Pakistan - Economy

Overview: Pakistan has a predominantly agricultural economy, with agriculture (notably cotton), fisheries and forestry contributing one-quarter of GDP. From the 1950s, manufacturing took off rapidly, growing at an annual 9% up to the mid-1960s.

The economy has been developed through a series of five-year plans. From the 1960s protectionist policies were adopted, followed by nationalisations in the 1970s and, from 1988, encouragement of private enterprise and privatisation of state-owned banks and manufacturing enterprises.

After years of strong growth, the economy stalled in the latter 1990s, with a widening trade deficit and large external debt. In March 1997, the Sharif government embarked on an economic revitalisation programme to enhance exports, reduce inflation, generate employment and widen the tax base (there were then only one million income tax payers, mainly belonging to the urban middle class). An IMF structural adjustment programme was approved in October 1997, but suspended in May 1999, until progress on economic reform was accelerated.

After the October 1999 coup, the military government set a new agenda of reforms, opening the way for the renewal of IMF support in late 2000 and resulting in good growth in the 2000s. From November 2002, the civilian government continued with this agenda which included the resumption of privatisation, giving priority to agriculture, smaller enterprises and oil and gas exploration, as well as encouraging the development of a computer software industry. The economy grew by 7.7% in 2005, 6.9% in 2006 and 6.4% in 2007, with inflation rising over 5% for the first time for several years in 2005.

Trade: Exports of goods and services account for 16% of GDP and manufactured exports for 85% of total merchandise exports (2004). The major exports are clothing, cotton cloth, cotton yarn, rice and textiles. Main imports are machinery, transport equipment, chemicals, oil, and iron and steel. The USA (24%), United Arab Emirates, the UK, Germany and China are the main trading partners for exports; and China, the United Arab Emirates, Saudi Arabia, Kuwait and the USA for imports.