% of
the GDP. The domestic debt of public sector enterprises
alone is estimated at Rs. 411 billion, compared to Rs. 290
billion two years ago.
As the resource crunch has intensified, and expected
aid flows have failed to materialize, the government has
implemented a loose monetary policy, with excessive bor-
rowing from the central bank, to finance its expenditure.
In the first four months of the current fiscal, i.e. from July
to October 2011, total borrowing from the State Bank
amounted to Rs. 305 billion (or 2.6 billion Euros), or Rs.
2.5 billion (or 21 million Euros) a day. This is Rs. 0.7 billion
(or 5.8 million Euros) higher than the per day borrowing
levels at the approximately the same time last year. In a further
loosening of control, the central bank cut the discount rate
twice in four months from July to October 2011. This loose
monetary policy is at least partially responsible for fuelling
inflation, and will in the long term contribute to structural
imbalances in the economy.
ECONOMIC SECTORS
Agriculture
Agriculture used to account for the bulk of the GDP until the
1960s, but the share of the sector in total GDP began to
decrease in the last three decades. Currently, agriculture
accounts for 20.9% of GDP and employs 45% of the labour
force. The four most important crops are cotton, wheat,
rice and sugarcane which together account for nearly 30%
of the value of total crop output. Livestock contributes over
55% of agriculture value added, more than the major and
minor crops combined.
Growth in the sector has remained largely stagnant over
the last decade. Agriculture suffered a serious setback at
the beginning of the last decade when a lingering drought
caused a sharp fall in the production of major crops. The
sector recovered over the period from FY2003 to FY2007,
with an average growth rate of 4.6%, but once again this
progress was uneven. Major crops did exceptionally well in
some years, boosting the average, but were just as liable to
show sharp drops in production in other years (for example
in FY2006) mainly due to pest attacks, or sometimes due
to water shortages. Over the last four years agricultural
growth has again stagnated appreciably, with major crops

Table I. Key MacroeconoMIc IndIcaTors of PaKIsTan

(1997-2011)
Current Account Fiscal Deficit Foreign Exchange Reserves Remittances
Year1 Balance (% of GDP) (% of GDP) Inflation (%) (Million $ as of 30 June) (Billion $)
CID OB I NT ERN aTIO nal YEARBO o K 2012

FY97-99 Average (4.4) (6.5) 8.2 - -

FY2000 (1.6) (5.4) 3.58 1,973.6 -
FY2001 (0.7) (4.3) 4.41 3,231.5 -
FY2002 1.9 (4.3) 3.54 6,435.6 2.39
FY2003 3.8 (3.7) 3.10 10,769.7 4.24
FY2004 1.3 (2.4) 4.57 12,389.3 3.87
FY2005 (1.6) (3.3) 9.28 12,597.6 4.17
FY2006 (4.5) (4.3) 7.92 13,122.4 4.60
FY2007 (5.1) (4.3) 7.77 15,647.2 5.49
FY2008 (8.6) (7.4) 12.0 11,398.7 6.50
FY2009 (5.7) (5.3) 20.77 12,425.2 7.81
FY2010 (1.7) (4.9) 11.49 16,750.4 8.91
FY2011 (0.1) (6.6) 13.7 18,243.8 11.2

NB: Figures in brackets show a deficit.

1. FY: Fiscal Year: from 1 July to 20 June.
Source: Pakistan Economic Survey, Various Issues. Foreign exchange reserve data from State Bank of Pakistan. Remittances data
from Board of Investment.

10
 Services

Econo M I C AND So CIAL I NDICAto R S of PAKI S tan

showing negative growth for three of the last four years.
Overall agricultural growth has been boosted by the steady
growth in the livestock sector, which remains relatively im-
pervious to weather conditions and pest attacks. Despite
intensive farming practices, Pakistan remains a net food
importer. Structural problems such as lack of infrastruc-
ture, water scarcity and mechanisation remain long-term
impediments to agricultural growth.
Manufacturing
The manufacturing sector accounts for about
GDP, and has witnessed many ups and downs in the last
decade. Large scale manufacturing growth was high in
the middle of the last decade, with annual growth rates of
almost 20% in FY2004 and FY2005. This growth spurt
was occasioned by significant investment in the textile sec-
tor, and by an increase in the manufacture of automobiles,
spurred on by the spike in consumer financing facilities. By
the end of the decade, manufacturing had been badly hit
by the growing energy crisis, with growth rates falling to
averages of 3 to 4 percent. Small scale manufacturing ac-
counts for over 80% of the total manufacturing capacity in
Pakistan, but since small and medium enterprises operate
mainly in the informal sector, small scale manufacturing
is not well-documented in the country. The growth rate of
this category of manufacturing is estimated at a consistent
7.5% in the Pakistan Economic Survey.
Cotton textile production and apparel manufacturing are
Pakistan’s largest industries, accounting for over 60% of export
earnings of the country and 46% of total manufac- turing.
Other major industries include food, beverage and tobacco,
petroleum, pharmaceuticals, automobile, steel, fertiliser and
non-metallic mineral products. The mining and quarrying
sector contributed 2.4% to GDP in 2010- 2011.
Over the past decade it has become evident that the serv-
ices sector has been the main driver of the economy, with
its share rising to 53.3% in 2010-2011, the highest in two
decades. The sector grew by 4.1% this period, and contrib-
uted to 90% of GDP growth. The sector consists of the fol-
lowing sub-sectors: Transport, storage and communication;
wholesale & retail trade; finance and insurance; ownership of
dwellings; public administration and defence; and social serv-
ices. The current year’s performance is dominated by public
18.7%of administration and defence and social services where value
addition grew by 13.2% and 7.1%, respectively.
TRADE
Pakistan has been increasingly integrating with global mar-
kets over the last two decades. Substantial progress has
been made in lowering trade barriers, through the reduc-
tion of trade tariffs, state interventions, improved sharing
of information and signing various free trade agreements.
Despite these positive developments, the wider picture
shows great barriers to trade in the Pakistani economy,
with high cost of doing business, complex regulation and
infrastructure bottlenecks all having a detrimental effect on
growth. The 2012 World Bank Ease of Doing Business in- dex
ranked Pakistan at 105, 5 dropping from 96 in 2011.
Internally, Pakistan faces the challenge of competitive-
ness, with a value chain analyses conducted by the World
Bank identifying a number constraints to trade, including
problems trade logistics, availability and cost of electricity,
labour market rigidities, the food safety standards regime,
and slow duty-drawback payments.6 Further impediments
include access to credit, lack of infrastructure and consist-
ent corruption, as indicated by Transparency International,
which ranks Pakistan 134 out of 182, with a score of 2.5 in
the Corruption Perception Index (CPI). 7

Table II. InvesTMenT (2000-2010)

Year Gross Total Investment Gross Fixed Investment Public Investment Private Investment

% of GDP (current factor cost)

FY2000 18.68 17.21 6.03 11.18

FY2001 18.47 17.00 6.09 10.91
FY2002 18.02 16.60 4.49 12.11
FY2003 18.23 16.43 4.27 12.16
FY2004 17.81 16.09 4.35 11.74
FY2005 20.26 18.54 4.61 13.92
FY2006 23.58 21.87 5.14 16.73
FY2007 23.72 22.03 5.81 16.22
FY2008 22.76 21.11 5.59 15.52
FY2009 19.99 18.29 4.88 13.42
FY2010 17.57 15.87 4.57 11.30

Source: State Bank of Pakistan, Annual Report, Various Issues.

3
PA KI S tan: Co UN TR y P R o FILE
Merchandise exports rose to $20.2 billion in July 2010
- April 2011 as against $ 15.8 billion in the comparable
period of last year, thereby showing an impressive growth
of 27.8%. The growth in exports remained broad based as
almost all the groups (textile and non-textile) witnessed a high
positive growth. The textile sector and food group contributed
61.8% and 18.1% respectively to overall exports growth July
2010 – March 2011. Pakistan’s main exports were Cotton
Manufactures, Leather and Leather-Manufactured Goods
and Rice, which each held a share of 53%, 4.4% and 8.9%
respectively, for the period July 2010 – March 2011. Other
exports include wheat, petroleum, sports goods, cement,
chemical and pharmaceutical products.
Pakistan’s main export destinations are USA, UK, Ger-
many, Hong Kong, U.A.E and Afghanistan. USA continues
to be the most favourite export destination with a current
16.1% share (July 2010 – March 2011), yet this share
has been decreasing from 25.5% in 2005-06, mainly
due to weakening economic activity in the USA amidst
the global financial crisis. The remaining countries’ share
has been relatively stable over the years, with the current
period UK and Germany holding a share of 5.1% each,
Hong Kong 2.3% and UAE 7.4%. In the recent past, Af-
ghanistan is emerging as an increasingly important export
destination, with its’ share rising from 6.5% in 2005-06
to 9% currently. However, since 2005-2006, the share of
exports to these destinations have decreased from 53.7%
in 2005-06 to 45% in July 2010 – March 2011 both due
to a reduction in trade with the USA as well as diversifica-
tion to regional markets, China and Bangladesh.
Merchandise imports increased to $32.3 billion in July-
April 2010-11 as against $ 28.1 billion in the comparable
period of last year, thereby showing an increase of 14.7%.
The overall import bill is higher by $ 4.1 billion, reflect-
ing the impact of higher global crude oil and commodity
prices. Pakistan’s main imports were Petroleum Products
(15.2%) and Crude Petroleum (11.9%), Edible Oil (5.1%)
and Chemical Products (8.3%), for the period July 2010
– March 2011. Along with petroleum, the majority of Pa-
kistan’s imports consist of raw materials for consumer
goods, accounting for 52% of the total share. Other im-
CID OB I NT ERN aTIO nal YEARBO o K 2012
ports include sugar, tea, pulses, generators, machinery
and vehicles.
Pakistan mainly imports from UAE (13.3%), Saudi Arabia
(11.7%), Kuwait (6.8%), Malaysia (5.7%), USA (4.3%),
Japan (4.1%), Germany (2.3%) and the UK (1.6%). These
countries together account for nearly 50% of the country’s
imports in any given year.
INVESTMENT
Despite the enormous potential opportunities available in
Pakistan, its economic and political instabilities have made
investors wary. With strong structural reforms, the invest- ment
environment improved in mid-2000s, with investors inching into
the country, investing in textiles, financial busi- ness and
construction. The severity of the international
4
financial crisis saw an immediate shrinkage in investment,
with a reduction from $5.4 billion in 2007-2008 to $1.57
billion in 2010-2011. Major investors were US, UK and
UAE, together making up nearly 50% of investment in the
past decade. The government’s policy of privatization of
public sector entities again being taken as one of the most
important factor which is to attract foreign investment at a
massive scale in Pakistan.
ECONOMIC RELATIONS WITH SPAIN
Without being a major Asian market for the Spanish econ-
omy, trade relations between Madrid and Islamabad have
maintained an upward trend in the last decade. Spanish
exports have doubled in ten years, reaching 134 million €
in 2011, showing a steady progression, though it still have
a long way ahead. As regards imports, these have shown
a similar trend, from 194 million € in 2000 to 429 million
in 2011, exceeding the impact of the economic crisis in
2009. The bilateral trade balance shows a clear histori-
cal deficit that has come in 2011 to almost 300 million €.
The main products exported by Spain are machinery (15%),
cast iron and steel (11%) and ceramic products (7%), while
the main materials imported are clothing (23%), other tex-
tiles (19%), cotton (15%), and leather goods (10%).
TRADE AND REgIONAL INTEgRATION
AgREEMENTS
Pakistan has always followed a policy of actively trying to im-
prove regional and international trade through trade missions,
multilateral and bilateral agreements and treaties. Pakistan is
a member of the World Trade Organisation (WTO), the World
Intellectual Property Organisation (WIPO), the Organisation
of Islamic Cooperation (OIC) and South Asian Association for
Regional Cooperation (SAARC) in a bid to bolster economic
and trade relations. With its strategic location along the Silk
Route, Pakistan can play a much larger role promoting re-
gional trade to the Middle East and Central Asia, as well as
further towards East Asia. Regional trade continues to in-
crease, in particular with China, Bangladesh and Afghanistan,
and prospects with Iran are increasing with several proposed
infrastructural projects, including a pipeline for natural gas.
India granted Pakistan the Most Favoured Nation status in
1995, and the move was finally reciprocated by Pakistan in
November 2011, fourteen years later.
Economic Cooperation Organisation (ECO)
In 1965, Pakistan, Iran and Turkey signed the Regional
Cooperation for Development (RCD) Pact. After the Iranian
revolution, RCD became defunct, and a new group, the Eco-
nomic Cooperation Organisation (ECO) was established in
1985. ECO was established to promote scientific, cultural
and technical cooperation amongst the countries, and to
provide a platform to discuss trade, development and in-
vestment opportunities. In 1992, Afghanistan, Azerbaijan,
Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uz-
bekistan also joined ECO.
 graPH I. eXPorTs and IMPorTs of PaKIsTan Table III. foreIgn Trade of PaKIsTan

Econo M I C AND So CIAL I NDICAto R S of PAKI S tan

2004-2011 (Million $) Per secTors 2010-2011

50,000 Million $ %
EXPORTS PER SECTORS
Imports Textile production 13,634 55.0
40,000
Agriculture / Food 4,280 17.3
Manufacturing sector and engineering 2,444 9.9
30,000 Metallurgical sector and mining 1,828 7.4
Exports Others 2,623 10.6
20,000 ToTal ft4,809 100.0
IMPORTS PER SECTORS
Minerals, oil and oil-based lubricants 12,583 35.8
10,000
Machinery and transports 7,416 21.1
Source: State Bank of Pakistan
Produced by CIDOB Chemical products 6,136 17.5
0,000 Other manufactured goods 4,284 12.2
Food and animals 2,483 7.1
Vegetable and animal oils 2,205 6.3
-10,000
Trade balance ToTal 35,107 100,0
Note: Period: July 2010-June 2011
-20,000 Source: Pakistan Economic Survey Produced by CIDOB

-30,000
2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

Table Iv. foreIgn Trade of PaKIsTan

by coUnTrIes 2011
Million $ %
EXPORTS OF PAKISTAN PER COUNTRY
graPH II. foreIgn dIrecT InvesTMenT USA 4,101 16.2
2000-2011 (Million $) Afghanistan 1,864 7.4
UAE 1,855 7.3
2,500
Oil and gas China 1,645 6.5
United Kingdom 1,278 5.0
Financial Business Germany 1,216 4.8
Textiles
Bangladesh 907 3.6
2,000
Turkey 751 3.0
Trade Italy 739 2.9
Hong Kong 699 2.8
Construction
Spain 540 2.1
1,500
Power France 507 2.0
Others 9,253 36.5
Chemical
ToTal ft5,355 100.0
Transport IMPORTS OF PAKISTAN PER COUNTRY
1,000
UAE 5,811 16.2
Communication (IT&Telecom)
Saudi Arabia 4,450 12.4
Others China 4,144 11.6
Kuwait 2,985 8.3
500
Singapur 2,515 7.0
Malaysia 1,773 4.9
Japan 1,583 4.4
India 1,445 4.0
0
USA 1,119 3.1
Fuente: Board of Investment, Pakistan Germany 947 2.6
Produced by CIDOB
Switzerland 872 2.4
United Kingdom 662 1.8
-500
Others 7,566 21.1
2000-2001

2001-2002

2002-2003

2003-2004

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

ToTal 35,87ft 100.0%

Note: Period: July 2010-June 2011.
Source: Pakistan Economic Survey Produced by CIDOB

5
 graPH III. MaJor InvesTors In PaKIsTan
PA KI S tan: Co U NT R y P R o FILE

South Asian Free Trade Agreement (SAFTA)

2000-2011 (per country and million $)
In 2004, several South Asian countries signed the South
6,000 Asia Free Trade Agreement (SAFTA), with the goal of gradu-
Others
ally eliminating tariffs, customs duties and other trade bar-
China riers, on the movement of goods and services in 2012. The
5,000 Norway member states are: Bangladesh, Bhutan, India, Maldives,
South Korea Nepal, Pakistan, Afghanistan and Sri Lanka.

Germany
Pak-Sri Lanka Free Trade Agreement
4,000 Saudi Arabia The Pakistan-Sri Lanka Free Trade Agreement was signed
Switzerland in 2002 and became operational since 2005. Under the
Hong Kong Agreement both sides offer preferential market access to
3,000 each other’s exports by way of tariff concessions, with Sri
Japan
Lanka benefitting more through the provision of duty-free
United Arab Emirates access to double the amount of goods compared to Paki-
2,000 United Kingdom stan.
US
Afghan-Pak Transit Trade Agreement (APTTA)
In 2010, Pakistan and Afghanistan signed the Afghan-Pak
1,000
Transit Trade Agreement (APTTA), allowing Afghan truckers
access to the ports of Lahore, Gwadar and Karachi. The
Agreement was an update of an earlier transit trade agree-
0
ment signed in 1965. In general, Afghan Transit Trade has
a controversial history in Pakistan. ATT logistics and trans-
-500
actions are basically considered as fronts for a significant
2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

smuggling operation –according to depositions made before

the National Assembly’s Standing Committee on Finance
last January, about $5 billion worth of smuggled goods en-
Source: Board of Investment, Pakistan ter the country via the ATT, representing a revenue loss of
Produced by CIDOB
about $2.5 billion to the national exchequer. The ATT, in
short, is thought to be responsible for three-fourths of the
value of smuggled items available in Pakistan. Key demands
graPH Iv. Trade sPaIn-PaKIsTan on ATT regulation from the Pakistani side have thus includ-
2000-2011 (Million €)
ed harmonization of tariffs and duty valuation methods on
both sides of the border, allowing Pakistani authorities to
700
Source: Datacomex collect duties for ATT goods in Karachi, and then transfer-
Produced by CIDOB ring funds to the Afghan government, and, most important,
600
making it mandatory for Afghan importers to open letters
Total trade
of credit from within Afghanistan, thus precluding the pos-
500
sibility of orders being placed for imports which are patently
not required or wanted in the Afghan market.
CID OB I NT ERN aTIO nal YEARBO o K 2012

400

Imports Malaysia-Pakistan Closer Economic Partnership Agreement

300
(MPCEPA)
200 In 2007, Malaysia and Pakistan signed the Malaysia-Paki- stan
Exports Closer Economic Partnership Agreement (MPCEPA), with the
100 goal to liberalise trade in industrial and agricultural products
and cooperate in bilateral capacity building and technical
0
cooperation.

-100
Pak-China Trade Agreement
In 2005, Pakistan and China announced the establish-
-200
Trade balance ment of a free trade area with the goal of tripling bi-
-300 lateral trade between the countries, including the trade
of goods, investments and services. The bilateral Early
-400 Harvest Programme was also incorporated into the FTA,
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

with an elimination or reduction in duties of a list of goods

from both countries.

6
Pak-Mauritius Preferential Trade Agreement
The Preferential Trade Area between Mauritius and Pa-
kistan was signed in 2007, with the main objectives to
strengthen economic and commercial relationship between
the two countries and increase trade of goods and serv-
ices, with concessions granted on a list of products to both
countries.
DEVELOPMENT COOPERATION
Historically, Pakistan has received large volumes of aid,
but has not made effective use of the inflows, and aid may
even have helped successive governments to put off nec-
essary structural reform. In the past decade, Pakistan has
witnessed several defining moments resulting in significant
inflow of aid into the country. In 2001, Pakistan allied with
the USA in the war on terror, which resulted in the dramatic
increase of aid from the USA and from multilateral agen-
cies. In 2005, the devastating earthquake in Kashmir that
killed nearly 80,000 and left over 2 million homeless resulted
in an outpouring of aid by the foreign community. In 2009,
the Pakistani army tackled in the Taleban insurgency in the
North-West of the country and displaced nearly 2 and a half
million in a short period of time. The initial cost estimates
after the 2010 floods was a figure of $10.85 billion required
to fully rehabilitate the 20 million displaced. The following
year saw the worst-hit areas inundated once more, displac-
ing over 2 million. These events have resulted in an additional
substantial outpouring of emergency aid for Pakistan, both
bilaterally and multilaterally. However, long-term assistance
has not materialized to the extent expected in the last few
years. Numerous criticisms on part of the government on
the corruption and mismanagement of funds have resulted in
the hesitation of donors in meeting pledges.
Currently the USA is the biggest source of bilateral aid to
Pakistan, but this has not always been the case, as USA
assistance was suspended through much of the 1990s. In
signing the Kerry-Lugar-Berman bill in 2009, also known as
the Enhanced Partnership with Pakistan Act, the USA has
tripled its development assistance to the country, allowing
an inflow of $7.5 billion over five years’ time from 2009
on. Since the debacle surrounding the killing of Osama Bin
Laden by USA forces on Pakistani soil, aid inflows have
been on hold. Relations with the UK have always remained
strong, due to the long history between the two countries
and the large diaspora of nearly 1 million people of Pakista-
ni origin living in the UK. UKAID’s 2011-2015 strategy has
budgeted nearly $2.2 billion for Pakistan, with the focus
on poverty eradication, health, education and humanitarian
assistance.
The Asian Development Bank is Pakistan’s biggest mul-
tilateral partner, with record high pledges of $1.7 billion
in 2009. Since joining the ADB in 1966, Pakistan has re-
ceived $20.89 billion in loans, a quarter of which remains
to be disbursed. In its 2009-2013 country strategy, ADB
has planned $4.4 billion in assistance, emphasizing infra-
structure development and economic reforms, with an av-
erage annual lending of nearly $1.5 billion.
Econo M I C AND So CIAL I NDICAto R S of PAKI S tan
The World Bank had envisioned financing of up to $6.5 bil-
lion from 2006 to 2009, yet with the onset of the political,
economic and security crises, the amount shrank to $4.6
billion for the period. IFC on the other hand, exceeded the
target of $500-600 million with a commitment of $960
million during the period. The World Bank’s 2010-2013
strategy focuses on governance, social protection and hu-
man development, infrastructure and security. The prior-
ity lending program amounts to an estimated $3.7 billion
(IBRD/IDA) through 2012, IFC intends to invest between
$1.3 and $1.5 billion provided that the economic and secu-
rity situations do not deteriorate significantly, and a further
$100 million in complementary grant financing of at least
$100 million for the MDTF for the Northwest Border Re- gion
will be administered.
Following the 2008 economic crisis, the IMF extended a
line of credit initially negotiated at $7.6 billion, later revised
to $11.3 billion. Conditions attached to this loan include
the elimination of electricity and oil subsidies, reform of do-
mestic taxation, reduction of the federal deficit, and the ex-
pansion of the social safety net. Amidst disagreements on
structural reform and inabilities to meet revenue enhancing
conditions, Pakistan chose to forfeit the last tranche of
$3.7 billion in 2011.
DEMOgRAPHY AND SOCIAL INDICATORS
At the time of independence, the population count was
32.5 million. The last official population census took place
in 1998. A new census is now due, although the exercise
has yet to commence. In 1998, the population was count- ed
to be 132.35 million. 8 In the inter-census period, the
population for each year is estimated on the basis of demo-
graphic and fertility studies. According to this estimate, Pa-
kistan’s population in mid-2011 is estimated at 177.1 mil-
lion, growing at annual rate of 2.07%, with urban growth
rate nearly 3%. However, many estimate the population to
be as much as 10 million more than the suggested official
figure. The current population growth rate has declined
consistently from the 1960s, when the rate was as high as
3.66% (1961 – 1972), and can be attributed to a modest
decline in fertility and mortality rates and an improvement
in medical services. In 2010, it was estimated that over
35% of the population was 14 and under, while over 57%
constituted of the ages 24 and under. Although the fertility
rates have been decreasing 0.1% per year since 2005, the
current rate of 3.5% remains very high compared to the
Asian average of 2.4%, and more efforts need to be made
in population planning.
In 2010, Pakistan was the 9 th largest country in the world
in terms of its labour force, with 54.9 million or 31.6% of
its population in the labour force, and an unemployment
rate of 5.5%. Agriculture still provides the bulk of employ-
ment with a share of 45%, followed by Wholesale and Re-
tail Trade with 16% and Manufacturing with 13%.
7
PA KI S tan: Co UN TR y P R o FILE

Education in Pakistan allocated 2.5% of GDP to education in the year

The 2010-2011 federal budget indicated a 69.5% allo-
cation of expenditure to General Public Service, followed
by 22.1% for Defence, 3.4% for Economic Affairs and a
2.07% for Education, Health and Social Protection com-
bined. 9 According to official data, the federal government
2006-07, 2.47% in 2007-08, 2.1% in 2008-09 and 2%in
2009-10, which shows a persistent declining trend. The
overall literacy rate is 57.7%, with 69.5% for males and
45.2% for females. Literacy remains higher in urban areas
(73.2%), as compared to rural areas (49.2%).

Table v. ToTal loans and credIT conTracTed

(2006-2011) (Million $)
Lending Country/Agency 2006 2007 2008 2009 2010 2011
France - 50.2 - - 103.6 103.9
Germany - 5.8 - 138.3 20.2 -
Italy - - 11.4 - - 53.4
Japan 244.7 197.8 460.4 - 249.4 237.5
IBRD 319.2 100 - 173.6 - 261.4
IDA 1,165.8 891.2 233.7 1,272.3 508.4 603
ADB 1,036.9 1,386.3 1,436.8 1,759.9 711.9 892.6
IFAD 53.6 - - - 18.8 -
European Investment Bank - - - - 149.5 -
ECO Trade and Development Bank - - - - - 10
China 322.3 10.4 327.7 800 1,979.8 213.7
South Korea 17.3 20 205 - -
Kuwait - 38 - - 49.8 42.6
Saudi Arabia - 133 - 135 380 100
OPEC Fund - 10 5.3 36 31.1 -
Islamic Development Bank 121.3 200 127 287.8 362.2 220
ToTal 3,ft81.1 3,0ftft.7 ft,6ftft.ft 4,797.9 4,564.7 ft,738.1

Source: State Bank of Pakistan Annual Report 2011 Produced by CIDOB

Table vI. esTIMaTes of foreIgn assIsTance

2012 (RS Million)
Lending country/Agency Loans Grants Total (Rs. Million) Share of total
IDA 86,233.91 - 86,233.91 19.75
Privatization - 70,400.00 70,400.00 16.12
ADB 47,634.22 - 47,634.22 10.91
IDB 47,589.00 - 47,589.00 10.90
Euro Bonds 44,000.00 - 44,000.00 10.08
CID OB I NT ERN aTIO nal YEARBO o K 2012

Japan 38,168.35 2,249.00 40,417.35 9.26

Kerry Lugar - 34,164.15 34,164.15 7.83
Tokyo Pledges 13,895.20 3,660.80 17,556.00 4.02
China 10,563.17 1,767.00 12,331.17 2.82
UK - 9,451.36 9,451.36 2.16
Saudi Arabia 5,159.42 458.90 5,618.22 1.29
European Union - 2,469.00 2,469.00 0.57
Germany 1,156.00 2,186.71 3,342.71 0.77
France 3,151.00 - 3,151.00 0.72
IBRD 3,340.00 - 3,340.00 0.77
IFAD 1,843.54 - 1,843.54 0.42
OPEC 789.00 - 789.00 0.18
USA - 1,326.84 1,326.84 0.30
Others* 3,207.20 1,724.67 4,931.87 1.13
Total 306,731.01 1ft9,858.34 436,589.35 100.0
*Australia, South Korea, Oman, Kuwait, Norway, Italy.
Source: Federal Budget Estimates of Foreign Assistance 2011-12, GOP, Finance Division Produced by CIDOB

8
 Table vII. Key deMograPHIc IndIcaTors

Econo M I C AND So CIAL I NDICAto R S of PAKI S tan

(2010-2011*)
Indicator
Total Population (million) 177.1
Urban Population (million) 65.3
Rural Population (million) 111.8
Total Fertility Rate (percent) 3.5
Population Growth Rate (percent) 2.07
Life Expectancy – Males (years) 64.18
Life Expectancy – Females (years) 67.9
*As of the 1st of July
Source: Pakistan Economic Survey 2010-11 Produced by CIDOB

Table vIII. rUral neT enrolMenT IndIcaTors

(2008-2011) (%)
Indicator/Year 2008-2009 2010-2011
Males Females Total Males Females Total
Primary Enrolment Rate (5-9) 58 48 53 57 48 53
Secondary School Enrolment Rate (10-12) 19 13 16 19 14 17
Matric Enrolment Rate (13-14) 10 7 9 21 15 18

Source: UNICEF Produced by CIDOB

Table IX. Urban neT enrolMenT IndIcaTors

(2008-2011) (%)
Indicator/Year 2008-2009 2010-2011
Males Females Total Males Females Total
Primary Enrolment Rate (5-9) 68 67 68 67 65 66
Middle School Enrolment Rate (10-12) 27 28 27 27 31 29
Matric Enrolment Rate (13-14) 17 18 18 32 34 33

Source: UNICEF Produced by CIDOB

Table X. HealTH IndIcaTors Table XI. PoverTy IncIdence

(2010) (1999-2006)
Indicator 2010 Headcount Poverty Severity
Year
Life Expectancy 67.2 Ratio (Percent) Gap of Poverty
Infant Mortality Rate per 1000 63.3 FY1999 30.60 6.4 2.0
Maternal Mortality Ratio per 1000* 250 FY2001 34.5 7.0 2.1
Mortality Rate under 5 per 1000 89 FY2004 _ _ _
Expenditure as a % of GDP 0.23 FY2005 23.9 4.8 1.5
FY2006 22.3 4.0 1.1
*UNICEF estimates 2006-2010
Source: UN Produced by CIDOB Source: Pakistan Economic Survey, 2009-10. Produced by CIDOB

With issues of low access, quality and governance, coupled
with a fragmented educational system and low schooling invest-
ments, education indicators remain dismal. Education indicators
are characterized by disparity across regions (provinces, and
within the provinces, urban/rural divisions) as well as by gender.
While some districts of northern Khyber Pakhtunkhwa and north-
ern Punjab have literacy and enrolment rates at par with middle
income economies, there are areas such as Balochistan or the
Federally Administrated Tribal Areas (FATA) where these indica-
tors are worse than those of sub-Saharan Africa.
For primary enrolment rural and urban indicators are similar,
however rural enrolment decreases considerably for middle
school and matric classes, as compared to urban enrolment.
It is evident that a large majority of the children drop out after
primary school to join the labour force, as there is no legal
framework to regulate compulsory education. Low enrolment
rates also highlight the challenges Pakistan faces in reaching
100 percent literacy rate.

9
PA KI S tan: Co UN TR y P R o FILE
Health
Despite the fact that Pakistan has made progress during
last couple of years towards achieving ambitious health
targets yet the pace has been sluggish, with low govern-
ment allocation to health. Pakistan still suffers from a high
infant and maternal mortality rate, a heavy burden of both
communicable and non-communicable diseases, and inad-
equate health care facilities combined with high popula-
tion growth. Malnutrition, mortality, morbidity and slow
progress of indicators in the maternal and child health are
major concerns in the progress towards achieving Millen-
nium Development Goals.
Extreme disparities remain between rural and urban
health, with inadequate health and sanitation facilities in
rural areas contributing to higher incidence of poverty and
related problems. Access to health services is estimated
to be available to only 55% of the population, and this
decreases from urban to rural areas, and drastically with
respect child and maternal health. The private sector has
compensated through small clinics, yet lack of regulation
leaves quality of care at sub-standard levels. The main
causes of death are Acute Respiratory Infections (ARI),
Viral Hepatitis, Malaria and Diarrhoea. During the 2010
floods, several hundred cases of cholera and dengue fever
were reported. With regard to the AIDS, the epidemic is
well-established in the country and according to some is
even expanding. Risk factors are high rates of commercial
sex and non-marital sex, re-usage of injections and low us-
age of condoms. UNAIDS states there are approximately
97,000 people living with HIV in Pakistan, while other ex-
perts estimate the figure to be less than half. In 2011,
the Federal Ministry of Health was dissolved by the govern-
ment, with the intention that the provincial health depart-
ments take responsibility for the implementation of public
sector health programs.
Poverty
Wealth distribution in Pakistan remains highly uneven and
a lack of political commitment to poverty eradication, in-
consistent implementation of policy, and low levels of in-
vestment have perpetuated the situation. Pakistan’s Hu-
CID OB I NT ERN aTIO nal YEARBO o K 2012
man Development Index rank is 145 out of 187 countries,
with an average of 0.504, well below the regional average of
0.548. 10
According to official poverty data released by the gov-
ernment in FY2005 and then FY2006, poverty incidence
came down from 30% in 1999 to 22.3% in 2006 as
shown in the table below.
No official poverty estimates have been released for the last
six years, but with the deterioration in general eco- nomic
conditions, poverty is expected to have increased significantly.
As in the case of socio-economic indicators, poverty incidence
too is highly variable across different re- gions.
10
Notes
1. “Next 11” group includes Mexico, Nigeria, Egypt,
Turkey, Iran, Pakistan, Bangladesh, Indonesia, Vietnam,
South Korea and Philippines. Goldman Sachs Global Eco-
nomics Paper No: 134
2. World Bank http://web.worldbank.org/WBSITE/EX-
TERNAL/COUNTRIES/SOUTHASIAEXT/0,,contentMDK:20
643510~menuPK:158937~pagePK:146736~piPK:1468
30~theSitePK:223547,00.html
3. Initially, the size of the package was negotiated at
$7.6 billion, but it was subsequently revised upwards.
4. Pakistan Economic Survey 2010-2011, Special Sec-
tion 1 Cost of War on Terror for Pakistan Army
5. Economies are ranked on their ease of doing business
from 1 – 183. http://www.doingbusiness.org/rankings
6. http://go.worldbank.org/E4GRINENA0
7. A country/territory’s score indicates the perceived
level of public sector corruption on a scale of 0 - 10,
where 0 means that a country is perceived as highly cor-
rupt and 10 means that a country is perceived as very
clean. A country’s rank indicates its position relative to
the other countries/territories included in the index.
8. Population Census Organisation, 1998
9. Budget 2010-2011 Ministry of Finance
10. The HDI represents a push for a broader definition
of well-being and provides a composite measure of three
basic dimensions of human development: health, educa-
tion and income
Bibliographical References
ECONOMIC ADVISORS WING (EAW), Finance Division,
Government of Pakistan,“Pakistan Economic Survey,” Vari- ous
Issues.
STATE BANK OF PAKISTAN (SBP), “Annual Report,” Vari-
ous Issues.
GOVERNMENT OF PAKISTAN, Planning Commission., World
Bank, Asian Development Bank (GOP/PC et.al.) 2010.
Pakistan Floods 2010: Preliminary Damage Needs
Assessment. November.