Economy Of Pakistan

The economy of Pakistan is classified as a developing economy, reflecting its ongoing transition from a primarily agrarian base toward greater industrialization and service sector expansion. As of 2024, Pakistan ranks as the 26th-largest economy globally when measured by gross domestic product (GDP) using purchasing power parity (PPP), which accounts for relative cost of living and inflation rates, providing a more accurate reflection of domestic economic capacity. By nominal GDP, which calculates economic output using current market exchange rates, Pakistan holds the position of the 44th-largest economy worldwide. These rankings underscore Pakistan’s significant role in the global economic landscape, despite persistent structural challenges and regional disparities. With an estimated population of approximately 254.4 million people in 2024, Pakistan is one of the most populous countries in the world, contributing substantially to its labor force and market size. However, the country’s per capita income remains comparatively low, ranking 160th globally by nominal GDP per capita and 141st by GDP per capita based on PPP, according to data from the International Monetary Fund (IMF). These figures highlight the considerable gap between aggregate economic output and individual wealth, reflecting issues such as income inequality, uneven development, and limited access to economic opportunities for large segments of the population. In the years immediately following independence in 1947, Pakistan’s economy was predominantly driven by private industries, with a focus on agriculture, textiles, and small-scale manufacturing. However, this private sector dominance underwent a dramatic shift during the early 1970s under the leadership of Prime Minister Zulfikar Ali Bhutto. His administration initiated a sweeping nationalization campaign that transferred ownership and control of key sectors—including financial services, manufacturing industries, and transportation networks—from private hands to the state. This move aimed to redistribute wealth, reduce economic disparities, and assert greater government control over strategic industries, but it also introduced challenges related to bureaucratic inefficiency and reduced private sector dynamism. The 1980s marked another significant transformation in Pakistan’s economic framework under the military regime of General Zia-ul Haq. During this period, the government adopted an “Islamic” economic model that sought to align financial and commercial practices with the principles of Sharīʿah law. This entailed the prohibition of interest (riba), the banning of certain speculative and unethical economic activities, and the promotion of profit-and-loss sharing arrangements consistent with Islamic jurisprudence. The Islamization of the economy affected banking, insurance, and other financial sectors, leading to the establishment of Islamic banking institutions and regulatory reforms aimed at integrating religious precepts into the national economic system. Following the end of General Zia’s rule, Pakistan embarked on a series of economic liberalization and privatization efforts during the 1990s. These policies aimed to reverse some of the earlier nationalization measures by encouraging private sector participation, reducing state control over industries, and fostering a more market-oriented economy. Privatization initiatives included the sale of government-owned enterprises and deregulation of various sectors to stimulate competition and attract both domestic and foreign investment. This period witnessed mixed results, with some improvements in efficiency and growth tempered by persistent governance issues and political instability. The primary centers of economic activity in Pakistan are concentrated along the fertile Indus River basin, where urban and industrial development is most pronounced. Karachi, the country’s largest city and main port, serves as a diversified economic hub encompassing finance, manufacturing, trade, and services. Similarly, major urban centers in the Punjab province—such as Faisalabad, Lahore, Sialkot, Rawalpindi, and Gujranwala—have evolved into vibrant industrial and commercial centers. These cities benefit from relatively better infrastructure, skilled labor pools, and access to domestic and international markets. In contrast, other regions of Pakistan, particularly in the western and northern areas, remain less developed, with limited industrialization and lower levels of economic activity, contributing to regional disparities in income and living standards. In recent decades, regional connectivity projects have assumed critical importance in Pakistan’s economic strategy, with the China-Pakistan Economic Corridor (CPEC) emerging as a flagship initiative. Launched in the 2010s as part of China’s Belt and Road Initiative, CPEC encompasses a network of infrastructure investments, including highways, railways, energy projects, and special economic zones. These developments aim to enhance Pakistan’s transport and energy infrastructure, reduce logistical bottlenecks, and stimulate industrial growth. The corridor holds the potential to significantly bolster Pakistan’s economic stability by improving trade connectivity, attracting foreign direct investment, and creating employment opportunities, although its long-term impacts remain subject to geopolitical and implementation challenges. By the late 1990s, Pakistan’s economy had been classified as semi-industrial, reflecting a gradual shift from an agriculture-dominated structure toward greater industrial output. Nevertheless, the country remained underdeveloped relative to many other emerging economies, with agriculture continuing to play a pivotal role. The textile industry, in particular, stood out as a cornerstone of Pakistan’s industrial sector, heavily reliant on domestic cotton production. This sector not only provided employment to millions but also constituted a major component of Pakistan’s export earnings, linking the agricultural base with manufacturing and global markets. Pakistan’s export portfolio reflects its dual agricultural and industrial base, with primary commodities including textiles, leather goods, sports equipment, chemicals, and carpets or rugs. The textile sector dominates exports, encompassing a wide range of products such as cotton yarn, fabrics, garments, and home textiles. Leather goods and sports equipment, including footballs and other sportswear, have also established Pakistan as a notable supplier in international markets. Chemical products and handwoven carpets contribute additional diversity to the export mix, underscoring the country’s capacity to produce both raw materials and value-added manufactured goods. Currently, Pakistan is engaged in a series of economic liberalization policies designed to modernize its economy and improve fiscal health. Central to these efforts is the privatization of remaining government-owned corporations, intended to enhance efficiency, reduce fiscal burdens, and attract foreign investment. By opening up sectors previously dominated by the public sector, these reforms seek to stimulate competition, foster innovation, and integrate Pakistan more fully into the global economy. The government’s focus on liberalization also includes deregulation, tax reforms, and initiatives to improve the business climate, all aimed at sustaining economic growth and reducing budget deficits. Despite these reform efforts, Pakistan faces a range of persistent challenges that constrain its economic potential. Rapid population growth continues to exert pressure on resources, infrastructure, and social services, complicating efforts to raise living standards. Widespread illiteracy and gaps in educational attainment limit the development of human capital necessary for a knowledge-based economy. Political instability, marked by frequent changes in government and governance issues, undermines policy continuity and investor confidence. Additionally, hostile relations with neighboring countries, particularly India and Afghanistan, create security concerns that affect trade and investment. The country also grapples with a heavy burden of foreign debt, which restricts fiscal space and necessitates ongoing negotiations with international lenders and financial institutions. The Wikipedia article on the Economy of Pakistan has been noted to require additional citations for verification and updates to reflect recent developments as of January 2023. Enhancements in sourcing and content accuracy are essential to provide a comprehensive and reliable overview of Pakistan’s economic landscape, ensuring that information remains current and well-substantiated for readers seeking to understand the complexities of the country’s economic trajectory.

Upon its establishment in 1947, Pakistan inherited an economy that was predominantly agrarian in nature, with agriculture constituting a substantial portion of the country’s gross domestic product (GDP). In 1947, the agricultural sector accounted for approximately 53% of Pakistan’s GDP, a figure that saw a slight increase to 53.2% by the fiscal year 1949–50. This dominance of agriculture underscored the foundational role that farming and related activities played in the nascent state’s economic structure. The reliance on agriculture was further reflected in the composition of the labor force, where about 65% of workers were engaged in agricultural pursuits, highlighting the sector’s centrality not only to production but also to employment. At the time, Pakistan’s population was estimated to be around 30 million, of which approximately 6 million individuals resided in urban areas. This demographic distribution indicated a predominantly rural society, with urban centers being relatively small and underdeveloped compared to rural regions. The rural majority was closely tied to agricultural livelihoods, which shaped social and economic dynamics across both East and West Pakistan. The agricultural sector’s critical importance extended beyond domestic production, as it was responsible for nearly all of Pakistan’s export earnings. Specifically, agriculture contributed to 99.2% of the country’s exports and generated close to 90% of foreign exchange earnings during this early period. This overwhelming dependence on agricultural exports underscored the vulnerability of Pakistan’s economy to fluctuations in global commodity prices and climatic conditions affecting crop yields. Despite the prominence of agriculture, Pakistan was endowed with significant natural resources across its two wings, East and West Pakistan. These included substantial land resources suitable for cultivation and habitation, as well as mineral wealth such as natural gas, crude oil, coal, limestone, and marble. The presence of these resources offered potential avenues for economic diversification and industrial development. However, the country faced considerable economic challenges that hindered the effective exploitation of these assets. The infrastructure necessary to support large-scale industrialization and resource extraction was largely absent, and the financial resources required to develop these sectors were severely limited. Consequently, Pakistan’s economy remained heavily reliant on its agrarian base, with little progress made toward building a robust industrial sector. In 1950, Pakistan’s per capita income stood at approximately $360 when measured in 1985 international dollars, a figure that reflected the country’s low level of economic development relative to global standards. This low per capita income was indicative of widespread poverty and limited economic opportunities for the majority of the population. Furthermore, the literacy rate at the time was only around 10%, signaling a critical deficiency in human capital development. The low literacy rate impeded efforts to modernize the economy and build a skilled workforce capable of supporting industrial growth and technological advancement. These human capital constraints, combined with inadequate infrastructure and financial limitations, posed significant obstacles to Pakistan’s economic progress. The country’s economic difficulties were further compounded by the absence of a well-developed industrial base. At independence, Pakistan’s industrial sector was nascent and underdeveloped, with limited manufacturing capacity and minimal technological expertise. Poverty was widespread, particularly in West Pakistan, where estimates suggested that between 55% and 60% of the population lived below the poverty line. This high incidence of poverty reflected structural weaknesses in the economy, including insufficient employment opportunities outside agriculture and inadequate social services. The lack of capital within the private sector also constrained economic growth, as private investment was insufficient to finance the industrial expansion necessary for economic diversification. In response to these challenges, the government of Pakistan adopted a strategy that prioritized the development of the public sector as the primary engine of economic and industrial growth. Given the scarcity of capital in the private sector, the state assumed a central role in mobilizing resources and directing investments toward key industries and infrastructure projects. This approach was aimed at overcoming the limitations of the private sector and accelerating the process of industrialization through state-led initiatives. The emphasis on public sector development reflected a broader policy orientation towards import-substituting industrialization, which sought to reduce dependence on foreign goods by promoting domestic manufacturing. During the fiscal year 1949–50, Pakistan’s national savings rate was recorded at a modest 2%, while foreign savings—comprising external financial assistance and capital inflows—also stood at 2%. Together, these savings rates resulted in an overall investment rate of approximately 4%, indicating limited resources available for economic development. The low level of domestic savings was a consequence of widespread poverty and low incomes, which restricted the capacity of households and businesses to save and invest. Foreign savings, though important, were insufficient to bridge the investment gap and finance the ambitious development plans envisioned by the government. Within the economy, the manufacturing sector contributed around 7.8% to the GDP, reflecting its relatively small but growing role in the overall economic structure. Meanwhile, the services sector, trade, and other non-agricultural activities collectively accounted for approximately 39% of GDP. This distribution of economic activity underscored the early stages of structural transformation, with agriculture remaining dominant but other sectors beginning to expand. The policy focus on import-substituting industrialization aimed to strengthen the manufacturing sector by fostering domestic production of goods that had previously been imported. This strategy was intended to create employment, reduce foreign exchange outflows, and build a more self-reliant economy. Despite these efforts, Pakistan’s trade balance of payments exhibited significant imbalances during the early years of independence. Between 1949/50 and 1950/51, the country experienced a trade deficit of 66 million rupees (Rs), highlighting the challenges of managing external accounts in the face of limited export diversification and growing import requirements. The trade deficit reflected the structural weaknesses of the economy, including its heavy reliance on agricultural exports and the need to import capital goods, machinery, and consumer products. Managing these economic imbalances became a central concern for policymakers as they sought to stabilize the economy and lay the groundwork for sustainable growth.

The 1950s marked a pivotal era in Pakistan’s economic history as the country embarked on its first planned approach to economic development. This initiative was catalyzed by Pakistan’s participation in the Colombo Plan, which was introduced in 1951 as a cooperative economic and social development program among Commonwealth countries. The Colombo Plan provided Pakistan with technical assistance, financial aid, and a framework for structured economic planning. Building upon this foundation, Pakistan launched a series of Five-Year Plans beginning in 1955, which continued intermittently until 1998. These plans aimed to systematically guide the country’s economic policies, prioritize resource allocation, and promote industrial and agricultural growth. The introduction of these plans signaled a shift from ad hoc economic policies to a more coordinated and goal-oriented development strategy. In addition to the Five-Year Plans, Pakistan implemented other planning instruments during the 1950s to further refine its economic trajectory. A Ten-Year Perspective Plan was formulated to provide a long-term vision for the country’s development, encompassing broad targets and sectoral priorities. Complementing this, a rolling Three-Year Development Plan was introduced to allow for more flexible and adaptive policy adjustments in response to changing economic conditions. These multiple layers of planning reflected the government’s recognition of the complexities involved in managing economic growth and the need for both strategic foresight and tactical responsiveness. Together, these plans sought to harmonize the efforts of various sectors and regions in pursuit of sustained economic progress. Throughout the decade, Pakistan adopted a policy of import-substituting industrialization (ISI), which aimed to reduce the country’s dependence on imported goods by fostering the growth of domestic industries. This policy was rooted in the belief that developing local manufacturing capabilities would not only conserve foreign exchange but also stimulate employment and technological advancement. The government encouraged the establishment of industries producing goods that had previously been imported, such as textiles, cement, and consumer products. Protective tariffs, import restrictions, and other regulatory measures were employed to shield nascent industries from foreign competition, thereby creating a conducive environment for industrial expansion. ISI became a cornerstone of Pakistan’s economic strategy during the 1950s, reflecting broader global trends in developing countries seeking economic self-reliance. The Korean War, which lasted from 1950 to 1953, had a significant and somewhat unexpected impact on Pakistan’s economy. The conflict generated increased demand for merchant shipping and military supplies, creating lucrative opportunities for Pakistan’s public sector enterprises and emerging private businesses involved in trade and logistics. The resulting merchant profits provided a financial boost that accelerated the country’s industrialization efforts. This influx of capital and increased economic activity helped Pakistan to invest in infrastructure and expand its industrial base. The war’s indirect economic benefits thus played a crucial role in shaping Pakistan’s early industrial development, despite the country’s limited direct involvement in the conflict. In 1952, Pakistan took decisive steps to protect its fledgling industries by imposing bans on the importation of cotton textiles and luxury goods. These measures were designed to curtail the outflow of foreign exchange and encourage domestic production of these items. The following year, in 1953, the government introduced comprehensive import regulations that further tightened control over foreign trade. These regulations included licensing requirements and restrictions aimed at managing the volume and composition of imports. Collectively, these policies contributed to Pakistan’s emergence as one of the fastest-growing economies of the time by fostering industrial growth and reducing reliance on imported consumer goods. The import restrictions also aligned with the broader import-substitution industrialization strategy pursued throughout the decade. Despite the notable industrial expansion, the agricultural sector faced significant challenges during the 1950s. Government policies exhibited a bias against agriculture, often favoring industrial development at the expense of the rural economy. Additionally, the terms of trade between agriculture and industry were unfavorable, with agricultural producers receiving relatively low prices for their outputs compared to the rising costs of industrial goods. This disparity discouraged investment in agriculture and limited the sector’s growth potential. As a result, the annual growth rate of agriculture declined during the decade, undermining the livelihoods of a large portion of the population dependent on farming. The neglect of agriculture also had broader implications for food security and rural development in Pakistan. By the late 1950s, Pakistan had achieved self-sufficiency in the production of cotton textiles, a milestone that underscored the success of its import-substitution policies. The domestic textile industry expanded rapidly, meeting the country’s internal demand and reducing the need for imports in this key sector. Following this achievement, the government began to shift its focus toward developing exports in cotton textiles, recognizing the potential of the sector to generate foreign exchange and contribute to economic growth. Efforts were made to improve the quality and competitiveness of textile products in international markets. This transition from import substitution to export orientation in textiles marked an important evolution in Pakistan’s industrial strategy during the latter half of the 1950s. Between 1955 and 1958, Pakistan received substantial military and economic aid from the United States, amounting to approximately US$500 million. This assistance was part of broader Cold War dynamics, with Pakistan aligning strategically with the West and benefiting from American support aimed at strengthening its military capabilities and economic infrastructure. The aid played a crucial role in sustaining Pakistan’s growth during a period when the country was heavily reliant on foreign assistance. Funds were utilized for a variety of purposes, including defense modernization, infrastructure development, and industrial projects. The influx of aid not only bolstered Pakistan’s economic resources but also influenced its policy orientation and international relations during the decade. Following the military coup d’état in 1958, the new martial law regime introduced a series of economic measures in 1959 designed to stimulate exports and streamline import procedures. One notable policy was the issuance of export bonus vouchers, which served as import licenses that allowed exporters to import goods without the usual restrictions, thereby incentivizing export activities. Additionally, certain categories of goods were exempted from licensing requirements, simplifying the import process and encouraging trade. These measures reflected the regime’s focus on promoting economic growth through increased export earnings and more efficient trade management. The reforms aimed to address some of the structural weaknesses in the economy and to create a more favorable environment for business operations. Despite these policy efforts, Pakistan’s trade balance deteriorated during the late 1950s. The country experienced growing trade deficits, with the deficit widening from −831 million Rupees in the fiscal year 1950/51 to −1043 million Rupees in 1959/60. This increasing gap between imports and exports highlighted persistent challenges in achieving a sustainable balance of payments. The deficits were driven by factors such as rising import demand for capital goods and raw materials needed for industrialization, as well as limited export diversification and competitiveness. The worsening trade balance underscored the vulnerability of Pakistan’s economy to external shocks and the need for policies that could enhance export performance and manage import consumption more effectively. During the 1950s, the agricultural sector in Pakistan grew at an annual rate of 1.6%, reflecting modest expansion despite the sector’s challenges. In contrast, the manufacturing sector experienced a significantly higher growth rate of 7.7% per annum, indicating rapid industrialization and structural transformation within the economy. This disparity in growth rates illustrated the shifting economic landscape, with industry increasingly becoming the engine of growth while agriculture lagged behind. The faster growth in manufacturing was largely driven by government policies favoring industrial development, import substitution strategies, and investments supported by foreign aid. However, the slower agricultural growth raised concerns about rural poverty, food production, and the equitable distribution of economic benefits. Economic disparities between the two wings of Pakistan—West Pakistan and East Pakistan—became increasingly evident by the end of the 1950s. In the fiscal year 1959–60, the Per Capita Gross National Product (GNP) was recorded at Rs. 355 in West Pakistan, substantially higher than the Rs. 269 recorded in East Pakistan. This gap highlighted the uneven economic development and resource allocation between the two regions. West Pakistan, with its more diversified industrial base and greater access to foreign aid and investment, experienced faster economic growth and higher income levels. In contrast, East Pakistan remained predominantly agrarian with limited industrialization and infrastructure development. The growing economic disparity contributed to political tensions and demands for greater autonomy in East Pakistan, which would have profound implications for the country’s future.

During the 1960s, Pakistan experienced a period of relative political stability that played a crucial role in shaping its economic trajectory. This stability was complemented by a substantial influx of American aid, which was part of broader Cold War-era geopolitical strategies aimed at strengthening allied nations in South Asia. The combination of steady governance and foreign assistance created an environment conducive to robust economic growth throughout the decade. The availability of financial resources from the United States enabled Pakistan to invest in key sectors such as infrastructure, agriculture, and industry, thereby laying the groundwork for accelerated development. Despite these positive economic indicators, poverty remained a persistent challenge in Pakistan during the early 1960s. The poverty headcount ratio, which measures the proportion of the population living below the poverty line, fluctuated significantly during this period. Initially, nearly half of the population was classified as poor, with the ratio hovering around 50%. However, by the fiscal year 1963–64, this figure had risen to 54%, indicating that economic growth had not yet translated into widespread poverty alleviation. This increase suggested that the benefits of growth were unevenly distributed, and that structural issues such as limited access to education, healthcare, and employment opportunities continued to hinder improvements in living standards for large segments of the population. Agriculture was a cornerstone of Pakistan’s economy in the 1960s, and the sector achieved an impressive annual growth rate of approximately 5%. This growth was driven by a series of targeted interventions and investments aimed at modernizing agricultural practices. One of the most significant factors was the development of water resources, including the construction of large-scale irrigation systems such as dams and canals, which expanded the cultivable area and improved water availability for farming. Additionally, the government introduced enhanced incentives for farmers, including subsidies and credit facilities, which encouraged greater production and investment in the sector. Mechanization also increased, with the adoption of tractors and other agricultural machinery reducing labor intensity and improving efficiency. The use of fertilizers and pesticides became more widespread, contributing to higher crop yields and better pest control. A key element of the agricultural transformation was the introduction and expanded cultivation of high-yielding varieties of rice and wheat, which were part of the Green Revolution technologies promoted globally during this period. These new crop varieties were more resistant to disease and produced significantly higher outputs, thereby boosting food security and rural incomes. Parallel to the advancements in agriculture, Pakistan’s large-scale manufacturing sector experienced rapid expansion during the early part of the decade. From 1960/61 to 1964/65, manufacturing grew at an annual rate of 16%, reflecting a dynamic industrialization process. This growth was facilitated by a series of protective government policies designed to nurture domestic industries. Import substitution strategies were implemented to reduce reliance on foreign goods, and tariffs were imposed to shield local manufacturers from international competition. Furthermore, the government provided export subsidies to encourage Pakistani products in foreign markets, thereby increasing industrial output and employment. The industrial sector diversified during this period, with growth observed in textiles, cement, steel, and chemical industries. These policies and investments contributed to the creation of a more balanced economy, reducing the country’s dependence on agriculture alone. However, the outbreak of the Pakistan-India War in 1965 had a significant adverse effect on the country’s economic momentum. The conflict led to a reduction in foreign economic assistance, as international donors became cautious and redirected aid due to the geopolitical instability. This decline in external support negatively impacted the manufacturing sector, which had been heavily reliant on foreign capital and technology for expansion. Consequently, the growth rate of large-scale manufacturing slowed to approximately 10% per annum during the period from 1965 to 1970. The war also disrupted trade routes and strained government finances, further constraining industrial growth. Despite these challenges, the manufacturing sector continued to grow, albeit at a reduced pace, reflecting the resilience of Pakistan’s industrial base. In spite of the setbacks caused by the 1965 war and the subsequent reduction in foreign aid, Pakistan maintained an impressive average annual Gross Domestic Product (GDP) growth rate of 6.7% throughout the entire 1960s. This sustained economic expansion was indicative of the country’s overall development trajectory during the decade, driven by continued investment in infrastructure, agriculture, and industry. The government’s focus on economic planning and development projects helped to stabilize the economy and promote growth even in the face of external shocks. The relatively high GDP growth rate positioned Pakistan as one of the faster-growing economies in the developing world during this period. By the fiscal year 1969–70, there were signs of improvement in living standards, as evidenced by a reduction in the incidence of poverty. The poverty headcount ratio had decreased to 46%, reflecting a modest but significant decline from the earlier peak of 54% in 1963–64. This reduction suggested that the benefits of economic growth were beginning to reach broader segments of the population, although poverty remained a critical issue. Improvements in agricultural productivity, increased employment opportunities in manufacturing, and government social programs contributed to this downward trend in poverty. Nonetheless, the persistence of nearly half the population living below the poverty line underscored ongoing challenges in achieving equitable development. Regional economic disparities were a prominent feature of Pakistan’s economy by the end of the 1960s. In the fiscal year 1969–70, the Per Capita Gross National Product (GNP) in West Pakistan was recorded at Rs. 504, while in East Pakistan it was significantly lower at Rs. 314. This stark difference highlighted the substantial economic gap between the two wings of the country, reflecting uneven development policies and resource allocation. West Pakistan, which included the capital and major industrial centers, benefited more from government investment and infrastructure development. In contrast, East Pakistan, despite having a larger population, remained predominantly agrarian with less industrial growth and fewer economic opportunities. These disparities contributed to growing political and social tensions between the two regions, which would later culminate in significant historical events. The economic imbalance underscored the challenges Pakistan faced in creating a unified and equitable national economy during the 1960s.

In the early 1970s, Pakistan underwent a profound political and economic upheaval precipitated by escalating disparities between its eastern and western wings. The economic imbalances between East and West Pakistan had long been a source of tension, with East Pakistan feeling marginalized in terms of political representation and economic resource allocation. These grievances culminated in the declaration of independence by East Pakistan in 1971, leading to the creation of the new nation of Bangladesh. This secession not only redrew the geopolitical boundaries of the region but also significantly altered Pakistan’s political and economic landscape, as the country lost a substantial portion of its population, territory, and economic resources. The aftermath of this separation required Pakistan to recalibrate its national policies and economic strategies to address the altered realities of a smaller, more centralized state. During this tumultuous period, Pakistan was governed under martial law authorities, which imposed a military-led administration amid challenging macroeconomic conditions. The early 1970s saw the rise of the Pakistan People’s Party (PPP), a socialist-leaning political force that gained considerable empowerment and influence. Under the leadership of Zulfikar Ali Bhutto, the PPP pursued a program of nationalization and social reform aimed at reducing inequality and promoting economic self-reliance. The party’s ascendancy marked a shift towards state intervention in the economy, with an emphasis on redistributive policies intended to address the widespread socioeconomic disparities exacerbated by the political crisis and the loss of East Pakistan. The socioeconomic challenges facing Pakistan during this period were starkly reflected in the dramatic increase in poverty levels. By the fiscal year 1971–72, the incidence of poverty had surged to approximately 55%, indicating that more than half of the population was living below the poverty line. This alarming rise was attributable to multiple factors, including the disruption caused by the secession of East Pakistan, the economic dislocation from the loss of a major export region, and the broader global economic pressures that affected domestic growth and employment. The high poverty rate underscored the urgent need for effective economic policies to stabilize the country and promote inclusive development. Compounding these domestic economic difficulties, Pakistan faced external shocks that further strained its economy. The global oil price shock of October 1973 had a pronounced impact on Pakistan’s import costs, as the sudden quadrupling of oil prices increased the country’s expenditure on energy imports. This surge in import costs exacerbated the existing economic difficulties by worsening the balance of payments and increasing inflationary pressures. The oil crisis not only heightened the cost of production and transportation within Pakistan but also constrained the government’s fiscal space, limiting its ability to invest in development projects or social programs. From 1974 to 1977, Pakistan’s economic performance was further undermined by a severe global recession that affected many developing countries. The recession led to reduced demand for Pakistan’s exports, particularly textiles and agricultural products, which were vital to the country’s foreign exchange earnings. The global downturn also limited the availability of external financing and foreign investment, constraining economic growth and development efforts. This period of economic stagnation was marked by declining industrial output and sluggish agricultural performance, which together contributed to rising unemployment and social discontent. The agricultural sector, a cornerstone of Pakistan’s economy, faced significant setbacks during the mid-1970s. The cotton sector, in particular, suffered failures in the 1974–75 period, primarily due to pest infestations that severely affected crop yields. Cotton, being a major cash crop and a key input for the textile industry, played a critical role in Pakistan’s export earnings and rural livelihoods. The pest outbreaks not only reduced the quantity and quality of cotton production but also disrupted the supply chains linked to the textile manufacturing sector. These agricultural challenges compounded the economic difficulties faced by rural communities, many of whom depended on farming for their income and sustenance. Natural disasters further exacerbated Pakistan’s economic woes during the 1970s. The country experienced massive floods in 1973, 1974, and again in 1976–77, causing widespread damage to infrastructure, agricultural land, and housing. These floods disrupted transportation networks, destroyed crops, and displaced large segments of the population, necessitating substantial government expenditure on relief and rehabilitation efforts. The recurrent nature of these floods highlighted the vulnerability of Pakistan’s economy to climatic shocks and underscored the need for improved disaster management and infrastructure resilience. Inflation emerged as a persistent and significant economic challenge throughout the decade. Between 1972 and 1977, consumer prices rose at an average annual rate of approximately 15%, eroding the purchasing power of households and increasing the cost of living. This high inflation rate was driven by a combination of factors, including the oil price shock, supply-side constraints in agriculture and industry, and fiscal imbalances. Inflationary pressures contributed to social unrest and complicated the government’s efforts to stabilize the economy, as wage increases often lagged behind rising prices, adversely affecting real incomes. Fiscal management during the 1970s was marked by considerable difficulties, with the government running persistent budget deficits. The fiscal deficit to gross domestic product (GDP) ratio averaged 8.1% during the period from 1973 to 1977, reflecting substantial and ongoing fiscal challenges. These deficits were driven by increased government spending on social programs, subsidies, and infrastructure projects, as well as reduced revenue collection amid economic stagnation. The high fiscal deficits necessitated borrowing, both domestically and externally, which in turn increased the country’s debt burden and constrained future fiscal flexibility. Trade imbalances widened considerably during the decade, highlighting the growing challenges in Pakistan’s external sector. The trade deficit expanded from US$337 million in the fiscal year 1970–71 to US$1,184 million by 1976–77, indicating a substantial increase in the gap between imports and exports. This widening deficit was partly a consequence of rising import costs, especially for oil and machinery, and the limited growth in export earnings due to global recession and agricultural setbacks. The expanding trade gap put pressure on Pakistan’s foreign exchange reserves and necessitated adjustments in trade and exchange rate policies to restore external balance. The political landscape of Pakistan underwent a dramatic transformation in 1977 when a military coup d’état led by General Muhammad Zia-ul-Haq overthrew the civilian government. The establishment of a martial law regime marked a turning point in the country’s economic policy direction. The new military government implemented a series of reforms aimed at reversing the previous era’s nationalization policies. These reforms included denationalization, deregulation, and privatization measures designed to stimulate private sector growth, improve efficiency, and attract investment. The shift towards market-oriented policies represented a significant departure from the socialist economic agenda of the early 1970s and sought to integrate Pakistan more fully into the global economy. Despite the numerous challenges faced during the decade, Pakistan’s agricultural sector recorded modest growth, averaging approximately 2.4% per annum throughout the 1970s. This growth was achieved despite adverse conditions such as floods, pest infestations, and fluctuating input supplies. The agricultural sector remained a critical source of employment and raw materials for the industrial sector, and its moderate expansion helped to sustain rural incomes and food production. However, the growth rate was insufficient to meet the needs of a rapidly growing population, and structural weaknesses in agriculture persisted. In contrast to agriculture, large-scale manufacturing in Pakistan expanded at a faster pace, averaging 5.5% per annum during the 1970s. This industrial growth was driven by increased investment in manufacturing capacity, technological improvements, and government policies that supported industrial development. The manufacturing sector became an increasingly important contributor to GDP and employment, reflecting Pakistan’s efforts to diversify its economic base beyond agriculture. The expansion of manufacturing also facilitated import substitution and export promotion, although the sector faced challenges related to energy shortages and infrastructure constraints. Within the manufacturing industry, the large and medium-scale private manufacturing sectors played a dominant role, accounting for approximately 75% of the total value-added and investment in manufacturing during the 1970s. These sectors included industries such as textiles, cement, chemicals, and machinery, which were characterized by relatively higher capital intensity and productivity. The predominance of private enterprise in these segments underscored the importance of the private sector in driving industrial growth and innovation during the decade. Small-scale manufacturing contributed the remaining 25% of the total value-added in the manufacturing sector during the 1970s. This segment comprised numerous small and cottage industries that produced a wide range of goods, including handicrafts, food products, and basic consumer items. While small-scale manufacturing was less capital-intensive and had lower productivity compared to large-scale industries, it played a vital role in providing employment opportunities, especially in rural and semi-urban areas. The coexistence of large, medium, and small-scale manufacturing reflected the diverse structure of Pakistan’s industrial economy. The 1970s in Pakistan were marked by significant political upheaval and economic transformation, driven by the interplay of internal and external challenges. The decade witnessed the loss of East Pakistan, the rise of socialist policies under the Pakistan People’s Party, and the subsequent military coup that ushered in a new economic paradigm. Economic difficulties such as high inflation, fiscal deficits, trade imbalances, and agricultural setbacks were compounded by natural disasters and global economic shocks. These factors collectively shaped Pakistan’s economic trajectory during the decade, setting the stage for further reforms and development initiatives in the years that followed.

The economic landscape of Pakistan underwent a significant transformation during the 1980s, marked by a decisive shift away from the nationalization policies that had dominated the previous decade. Throughout the 1970s, Pakistan’s economy had been characterized by extensive state control over key industries, but the 1980s ushered in a new era that emphasized the promotion of private sector industrial investment. This strategic pivot aimed to stimulate economic dynamism and foster a more market-oriented environment. The government encouraged private entrepreneurship and facilitated industrial expansion, which substantially contributed to robust economic growth during the decade. This period witnessed an increased role of private capital in sectors that had previously been under government monopoly, leading to enhanced productivity and diversification of the industrial base. One of the notable social indicators reflecting the economic progress of the 1980s was the decline in poverty incidence. The poverty headcount ratio, which measures the proportion of the population living below the poverty line, decreased to 29.1% by the fiscal year 1986–87. This reduction signified a meaningful improvement in living standards for a significant segment of the population. The decline in poverty was attributed to a combination of factors, including higher economic growth, increased employment opportunities, and targeted social programs. The expansion of both agricultural and industrial sectors played a crucial role in generating income and employment, thereby helping to lift many households out of poverty. Parallel to poverty reduction, the labor market exhibited positive trends, with the unemployment rate improving steadily over the decade. In 1980, the unemployment rate stood at 3.7%, but by 1990 it had decreased to 2.6%. This decline reflected the expanding economic activities and the government’s focus on employment generation. The improvement in labor market conditions was further supported by the growth of manufacturing and agricultural sectors, which absorbed a large portion of the workforce. Additionally, the government’s policies aimed at enhancing vocational training and skill development contributed to better employability and labor market participation. Between 1985 and 1988, the Pakistani government undertook a notable initiative to align the country’s financial system with Islamic principles by attempting to implement an Islamic interest-free banking system. This effort involved introducing business partnerships based on profit and loss sharing (PLS) mechanisms, which sought to replace conventional interest-based lending with Sharia-compliant financial arrangements. The PLS model emphasized risk-sharing between lenders and borrowers, promoting ethical investment and discouraging speculative activities. Although the full transition to an Islamic banking system faced practical challenges and was not entirely realized during this period, the initiative marked a significant step toward integrating Islamic financial principles into Pakistan’s economic framework and laid the groundwork for future developments in Islamic finance within the country. The national savings rate, a critical component of capital formation and economic growth, reached 16% of GDP in the fiscal year 1986–87. This relatively high savings rate was largely driven by substantial remittances from Pakistani workers employed in the Middle East. The inflow of remittances provided a vital source of foreign exchange and domestic capital, which helped to finance investment and support consumption. The remittances not only bolstered household incomes but also contributed to the overall macroeconomic stability of the country. However, despite the growth in national savings, the decade also witnessed challenges related to public finances. Public savings remained negative, indicating that government expenditures consistently exceeded revenues, and the public investment to GDP ratio declined throughout the 1980s. This trend suggested a reduction in government spending on infrastructure and development projects, which could have long-term implications for economic growth. To manage the increasing budget deficits that emerged in the early 1980s, the Pakistani government relied heavily on non-bank domestic borrowing. This approach involved raising funds through the issuance of government securities to the domestic private sector rather than through borrowing from the central bank. While this strategy helped to finance fiscal deficits without triggering immediate inflationary pressures, it led to a significant increase in domestic debt. The accumulation of such debt raised concerns about fiscal sustainability and the crowding out of private investment, as government borrowing competed with the private sector for available financial resources. The escalation of public debt during the 1980s was particularly pronounced. The public debt to GDP ratio rose sharply, reaching 77.1% in 1988, 81.9% in 1989, and further climbing to 82.6% in 1990. This rapid increase in debt levels resulted in a substantial portion of government revenues being allocated to interest payments, which in turn perpetuated ongoing fiscal deficits. The high debt burden constrained the government’s fiscal space and limited its ability to invest in development programs or respond effectively to economic shocks. The rising debt service obligations underscored the challenges faced by Pakistan in maintaining fiscal discipline amid ambitious development goals and external economic pressures. The restoration of democracy in 1985 represented a pivotal political event that had significant implications for Pakistan’s economic environment during the 1980s. After a prolonged period of military rule, the return to civilian governance introduced new dynamics in policymaking and economic management. The democratic government sought to balance economic liberalization with social equity, and its policies reflected a mix of market-oriented reforms and efforts to address poverty and unemployment. The political transition also influenced investor confidence and international relations, which were important factors in sustaining economic growth and attracting foreign investment during the decade. Pakistan’s overall economic performance in the 1980s was marked by strong growth, with an average annual GDP growth rate of 6.3% recorded between 1980 and 1990. This rate of growth was among the highest in the region and reflected the combined effects of structural reforms, increased private sector activity, and favorable external conditions. The sustained expansion of the economy contributed to improvements in living standards and provided the resources necessary for social development initiatives. The government’s focus on industrialization and agricultural modernization played a central role in achieving this growth trajectory. The manufacturing sector experienced a particularly notable surge during the 1980s, with an annual large-scale manufacturing growth rate of 8.8%. This rapid expansion was driven by increased private investment, technological advancements, and supportive government policies such as tariff protection and export promotion. The growth in manufacturing not only diversified the economy but also created significant employment opportunities and contributed to the country’s export earnings. Key industries such as textiles, cement, and chemicals saw substantial development, positioning Pakistan as a competitive player in regional markets. Similarly, the agricultural sector demonstrated solid growth throughout the decade, with an annual growth rate of 5.4%. Agriculture remained a cornerstone of Pakistan’s economy, employing a large portion of the population and providing raw materials for the industrial sector. The growth in agriculture was supported by improvements in irrigation infrastructure, the adoption of high-yield crop varieties, and increased use of fertilizers and mechanization. These advancements enhanced productivity and ensured food security, while also generating surplus production for export. The 1980s were characterized by transformative economic policies that contributed to improved fiscal performance and significant progress in poverty reduction and employment generation. The government’s efforts to liberalize the economy, encourage private sector participation, and implement social development programs created a more conducive environment for sustainable growth. Although challenges such as fiscal deficits and rising public debt persisted, the decade laid the foundation for Pakistan’s continued economic development in subsequent years. Efforts to align financial practices with Islamic principles were a notable feature of the decade, particularly through the introduction of interest-free banking and profit and loss sharing mechanisms. These initiatives reflected the government’s intention to integrate religious values into economic governance and to offer alternatives to conventional banking systems. While the full institutionalization of Islamic banking required further refinement, the 1980s marked an important period of experimentation and policy innovation in this regard. Overall, the decade witnessed substantial economic growth in both manufacturing and agriculture, underscoring a recovering and dynamic economic period for Pakistan. The combined expansion of these key sectors, alongside improvements in social indicators such as poverty reduction and employment, highlighted the multifaceted nature of Pakistan’s economic progress during the 1980s. Despite fiscal challenges and structural constraints, the policies and developments of this era contributed to shaping the trajectory of Pakistan’s economy in the years that followed.

The economic landscape of Pakistan during the 1990s was marked by a series of formidable challenges that exerted considerable strain on the country’s financial stability and growth prospects. One of the critical issues was the decline in worker remittances, a vital source of foreign exchange that had previously helped to stabilize the economy. This reduction in remittance inflows coincided with a widening external deficit, as the country’s import bills grew faster than its export earnings. The combination of declining remittances and increasing external imbalances contributed substantially to the overall economic strain experienced throughout the decade, complicating efforts to maintain macroeconomic stability. Inflation emerged as a particularly severe problem during the 1990s, with the country experiencing the second-worst inflationary episode in its history. The surge in inflation was closely linked to diminishing GDP growth rates, which reflected a slowdown in economic activity and productivity. As economic growth faltered, price levels rose sharply, eroding purchasing power and increasing the cost of living for ordinary citizens. This inflationary environment created additional challenges for policymakers, who struggled to balance the need for growth with the imperative to control rising prices. Labor market conditions deteriorated significantly over the course of the decade, as evidenced by a notable increase in unemployment rates. In 1991, the unemployment rate stood at 5.9%, but by the year 2000, it had climbed to 7.2%. This upward trend indicated worsening employment prospects for the workforce, with fewer job opportunities available in both formal and informal sectors. The rise in unemployment not only reflected the sluggish economic growth but also underscored structural issues within the labor market, including skill mismatches and limited industrial expansion. Financial obligations to foreign creditors escalated dramatically during the early to mid-1990s, with Pakistan’s external debt tripling in size. By 1995, the total external debt had reached approximately US$30 billion, a figure that underscored the country’s growing dependence on external borrowing to finance its development and balance of payments needs. This rapid accumulation of external debt heightened concerns about debt sustainability and the country’s ability to meet its repayment obligations without compromising economic stability. The increasing external debt burden was further reflected in key debt sustainability indicators. The external debt-to-GDP ratio rose from 42% to 50%, signaling that the country’s external liabilities were growing faster than its overall economic output. Simultaneously, the external debt-to-exports ratio increased from 209% to 258%, indicating that the debt stock had become more burdensome relative to the country’s export earnings. These rising ratios highlighted the vulnerability of Pakistan’s external debt position and the potential risks associated with servicing such large obligations in the face of fluctuating export revenues. The strain of external debt servicing was also evident in the debt service ratio, which measures the proportion of export earnings dedicated to repaying debt principal and interest. This ratio increased from 18% to 27% during the 1990s, reflecting a heavier debt repayment burden that constrained the country’s ability to allocate resources toward development and social spending. The elevated debt service requirements placed additional pressure on foreign exchange reserves and limited fiscal space, complicating efforts to stabilize the economy. Alongside external debt pressures, domestic debt also rose sharply throughout the decade. By the late 1990s, domestic debt had reached Rs. 909 billion, with the domestic debt-to-GDP ratio climbing to 42%. This increase in domestic borrowing was partly a response to fiscal deficits and the need to finance government expenditures amid constrained external financing options. The growing domestic debt stock added another layer of complexity to Pakistan’s fiscal challenges, as it increased interest payment obligations and crowding out of private investment. By the end of the 1990s, Pakistan was confronting a severe debt crisis, with public debt levels escalating dramatically. The public debt-to-GDP ratio surged from 57.5% during the period 1975–77 to a staggering 102% in 1998–99. This sharp increase underscored the unsustainable trajectory of government borrowing and the accumulation of liabilities that far exceeded the country’s economic capacity. The magnitude of the public debt raised alarms about fiscal discipline and the long-term viability of Pakistan’s debt management strategies. The severity of the debt situation was further illustrated by the public debt-to-revenues ratio, which soared to 624%, indicating that the total public debt was more than six times the government’s annual revenue collection. Additionally, the interest payments-to-revenues ratio reached 42.6%, meaning that nearly half of the government’s revenue was consumed by interest obligations alone. These ratios highlighted the unsustainable nature of the public debt burden and the limited fiscal space available for development expenditures or social programs. Concerns about the possibility of an external debt default became particularly pronounced in 1996 and again in 1998. These fears were exacerbated by the imposition of Western economic sanctions following Pakistan’s nuclear tests conducted in May 1998. The sanctions restricted access to international financial markets and aid, further constraining the country’s ability to service its external obligations. The geopolitical ramifications of the nuclear tests thus had a direct and adverse impact on Pakistan’s economic and financial stability. The imposition of sanctions triggered massive capital flight, as investors and depositors moved funds out of Pakistan in anticipation of worsening economic conditions and potential default. This outflow of capital further destabilized the financial position of the country during the late 1990s, depleting foreign exchange reserves and undermining confidence in the domestic economy. The combination of sanctions and capital flight intensified the economic crisis and complicated efforts to restore macroeconomic stability. Despite these macroeconomic difficulties, certain sectors of the economy demonstrated resilience throughout the 1990s. Agriculture, a cornerstone of Pakistan’s economy, sustained an average growth rate of 4.4% per annum during the decade. This steady expansion was supported by improvements in agricultural productivity, irrigation infrastructure, and favorable government policies aimed at supporting rural development. The consistent growth in agriculture provided a vital source of employment and income for a large segment of the population, helping to mitigate some of the adverse effects of the broader economic challenges. Similarly, the large-scale manufacturing sector maintained a steady growth trajectory, averaging 4.8% per annum over the same period. This sector’s performance was driven by diversification into various industries, including textiles, food processing, and consumer goods, which contributed to industrial output and export earnings. The sustained growth in manufacturing helped to create jobs and generate value-added production, providing an important counterbalance to the economic difficulties faced in other areas. Despite these pockets of growth, the overall socio-economic conditions deteriorated, as evidenced by a significant increase in poverty incidence. By 1998–99, approximately 30.6% of the population was living below the poverty line, reflecting worsening living standards and limited access to basic services for a substantial portion of the population. The rise in poverty was linked to factors such as inflation, unemployment, and fiscal austerity measures that constrained social spending, highlighting the human cost of the economic challenges during the decade. The 1990s in Pakistan thus presented a complex economic narrative characterized by rising external and domestic debt burdens, fiscal imbalances, high inflation, and increasing unemployment. These macroeconomic difficulties were juxtaposed against positive developments in key sectors such as agriculture and manufacturing, which provided some degree of economic resilience amid broader difficulties. However, the decade ultimately concluded with a looming threat of debt default, intensified by international economic sanctions following Pakistan’s nuclear tests. This period underscored the vulnerabilities inherent in the country’s economic and financial systems and the challenges of managing growth and stability in a turbulent global and domestic environment.

The economic landscape of Pakistan during the 2000s was marked by a series of significant challenges and transformations that shaped the trajectory of the country’s development. Early in the decade, high levels of public debt emerged as a critical concern, as highlighted by the official Debt Reduction and Management Committee in 2001. This committee identified the burgeoning debt burden as a key factor that contributed to a slowdown in economic growth, with the annual growth rate falling below 4 percent. The accumulation of debt constrained fiscal space, limiting the government’s ability to invest in infrastructure and social services, which in turn hampered broader economic expansion. This period underscored the vulnerabilities within Pakistan’s financial management and fiscal policies, setting the stage for ongoing economic difficulties. Despite these initial setbacks, Pakistan experienced a temporary resurgence in economic growth during the mid-2000s. The growth rate peaked impressively at 8.6 percent in the fiscal year 2004–05, reflecting a period of economic optimism and relative stability. This surge was driven by a combination of factors, including improved agricultural output, industrial expansion, and increased domestic consumption. However, this growth momentum proved unsustainable, as the country soon faced a series of macroeconomic crises that undermined the gains made. The latter half of the decade witnessed growth slowdowns and periods of low economic expansion, compounded by high inflation rates that eroded purchasing power and increased the cost of living. An acute energy crisis further exacerbated these problems, disrupting industrial production and daily life. Fiscal imbalances deepened, and the balance of payments situation deteriorated, reflecting persistent structural weaknesses and external vulnerabilities in Pakistan’s economy. The socioeconomic impact of these economic fluctuations was evident in the changing patterns of poverty and unemployment. At the start of the decade, poverty incidence was alarmingly high, reaching 34.5 percent in 2000–01. This figure reflected the widespread economic hardships faced by a significant portion of the population, including limited access to basic services and employment opportunities. Nevertheless, subsequent years saw a gradual reduction in poverty levels, with the incidence declining to 22.3 percent by 2005–06. This improvement was attributed to a combination of factors such as targeted poverty alleviation programs, increased agricultural productivity, and remittances from overseas Pakistanis. Meanwhile, the labor market exhibited notable fluctuations; unemployment rose to 7.8 percent in 2002, indicating strained job creation amid economic challenges. However, by 2008, the unemployment rate had decreased to 5 percent, suggesting some recovery in labor market conditions and an expansion of employment opportunities in various sectors. Education also saw progress during this period, despite the overarching economic difficulties. Adult literacy rates improved, reaching 55 percent by 2007–08. This increase in literacy was the result of sustained efforts by the government and non-governmental organizations to expand access to education, particularly in rural and underserved areas. Literacy improvements were considered vital for enhancing human capital and supporting long-term economic growth, as a more educated workforce could contribute more effectively to productivity and innovation. Nonetheless, the persistence of economic challenges limited the pace and scope of educational reforms, and disparities in educational attainment remained across different regions and socioeconomic groups. The global financial crisis of 2008 had a significant impact on Pakistan’s economy, exacerbating existing vulnerabilities and contributing to economic difficulties during that year. The crisis led to reduced foreign investment, a decline in exports, and tighter credit conditions, all of which strained Pakistan’s economic performance. The external shocks from the global downturn highlighted the country’s exposure to international market fluctuations and underscored the need for greater economic resilience. Despite these adversities, Pakistan’s economy demonstrated a degree of recovery in the following fiscal year. In 2009–2010, the economy grew by 4.1 percent, supported by sectoral growth across agriculture, industry, and services. Agricultural output increased by 2 percent, reflecting improved crop yields and favorable weather conditions. The industrial sector expanded by 4.9 percent, driven by growth in manufacturing and construction activities. Large-scale manufacturing grew by 4.4 percent, indicating a revival in industrial production, while the services sector experienced a 4.6 percent increase, supported by growth in wholesale and retail trade, finance, and telecommunications. Despite these positive developments, fiscal challenges remained pronounced. By March 2010, Pakistan’s public debt had reached Rs. 8,160 billion, underscoring the scale of the country’s borrowing and financial obligations. The total public debt to GDP ratio stood at 56 percent, reflecting a substantial debt burden relative to the size of the economy. Moreover, the foreign-currency denominated debt to GDP ratio was 25 percent, highlighting the vulnerability to exchange rate fluctuations and external debt servicing pressures. These figures illustrated the ongoing fiscal constraints faced by the government, which limited its capacity to finance development projects and social programs without resorting to further borrowing or austerity measures. The decade also witnessed a significant structural transition in Pakistan’s economy, reflecting long-term shifts in the composition of economic activity. The share of agriculture in the country’s gross domestic product (GDP) continued its historical decline, falling from 53 percent in 1947 to 21.2 percent in 2010. This reduction mirrored broader trends of urbanization, industrialization, and the diversification of economic activities away from traditional farming. Concurrently, the industry sector’s share of GDP increased markedly, rising from 9.6 percent in 1949–50 to 25.4 percent in 2010. This growth was driven by the expansion of manufacturing, mining, and construction industries, which contributed to employment generation and export earnings. The services sector experienced the most pronounced growth, with its share of GDP climbing from 37.2 percent in 1950 to 53.4 percent in 2010. This sector’s expansion reflected the rising importance of trade, finance, telecommunications, education, and health services in the economy, signaling a shift toward a more service-oriented economic structure. Throughout the 2000s, Pakistan’s economy embodied a complex narrative characterized by significant challenges, recurrent crises, and notable structural shifts. The decade underscored the country’s resilience and adaptability in the face of economic adversity, as it navigated fiscal constraints, external shocks, and internal vulnerabilities. The interplay of growth spurts and setbacks, poverty reduction efforts, labor market fluctuations, and sectoral transformations collectively shaped the economic evolution of Pakistan during this pivotal period.

Between 1980 and 2024, Pakistan experienced substantial economic growth as evidenced by the dramatic increase in its gross domestic product (GDP) measured in purchasing power parity (PPP) terms. In 1980, the GDP stood at 74.9 billion US dollars (PPP), and by 2024, this figure had surged to 1,584.5 billion US dollars (PPP). This nearly twenty-one-fold increase over four and a half decades reflects the country’s expanding economic base, driven by factors such as population growth, industrial development, and diversification of economic activities. The rise in GDP (PPP) highlights not only the quantitative growth of the economy but also the enhanced capacity of Pakistan’s economy to produce goods and services relative to international price levels, underscoring improvements in living standards and economic productivity. Corresponding to the overall GDP growth, Pakistan’s GDP per capita in terms of purchasing power parity also showed significant improvement, rising from 950.0 US dollars in 1980 to 6,715.3 US dollars in 2024. This increase in GDP per capita (PPP) indicates a substantial enhancement in average income levels adjusted for the cost of living differences and inflation, thereby providing a more accurate measure of the economic well-being of the average Pakistani citizen. The growth in GDP per capita (PPP) over this period reflects gains in productivity and economic efficiency, as well as the impact of demographic changes, including urbanization and improvements in education and health, which contributed to a more skilled and productive workforce. In nominal terms, Pakistan’s GDP also exhibited robust growth, expanding from 38.6 billion US dollars in 1980 to 374.6 billion US dollars in 2024. Nominal GDP measures the value of all final goods and services produced within the country at current market prices without adjusting for inflation, thus reflecting the economy’s size in absolute monetary terms. This increase in nominal GDP corresponds with inflationary trends, currency valuation changes, and real economic expansion. The growth in nominal GDP underscores Pakistan’s increasing integration into the global economy, with rising exports, domestic consumption, and investment driving the expansion of economic output. Similarly, nominal GDP per capita increased from 418.9 US dollars in 1980 to 1,587.6 US dollars in 2024. This measure, which does not account for inflation or purchasing power differences, shows the average income of individuals in nominal terms. Although this growth is significant, the nominal GDP per capita consistently lagged behind the PPP-adjusted GDP per capita, highlighting the impact of exchange rate fluctuations and differences in the cost of living between Pakistan and other countries. The disparity between nominal and PPP GDP per capita figures illustrates challenges in currency valuation and the relative affordability of goods and services within Pakistan compared to global markets. Real GDP growth rates in Pakistan fluctuated considerably over the years, reflecting the country’s exposure to various economic cycles, policy changes, and external shocks. Notable peaks in economic growth included an 8.7% increase in 1985 and a 7.7% rise in 2004, periods characterized by strong industrial performance, agricultural productivity, and favorable macroeconomic conditions. These high growth rates were often accompanied by government initiatives aimed at economic liberalization, infrastructure development, and export promotion. Conversely, the economy experienced downturns such as a contraction of -0.9% in 2020 and -0.2% in 2023, which corresponded with significant challenges including the global COVID-19 pandemic, political instability, and domestic economic pressures. These negative growth years underscored vulnerabilities in Pakistan’s economic structure and the impact of external disruptions on its development trajectory. Inflation rates in Pakistan varied widely over the examined period, reflecting shifts in monetary policy, supply-side constraints, and global commodity price fluctuations. Years with inflation rates below 5% were considered periods of relative price stability and were highlighted by several notable instances, including 3.5% in 1986, 3.6% in 2000, 3.5% in 2002, and 2.9% in 2016. These low inflation years often coincided with prudent fiscal management, stable exchange rates, and moderate demand pressures. However, inflation also experienced significant spikes, with the peak reaching 29.2% in 2023, the highest recorded in the dataset, followed by a rate of 23.4% in 2024. These elevated inflation rates reflected severe inflationary pressures driven by factors such as currency depreciation, rising energy prices, supply chain disruptions, and fiscal imbalances, which eroded purchasing power and posed challenges to economic stability. Unemployment rates in Pakistan displayed considerable variation over the decades, indicating fluctuating labor market conditions influenced by demographic changes, economic growth patterns, and government policies. The unemployment rate reached a low of 3.1% in the late 1980s, a period marked by relatively strong economic performance and labor absorption. However, by 2023, unemployment had risen to a high of 8.5%, reflecting structural challenges in the labor market, including skill mismatches, slow job creation, and economic disruptions. Throughout much of the 2000s and 2010s, the unemployment rate remained relatively stable around 6%, suggesting a degree of labor market equilibrium despite underlying economic challenges. The notable increase in unemployment in the early 2020s highlighted the impact of economic shocks and the need for policies to stimulate employment growth. Government debt as a percentage of GDP was first recorded in 1994 at 64.8%, marking the beginning of systematic tracking of Pakistan’s fiscal obligations relative to its economic output. Over the following decades, the debt-to-GDP ratio fluctuated, reflecting changes in fiscal policy, borrowing requirements, and economic growth. The ratio reached a peak of 79.6% in 2020, a year characterized by increased government borrowing to finance pandemic-related expenditures and economic stimulus measures. By 2024, the government debt-to-GDP ratio had declined to 69.2%, indicating some progress in debt management and fiscal consolidation efforts. These fluctuations in debt levels underscored the challenges Pakistan faced in balancing the need for public investment and social spending with sustainable fiscal policies. The data from this period reveals alternating phases of economic stability and growth alongside episodes of economic difficulty. The mid-2000s, for example, were characterized by GDP growth rates consistently above 5%, coupled with inflation generally below 10%, reflecting a relatively stable macroeconomic environment conducive to investment and development. This period benefited from structural reforms, improved governance, and favorable external conditions. In contrast, the years 2020 and 2023 were marked by economic challenges, including negative GDP growth and high inflation, illustrating the impact of both global and domestic shocks on Pakistan’s economy. These contrasting periods highlight the volatility inherent in Pakistan’s economic landscape and the complex interplay of internal and external factors shaping its trajectory. Throughout much of the 2000s and 2010s, the unemployment rate remained steady at around 6%, suggesting a relatively stable labor market despite ongoing economic challenges. However, the early 2020s saw a notable increase in unemployment, reflecting the adverse effects of economic disruptions, including the COVID-19 pandemic and associated economic contractions. This rise in unemployment underscored the vulnerability of Pakistan’s labor market to economic shocks and the importance of policies aimed at job creation and workforce development. The persistent gap between nominal GDP per capita and PPP-adjusted GDP per capita illustrates the significant influence of exchange rates and cost of living differences on Pakistan’s economic indicators. While nominal GDP per capita provides a snapshot of income levels in current US dollar terms, the PPP-adjusted figure offers a more accurate reflection of the purchasing power of Pakistani residents. This divergence highlights challenges related to currency valuation and inflation, which affect the real economic welfare of the population and complicate international comparisons of income and living standards. The dataset also highlights the economic volatility Pakistan experienced, particularly in the 2010s and early 2020s, with significant variation in inflation rates and government debt levels. Inflation fluctuated widely, with periods of relative price stability interrupted by episodes of high inflation, while government debt rose sharply during times of fiscal stress before declining as economic conditions improved. These fluctuations reflect the ongoing challenges Pakistan faced in maintaining macroeconomic stability amid domestic and external pressures, including political instability, security concerns, and global economic trends. Collectively, these economic indicators illustrate Pakistan’s long-term economic development from 1980 through 2024, characterized by substantial growth in GDP and income levels alongside persistent challenges related to inflation control, debt management, and labor market fluctuations. The data underscores the complexity of Pakistan’s economic evolution, marked by periods of robust expansion and stability as well as episodes of volatility and contraction, reflecting the interplay of structural factors, policy decisions, and external influences shaping the country’s economic landscape over more than four decades.

During the early 2000s, Pakistan’s stock market witnessed remarkable performance, with the Karachi Stock Exchange (KSE) 100 Index gaining international recognition. The index was lauded as the best-performing stock market index globally by the international magazine “Business Week,” underscoring the rapid growth and investor confidence in Pakistan’s equity markets during that period. This acclaim highlighted the dynamic nature of the Pakistani capital market and its potential to attract both domestic and foreign investment. The KSE 100 Index’s performance was driven by a combination of macroeconomic reforms, improved corporate governance, and increased liquidity, which together created a conducive environment for market expansion. By 2005, the World Bank reported that the stock market capitalization of listed companies in Pakistan had reached approximately $5,937 million. This valuation reflected the growing size and importance of the equity market within the country’s broader financial system. Market capitalization, representing the total market value of all listed shares, served as a key indicator of the stock market’s depth and maturity. The figure also illustrated the increasing role of public companies in Pakistan’s economy and the expanding investor base that supported capital formation through equity financing. A significant structural change occurred on 11 January 2016 when Pakistan unified its three separate stock exchanges—the Karachi Stock Exchange, Lahore Stock Exchange, and Islamabad Stock Exchange—into a single consolidated entity named the Pakistan Stock Exchange (PSX). This merger aimed to reduce market fragmentation, which had previously led to inefficiencies and limited liquidity across the separate exchanges. By creating a unified platform, the PSX sought to enhance market transparency, improve regulatory oversight, and streamline trading operations. Additionally, the consolidation was intended to attract strategic partnerships, particularly those that could bring technological expertise and innovation to the Pakistani capital markets, thereby aligning the PSX with global best practices and increasing its competitiveness in the international arena. In May 2017, the Pakistan Stock Exchange achieved a milestone when MSCI, an American provider of stock market indexes and analytical tools, reclassified the PSX from the Frontier Markets category to the Emerging Markets category during its semi-annual index review. This reclassification signified recognition of Pakistan’s improved market accessibility, regulatory environment, and economic fundamentals. Being designated as an Emerging Market by MSCI generally leads to increased foreign investment inflows, as many global institutional investors allocate capital based on such classifications. The upgrade reflected the progress made by Pakistan in terms of market reforms, transparency, and investor protection, and it positioned the PSX alongside other rapidly developing markets in Asia and beyond. The Pakistan Stock Exchange demonstrated resilience during the global economic challenges posed by the COVID-19 pandemic, being recognized as the best-performing Asian stock market and the fourth best-performing market worldwide in 2020. Despite the initial economic downturn triggered by the pandemic, the PSX managed to navigate the crisis effectively, supported by government stimulus measures, accommodative monetary policies, and investor optimism about the country’s economic recovery. This performance underscored the market’s ability to absorb shocks and adapt to rapidly changing conditions, enhancing its reputation among regional and global investors. In the fiscal year 2021, the PSE-100 index experienced robust growth of nearly 40%, a surge that was driven by multiple interrelated factors. The government’s large stimulus package provided critical support to various sectors, bolstering economic activity and corporate earnings. Concurrently, the State Bank of Pakistan maintained a stable policy rate, which helped sustain liquidity and encouraged investment. The manufacturing sector saw increased large-scale production, contributing positively to overall economic output and corporate profitability. Improvements in external accounts, including better trade balances and foreign exchange reserves, further strengthened investor confidence. Additionally, regulatory reforms implemented by the Securities and Exchange Commission of Pakistan (SECP) and the Pakistan Stock Exchange itself, particularly those introduced in response to the COVID-19 pandemic, enhanced market efficiency and transparency, facilitating the strong performance of the index. An examination of the PSX 100 index growth rates from fiscal year 2008 through fiscal year 2024 reveals significant volatility and periods of both decline and robust expansion. The index contracted by 10.8% in FY08 and then sharply declined by 41.7% in FY09, reflecting the global financial crisis and domestic economic challenges. Recovery began in FY10 with a growth rate of 35.7%, followed by continued positive performance in FY11 (28.5%) and FY12 (10.4%). The market surged in FY13 and FY14, posting gains of 52.2% and 41.2% respectively, driven by economic reforms and improved investor sentiment. Growth moderated in FY15 (16.0%) and FY16 (9.8%), before rebounding to 23.2% in FY17. However, the index faced setbacks in FY18 (-10.0%) and FY19 (-19.1%), reflecting political uncertainty and economic pressures. FY20 saw marginal growth of 1.5%, followed by a strong recovery in FY21 with 37.6% growth. The index declined again in FY22 by 12.3% and remained nearly flat in FY23 with a -0.2% change. The most recent data for FY24 shows a remarkable surge of 61.6%, indicating renewed investor confidence and favorable economic conditions. In fiscal year 2023, the aggregate sales of all non-financial companies listed on the Pakistan Stock Exchange reached Rs 16,815 billion, marking an increase of Rs 1,864 billion compared to the previous year. This growth in sales revenue highlighted the expanding scale of business operations and demand across various sectors of the economy. The rise in sales was indicative of broader economic recovery trends, increased consumer spending, and possibly improved export performance. However, despite this surge in sales, the net profit margin of these companies declined to 5.98% in FY23 from 6.34% in FY22. The reduction in profitability margins suggested rising costs, competitive pressures, or other operational challenges that impacted the overall efficiency and earnings quality of listed firms. Further analysis of profitability metrics revealed that the return on assets (ROA) for all companies listed on the PSX decreased to 6.05% in FY23, signaling a lower efficiency in utilizing assets to generate profits compared to previous years. Similarly, the return on equity (ROE) declined to 17.76%, reflecting a reduction in the profitability generated on shareholders’ investments. These declines in ROA and ROE pointed to challenges in maintaining high returns amid changing economic conditions, cost structures, and market dynamics. The trends underscored the importance of continued reforms and strategic management to enhance corporate performance and shareholder value. Key financial statistics for all public and private non-financial companies listed on the Pakistan Stock Exchange over the six-year period from 2018 to 2023 provide a comprehensive overview of the sector’s financial health and operational trends. These statistics, expressed in billion rupees unless otherwise stated, include aggregate sales, net profits, total assets, equity, and other relevant financial indicators. The data reflect fluctuations in revenue generation, profitability, asset base, and capital structure, illustrating the cyclical nature of business performance in the Pakistani market. Alongside absolute figures, percentage financial indicators such as profit margins, asset turnover ratios, and leverage ratios offer insights into efficiency, risk, and growth prospects of the listed companies. The percentage financial indicators for the same period further elucidate trends in profitability, liquidity, and solvency across the listed firms. These indicators include metrics such as net profit margin, return on assets, return on equity, and other ratios that measure operational effectiveness and financial stability. The analysis of these percentages over time reveals the impact of macroeconomic factors, regulatory changes, and market conditions on corporate performance. Together, the absolute financial statistics and percentage indicators provide a detailed picture of the evolving landscape of Pakistan’s stock market and its role in the country’s economic development.

As of 2017, the Wall Street Journal reported estimates suggesting that up to 42% of Pakistan’s population could be classified within the upper and middle classes. This assessment was largely based on analyses of income levels and patterns of consumption, particularly the purchase of consumer goods, which serve as indicators of economic status. The methodology involved examining household expenditures and ownership of durable goods, reflecting an increasing capacity for discretionary spending among a substantial portion of the population. Such a high proportion of middle and upper class citizens marked a significant shift in Pakistan’s socio-economic landscape, indicating a broadening base of economic prosperity beyond traditional elite segments. If the estimate of 42% is taken as accurate or at least broadly indicative, it implies that approximately 87 million Pakistanis belonged to the middle and upper classes at that time. This figure is particularly striking when compared to the total population of Germany, which stood around 83 million in 2017, underscoring the considerable size of Pakistan’s emerging middle class. The demographic weight of this group has important implications for domestic consumption patterns, political dynamics, and social mobility within the country. It also highlights the potential for Pakistan to leverage this sizable middle class as a driver of economic growth and modernization, given their increased purchasing power and demand for goods and services. Official data collected over the preceding fifteen years further corroborate the narrative of rising consumer affluence in Pakistan. Notably, there has been a significant increase in household ownership of motorcycles and washing machines, two key indicators of improving living standards and disposable income. Motorcycles, often the primary mode of personal transportation for many families, have seen widespread adoption, reflecting both improved affordability and the necessity of mobility in urban and rural contexts. Similarly, the growing prevalence of washing machines in households points to enhanced access to modern conveniences and a shift towards more comfortable lifestyles. These trends collectively illustrate the gradual but steady expansion of consumer capacity and the penetration of durable goods into a broader segment of Pakistani society. Consumer confidence in Pakistan also experienced a marked upswing during this period, as evidenced by the IBA-SBP Consumer Confidence Index. In January 2017, this index reached its highest recorded level of 174.9 points, representing a significant increase of 17 points since July 2016. The index, developed jointly by the Institute of Business Administration (IBA) and the State Bank of Pakistan (SBP), measures consumer sentiment regarding current economic conditions and expectations for the future. The rise to this peak level indicated growing optimism among consumers, likely fueled by improvements in economic indicators such as inflation rates, employment opportunities, and wage growth. Elevated consumer confidence typically translates into increased spending and investment, which in turn can stimulate further economic expansion. The growth in consumer optimism was mirrored by tangible increases in consumer financing, which reached a total of Rs. 179 billion in the fiscal year 2022. This robust expansion in credit availability signaled a strengthening financial sector and greater access to borrowing facilities for individuals seeking to finance consumption and investment. The availability of consumer credit plays a critical role in enabling households to make significant purchases that might otherwise be unaffordable, thereby supporting the development of a vibrant middle class. The increase in consumer financing also reflects broader financial inclusion efforts and the deepening of credit markets within Pakistan’s economy. Within the broader category of consumer financing, the auto finance sector maintained its position as the dominant segment. This sustained demand for vehicle purchases underscores the importance of personal transportation as a status symbol and a practical necessity for many Pakistani households. The dominance of auto finance suggests that consumers were increasingly leveraging credit to acquire motorcycles, cars, and other vehicles, facilitating greater mobility and contributing to the growth of related industries such as automobile sales, maintenance, and insurance. The persistence of auto finance as the leading segment also points to the relatively mature state of this market compared to other forms of consumer credit. Another noteworthy development in consumer financing was the remarkable growth observed in the house building finance segment, particularly following the launch of the Mera Pakistan Mera Ghar housing scheme by the State Bank of Pakistan in December 2020. This initiative was designed to promote home ownership by providing subsidized financing options and incentives aimed at making housing more affordable for middle and lower-middle-income groups. The scheme’s introduction catalyzed increased demand for housing loans, thereby expanding the mortgage market and supporting the construction sector. By facilitating easier access to credit for home buyers, the program sought to address Pakistan’s significant housing deficit and stimulate economic activity through increased construction and related industries. The success of the Mera Pakistan Mera Ghar scheme reflects both the latent demand for affordable housing and the critical role of targeted financial policies in enabling socioeconomic advancement within the middle class.

Between 2010 and 2014, the government of Pakistan allocated over 1 trillion Pakistani rupees, an amount equivalent to approximately $16.7 billion, towards various poverty alleviation programs. This substantial financial commitment was aimed at addressing the widespread socioeconomic challenges faced by the country’s impoverished population. The funds were directed towards a range of initiatives, including social safety nets, microfinance schemes, skill development programs, and rural development projects, all designed to improve the living standards of vulnerable groups. These efforts were part of a broader governmental strategy to stimulate inclusive economic growth and reduce income disparities across different regions and demographics. The impact of these poverty alleviation expenditures became evident in the gradual decline of Pakistan’s national poverty rate over the subsequent years. In the fiscal year 2000–01, the poverty rate stood at approximately 35%, reflecting the high proportion of the population living below the national poverty line. By 2013, this figure had decreased to 29.3%, marking a notable reduction in poverty incidence. This decline was attributed to a combination of factors, including improved access to education and healthcare, increased employment opportunities, and targeted social protection programs funded by the government’s investments. The reduction also reflected the positive effects of macroeconomic stability and growth during this period, which helped lift millions out of poverty. Further advancements in poverty reduction were recorded in the years following 2013, with the national poverty rate falling to 17% by 2015. This significant improvement underscored the effectiveness of sustained poverty alleviation measures and the government’s commitment to addressing structural barriers to economic inclusion. The drop to 17% represented one of the most substantial decreases in poverty levels in Pakistan’s recent history, highlighting progress in both urban and rural areas. Enhanced infrastructure development, increased agricultural productivity, and expanded social welfare programs contributed to this downward trend. Additionally, international development partners and non-governmental organizations played supportive roles in complementing government initiatives, thereby amplifying the reach and impact of poverty reduction efforts. Despite these encouraging trends, rural poverty remained a critical and persistent challenge within Pakistan. Economic and social development in rural regions progressed at a considerably slower pace compared to major urban centers such as Karachi, Lahore, and Islamabad. Rural areas continued to face issues such as limited access to quality education, inadequate healthcare facilities, poor infrastructure, and constrained employment opportunities. Agricultural communities, which constitute a significant portion of the rural population, were particularly vulnerable due to factors like land fragmentation, water scarcity, and exposure to climate-related risks. The slower rate of development in rural sectors contributed to ongoing disparities in income and living standards between urban and rural populations, underscoring the need for more targeted and region-specific poverty alleviation strategies. The persistence of rural poverty also highlighted structural challenges within Pakistan’s economy, including the dominance of informal labor markets and limited industrial diversification in non-urban areas. Efforts to address these issues involved promoting rural entrepreneurship, improving access to credit, and investing in rural infrastructure such as roads, electrification, and sanitation. Moreover, social protection programs increasingly focused on vulnerable rural households, aiming to provide safety nets against shocks and enhance human capital development. The government’s recognition of the rural-urban divide in poverty dynamics prompted policy adjustments aimed at fostering more balanced and inclusive growth across the country’s diverse regions. Overall, the allocation of over 1 trillion Pakistani rupees towards poverty alleviation between 2010 and 2014 played a pivotal role in reducing the national poverty rate from 35% in 2000–01 to 17% by 2015. While these gains marked significant progress, the ongoing challenge of rural poverty remained a central concern, necessitating continued and enhanced efforts to ensure equitable socioeconomic development throughout Pakistan.

Pakistan has experienced rapid population growth over the past several decades, leading to a significant increase in the number of young people entering the labor market. This demographic trend has placed considerable pressure on the country’s employment sector, as a growing youth population demands expanded job opportunities and economic participation. The influx of young workers has intensified the need for job creation, skill development, and labor market absorption capacity, making employment a critical focus of economic policy and planning. Demographic factors, combined with socio-economic challenges, have shaped the dynamics of Pakistan’s labor market, influencing both supply and demand for labor. Despite being one of the six most populous countries in Asia, Pakistan historically encountered substantial obstacles related to labor market flexibility. The country’s labor market was characterized by excessive bureaucratic red tape, which significantly hindered the ease with which businesses could adjust their workforce according to changing economic conditions. This bureaucratic complexity manifested in rigid labor laws and administrative procedures that complicated both hiring and firing processes. Employers faced stringent regulations and procedural requirements that limited their ability to respond swiftly to market fluctuations, thereby restricting labor market dynamism and adaptability. The difficulties in navigating labor regulations not only affected employers’ operational efficiency but also contributed to a broader economic rigidity. The cumbersome procedures for terminating employment contracts discouraged firms from expanding their workforce, while the complexities involved in hiring new employees created barriers to entry for many businesses. This regulatory environment reduced incentives for formal employment and discouraged investment in labor-intensive sectors. Consequently, the labor market’s inflexibility impeded productivity growth and constrained the overall economic potential of Pakistan, particularly in the context of a rapidly growing working-age population. In recent years, Pakistan has made significant strides in improving its regulatory framework through comprehensive taxation and business reforms. These reforms aimed to simplify the administrative burden on firms, enhance transparency, and foster a more conducive environment for business operations. By streamlining tax procedures and reducing bureaucratic hurdles, the government sought to encourage greater compliance and formalization among enterprises. The introduction of digital platforms for tax filing, reduction in tax rates for small and medium-sized enterprises, and measures to improve ease of doing business have collectively contributed to a more efficient regulatory landscape. The positive impact of these reforms extended beyond taxation, as they also facilitated improvements in labor market regulations and business registration processes. By reducing the complexity and cost associated with formal business operations, these changes diminished the incentives for firms to operate in the underground economy. The underground economy, characterized by unregistered and informal business activities, had traditionally been a significant component of Pakistan’s economic landscape, partly due to the burdensome regulatory environment. The reforms encouraged many firms to transition into the formal sector, thereby broadening the tax base and enabling better enforcement of labor standards. Greater formalization of business activities has had multiple benefits for Pakistan’s economy and labor market. Formal firms typically provide more stable employment, better working conditions, and access to social security benefits, which contribute to improved labor market outcomes for workers. Additionally, formalization enhances access to credit and other financial services for businesses, enabling expansion and innovation. The shift towards a more formalized economy also facilitates more accurate labor market data collection, allowing policymakers to design targeted interventions to address unemployment and underemployment. Overall, the recent progress in regulatory reforms has played a crucial role in enhancing labor market flexibility, promoting economic growth, and improving employment prospects for Pakistan’s burgeoning workforce.

Pakistan functions as a federal republic characterized by a constitutional division of taxation powers between the Federal Government and its four constituent provinces: Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan. Despite this formal division, the Federal Board of Revenue (FBR), which operates as the revenue collection agency of the Federal Government, dominates the national tax collection landscape, accounting for more than 80% of the entire tax revenue generated across the country. This centralization of tax collection authority under the FBR underscores its pivotal role in Pakistan’s fiscal architecture, even as provinces maintain certain taxation rights within their jurisdictions. The government’s revenue streams are broadly categorized into two primary sources: taxation and non-tax revenue. Taxation revenue forms the backbone of government finances and includes key components such as income tax, sales tax, and customs duties. Income tax encompasses both direct taxes levied on individual and corporate earnings, while sales tax is an indirect tax imposed on the consumption of goods and services. Customs duties are tariffs collected on imports and exports, serving both as a revenue source and a regulatory tool for trade. These tax revenues significantly underpin the budgets of both federal and provincial governments, enabling them to finance public services and development initiatives. Non-tax revenue, constituting an important complementary source of government income, derives from several distinct channels. One significant contributor is the mark-up earned from state-owned enterprises, which includes profits generated by government-run corporations and entities. Additionally, surplus profits from the State Bank of Pakistan, the country’s central bank, contribute to non-tax revenue through dividend transfers and other financial returns. Royalties on natural resources, particularly oil and gas, also form a substantial part of non-tax revenue, reflecting Pakistan’s utilization of its domestic energy reserves. Collectively, these non-tax sources enhance the fiscal framework by supplementing tax revenues and providing additional budgetary resources. Government expenditures in Pakistan are strategically allocated across multiple sectors to address diverse national priorities. Defense spending constitutes a major portion, reflecting the country’s emphasis on maintaining military readiness and national security. Social services, including health, education, and welfare programs, receive significant funding to support human development and poverty alleviation. Infrastructure development is another critical area of expenditure, aimed at improving transportation networks, energy supply, and urban facilities to foster economic growth. Debt servicing, which involves interest payments on domestic and external borrowings, also commands a considerable share of government spending, reflecting the country’s ongoing fiscal obligations. Expenditures are broadly divided into current and development categories. Current expenditures cover operational costs such as salaries of government employees, administrative expenses, pensions, and interest payments on public debt. These recurrent costs are essential for maintaining the day-to-day functions of government and honoring financial commitments. Development expenditures, on the other hand, focus on capital investments and projects intended to stimulate long-term economic growth and structural progress. These include investments in infrastructure, social sector programs, and initiatives designed to enhance productivity and economic diversification. Balancing the generation of revenue with the allocation of expenditures has historically posed a significant challenge for Pakistan’s fiscal management. The government frequently encounters budgetary deficits, where expenditures exceed revenues, necessitating borrowing to bridge the gap. These deficits have implications for macroeconomic stability, debt sustainability, and fiscal discipline, requiring careful management and policy adjustments to mitigate adverse effects on the economy. Fiscal data pertaining to government revenues and expenditures are sourced from the Ministry of Finance of Pakistan, which compiles and publishes official statistics and budgetary reports. These data provide a comprehensive overview of the country’s fiscal performance over time, enabling analysis of trends and policy outcomes. Between fiscal years 2008 and 2024, total consolidated revenue combining federal and provincial receipts experienced substantial growth, rising from 1,499 billion Pakistani Rupees (PKR) in FY 2008 to 13,269 billion PKR in FY 2024. This remarkable increase reflects both economic expansion and enhanced revenue mobilization efforts. Within this total, tax revenue exhibited a parallel upward trajectory, increasing from 1,065 billion PKR in FY 2008 to 10,085 billion PKR in FY 2024. The growing importance of tax collection in government finances is evident in these figures, underscoring the expanding role of taxation as a sustainable revenue source. The FBR’s tax collections specifically grew from 1,008 billion PKR in FY 2008 to 9,311 billion PKR in FY 2024, maintaining its position as the principal tax collector in Pakistan. This growth highlights the agency’s capacity to broaden the tax base and improve compliance, despite challenges such as informal economic activity and tax evasion. The FBR’s dominance in tax collection also reflects the centralization of fiscal authority at the federal level. Government expenditure also escalated markedly over this period, rising from 2,277 billion PKR in FY 2008 to 20,476 billion PKR in FY 2024. This increase in spending corresponds with expanding government functions, rising costs of public services, and greater investment in development projects. The widening gap between revenue and expenditure contributed to persistent fiscal deficits. Fiscal deficits, defined as the shortfall between total government expenditures and total revenues, fluctuated during this period. Starting at 777 billion PKR in FY 2008, the deficit expanded significantly, peaking at 6,521 billion PKR in FY 2023 before slightly increasing to 7,207 billion PKR in FY 2024. These deficits necessitated increased borrowing, both domestically and externally, to finance government operations and investments, thereby influencing the country’s debt dynamics. When analyzed as a percentage of Gross Domestic Product (GDP), total government revenue exhibited variability, ranging from a low of 11.2% in FY 2019 to a high of 14.5% in FY 2014, with a recorded level of 12.5% in FY 2024. This variation reflects changes in economic activity, tax policy, and revenue collection efficiency over time. Tax revenue as a percentage of GDP also fluctuated, spanning from 9.1% in FY 2009 to a peak of 11.0% in FY 2015, and standing at 9.5% in FY 2024. These figures indicate the relative weight of taxation in the overall economy and the government’s success in mobilizing tax resources. Total government expenditure as a percentage of GDP ranged between 17.7% in FY 2016 and 21.5% in FY 2013, with a level of 19.3% recorded in FY 2024. The elevated expenditure ratios reflect the government’s commitments to defense, social services, infrastructure, and debt servicing. Fiscal deficit as a percentage of GDP showed considerable variation, from a low of 4.1% in FY 2016 to a high of 8.8% in FY 2012, with a level of 6.8% in FY 2024. These deficit ratios highlight the ongoing challenges in achieving fiscal balance and the persistent reliance on borrowing to finance budget shortfalls. Overall, the fiscal data reveal enduring challenges in balancing revenue generation with expenditure demands in Pakistan. Persistent budgetary deficits have necessitated borrowing and prompted continuous fiscal management efforts aimed at improving revenue mobilization, rationalizing expenditures, and ensuring macroeconomic stability. These dynamics remain central to Pakistan’s economic policy and fiscal governance.

The basic unit of currency in Pakistan is the rupee, which is internationally recognized by the ISO code PKR and commonly abbreviated as Rs. The rupee is further subdivided into 100 smaller units known as paisas, facilitating transactions of smaller denominations. This decimal subdivision aligns with global currency standards, allowing for ease of accounting and exchange. The use of paisas, however, has diminished over time due to inflation and the declining purchasing power of smaller denominations, leading to their reduced circulation in everyday transactions. The highest denomination of the Pakistani rupee currently in circulation is the 5,000 rupee note. This large denomination was introduced to accommodate the needs of high-value transactions and to facilitate easier handling of cash in an economy where inflation has increased the price levels over time. The 5,000 rupee note is distinct in its design and security features, reflecting its status as the largest circulating banknote. Its introduction was part of a broader initiative to modernize the currency and improve its usability in the face of evolving economic conditions. On 13 August 2005, the State Bank of Pakistan (SBP) embarked on a significant modernization of the country’s currency by issuing its fifth generation of banknotes. This new series incorporated enhanced security measures aimed at combating counterfeiting and improving the durability of the notes. The initiative began with the issuance of the Rs. 20 note, which featured updated design elements and advanced security features such as watermarks, security threads, and optically variable inks. This marked a crucial step in aligning Pakistan’s currency with international standards of banknote security and design. Following the initial release of the new Rs. 20 note, the State Bank of Pakistan gradually introduced redesigned banknotes across various denominations to complete the fifth-generation series. The Rs. 5 note was reissued in July 2008 with the new design but was later replaced by a coin to better suit the lower value and frequent use of this denomination. The Rs. 10 note followed in May 2006, featuring similar security enhancements and updated aesthetics. The Rs. 20 note received a new color scheme in March 2008 to further distinguish it from other denominations and to enhance visual recognition. The Rs. 50 note was introduced in July 2008, while the Rs. 100 note came out in November 2006, both incorporating the latest security technologies. The Rs. 500 note was released in January 2010, the Rs. 1,000 note in February 2007, and the Rs. 5,000 note in May 2006, each reflecting a consistent design philosophy aimed at improving anti-counterfeiting measures and public confidence in the currency. Historically, the Pakistani rupee was pegged to the British pound sterling until 1982, maintaining a fixed exchange rate regime. This peg reflected the economic and historical ties between Pakistan and the United Kingdom, which had been the colonial power prior to Pakistan’s independence in 1947. The fixed exchange rate system provided stability to the rupee’s value against the pound, facilitating trade and financial planning during the early decades of Pakistan’s economic development. However, this arrangement also limited the flexibility of monetary policy and exposed the economy to external shocks affecting the pound. In 1982, under the administration of General Zia-ul-Haq, Pakistan shifted its currency regime from a fixed peg to a managed float system. This transition was part of broader economic reforms aimed at liberalizing the economy and responding to changing global financial conditions. The managed float allowed the rupee’s exchange rate to be influenced by market forces, with the State Bank of Pakistan intervening selectively to prevent excessive volatility. This shift was intended to improve the competitiveness of Pakistani exports and to better reflect the underlying economic fundamentals in the currency’s valuation. Following the adoption of the managed float system, the Pakistani rupee experienced a significant devaluation of 38.5% between the fiscal years 1982 and 1983. This sharp decline in value was a direct consequence of the currency’s adjustment to market conditions after the removal of the fixed peg. The devaluation made imports more expensive, as foreign goods and raw materials required more rupees to purchase. While this adjustment aimed to correct overvaluation and stimulate export growth, it also had immediate adverse effects on sectors dependent on imported inputs. The devaluation of the rupee led to a substantial increase in import costs, which adversely affected many industries that had been established during the tenure of General Zia-ul-Haq’s predecessor. These industries, often reliant on imported machinery, raw materials, and intermediate goods, faced higher production costs, squeezing profit margins and challenging their competitiveness. The increased cost of imports contributed to inflationary pressures within the economy and necessitated adjustments in industrial strategies. Some sectors struggled to adapt to the new cost structure, highlighting the complexities of transitioning from a fixed to a managed exchange rate regime. Prior to this period of devaluation and exchange rate reform, the rupee had experienced a phase of appreciation under the leadership of Zulfikar Ali Bhutto. Despite receiving substantial foreign aid during his tenure, the rupee’s value strengthened against major currencies, reflecting a combination of favorable economic policies and external support. However, this appreciation was not sustained indefinitely, and the rupee eventually depreciated thereafter due to changing economic conditions and policy shifts. Bhutto’s era thus represents a contrasting phase in the rupee’s history, marked by relative strength followed by a reversal that set the stage for subsequent currency management challenges.

Throughout much of the latter half of the 20th century, the Pakistani rupee experienced a persistent depreciation against the United States dollar, reflecting a trend of declining value relative to the dollar that extended until approximately the dawn of the 21st century. This depreciation was influenced by a combination of domestic economic challenges, including fiscal deficits, inflationary pressures, and structural imbalances in the balance of payments. The persistent weakness of the rupee during this period underscored Pakistan’s external vulnerabilities and the pressures exerted by global currency markets, as the dollar maintained its status as the dominant reserve currency and benchmark for international trade. Entering the early 2000s, Pakistan witnessed a notable shift in its external economic position, as the country achieved a large current-account surplus. This surplus was driven by a combination of factors, including increased remittances from overseas Pakistanis, robust export growth, and improved foreign investment inflows. The accumulation of foreign exchange reserves as a result of this surplus exerted upward pressure on the Pakistani rupee, leading to an appreciation against the US dollar. This appreciation reflected a strengthening of Pakistan’s external accounts and a temporary easing of the downward pressure on the rupee that had characterized the previous decades. In response to the rupee’s appreciation during this period, Pakistan’s central bank, the State Bank of Pakistan, undertook a series of stabilization measures aimed at preserving the country’s export competitiveness. Recognizing that an excessively strong rupee could undermine the price competitiveness of Pakistani goods in international markets, the central bank opted to lower interest rates as a monetary policy tool to moderate capital inflows and reduce upward pressure on the currency. By easing monetary policy, the central bank sought to balance the objectives of currency stability and economic growth, while preventing an overvaluation of the rupee that could harm the export sector. Complementing the interest rate adjustments, the State Bank of Pakistan actively intervened in the foreign exchange market to manage the rupee’s appreciation. This intervention involved the central bank purchasing US dollars in the open market to increase demand for the currency and thereby prevent further strengthening of the rupee. Such market operations were aimed at smoothing exchange rate volatility and maintaining a competitive exchange rate level that would support Pakistan’s trade balance and broader economic objectives. These interventions underscored the central bank’s commitment to a managed exchange rate regime during this phase, balancing market forces with policy objectives. The trajectory of the Pakistani rupee’s exchange rate against the US dollar from 2008 through 2024 reveals a general pattern of depreciation, punctuated by periods of relative stability and accelerated decline. In 2008, the average annual exchange rate stood at 62.55 Pakistani rupees per US dollar, reflecting a relatively stable currency environment at the outset of the global financial crisis. However, by 2009, the rupee had depreciated to 78.50 PKR per USD, a significant weakening influenced by both domestic economic pressures and global financial turbulence. The depreciation trend continued steadily, with the exchange rate reaching 83.80 PKR per USD in 2010 and 85.50 PKR per USD in 2011, signaling ongoing challenges in maintaining currency stability amid fluctuating economic conditions. Between 2012 and 2014, the rupee’s depreciation persisted, with average annual exchange rates of 89.23 PKR per USD in 2012, 96.73 PKR per USD in 2013, and 102.86 PKR per USD in 2014. This period was marked by heightened inflationary pressures, fiscal deficits, and external account imbalances that exerted downward pressure on the currency. In 2015, the rupee experienced a slight appreciation to 101.29 PKR per USD, reflecting temporary stabilization efforts and improved economic indicators. Nonetheless, the depreciation trend resumed in 2016 and 2017, with exchange rates of 104.23 PKR per USD and 104.70 PKR per USD respectively, indicating persistent vulnerabilities in the currency market. From 2018 onwards, the depreciation of the Pakistani rupee accelerated markedly, reflecting intensifying economic challenges including rising inflation, widening current account deficits, and external debt pressures. The average annual exchange rate reached 109.84 PKR per USD in 2018, followed by a sharp depreciation to 136.09 PKR per USD in 2019. This downward trend continued through 2020 and 2021, with rates of 158.02 PKR per USD and 160.02 PKR per USD respectively, underscoring the sustained pressure on the currency amid both domestic and global economic headwinds, including the impact of the COVID-19 pandemic. The depreciation intensified further in subsequent years, with the exchange rate climbing to 177.45 PKR per USD in 2022. The trend culminated in a dramatic weakening of the rupee in 2023 and 2024, when the average annual rates reached 248.04 PKR per USD and 282.91 PKR per USD respectively. This significant decline in the rupee’s value against the US dollar represented one of the steepest depreciations in Pakistan’s recent history, reflecting deep-seated economic challenges such as balance of payments crises, inflationary spirals, and structural fiscal imbalances. The exchange rate figures over this period highlight the volatility and fragility of the Pakistani currency in the face of both internal policy constraints and external economic shocks, emphasizing the ongoing challenges faced by policymakers in stabilizing the foreign exchange market.

Pakistan’s foreign exchange reserves have traditionally been managed by the State Bank of Pakistan (SBP), the country’s central monetary authority responsible for regulating monetary policy and maintaining financial stability. Historically, the SBP held its foreign exchange reserves exclusively in United States dollars, a strategy that exposed the country to significant currency risk. This vulnerability became particularly evident in 2005 when the value of the US dollar declined sharply against other major currencies. The depreciation of the dollar led to substantial financial losses on Pakistan’s dollar-denominated reserves, as their real value diminished in terms of global purchasing power. The reliance on a single currency for reserves underscored the inherent risks associated with a lack of diversification in foreign exchange holdings. The financial repercussions of the 2005 dollar depreciation culminated in the resignation of Ishrat Hussain, the then Governor of the State Bank of Pakistan. His departure highlighted the critical challenges faced by the SBP in managing the country’s reserves amid volatile global currency markets. Hussain’s resignation was widely interpreted as a response to the losses incurred and the broader implications for Pakistan’s monetary policy credibility. The episode underscored the necessity for a more resilient and diversified approach to foreign exchange reserve management, prompting a reassessment of the SBP’s currency allocation strategy. In the aftermath of these events, the SBP formally announced a policy shift aimed at diversifying its foreign exchange reserves portfolio. The new policy included the incorporation of other major international currencies such as the Euro and the Japanese Yen alongside the US dollar. This diversification was intended to mitigate the risks associated with holding reserves in a single currency and to enhance the stability and security of Pakistan’s foreign exchange assets. Although the SBP disclosed its intention to diversify, it did not reveal the specific proportions or ratios of each currency within the reserves. This strategic adjustment reflected a broader trend among central banks globally to adopt multi-currency reserve holdings as a safeguard against currency volatility and to optimize returns on reserve assets. Karachi, often described as the economic capital of Pakistan, plays a pivotal role in the country’s financial ecosystem, including the management and movement of foreign exchange. As the largest city and principal port, Karachi serves as the hub for banking, trade, and financial services, facilitating the inflow and outflow of foreign currency. The city’s financial institutions, stock exchanges, and corporate headquarters collectively contribute to the operational framework within which the SBP and commercial banks manage foreign exchange reserves. Karachi’s significance is further amplified by its status as the primary gateway for Pakistan’s international trade, making it central to the country’s foreign exchange earnings and reserves management. The global financial crisis of 2007–2008, coupled with surging crude oil prices, exerted severe pressure on Pakistan’s economy, triggering a sharp depletion of its foreign exchange reserves. The economic turmoil led to reduced export earnings, increased import costs, and constrained capital inflows, all of which strained the country’s external accounts. The rising cost of oil imports, in particular, exacerbated the balance of payments deficit, compelling the government and the SBP to draw down reserves to meet external payment obligations. This period marked one of the most challenging phases for Pakistan’s foreign exchange reserves, as the country struggled to maintain adequate levels amid adverse global economic conditions. On 11 October 2008, the SBP reported a significant decline in Pakistan’s foreign exchange reserves, which fell by $571.9 million to a total of $7,749.7 million. This sharp reduction was symptomatic of the broader economic challenges confronting the country, including diminished export revenues and increased demand for foreign currency to service external debt and import bills. The contraction in reserves underscored the vulnerability of Pakistan’s external financial position during the height of the international credit crisis, highlighting the urgent need for policy interventions to stabilize the economy and restore confidence among foreign investors and creditors. Throughout the duration of the international credit crisis, Pakistan’s foreign exchange reserves experienced a precipitous decline exceeding $10 billion, ultimately reaching a nadir of $6.59 billion. This dramatic fall reflected the cumulative impact of global financial instability, domestic economic imbalances, and rising import costs. The depletion of reserves to such critically low levels raised concerns about the country’s ability to meet its external obligations and maintain currency stability. The situation necessitated engagement with international financial institutions and the implementation of economic reforms aimed at restoring macroeconomic stability and rebuilding reserve buffers. By June 2013, Pakistan’s foreign exchange reserves had plummeted to a historic low, sufficient to cover only approximately two weeks of import requirements. This precarious reserve position placed the country on the brink of defaulting on its financial obligations, generating widespread apprehension regarding Pakistan’s economic viability and creditworthiness. The limited reserve coverage underscored the urgency of securing external financing and implementing structural reforms to address the underlying causes of the balance of payments crisis. The government’s efforts during this period focused on negotiating bailouts, attracting foreign investment, and enhancing export competitiveness to rebuild the country’s foreign exchange reserves and stabilize the economy. As of January 2020, Pakistan’s foreign exchange reserves had recovered significantly, reaching a level of US$11.503 billion. This recovery reflected a combination of improved export performance, inflows from remittances, external borrowing, and prudent monetary policies implemented by the SBP. The increase in reserves provided a more comfortable buffer to meet import requirements and external debt servicing, contributing to greater economic stability. However, the reserves remained vulnerable to external shocks and domestic economic challenges, necessitating continued vigilance and strategic management by the central bank and government authorities. Detailed data on Pakistan’s foreign exchange reserves from June 2008 to June 2024 reveal considerable fluctuations in total reserves, reserves held by the SBP, and those maintained by commercial banks. Total reserves reached a peak of $24.4 billion in June 2021, reflecting a period of relative economic stability and favorable external conditions. However, by June 2023, total reserves had declined sharply to a low of $9.2 billion, indicative of renewed economic pressures and external vulnerabilities. A partial recovery ensued, with total reserves rising to $14.0 billion by June 2024, signaling some stabilization efforts and improved financial inflows. The reserves held specifically by the SBP mirrored this trend, reaching a high of $17.3 billion in June 2021 before plunging to $4.5 billion in June 2023. By June 2024, SBP reserves had rebounded to $9.4 billion, reflecting central bank interventions and external support mechanisms. In contrast, commercial banks’ reserves exhibited comparatively less volatility, fluctuating between $2.8 billion in June 2008 and $7.2 billion in June 2019. Following this period, banks’ reserves declined to $4.6 billion by June 2024, indicating shifts in banking sector liquidity and foreign exchange holdings amid broader economic dynamics. This data collectively illustrates the volatility and challenges Pakistan has faced in maintaining adequate foreign exchange reserves over the past decade and a half. Economic pressures, external shocks such as global financial crises and commodity price fluctuations, and domestic policy responses have all contributed to the fluctuating reserve levels. The management of these reserves remains a critical component of Pakistan’s economic strategy, as adequate foreign exchange reserves are essential for ensuring currency stability, meeting import demands, and maintaining investor confidence in the country’s financial system.

At the time of Pakistan’s independence in 1947, agriculture was the cornerstone of the national economy, constituting approximately 53% of the country’s Gross Domestic Product (GDP). This dominant role reflected the agrarian nature of the economy, where a large majority of the population was engaged in farming and related activities. The agricultural sector not only provided the primary source of livelihood for most Pakistanis but also served as the main driver of economic activity, supplying essential raw materials for emerging industries and contributing significantly to export earnings. The prominence of agriculture in 1947 underscored the limited development of industrial and service sectors, which were still in nascent stages following the partition. Over the subsequent decades, Pakistan witnessed a gradual but steady increase in per-capita agricultural output, driven by improvements in farming techniques, irrigation infrastructure, and the adoption of high-yield crop varieties. Despite these gains, the growth rate of non-agricultural sectors—particularly industry and services—surpassed that of agriculture, resulting in a relative decline in agriculture’s share of the national economy. This trend reflected broader structural changes as the country sought to diversify its economic base, reduce dependence on a single sector, and promote industrialization and modernization. The faster expansion of manufacturing, construction, and service industries indicated a shift towards a more complex and multifaceted economy. By recent years, agriculture’s contribution to Pakistan’s GDP had decreased to about one-fifth, or approximately 20%, signaling a significant structural transformation. This decline in relative terms did not necessarily imply a reduction in absolute agricultural output but rather highlighted the accelerated growth of other sectors. The diminishing share of agriculture in the economy was consistent with global patterns observed in developing countries undergoing industrialization, where the service and industrial sectors progressively assume larger roles in economic activity. This shift also reflected changes in employment patterns, urbanization, and technological advancements that altered the economic landscape. Simultaneously, Pakistan experienced rapid growth in various industrial sectors, which played a crucial role in diversifying the economy. Key industries such as apparel manufacturing, textiles, and cement production expanded markedly, contributing to increased industrial output and export potential. The textile industry, in particular, became a vital component of Pakistan’s industrial base, leveraging the country’s abundant cotton production and skilled labor force to become a major player in global textile markets. Cement production growth was driven by rising demand from infrastructure development and construction activities, reflecting broader economic development trends. These industrial sectors not only enhanced the country’s manufacturing capabilities but also generated employment opportunities and contributed to urban economic growth. The services sector in Pakistan also expanded significantly, reflecting the country’s evolving economic structure and increasing integration into the global economy. Telecommunications emerged as a dynamic and rapidly growing industry, fueled by technological advancements, deregulation, and rising consumer demand for mobile and internet services. Transportation services expanded in response to growing trade and internal mobility needs, while advertising and finance industries developed in tandem with the modernization of markets and increased business activities. The growth of the services sector underscored the shift towards a knowledge- and information-driven economy, with services becoming a dominant force in GDP composition and employment generation. An analysis of sectoral shares of GDP at constant basic prices from fiscal year (FY) 2000 to FY 2024 illustrates the changing economic structure in Pakistan over this period. The agricultural sector’s share declined from 31.75% in FY 2000 to 24.04% in FY 2024, reflecting the ongoing relative reduction in agriculture’s economic dominance. Intermediate values show a gradual downward trend with shares of 28.15% in FY 2005, 25.89% in FY 2010, 24.83% in FY 2015, and 23.53% in FY 2020. This pattern highlights the persistent but moderate contraction of agriculture’s role as other sectors expanded. Conversely, the industrial sector’s share increased from 16.73% in FY 2000 to a peak of 19.11% in FY 2015, before experiencing a slight decline to 18.22% by FY 2024. The industrial sector’s intermediate shares were 19.01% in FY 2005, 19.04% in FY 2010, and 18.53% in FY 2020, indicating a period of growth followed by stabilization and minor contraction. This trajectory reflects the industrial sector’s fluctuating performance, influenced by factors such as investment cycles, global market conditions, and domestic policy changes. The services sector demonstrated consistent and sustained growth throughout the same period, with its share of GDP rising from 51.52% in FY 2000 to 57.74% in FY 2024. This upward trend was marked by steady increments, with shares of 52.84% in FY 2005, 55.07% in FY 2010, 56.06% in FY 2015, and 57.94% in FY 2020. The expansion of the services sector reflects its increasing importance in Pakistan’s economy, driven by growth in telecommunications, finance, transportation, and other service industries. The dominance of services in GDP composition aligns with global economic shifts towards service-oriented economies, particularly in developing countries undergoing structural transformation. Together, these sectoral changes illustrate Pakistan’s evolving economic structure from an agriculture-dominated economy in 1947 towards a more diversified and service-oriented economy by the early 21st century. The relative decline of agriculture, the rise and stabilization of industry, and the steady expansion of services underscore the dynamic nature of Pakistan’s economic development and the ongoing structural adjustments shaping its growth trajectory.

The agriculture sector in Pakistan holds a pivotal role within the national economy, serving as the primary livelihood for a significant portion of the population, either through direct engagement in farming activities or indirectly via allied industries and services. In 2021, this sector contributed approximately 23.0% to the country’s gross domestic product (GDP), reflecting its substantial economic weight despite a long-term decline in relative importance. Furthermore, it employed about 37.4% of the labor force, underscoring its critical function as a source of employment and income for millions of Pakistanis, particularly in rural areas where agricultural activities dominate the socioeconomic landscape. Agriculture also stands as Pakistan’s largest source of foreign exchange earnings, driven primarily by the export of key crops such as wheat, sugarcane, cotton, and rice. These four crops collectively account for more than 75% of the total crop output value, highlighting their dominance in the agricultural production system. Wheat, in particular, is the country’s largest food crop and a staple in the national diet. In 2017, Pakistan produced 26,674,000 tonnes of wheat, a volume nearly equivalent to the entire African continent’s production of 27.1 million tonnes and surpassing South America’s 25.9 million tonnes, according to data from FAOSTAT. This remarkable output reflects both the scale of wheat cultivation and its central role in food security and agricultural policy. Rice production and export have also been significant contributors to Pakistan’s agricultural economy. In the 2018/19 market year, the country achieved a record export of 4.5 million tonnes of rice, underscoring its status as a major player in the global rice market. This achievement not only provided substantial foreign exchange earnings but also demonstrated the efficiency and competitiveness of Pakistan’s rice sector on the international stage. The country’s agricultural exports extend beyond rice to include cotton, fish, fruits—most notably oranges and mangoes—and vegetables, all of which contribute to foreign earnings and rural livelihoods. Pakistan generally functions as a net food exporter, a position that has been maintained except in years when adverse weather conditions, such as drought, have negatively impacted harvests. Despite occasional shortfalls, the country’s export portfolio remains diverse, encompassing a range of agricultural commodities. However, Pakistan also imports certain essential food items including vegetable oil, wheat, pulses, and various consumer foods to meet domestic demand and compensate for production shortfalls or quality preferences. This dynamic trade balance reflects the complex interplay between domestic agricultural production, consumption patterns, and international market forces. Since gaining independence in 1947, the economic importance of agriculture in Pakistan has experienced a gradual decline relative to other sectors. At the time of independence, agriculture accounted for around 53% of the GDP, reflecting the country’s predominantly agrarian economy. Over the ensuing decades, this share decreased to approximately 23.0% by 2021, as industrialization, services, and other sectors expanded and diversified the economic base. Despite this relative decline, agriculture remains a cornerstone of Pakistan’s economy, both in terms of output and employment, and continues to influence broader economic and social development. The growth trajectory of Pakistan’s agriculture sector has exhibited considerable variability over recent years, as evidenced by annual growth rates from fiscal year (FY) 2008 through FY 2024. In FY 2008, the sector grew by a modest 0.81%, followed by a more robust increase of 3.41% in FY 2009. Growth slowed to 0.31% in FY 2010 but rebounded to 2.71% in FY 2011 and further to 3.23% in FY 2012. The sector maintained steady growth rates of 3.14% in FY 2013 and 2.42% in FY 2014, before experiencing a decline to 1.78% in FY 2015 and a near stagnation at 0.41% in FY 2016. Growth resumed at 2.22% in FY 2017 and accelerated to 3.88% in FY 2018, only to slow again to 0.94% in FY 2019. The sector witnessed a resurgence in FY 2020 with a growth rate of 3.91%, followed by 3.52% in FY 2021 and an even stronger 4.21% in FY 2022. Growth moderated to 2.27% in FY 2023 before surging to 6.25% in FY 2024, indicating a notable recovery and expansion in recent years. These fluctuations reflect the sector’s sensitivity to climatic conditions, policy changes, market dynamics, and technological advancements. Production data for key crops over the same period reveal both growth trends and fluctuations. Wheat production stood at 20.9 million tonnes in FY 2008 and experienced an overall upward trend, reaching 31.6 million tonnes by FY 2024, though with some variability in intermediate years. Rice production increased from 5.6 million tonnes in FY 2008 to 9.9 million tonnes in FY 2024, reflecting improvements in yield and cultivated area. Sugarcane production began at 63.9 million tonnes in FY 2008 and peaked at 88.7 million tonnes in FY 2022, slightly declining to 87.6 million tonnes in FY 2024. Cotton production, measured in million bales, showed more pronounced fluctuations, starting at 11.7 million bales in FY 2008, dipping to a low of 4.9 million bales in FY 2023, and recovering somewhat to 10.2 million bales in FY 2024. Maize, or corn, production rose steadily from 3.6 million tonnes in FY 2008 to 9.7 million tonnes in FY 2024, indicating diversification and increased cultivation of this crop. Pakistan’s agricultural productivity is underpinned by its principal natural resources, notably arable land and water availability. Approximately 25% of the country’s total land area is cultivated, benefiting from one of the world’s largest and most extensive irrigation systems. This irrigation infrastructure enables the cultivation of crops throughout the year, mitigating the impact of seasonal rainfall variability. Pakistan irrigates three times more acres than Russia, a testament to the scale and efficiency of its irrigation network. The country’s warm climate further supports year-round agricultural activities, providing favorable conditions for multiple cropping cycles and a diverse range of crops. Financial and technical support for the agriculture sector is provided by institutions such as Zarai Taraqiati Bank Limited, which stands as the largest financial institution dedicated exclusively to agriculture in Pakistan. This bank offers a range of financial services and technical expertise aimed at fostering agricultural development, improving productivity, and supporting farmers in accessing credit and modern inputs. Its role is crucial in facilitating investment in agricultural infrastructure, machinery, and technology, thereby enhancing the sector’s overall performance and sustainability. Through such institutional support, Pakistan’s agriculture sector continues to evolve, adapting to emerging challenges and opportunities in the domestic and global markets.

Pakistan’s industrial sector plays a pivotal role in the nation’s economy, contributing approximately 19.12% to the gross domestic product (GDP). This substantial share underscores the sector’s importance as a driver of economic activity and employment. The industrial sector encompasses a broad range of activities, including manufacturing, mining, and construction, each contributing variably to the overall industrial output. In 2021, the sector demonstrated remarkable resilience and recovery by registering a robust growth rate of 7.81%, a significant turnaround from the contraction of -5.75% experienced in 2020. This rebound reflected the gradual normalization of economic activities following disruptions caused by the COVID-19 pandemic and other external shocks. The Pakistani government has pursued an active policy of privatization, particularly targeting large-scale industrial units that were previously under public ownership. This strategic shift has led to a decreasing share of industrial output originating from the public sector, as private enterprises increasingly dominate production and investment. Despite the shrinking role of the public sector, overall industrial output growth has accelerated, driven by the expanding contributions of private sector firms. This trend highlights the growing dynamism and competitiveness of Pakistan’s industrial landscape, as market-oriented reforms encourage efficiency and innovation. Government policies have also prioritized the diversification of Pakistan’s industrial base to reduce dependency on traditional sectors and enhance economic resilience. A key focus has been on strengthening export-oriented industries, which are seen as vital for generating foreign exchange earnings and integrating Pakistan more deeply into global value chains. Initiatives aimed at improving infrastructure, easing regulatory burdens, and fostering technological adoption have been implemented to support these objectives. These measures seek to create a more conducive environment for industrial growth and export competitiveness. Within the industrial sector, Large Scale Manufacturing (LSM) has emerged as the fastest-growing segment, underscoring its critical role in Pakistan’s industrial development. LSM includes capital-intensive industries that produce goods on a large scale, often for both domestic consumption and export markets. The growth of LSM reflects increased investment, modernization of production processes, and rising demand for manufactured goods. This sub-sector’s expansion is a key indicator of industrial health and economic modernization. Pakistan’s industrial sector comprises a diverse array of key industries. The textile industry remains the backbone of industrial production, accounting for a significant portion of exports and employment. Fertilizer production supports the agricultural sector by supplying essential inputs, while cement manufacturing is closely linked to construction and infrastructure development. Oil refineries process crude oil into various petroleum products, essential for energy supply and industrial use. Other important industries include dairy products, food processing, beverages, construction materials, clothing, paper products, and shrimp processing. Together, these industries form a complex industrial ecosystem that supports both domestic needs and export ambitions. Small and Medium Enterprises (SMEs) constitute a vital component of Pakistan’s industrial economy, contributing approximately 40% to the annual GDP, according to reports from the Small and Medium Enterprises Development Authority (SMEDA) and the Economic Survey of Pakistan. SMEs are instrumental in fostering entrepreneurship, innovation, and regional economic development. They generate significant employment opportunities, particularly for skilled workers and entrepreneurs, thereby playing a crucial socio-economic role in poverty alleviation and inclusive growth. The sector’s capacity to absorb labor and adapt to changing market conditions enhances its importance within the broader industrial framework. Nearly 90% of all enterprises in Pakistan are small and medium-scale firms, which collectively employ about 80% of the non-agricultural labor force. This dominant presence highlights the SMEs’ extensive reach across the industrial landscape and their critical function in sustaining livelihoods. The widespread distribution of SMEs across various industrial subsectors ensures a diversified and resilient industrial base. Their contribution to employment and production complements the activities of larger firms, creating a balanced industrial ecosystem. Analysis of annual growth rates within Pakistan’s industrial sector from fiscal year (FY) 2008 to FY 2024 reveals a pattern of fluctuations reflecting broader economic cycles and external influences. In FY 2008, the sector experienced a strong growth rate of 8.78%, indicative of favorable economic conditions and investment climate at the time. However, the sector faced a sharp contraction in FY 2020, with a negative growth rate of -5.75%, largely attributable to the global economic slowdown and domestic disruptions caused by the COVID-19 pandemic. The subsequent recovery in FY 2021, with an 8.20% growth rate, demonstrated the sector’s resilience and the effectiveness of policy measures aimed at economic revival. Growth rates in the following years have varied, reflecting ongoing challenges and opportunities within the industrial environment. Within the manufacturing sub-sector, growth rates have exhibited considerable volatility over the same period. For instance, manufacturing expanded by as much as 10.86% in FY 2022, signaling a strong rebound and increased production capacity. Conversely, the sector contracted sharply by -7.80% in FY 2020, mirroring the broader industrial downturn during the pandemic. These fluctuations highlight the sensitivity of manufacturing activities to both domestic demand conditions and global supply chain dynamics. The mining sector in Pakistan has experienced mixed growth patterns, with notable peaks and troughs. A peak growth rate of 7.26% was recorded in FY 2018, reflecting increased extraction activities and favorable commodity prices. However, the sector suffered a significant decline of -7.17% in FY 2020, impacted by reduced industrial demand and logistical constraints. Subsequent years have seen modest recovery phases, although the mining sector remains susceptible to global market volatility and regulatory challenges. Construction, another key component of the industrial sector, has demonstrated considerable variability in growth rates. In FY 2017, the construction sector achieved a remarkable growth rate of 19.55%, driven by infrastructure projects and increased investment in housing and commercial developments. However, this momentum was not sustained, as evidenced by a sharp decline of -18.14% in FY 2019, reflecting economic uncertainties and tightening financial conditions. The sector’s performance is closely tied to government spending, credit availability, and overall economic confidence. Collectively, the data from FY 2008 to FY 2024 illustrate the cyclical and sometimes volatile nature of Pakistan’s industrial sector. The fluctuations in growth rates across manufacturing, mining, and construction sub-sectors underscore the sector’s sensitivity to both domestic economic policies and global economic factors. External shocks, such as commodity price swings, geopolitical tensions, and global health crises, have periodically disrupted industrial activities. At the same time, structural reforms, investment in infrastructure, and diversification efforts have contributed to periods of robust growth and recovery. This dynamic interplay shapes the ongoing evolution of Pakistan’s industrial economy.

Manufacturing represents the largest industrial sector within Pakistan’s economy, contributing approximately 12.13% to the nation’s Gross Domestic Product (GDP). This sector is subdivided into three principal components, each playing a distinct role in the overall industrial output. Large-scale manufacturing (LSM) dominates the manufacturing landscape, accounting for 79.6% of the sector’s total output, reflecting the prominence of organized, capital-intensive industries. Small-scale manufacturing constitutes 13.8%, encompassing numerous cottage and small enterprises that contribute significantly to employment and regional economic activity. Additionally, slaughtering activities comprise 6.5% of the manufacturing sector, highlighting the importance of meat processing industries within the broader manufacturing framework. The manufacturing sector encompasses a diverse array of key industrial segments that are vital to Pakistan’s industrial base and export capabilities. Prominent among these are the cement and fertilizer industries, which provide essential inputs for construction and agriculture, respectively. Edible oil and sugar manufacturing are critical for domestic consumption and food security, while steel production supports infrastructure development and industrial growth. The tobacco industry remains a significant contributor to manufacturing output and government revenues through taxation. Chemical manufacturing, machinery production, and food processing sectors further diversify the industrial portfolio, enhancing both domestic supply and export potential. Notably, Pakistan has established a global reputation as a leading manufacturer and exporter of surgical instruments, a niche industry that underscores the country’s specialized manufacturing capabilities and export diversification. Production trends for selected manufactured goods between 2016 and 2024 reveal a complex pattern of growth, fluctuation, and decline across various sub-sectors. Cotton yarn production reached its peak at 3,459 thousand metric tonnes in 2022, reflecting a period of robust activity in the textile raw material segment. However, by 2024, production declined to 2,477 thousand metric tonnes, indicating challenges such as raw material availability, market demand shifts, or competitive pressures. Jute goods production exhibited volatility, peaking at 74 units in 2018 before decreasing to 41 units in 2024, which may reflect changing global demand and competition from synthetic alternatives. Conversely, cooking oil production demonstrated a steady upward trajectory, rising from 380 units in 2016 to 642 units in 2024, signaling growing domestic consumption and possibly expanding export markets. Sugar production experienced variability during this period, with a high of 7,921 units recorded in 2021, followed by a slight decline to 6,796 units in 2024, potentially influenced by agricultural output fluctuations and market dynamics. Cement production peaked at 49,797 units in 2021, coinciding with infrastructure development booms, but subsequently declined to 39,566 units in 2024, possibly due to economic slowdowns or reduced construction activity. Paper and board production showed consistent growth, increasing from 610 units in 2016 to 787 units in 2024, reflecting rising demand for packaging and printing materials. Similarly, caustic soda production more than doubled from 225 units in 2016 to 497 units in 2024, indicating expansion in the chemical manufacturing sector. Hydrogen chloride production experienced significant growth, escalating from 172 units in 2016 to a peak of 525 units in 2023 before slightly decreasing to 507 units in 2024, suggesting increased industrial usage and chemical processing activities. Sulphuric acid production fluctuated considerably, with a low of 40 units in 2020 and a peak of 111 units in 2022, ending at 64 units in 2024, reflecting variable demand in fertilizer production and industrial applications. Vegetable ghee production steadily increased from 1,241 units in 2016 to 1,554 units in 2023, with a minor decline to 1,493 units in 2024, indicating sustained consumer demand for edible fats. Cotton cloth production remained relatively stable around 1,039 million meters in 2016 but declined to 871 million meters by 2024, possibly due to shifts in textile industry competitiveness and export markets. Cigarette production displayed volatility, starting at 54 billion units in 2016 and dropping to 33 billion units in 2024, reflecting regulatory changes, health awareness campaigns, and market dynamics. Nitrogenous fertilizers production fluctuated over the years, reaching 3,483 thousand units in 2024, while phosphatic fertilizers production increased from 664 units in 2016 to 756 units in 2024, indicative of evolving agricultural input demands. Cycle tyres and tubes production varied, with 11,490 thousand units in 2016 and a slight decrease to 10,943 thousand units in 2024, whereas motor tyres and tubes production remained relatively steady, around 34,202 thousand units in 2016, declining marginally to 31,107 thousand units in 2024, reflecting trends in the automotive and transportation sectors. Motorcycle production peaked at 2,825 units in 2018 but declined significantly to 1,235 units in 2024, possibly due to market saturation or economic factors affecting consumer purchasing power. Bicycle production also decreased from 199 units in 2016 to 159 units in 2024, signaling changing transportation preferences. Electric transformers production experienced fluctuations, concluding at 22 units in 2024, while refrigerator production peaked at 1,834 units in 2017 before declining to 818 units in 2024, reflecting consumer demand variability and competition. Air conditioner production peaked at 540 units in 2021 but dropped to 224 units in 2024, indicating seasonal demand and economic influences. Electric fans production showed growth, increasing from 2,033 units in 2016 to 2,283 units in 2024, while electric meters production rose significantly from 1,310 units in 2016 to 2,117 units in 2024, highlighting infrastructure expansion. Production of motor spirits or petrol increased from 2,216 million liters in 2016 to 3,294 million liters in 2024, reflecting rising energy consumption. High-speed diesel production fluctuated, with 5,236 million liters in 2016 and a slight increase to 5,340 million liters in 2024, whereas furnace oil production declined from 3,080 million liters in 2016 to 2,633 million liters in 2024, possibly due to shifts in energy policy and fuel preferences. Production of jeeps and cars showed variability, peaking at 271,923 units in 2022 before declining sharply to 100,221 units in 2024, influenced by market cycles and economic conditions. Tractor production reached a peak of 71,894 units in 2018 but decreased to 46,275 units in 2024, while trucks and buses production peaked at 13,425 units in 2018 and declined to 3,240 units in 2024, reflecting broader trends in agricultural mechanization and transportation demand. Pakistan’s largest corporations predominantly operate within utilities and industrial sectors, encompassing oil, gas, electricity, automobiles, cement, food, chemicals, fertilizer, civil aviation, textiles, and telecommunications. These conglomerates form the backbone of the industrial economy, driving growth, employment, and technological advancement. In 2023, financial data for major Pakistani corporations reveal significant asset bases, sales volumes, and profitability metrics that underscore their economic importance. Oil and Gas Development Co. Ltd. reported total assets of 1,424 billion Pakistani Rupees (PKR), sales of 414 billion PKR, and a profit after tax of 224.6 billion PKR, reflecting its dominant position in the energy sector. Sui Northern Gas Pipelines Limited held assets worth 1,268 billion PKR, with sales of 1,294 billion PKR and a profit of 10.4 billion PKR, while Pakistan State Oil Co. Ltd. reported assets of 983 billion PKR, sales of 3,391 billion PKR, and a profit of 5.7 billion PKR, highlighting their critical roles in energy distribution and refining. K-Electric, with assets of 1,025 billion PKR and sales of 519 billion PKR, incurred a loss after tax of 30.9 billion PKR, indicating challenges within the power generation and distribution sector. Similarly, Sui Southern Gas Co. Ltd. reported assets of 798 billion PKR, sales of 376 billion PKR, and a loss of 11.4 billion PKR. Pakistan Petroleum Ltd. held assets of 790 billion PKR, sales of 286 billion PKR, and a profit of 97.9 billion PKR, demonstrating strong performance in upstream petroleum activities. Lucky Cement Ltd. reported assets of 608 billion PKR, sales of 385 billion PKR, and a profit of 49.4 billion PKR, reflecting the cement industry’s contribution to construction and infrastructure. The Hub Power Co. Ltd. recorded assets of 406 billion PKR, sales of 114 billion PKR, and a profit of 62.0 billion PKR, underscoring its role in power generation. Attock Refinery Ltd. reported assets of 193 billion PKR, sales of 369 billion PKR, and a profit of 28.0 billion PKR, while Fatima Fertilizer Co. Ltd. had assets of 234 billion PKR, sales of 235 billion PKR, and a profit of 23.0 billion PKR, highlighting the fertilizer sector’s importance. Engro Fertilizers Ltd. reported assets of 161 billion PKR, sales of 224 billion PKR, and a profit of 26.2 billion PKR, and Fauji Fertilizer Co. Ltd. held assets of 327 billion PKR, sales of 181 billion PKR, and a profit of 19.7 billion PKR, reflecting sustained demand in agriculture inputs. Attock Petroleum Ltd. reported assets of 108 billion PKR, sales of 474 billion PKR, and a profit of 12.5 billion PKR, while Indus Motor Co. Ltd. held assets of 123 billion PKR, sales of 178 billion PKR, and a profit of 9.7 billion PKR, indicating activity in the automotive manufacturing sector. Shell Pakistan Ltd. reported assets of 106 billion PKR, sales of 432 billion PKR, and a profit of 5.8 billion PKR. Fauji Fertilizer Bin Qasim Ltd. held assets of 146 billion PKR, sales of 193 billion PKR, and a profit of 4.4 billion PKR. National Refinery Ltd. reported assets of 112 billion PKR, sales of 299 billion PKR, but incurred a loss of 4.5 billion PKR, reflecting challenges in refining operations. Nestle Pakistan Ltd. held assets of 98 billion PKR, sales of 201 billion PKR, and a profit of 16.5 billion PKR, demonstrating strength in the food processing sector. Cnergyico PK Limited reported assets of 365 billion PKR, sales of 194 billion PKR, and a loss of 13.6 billion PKR, while Pakistan Telecommunication Co. Ltd. held assets of 644 billion PKR, sales of 188 billion PKR, and a loss of 15.5 billion PKR, indicating difficulties in the telecommunications sector. Pakistan International Airlines Corporation Ltd. reported assets of 321 billion PKR, sales of 179 billion PKR, and a loss of 17.5 billion PKR, reflecting ongoing challenges in civil aviation. Nishat Mills Ltd. held assets of 170 billion PKR, sales of 142 billion PKR, and a profit of 12.2 billion PKR, highlighting the textile industry’s contribution. Fauji Cement Co. Ltd. reported assets of 139 billion PKR, sales of 90 billion PKR, and a profit of 29.5 billion PKR, while Gul Ahmed Textile Mills Ltd. held assets of 134 billion PKR, sales of 139 billion PKR, and a profit of 4.9 billion PKR. INTERLOOP (Pvt) Ltd. reported assets of 125 billion PKR, sales of 121 billion PKR, and a profit of 21.7 billion PKR, and Pakistan Tobacco Co. Ltd. held assets of 110 billion PKR, sales of 110 billion PKR, and a profit of 29.0 billion PKR. Bestway Cement Ltd. reported assets of 175 billion PKR, further underscoring the significant scale and diversity of Pakistan’s industrial and manufacturing enterprises.

At the time of Pakistan’s independence in 1947, the nascent country inherited a modest cement industry comprising only four cement plants. These facilities collectively possessed a production capacity of approximately 0.5 million tons, laying the foundational framework for the country’s cement sector. This initial capacity was relatively limited, reflecting the early stage of industrial development in the region and the broader economic challenges faced by the newly established state. The inherited plants were crucial in meeting the minimal domestic demand for cement, which was essential for reconstruction and development projects in the post-partition period. During the decade spanning 1956 to 1966, the cement industry in Pakistan experienced some degree of expansion. New plants were established, and existing facilities underwent modernization efforts aimed at increasing output. However, this growth was insufficient when measured against the rapid pace of Pakistan’s overall economic development during that era. The industrial and infrastructural demands of a growing population and expanding urban centers outstripped the incremental increases in cement production capacity. Consequently, the industry struggled to keep up with the burgeoning requirements of construction and infrastructure development, which were critical components of the country’s economic agenda. By the mid-1970s, the gap between domestic cement production and demand had widened significantly. This shortfall compelled Pakistan to resort to importing cement beginning in the fiscal year 1976–77. The reliance on imports was a direct consequence of inadequate expansion and investment in the domestic cement industry during the preceding decades. Imports continued to play a vital role in supplementing local production for nearly two decades, persisting until the fiscal year 1994–95. During this period, the government and private sector gradually focused on enhancing indigenous production capabilities to reduce dependence on foreign cement supplies, which were subject to international market fluctuations and trade barriers. By the time of the referenced report, Pakistan’s cement sector had undergone substantial transformation and growth. The industry had expanded to include 27 operational cement plants, reflecting significant capital investment and technological advancements. Collectively, these plants contributed over Rs 30 billion annually to the national exchequer through various forms of taxation, including sales tax, income tax, and excise duties. This fiscal contribution underscored the cement industry’s importance not only as a key supplier of construction materials but also as a significant revenue generator for the government. The growth of the sector was indicative of broader industrial development trends and increasing domestic infrastructure needs. The rapid expansion of Pakistan’s cement industry by 2013 was largely fueled by heightened demand from neighboring Afghanistan, as well as other countries experiencing real estate booms. Afghanistan’s reconstruction efforts following prolonged conflict created a substantial market for Pakistani cement exports. Simultaneously, the real estate sector in various regional markets witnessed accelerated growth, driving up demand for cement as a fundamental construction input. This external demand complemented the domestic market’s expansion, enabling Pakistani cement manufacturers to increase production volumes and improve economies of scale. The industry’s responsiveness to regional market dynamics highlighted its strategic importance within the broader South Asian construction and infrastructure landscape. In April 2020, the Pakistani government introduced a comprehensive incentive package designed to stimulate the construction industry, recognizing its pivotal role in economic growth and employment generation. This package included an amnesty scheme aimed at encouraging compliance and formalization within the sector, as well as targeted tax exemptions to reduce the financial burden on construction-related businesses. A significant component of the package was the allocation of a Rs 36 billion subsidy specifically earmarked for the Naya Pakistan Housing Scheme, a government initiative focused on addressing the country’s housing deficit by promoting affordable residential construction. These measures were intended to catalyze construction activity, thereby increasing demand for cement and related materials. As part of the 2020 incentive measures, the government directed banks to increase their lending exposure to the construction sector, mandating that such loans constitute 5 percent of the total loan portfolio. This directive was aimed at enhancing the availability of affordable financing for construction projects, enabling developers and contractors to undertake new ventures and expand existing ones. By facilitating greater access to credit, the policy sought to overcome one of the key constraints facing the construction industry—limited capital availability. The increased financial support was expected to stimulate demand for construction inputs, including cement, thereby driving growth in the sector. In addition to financial sector reforms, the government implemented fiscal measures to further support the cement industry. The Federal Excise Duty (FED) on cement was reduced from Rs 2 per kilogram to Rs 1.5 per kilogram. This reduction in excise duty lowered the cost of production and sale of cement, making it more competitive both domestically and in export markets. The tax cut was part of a broader strategy to enhance the affordability of construction materials, encourage investment in cement production, and support the overall growth of the construction sector. By easing the tax burden, the government aimed to stimulate production capacity utilization and promote industry expansion. Cement production capacity in Pakistan demonstrated remarkable growth over a 15-year period, rising from 37.68 million tonnes in 2008 to 83.18 million tonnes in 2023. This more than doubling of capacity reflected sustained investment in new plants, capacity upgrades at existing facilities, and adoption of modern production technologies. The expansion was driven by both domestic demand growth and export opportunities, with manufacturers seeking to capitalize on regional markets. The increase in capacity also signified the cement industry’s evolution into a more robust and competitive sector capable of meeting the country’s infrastructural and construction needs. Local dispatches of cement, representing domestic consumption, exhibited notable fluctuations during the same period. Starting at 22.58 million tonnes in 2008, local dispatches increased steadily to reach a peak of 48.12 million tonnes in 2021. This growth was driven by expanding construction activities, urbanization, and government housing initiatives. However, by 2023, local dispatches declined to 40.01 million tonnes, indicating a contraction in domestic demand. This decline could be attributed to various factors, including economic slowdowns, shifts in construction activity, or changes in government policy. The variability in local dispatches highlighted the sensitivity of domestic cement consumption to broader economic and policy environments. Cement exports from Pakistan also experienced variability over the years. Exports rose from 7.72 million tonnes in 2008 to a peak of 10.98 million tonnes in 2009, reflecting strong regional demand and competitive pricing. Following this peak, exports generally declined, reaching 4.57 million tonnes by 2023. The downward trend in exports may have been influenced by increased competition from other regional producers, logistical challenges, or changes in demand from key export markets such as Afghanistan. The fluctuation in export volumes underscored the dynamic nature of international trade in cement and the impact of external economic and geopolitical factors on Pakistan’s export performance. Total cement dispatches, encompassing both local sales and exports, increased from 30.30 million tonnes in 2008 to a high of 57.43 million tonnes in 2021. This overall growth reflected the combined effects of rising domestic consumption and export demand during the period. However, by 2023, total dispatches declined to 44.58 million tonnes, mirroring the reductions observed in both local and export markets. These shifts illustrated the cyclical and sometimes volatile nature of the cement industry, which is closely tied to construction activity, economic conditions, and government policies. The data revealed how market dynamics and demand fluctuations influenced the total volume of cement moved within and beyond Pakistan’s borders. While the production capacity of Pakistan’s cement industry consistently increased over the years, local demand and export volumes displayed greater variability. This divergence highlighted the complex interplay of domestic economic conditions, government initiatives, regional market trends, and international competition. The steady rise in capacity signaled confidence in the sector’s long-term prospects and the anticipation of sustained demand growth. Conversely, the fluctuations in consumption and exports reflected the sensitivity of the cement market to short-term economic cycles, policy changes, and external geopolitical factors affecting trade and construction activity. Together, these trends underscored the evolving nature of Pakistan’s cement industry within both domestic and regional contexts.

As of 2021, Pakistan’s fertilizer industry consisted of a diverse array of manufacturing facilities designed to meet the agricultural sector’s nutrient requirements. The industry included nine urea manufacturing plants, which formed the backbone of fertilizer production due to the crop sector’s heavy reliance on nitrogen-based fertilizers. In addition to these urea plants, there was one Diammonium Phosphate (DAP) plant, which produced phosphorus-rich fertilizer essential for crop development. Complementing these were three Nitrogen-Phosphorus (NP) plants, which supplied a balanced nutrient mix catering to specific soil and crop needs. The industry also incorporated four Single Super Phosphate (SSP) plants, which produced phosphorus fertilizers widely used in Pakistan’s farming practices. Furthermore, two Calcium Ammonium Nitrate (CAN) plants contributed to nitrogen fertilizer availability, while a single Sulphate of Potash (SOP) plant provided potassium fertilizer, a critical nutrient for crop quality and yield. The sector was rounded out by two blended Nitrogen-Phosphorus-Potassium (NPK) plants that manufactured compound fertilizers combining all three primary nutrients. Collectively, these facilities had an installed total production capacity of 9,172 thousand tonnes per annum, reflecting the scale and diversity of Pakistan’s fertilizer manufacturing capabilities. Among the various fertilizer types produced domestically, urea remained the predominant product, accounting for approximately 70 percent of the total fertilizer output. This dominance was largely attributable to urea’s high nitrogen content, which is vital for plant growth and a key driver of crop yields in Pakistan’s predominantly cereal-based agriculture. The installed production capacity for urea alone was 6,307 thousand tonnes per annum, a figure that aligned closely with the country’s domestic consumption needs. However, this capacity was contingent on the uninterrupted supply of natural gas and Re-Liquefied Natural Gas (RLNG), which served as the primary feedstock and energy source for urea production. Any disruptions in gas supply could therefore directly impact urea output and, by extension, fertilizer availability for farmers. The reliance on these energy inputs underscored the interconnectedness of Pakistan’s energy and agricultural sectors, highlighting the importance of stable fuel supplies to maintain fertilizer production and support food security. Analysis of fertilizer offtake data by nutrient type from 2008 through 2022 reveals notable trends and fluctuations in consumption patterns across nitrogen, phosphorus, and potassium fertilizers. Nitrogen offtake, measured in thousand tonnes, exhibited an overall upward trajectory, increasing from 2,925 thousand tonnes in 2008 to 3,838 thousand tonnes in 2022. This growth, however, was not linear; it included significant variations such as a pronounced dip to 2,672 thousand tonnes in 2016, which may have been influenced by factors such as price volatility, supply constraints, or shifts in cropping patterns. Following this decline, nitrogen consumption rebounded sharply to a peak of 3,730 thousand tonnes in 2017, indicating a recovery in fertilizer demand possibly driven by favorable agricultural policies or improved market conditions. This pattern of fluctuation reflected the dynamic nature of fertilizer usage in Pakistan, shaped by economic, environmental, and policy variables over the years. Phosphorus fertilizer offtake also experienced a general increase during the same period, rising from 630 thousand tonnes in 2008 to a peak of 1,279 thousand tonnes in 2017. This substantial growth underscored the increasing recognition of phosphorus’s role in enhancing crop productivity and soil fertility. However, after reaching this peak, phosphorus consumption declined to 1,093 thousand tonnes by 2022. The reduction could be attributed to factors such as changes in fertilizer pricing, availability of imported phosphorus fertilizers, or shifts in crop cultivation patterns that affected phosphorus demand. Despite this decline, phosphorus fertilizer remained a critical input in Pakistan’s agricultural system, reflecting its essential role in plant development and yield optimization. In contrast, potassium fertilizer offtake remained relatively low throughout the period compared to nitrogen and phosphorus. Starting at 27 thousand tonnes in 2008, potassium consumption increased modestly to 71 thousand tonnes in 2022. The relatively low usage of potassium fertilizers in Pakistan has historically been linked to limited domestic production capacity and lower awareness among farmers regarding potassium’s importance in crop nutrition. Nonetheless, the gradual increase in potassium offtake over the 15-year period indicated a slow but steady improvement in the adoption of balanced fertilization practices. Minor fluctuations in potassium consumption were observed year-to-year, reflecting the evolving market dynamics and the gradual expansion of potassium fertilizer use in the country. Overall, the fertilizer consumption data from 2008 to 2022 illustrated a general upward trend in nutrient consumption, particularly for nitrogen and potassium. This trend mirrored changes in agricultural fertilizer demand driven by factors such as intensification of crop production, expansion of cultivated areas, and increased emphasis on improving crop yields through balanced fertilization. The growth in nitrogen and potassium usage suggested a move towards more comprehensive nutrient management strategies, while the fluctuations in phosphorus consumption highlighted the complex interplay of market and agronomic factors influencing fertilizer demand. Collectively, these patterns underscored the critical role of the fertilizer industry in supporting Pakistan’s agricultural productivity and food security over the past decade and a half.

The defence industry of Pakistan functions under the jurisdiction of the Ministry of Defence Production, which was established in September 1951 with the primary objective of promoting and coordinating the various military production facilities that had been developed since the country’s independence in 1947. This ministry was tasked with centralizing efforts to enhance self-reliance in defence manufacturing and to reduce dependence on foreign arms imports. Over the decades, the ministry has overseen the expansion and modernization of Pakistan’s defence industrial base, facilitating the development of indigenous capabilities across a broad spectrum of military hardware and technology. The establishment of the Ministry of Defence Production marked a significant step in institutionalizing the country’s defence manufacturing efforts, enabling a more systematic approach to research, development, and production aligned with national security requirements. Pakistan’s defence industry has been actively engaged in numerous joint production projects, reflecting a strategic emphasis on collaboration both domestically and with international partners. Among the most notable projects is the development of the Al Khalid 2 tank, an advanced main battle tank that represents a significant upgrade over its predecessor, the original Al Khalid. This tank incorporates modern armor, firepower, and mobility enhancements, designed to meet the evolving demands of contemporary armored warfare. In addition to armored vehicles, the industry has focused on the production of advanced trainer aircraft and combat aircraft, which are essential for maintaining an effective and well-trained air force. These projects often involve technology transfers and joint development agreements, enabling Pakistan to build indigenous expertise while integrating cutting-edge technologies. Artillery systems, including Multiple Rocket Launch Systems (MRLS), form another critical component of the defence manufacturing portfolio, providing the Pakistan Army with enhanced firepower and tactical flexibility on the battlefield. The development and production of MRLS have been crucial in modernizing Pakistan’s artillery capabilities, allowing for rapid and precise delivery of firepower over extended ranges. In the realm of unmanned systems, Pakistan’s defence industry has made significant strides in producing combat and surveillance drones, which have become increasingly important in modern military operations for reconnaissance, target acquisition, and precision strikes. The GIDS Shahpar-1 and Shahpar-2 models stand out as prominent examples of indigenous drone technology developed by Pakistan. These unmanned aerial vehicles (UAVs) are designed for tactical surveillance and reconnaissance missions, equipped with advanced sensors and communication systems that enable real-time intelligence gathering. The Shahpar series reflects Pakistan’s growing capabilities in drone technology, which has been a focus area for enhancing situational awareness and battlefield management. Beyond UAVs, the defence industry also manufactures battle management and surveillance radars, electronic warfare systems, naval ships, and submarines. These systems collectively contribute to the country’s comprehensive defence posture, enabling effective command and control, electronic countermeasures, and maritime security. The production of naval vessels and submarines, in particular, underscores Pakistan’s efforts to strengthen its naval capabilities and assert control over its maritime boundaries. Pakistan’s defence industry not only serves domestic military needs but also plays a significant role in the international arms market. The country manufactures and exports a wide range of weapons and defence equipment to over 40 countries worldwide, including several European nations. This export activity has become a vital source of revenue and a means of fostering strategic partnerships. The annual revenues generated from defence exports are approximately $620 million, reflecting the growing competitiveness and global reach of Pakistan’s defence manufacturing sector. The ability to export to diverse markets demonstrates the industry’s capacity to meet international standards and adapt to various operational requirements. These exports encompass a broad spectrum of military hardware, from small arms and ammunition to more sophisticated systems such as drones and artillery. The expansion of defence exports has also contributed to technology development and industrial growth within Pakistan, creating employment opportunities and enhancing the country’s technological base. Between the periods 2004–2008 and 2009–2013, Pakistan experienced a significant increase in the importation of sophisticated arms, with imports rising by 119 percent. This surge reflects Pakistan’s efforts to modernize its military capabilities in response to evolving regional security challenges and the need to maintain a qualitative edge. The increased arms imports during this period were part of a broader strategy to complement indigenous production with advanced foreign technology, ensuring that the armed forces remained equipped with state-of-the-art weaponry and systems. The growth in arms imports also coincided with heightened geopolitical tensions and the need to address asymmetric threats, necessitating the acquisition of advanced platforms and equipment. China emerged as the dominant supplier of arms to Pakistan during this period, accounting for 54 percent of Pakistan’s total arms imports. The strong defence relationship between Pakistan and China has been characterized by extensive cooperation in arms production, technology transfer, and joint development projects. China’s role as the primary arms supplier has been instrumental in enabling Pakistan to acquire advanced weaponry, including fighter jets, naval vessels, missiles, and other critical defence systems. This partnership has also facilitated the transfer of technology that has supported Pakistan’s indigenous defence manufacturing capabilities. The United States, while a smaller supplier compared to China, provided 27 percent of Pakistan’s arms imports during the same period. U.S. arms supplies have included a range of military equipment and platforms, often linked to broader strategic and military cooperation agreements. The United States’ contribution to Pakistan’s arms imports reflects the complex and multifaceted nature of Pakistan’s defence procurement strategy, which balances relationships with multiple international partners to meet diverse operational requirements. Together, these developments illustrate the dynamic nature of Pakistan’s defence industry, which combines indigenous production, joint ventures, and strategic imports to build a robust and versatile military industrial base. The interplay between domestic manufacturing and foreign procurement has enabled Pakistan to maintain a credible defence posture while gradually enhancing self-sufficiency and technological expertise. The ongoing modernization efforts, supported by both internal capabilities and external partnerships, continue to shape the evolution of Pakistan’s defence industry in the context of regional and global security challenges.

The textile industry in Pakistan has undergone significant geographical and structural transformations over the decades. Historically, prior to 1990, Karachi served as the primary hub for textile manufacturing, benefiting from its status as a major port city and commercial center. However, since the early 1990s, the industry’s focal point shifted predominantly to the province of Punjab, which now hosts the majority of textile production facilities. This relocation was influenced by factors such as proximity to raw materials, especially cotton cultivation in Punjab, improved infrastructure, and government policies encouraging industrial development in the region. The concentration of textile units in Punjab has led to the emergence of major industrial clusters, particularly in cities like Faisalabad, Gujranwala, and Sialkot, which have become synonymous with textile manufacturing and exports. The contemporary textile industry in Pakistan is characterized by a bifurcated structure comprising two primary segments: a highly organized large-scale sector and a fragmented cottage or small-scale sector. The organized large-scale segment predominantly consists of integrated textile mills that encompass multiple stages of production under one roof, including spinning, weaving, and finishing processes. These integrated mills are equipped with numerous spinning units and a limited number of shuttle-less loom units, enabling them to produce yarn, fabric, and finished textiles efficiently and at scale. The presence of integrated mills facilitates economies of scale, consistent quality control, and the ability to meet large export orders. On the other hand, the unorganized or cottage sector is composed of smaller, often family-owned enterprises that operate downstream industries such as weaving, finishing, garment manufacturing, towel production, and hosiery. Despite their fragmented nature, these smaller units play a crucial role in the industry’s overall output and possess considerable export potential, particularly in niche and value-added textile products. Within the organized large-scale sector, integrated textile mills form the backbone of production. These mills typically house numerous spinning units, which are responsible for converting raw cotton into yarn. The spinning units are the most capital-intensive and technologically advanced components of the mills, utilizing modern machinery to ensure high productivity and quality. In contrast, the weaving segment within these integrated mills is relatively smaller, with a limited number of shuttle-less looms in operation. Shuttle-less looms, which are more efficient and produce higher quality fabric than conventional shuttle looms, have gradually been adopted in these mills to enhance fabric production. However, the bulk of weaving activities, especially in the unorganized sector, still rely on conventional looms. The integrated nature of these mills allows for streamlined operations, reducing lead times and enhancing the ability to respond to market demands both domestically and internationally. The unorganized sector, while fragmented and composed of smaller enterprises, encompasses a wide range of downstream textile activities that add significant value to the industry. These include weaving, finishing, garment manufacturing, towel production, and hosiery, all of which contribute substantially to Pakistan’s textile exports. Many of these enterprises operate with limited capital and technology but have demonstrated resilience and adaptability in the face of market challenges. Notably, some units within this sector have expanded their operations beyond national borders, establishing international footprints and adopting progressive business philosophies such as quality certifications, supply chain integration, and export-oriented production models. This international expansion reflects the dynamic nature of the unorganized sector and its capacity to evolve in response to global market opportunities, thereby reinforcing Pakistan’s position as a competitive player in the global textile trade. As of June 2021, the Pakistani textile industry comprised a total of 517 textile units, reflecting the sector’s substantial scale and diversity. Among these, 40 were composite units, which are integrated mills encompassing multiple stages of textile production, while the remaining 477 were spinning units focused primarily on yarn production. This distribution underscores the dominance of spinning within the textile value chain and highlights the importance of yarn production as a foundational activity supporting downstream processes. The presence of a large number of spinning units also indicates the sector’s capacity to meet both domestic demand and export requirements for yarn, which serves as a critical input for fabric manufacturing and garment production. In terms of weaving technology, the industry operated approximately 28,500 shuttle-less looms alongside 375,000 conventional looms as of June 2021. The substantial number of conventional looms reflects the continued reliance on traditional weaving methods, particularly within the unorganized sector and smaller enterprises. However, the growing adoption of shuttle-less looms, which offer higher efficiency, better fabric quality, and faster production speeds, signals a gradual technological shift within the industry. This dual presence of conventional and shuttle-less looms illustrates the coexistence of traditional practices and modern advancements, enabling the textile sector to cater to diverse market segments ranging from low-cost, mass-produced fabrics to premium, high-quality textiles. The growth trajectory of the spinning sector has been primarily driven by increasing export demand and robust domestic cotton production. Pakistan’s status as one of the world’s leading cotton producers has provided a steady supply of raw material, enabling the spinning industry to expand its capacity and output. Export demand, particularly from markets in Europe, North America, and Asia, has incentivized spinning mills to enhance production capabilities, adopt modern technologies, and improve quality standards. This expansion in the spinning sector has subsequently stimulated growth in the weaving and processing segments, as increased yarn production necessitates corresponding increases in fabric manufacturing and finishing activities. The interdependence between these sectors has fostered a more integrated and efficient textile value chain, contributing to the overall competitiveness of Pakistan’s textile industry. Independent air-jet weaving units have emerged as a notable development within the textile sector, operating both as standalone entities and in conjunction with spinning or processing units. Air-jet weaving technology represents a more advanced and faster method of fabric production compared to conventional shuttle or shuttle-less looms. These units have gained popularity due to their ability to produce high-quality fabrics at competitive speeds, making them attractive to both domestic and export-oriented manufacturers. The emergence of independent air-jet weaving units reflects the industry’s ongoing efforts to modernize and diversify its production capabilities, enabling it to meet evolving market demands and enhance product offerings. A significant trend within the textile industry has been the backward integration of certain clothing units, whereby garment manufacturers have expanded their operations upstream into fabric production and other preparatory stages. Conversely, spinning units have increasingly developed capabilities in weaving, finishing, and assembly, aiming to establish a complete supply chain within a single organizational framework. This movement towards vertical integration allows companies to control multiple stages of production, reduce dependency on external suppliers, and improve cost efficiencies. Such integration fosters a symbiotic relationship between the textile and clothing sectors, facilitating smoother coordination, faster turnaround times, and enhanced product quality. The horizontal and vertical integration observed in the industry is often managed by the same companies or achieved through strategic business collaborations, joint ventures, and partnerships, reflecting a sophisticated approach to value chain management. The textile sector holds a pivotal role in Pakistan’s industrial economy, contributing approximately one-fourth, or 25 percent, of the country’s industrial value-added output. This substantial contribution underscores the sector’s importance as a driver of economic growth, industrial development, and export earnings. Employment generation is another critical dimension of the textile industry’s impact, as it provides jobs to about 40 percent of the industrial labor force in Pakistan. This extensive employment base includes workers engaged in spinning, weaving, finishing, garment manufacturing, and ancillary services, highlighting the sector’s role in supporting livelihoods and fostering socio-economic development across urban and rural areas. Textile products have consistently accounted for an average of about 60 percent of Pakistan’s national exports, excluding seasonal and cyclical fluctuations. This dominant share reflects the sector’s centrality to the country’s trade balance and foreign exchange earnings. The export portfolio includes a wide range of products such as yarn, fabric, garments, towels, and hosiery, catering to diverse international markets. Despite challenges posed by global competition, fluctuating cotton prices, and evolving consumer preferences, the textile industry has maintained its position as Pakistan’s leading export sector. Its sustained contribution to exports underscores the industry’s resilience and adaptability, as well as its critical role in supporting the country’s economic stability and growth.

In 2021, the automobile sector in Pakistan accounted for approximately 7 percent of the country’s Large Scale Manufacturing (LSM), underscoring its significant contribution to the industrial output of the nation. This sector’s prominence within the manufacturing landscape reflects its role as a key driver of economic activity, employment, and technological advancement. The government’s proactive support, coupled with the systematic removal of regulatory and infrastructural obstacles, has fostered a conducive environment for industrial expansion within the automobile domain. Such measures have been instrumental in encouraging both domestic and foreign investment, setting the stage for anticipated positive outcomes in the near future. The market witnessed an influx of numerous new investors who commenced commercial production, signaling growing confidence in Pakistan’s automotive potential. Concurrently, established manufacturers undertook substantial capital investments aimed at expanding their production capacities and enhancing technological capabilities. These developments indicate a dynamic phase of growth and modernization within the sector. Among the notable entrants poised to influence the local passenger vehicle market are international automakers such as Proton, MG, and Volkswagen. Although these companies had not yet begun production as of the latest reports, their planned market entry is expected to diversify consumer options and intensify competition. Meanwhile, several manufacturers had already initiated vehicle production within Pakistan, including KIA, Hyundai, Changan, and Prince DFSK. These companies have contributed to the expansion of locally assembled vehicles, offering a range of models that cater to various segments of the market. Their presence has also facilitated technology transfer and skill development, further strengthening the domestic automotive ecosystem. An analysis of vehicle production and sales data from 2006 through 2024 reveals notable fluctuations across different categories, including cars, trucks, buses, jeeps and pick-ups, farm tractors, and two- and three-wheelers. These figures, recorded annually, provide insight into the sector’s evolving dynamics. Car production reached its zenith in 2022 with 226,433 units manufactured, reflecting a period of robust demand and capacity utilization. However, by 2024, production had declined sharply to 79,573 units, a trend mirrored by car sales which peaked at 234,180 units in 2022 before falling to 81,577 units in 2024. This contraction indicates a cooling of consumer demand or potential supply-side constraints impacting the passenger vehicle segment. Production and sales of trucks remained relatively low throughout the period, with 2,204 units produced and 2,187 units sold in 2024. The bus segment similarly exhibited minimal activity, with 419 units manufactured and 454 units sold in the same year. These figures suggest limited expansion or demand in the commercial transport vehicle categories compared to passenger vehicles. Production and sales of jeeps and pick-ups demonstrated variability, culminating in 21,084 units produced and 22,250 units sold in 2024. This segment, often favored for both personal and commercial use, reflects fluctuating market preferences and economic conditions. Farm tractor production and sales also experienced oscillations, with 45,529 units produced and 45,484 units sold in 2024. Given the agricultural sector’s reliance on mechanization, these figures are indicative of broader trends in rural investment and farming practices. Notably, the two- and three-wheeler segment consistently recorded the highest volumes among all categories, with production at 1,150,090 units and sales at 1,150,112 units in 2024. This segment caters to a large portion of the population requiring affordable and efficient transportation, underscoring its critical role in the overall automotive market. It is important to note that the reported production and sales figures exclude companies that are not members of the Pakistan Automotive Manufacturers Association (PAMA), which may result in partial representation of the entire industry landscape. The introduction of new vehicle models and brands, alongside a significantly low benchmark interest rate of 7 percent, catalyzed record-high consumer financing for automobiles in 2021. This surge in financing activity was closely linked to the approval of the Automotive Development Policy (2016–2021) by the Economic Coordination Committee (ECC) on 18 March 2016, which provided a strategic framework for industry growth and investment incentives. The pattern of increased car financing demand in 2021 echoed a similar phenomenon observed during President Pervez Musharraf’s regime from 2001 to 2008. During that earlier period, banks extended extensive loans for car purchases without stringent borrower credit assessments, leading to a rapid expansion in consumer vehicle financing. However, this previous boom ended abruptly due to widespread defaults on loan repayments, highlighting the risks associated with aggressive lending practices absent adequate credit evaluation. Outstanding consumer financing loans for automobiles, measured in billion Pakistani Rupees (PKR), demonstrated a general upward trajectory over the years, rising from 97.78 billion PKR in June 2006 to a peak of 367.85 billion PKR in June 2022. This growth reflects increasing consumer access to credit and the expanding scale of the automobile market. Subsequently, the outstanding loan amount declined to 230.501 billion PKR by June 2024, indicating a contraction possibly influenced by tighter lending standards, economic conditions, or shifts in consumer demand. Detailed figures over the years include 105.44 billion PKR in June 2007, a dip to 64.20 billion PKR in June 2010, followed by gradual increases to 85.12 billion PKR in June 2015, 111.96 billion PKR in June 2016, 154.25 billion PKR in June 2017, 193.60 billion PKR in June 2018, 215.46 billion PKR in June 2019, 211.11 billion PKR in June 2020, 308.10 billion PKR in June 2021, and 293.728 billion PKR in June 2023. The growth trajectory and financing trends within Pakistan’s automobile industry are intricately linked to government policies that shape the regulatory environment, the market entry of new manufacturers that enhance competition and product diversity, and macroeconomic factors such as interest rates and banking liquidity that influence consumer purchasing power. These interconnected elements collectively determine the sector’s capacity for sustained expansion, technological advancement, and contribution to the national economy.

Pakistan possesses a wealth of mineral resources, positioning the country as an increasingly promising region for the prospecting and exploration of diverse mineral deposits. The geological diversity of the region has attracted attention from both domestic and international stakeholders, highlighting the potential for expanding the mining sector. This growing recognition stems from the country’s varied topography and rich mineral belts, which include metallic, non-metallic, and industrial minerals. The exploration and development of these resources have become a focal point for economic growth and industrial diversification. The constitutional framework governing mineral resource management underwent a significant transformation following the 18th Amendment to the Constitution of Pakistan. This amendment devolved considerable authority to the provinces, granting them autonomy to exploit and explore mineral resources within their respective jurisdictions. Prior to this change, mineral resource management was largely centralized under federal control. The decentralization empowered provincial governments to formulate policies, attract investments, and oversee mining operations independently, thereby fostering localized development and enabling more tailored approaches to resource management. This shift has had a profound impact on the mining landscape, stimulating increased exploration activities and facilitating more efficient resource utilization. The mining and quarrying sector constitutes a vital component of Pakistan’s industrial framework, contributing approximately 13.19% to the industrial sector’s overall output. In terms of the national economy, this sector accounts for about 2.4% of the country’s Gross Domestic Product (GDP), underscoring its significance as a contributor to economic activity. The sector encompasses a broad range of activities, including the extraction of metallic minerals such as chromite and copper, as well as industrial minerals like limestone, gypsum, and marble. The steady contribution of mining to the industrial sector reflects ongoing efforts to harness mineral wealth and integrate it with broader economic development strategies. Recent exploration initiatives, undertaken by both government agencies and multinational mining corporations, have uncovered substantial mineral deposits across various regions of Pakistan. These explorations have been supported by advances in geological surveying techniques, improved access to remote areas, and increased investment in mineral research. The findings have expanded the known reserves of several key minerals, encouraging further investment and development. The collaborative efforts between public and private entities have been instrumental in identifying new mining prospects, thereby enhancing the country’s mineral resource base and potential for export-oriented growth. Among the noteworthy recent discoveries is the identification of a thick oxidized zone beneath a substantial alluvial cover in the shield area of Punjab province. This oxidized zone is underlain by sulphide mineralization, presenting new opportunities for the exploration and extraction of metallic minerals. The presence of a thick alluvial layer had previously concealed these deposits, posing challenges to traditional exploration methods. However, modern geophysical and geochemical techniques have facilitated the detection of these mineralized zones, opening avenues for the development of metallic mineral resources in a region that was not previously recognized for such deposits. This discovery holds promise for enhancing the metallic mineral output and diversifying the mining portfolio of Punjab. Pakistan’s mineral wealth extends beyond metallic ores to include a substantial base of industrial minerals, which are critical for various manufacturing and construction industries. The country is endowed with vast reserves of precious stones and dimension stones, which have significant commercial value both domestically and internationally. Dimension stones such as marble and granite are extensively quarried and processed, contributing to the construction sector and export revenues. Precious stones, although less extensively exploited, represent an untapped resource with potential for growth in the gemstone market. The abundance of these industrial minerals underscores the diversity of Pakistan’s mineral endowment and its capacity to support multiple sectors of the economy. One of the most significant developments in Pakistan’s mining sector has been the discovery of extensive coal deposits in the Thar region of Sindh province. These coal reserves are estimated to exceed 175 billion tonnes, making them among the largest coal reserves in the world. The exploitation of Thar coal has provided a substantial impetus for the development of coal as an alternative energy source, addressing the country’s energy shortfall and reducing dependence on imported fuels. The Thar coalfield’s lignite deposits, although of lower calorific value compared to other coal types, offer a viable option for power generation and industrial use. This discovery has attracted both government and private sector interest, leading to the initiation of large-scale mining and power generation projects aimed at harnessing this resource for sustainable energy production. An analysis of extraction data for principal minerals over the last decade, spanning fiscal years 2015 to 2024, reveals distinct trends in Pakistan’s mining output. Coal production witnessed remarkable growth, increasing from 3,407,000 metric tons in FY 2015 to 20,086,000 metric tons in FY 2024. This substantial rise reflects intensified mining activities, particularly in the Thar coalfield, and underscores coal’s growing role in the country’s energy mix. The expansion in coal production is indicative of strategic efforts to capitalize on indigenous resources to meet rising energy demands and support industrial development. In contrast, natural gas extraction experienced a slight decline over the same period, decreasing from 1,466,000 million cubic feet (MMCFT) in FY 2015 to 1,141,000 MMCFT in FY 2024. This reduction may be attributed to factors such as depleting reserves, changes in production policies, or shifts in energy consumption patterns. Similarly, crude oil production showed a downward trend, falling from 34,490,000 barrels (JSB) in FY 2015 to 25,812,000 barrels in FY 2024. The decline in oil output reflects challenges in maintaining production levels amid aging fields and limited new discoveries, prompting increased reliance on imports to satisfy domestic demand. The production of chromite, an important metallic mineral used in stainless steel manufacturing and refractory industries, exhibited fluctuations during this period. Output rose from 100,516 metric tons in FY 2015 to 259,000 metric tons in FY 2024, indicating a resurgence in chromite mining activities. This increase may be linked to improved mining techniques, exploration success, and growing demand from both domestic and international markets. Dolomite production also showed variability, with extraction volumes reaching 502,000 metric tons in FY 2024 compared to 223,117 metric tons in FY 2015. Dolomite’s applications in steelmaking, construction, and agriculture have driven its demand, influencing production trends. Gypsum extraction similarly varied, with production increasing from 1,417,000 metric tons in FY 2015 to 2,136,000 metric tons in FY 2024. Gypsum’s use in cement manufacturing and agriculture underpins its importance, and the upward trend reflects expanding industrial requirements. Limestone production demonstrated consistent growth, rising from 40,470,000 metric tons in FY 2015 to 61,387,000 metric tons in FY 2024. Limestone’s critical role in cement production and construction materials has sustained its high extraction levels, supporting infrastructure development across the country. Rock salt production experienced fluctuations, with 3,200,000 metric tons extracted in FY 2024 compared to 2,136,000 metric tons in FY 2015. The variations in rock salt output may be influenced by market demand, mining capacity, and export opportunities. Sulphur production, on the other hand, declined significantly from 19,730 metric tons in FY 2015 to 7,200 metric tons in FY 2024. This sharp decrease could be related to reduced industrial consumption or substitution by alternative materials. Conversely, barytes production increased markedly, from 24,689 metric tons in FY 2015 to 145,000 metric tons in FY 2024. Barytes, used primarily in the oil and gas drilling industry, has seen rising demand, which has stimulated higher extraction rates. Marble extraction also showed notable variation, with production reaching 7,490,000 metric tons in FY 2024 compared to 2,816,000 metric tons in FY 2015. The growth in marble mining corresponds with increased domestic construction activity and export potential, reflecting the mineral’s aesthetic and commercial value. Among Pakistan’s most prominent mining sites is the Khewra Salt Mine, located in the Jhelum District. This mine is renowned for being one of the world’s largest and oldest salt mines, producing high-quality rock salt that is utilized both domestically and internationally. The Khewra Salt Mine not only contributes significantly to the country’s salt production but also serves as a tourist attraction, highlighting the historical and economic importance of mineral resources in Pakistan.

In 2022, Pakistan’s primary energy supply was predominantly composed of natural gas, oil, coal, liquefied natural gas (LNG), and hydroelectricity, reflecting significant transformations in the energy landscape over the preceding two decades. Natural gas accounted for approximately 29% of the primary energy mix, while oil contributed 24%, coal 15%, LNG 10%, and hydroelectricity 11%. This composition marked a departure from earlier years, highlighting the evolving dynamics of energy sourcing and consumption within the country. The increasing shares of coal and imported LNG were particularly notable, driven by strategic developments such as the initiation of coal mining in the Thar desert and the commencement of LNG imports from Qatar. These developments substantially augmented the contributions of coal and LNG to Pakistan’s energy supply within a relatively short span of five years. Historically, the share of natural gas in Pakistan’s primary energy supply experienced a marked decline, dropping from 50% in 2005 to 24% in 2022. This reduction was paralleled by a decrease in oil’s share, which fell from 35% in 2015 to 27% in 2022. The decline in these traditional fossil fuels was largely offset by the increased utilization of coal and LNG, reflecting a strategic shift aimed at diversifying energy sources and addressing supply constraints. The expansion of coal mining activities, particularly in the Thar desert region, provided a domestic alternative to imported fuels, while LNG imports helped alleviate natural gas shortages and supported power generation needs. Pakistan’s energy strategy also includes a planned expansion of nuclear power capacity, with an objective to generate approximately 8,800 megawatts (MW) of nuclear power by 2030. This initiative is expected to gradually increase the nuclear share within the national energy mix, contributing to energy security and diversification. The growth of nuclear energy aligns with broader efforts to incorporate low-carbon energy sources and reduce reliance on imported fuels. Detailed data on Pakistan’s primary energy supply, measured in million tonnes of oil equivalent (MTOE), illustrates the shifts in energy composition over selected years. In 2005, the total primary energy supply was 55.59 MTOE, with natural gas constituting 27.95 MTOE (50.3%), oil 16.33 MTOE (29.4%), coal 4.23 MTOE (7.6%), hydroelectricity 6.13 MTOE (11.0%), and nuclear energy 0.67 MTOE (1.2%). By 2010, the total supply had increased to 63.09 MTOE, with natural gas at 30.81 MTOE (48.8%), oil at 19.81 MTOE (31.4%), coal at 4.62 MTOE (7.3%), hydroelectricity at 6.71 MTOE (10.6%), and nuclear energy marginally decreased to 0.69 MTOE (1.1%). The year 2015 saw the total primary energy supply rise to 70.26 MTOE, with natural gas at 29.98 MTOE (42.7%), oil at 24.97 MTOE (35.5%), coal at 4.95 MTOE (7.0%), hydroelectricity at 7.75 MTOE (11.0%), LNG emerging at 0.47 MTOE (0.7%), nuclear energy increasing to 1.38 MTOE (2.0%), and renewable electricity contributing 0.19 MTOE (0.3%). By 2020, the total primary energy supply had grown to 80.62 MTOE, with significant changes in the energy mix: natural gas declined to 26.66 MTOE (33.0%), oil to 18.19 MTOE (26.7%), coal surged to 14.71 MTOE (18.2%), hydroelectricity stood at 8.02 MTOE (9.9%), LNG increased markedly to 8.32 MTOE (10.3%), nuclear energy rose to 2.58 MTOE (3.2%), and renewable electricity expanded to 0.99 MTOE (1.2%). The most recent data from 2023 indicated a total primary energy supply of 82.62 MTOE, with natural gas at 23.88 MTOE (28.9%), oil at 20.11 MTOE (24.3%), coal at 12.57 MTOE (15.2%), hydroelectricity at 8.75 MTOE (10.6%), LNG at 8.05 MTOE (9.7%), nuclear energy at 6.20 MTOE (7.5%), and renewable electricity at 1.39 MTOE (1.7%). The electricity sector in Pakistan operates through a structured system involving multiple entities. The Central Power Purchasing Agency-Guarantee (CPPA-G) is responsible for procuring electricity from various power producers. This electricity is then transmitted by the National Transmission and Despatch Company (NTDC) through an extensive network of transmission lines to Distribution Companies (DISCOs). These DISCOs subsequently distribute electricity to end consumers across the country. Despite this organized framework, balancing electricity supply and demand has historically posed significant challenges. However, since 2018, the availability of electricity has improved, attributable to increased generation capacity and infrastructure enhancements. Nevertheless, the cost of electricity has risen due to several factors. Circular debt, which refers to the accumulation of unpaid dues within the power sector, has exerted financial pressure on the system. Capacity payments, fuel costs, currency devaluation, low recovery rates from consumers, and transmission and distribution losses have also contributed to escalating electricity expenses. These challenges underscore the need for modernization and overhaul of Pakistan’s electricity supply network to enhance efficiency, reliability, and financial sustainability. Data from the National Electric Power Regulatory Authority (NEPRA) highlights key indicators within the electricity sector from 2016 to 2024. Installed capacity increased substantially from 25,421 megawatts (MW) in 2016 to 45,888 MW in 2024, reflecting significant investment in generation infrastructure. Electricity generation rose from 114,093 gigawatt-hours (GWh) in 2016 to a peak of 154,056 GWh in 2022, before experiencing a slight decline to 137,196 GWh in 2024. Electricity consumption followed a similar trend, increasing from 94,354 GWh in 2016 to 133,665 GWh in 2022, then decreasing to 118,246 GWh in 2024. Transmission losses fluctuated between 2.31% and 2.83% during this period, averaging approximately 2.5%. Distribution losses showed a downward trend from 18.14% in 2016 to 16.45% in 2023, though they rose again to 18.31% in 2024, indicating ongoing challenges in reducing losses at the distribution level. The generation mix in 2024 comprised 29.08% hydel (hydroelectric) power, 49.01% thermal power, 16.88% nuclear power, 4.75% renewable energy, and 0.28% imported electricity, illustrating the diverse sources contributing to Pakistan’s electricity supply. The demand for petroleum products in fiscal year (FY) 2022 totaled approximately 23.1 million tonnes, with the transport and power sectors accounting for nearly 90% of this consumption. Sectoral breakdowns in FY 2022, measured in thousand metric tonnes, included domestic consumption at 29.522, industry at 1,332.899, agriculture at 11.822, transport at 17,409.035, power generation at 3,683.322, government use at 373.489, and overseas consumption at 250.121, culminating in a total of 23,090.210 thousand metric tonnes. Pakistan remained a net importer of petroleum products and crude oil, with imports in FY 2022 reaching approximately 12.9 million tonnes valued at over US$11.1 billion. Among the major imported petroleum products in FY 2022, motor spirit (gasoline) accounted for 6,502 thousand tonnes, high-speed diesel (HSD) 3,950 thousand tonnes, and furnace oil 2,258 thousand tonnes. The import quantities and their corresponding values were as follows: motor spirit at 6,502.07 thousand tonnes valued at US$6,070.38 million; high-octane blending component (HOBC) at 125.62 thousand tonnes valued at US$115.94 million; high-speed diesel at 3,949.97 thousand tonnes valued at US$3,462.71 million; furnace oil at 2,258.20 thousand tonnes valued at US$1,414.40 million; and jet propellant-1 (JP-1) at 53.87 thousand tonnes valued at US$47.42 million. The total imports amounted to 12,889.73 thousand tonnes with a value of US$11,110.85 million. In FY 2020–21, Pakistan’s total refinery production reached 10.66 million tons, distributed among several major refineries. Pakistan Refinery Limited (PARCO) held the largest share at 41%, followed by Attock Refinery Limited (ARL) with 17%, Byco Petroleum Pakistan Limited (BPPL) at 16%, National Refinery Limited (NRL) at 14%, and Pak-Arab Refinery Limited (PRL) at 12%. This refinery capacity supported domestic petroleum product demands and contributed to energy security. The Oil and Gas Regulatory Authority (OGRA), established in March 2002, plays a pivotal role in regulating Pakistan’s petroleum sector. Its objectives include promoting competition, enhancing private sector investment, and improving ownership structures through the implementation of effective regulatory frameworks. OGRA’s oversight extends to licensing, tariff setting, and ensuring compliance with industry standards, thereby fostering a more efficient and transparent petroleum market. Oil Marketing Companies (OMCs) in Pakistan have developed extensive infrastructure to market petroleum, oil, and lubricant (POL) products. This infrastructure includes storage facilities and a widespread network of retail outlets. Motor spirit (MS) and high-speed diesel (HSD) constitute nearly 80% of OMC sales, underscoring their importance in the country’s fuel consumption profile. By the end of FY 2021, OMCs had established storage capacities of 0.58 million tons for motor spirit and 0.88 million tons for high-speed diesel, distributed across various depots nationwide to ensure supply reliability. OMCs operate a total of 9,978 retail outlets throughout Pakistan, with Pakistan State Oil (PSO) commanding the largest share at 3,158 outlets. This represents approximately 31.65% of the total retail network, reflecting PSO’s dominant position in the fuel retail market. The extensive retail infrastructure facilitates consumer access to petroleum products across urban and rural areas. Indigenous natural gas contributed about 30% of Pakistan’s total primary energy supply mix in FY 2022, highlighting its continued significance despite the growth of alternative energy sources. Pakistan’s natural gas infrastructure is extensive, comprising over 13,775 kilometers of transmission pipelines, 157,395 kilometers of main pipelines, and 41,352 kilometers of service pipelines. This network serves more than 10.7 million consumers nationwide, encompassing residential, commercial, industrial, and power generation sectors. In FY 2021–22, Pakistan’s natural gas supply reached 3,982 million cubic feet per day (MMCFD), sourced primarily from major domestic gas fields. These include the Sui, Uch, Qadirpur, Sawan, Zamzama, Badin, Bhit, Kandhkot, Mari, and Manzalai fields, which collectively underpin the country’s natural gas production. Since 2015, Pakistan has supplemented its domestic gas production with imports of liquefied natural gas (LNG). Regasified LNG (RLNG) has played a critical role in mitigating natural gas shortages and ensuring supply continuity. In 2021–22, imported RLNG accounted for approximately 24% of the country’s total gas supplies, reflecting its growing importance in the energy mix. The power sector emerged as the largest consumer of natural gas in FY 2020–21, utilizing over 30% of total consumption, equivalent to 1,208 MMCFD. The domestic sector followed, consuming 21% of natural gas, amounting to 850 MMCFD, while the fertilizer sector accounted for 20% of consumption. This distribution underscores the multifaceted demand for natural gas across key economic sectors, with power generation and agriculture-related industries being particularly reliant on this resource.

Pakistan’s service sector plays a pivotal role in the country’s economy, accounting for approximately 61.7% of the national Gross Domestic Product (GDP). This substantial share underscores the sector’s dominant position relative to agriculture and industry, reflecting a structural shift towards services in the overall economic landscape. The service sector encompasses a wide range of activities, with key sub-sectors contributing variably to its overall output. Among these, transport, storage, communications, finance, and insurance collectively represent about 24% of the sector’s contribution to GDP. These components are critical for facilitating economic transactions, enabling mobility, and supporting financial intermediation, thereby underpinning the broader economic framework. Commerce, particularly wholesale and retail trade, constitutes a significant portion of the service sector, accounting for roughly 30% of its share. This highlights the vital role of trade in Pakistan’s services economy, where the distribution of goods and consumer services forms a major employment and income source. The prominence of wholesale and retail trade reflects the country’s demographic trends, urbanization patterns, and consumer demand dynamics, which together drive the expansion of commercial activities. The interplay between trade and other service sub-sectors creates a comprehensive ecosystem that supports both domestic consumption and supply chain operations. Recognizing the strategic importance of the service sector, the government of Pakistan has actively sought to foster the expansion of the information industry and other modern service industries. This proactive stance involves the provision of various incentives aimed at stimulating investment and growth within these sectors. Among the key policy measures are long-term tax holidays, which serve to reduce the fiscal burden on emerging enterprises and encourage the inflow of capital. These incentives are designed to enhance the competitiveness of Pakistan’s service industries, promote technological adoption, and facilitate integration with global markets. The focus on information technology and related services aligns with global economic trends favoring digital transformation and knowledge-based industries. The growth trajectory of Pakistan’s service sector over recent years reveals a pattern of fluctuations influenced by both domestic and external factors. From Fiscal Year (FY) 2008 to FY 2022, the sector experienced varying annual growth rates that reflect underlying economic conditions. In FY 2008, the service sector grew by 4.72%, followed by a slowdown to 1.84% in FY 2009, indicative of global economic uncertainties during that period. Subsequent years saw a gradual recovery and stabilization, with growth rates of 2.63% in FY 2010 and 2.86% in FY 2011. The sector gained momentum in FY 2012, achieving a growth rate of 3.48%, and further accelerated to 5.13% in FY 2013. This upward trend continued with moderate fluctuations, recording 3.82% in FY 2014, 4.20% in FY 2015, 5.03% in FY 2016, and reaching 5.62% in FY 2017. The period from FY 2018 to FY 2019 maintained relatively strong growth, with rates of 5.95% and 5.00% respectively, reflecting sustained demand and improvements in service delivery. However, FY 2020 marked a notable contraction in the service sector, with a negative growth rate of -1.21%. This downturn was primarily attributed to adverse conditions prevailing during that fiscal year, including the global COVID-19 pandemic, which disrupted economic activities, reduced consumer spending, and constrained mobility. The pandemic’s impact was particularly pronounced in service industries reliant on physical interaction and travel, such as transport, hospitality, and retail. Despite the challenges faced in FY 2020, the service sector demonstrated resilience with a strong recovery in the subsequent years. In FY 2021, growth rebounded sharply to 5.91%, supported by easing restrictions, government stimulus measures, and a gradual restoration of economic confidence. This recovery gained further strength in FY 2022, when the sector expanded by 6.59%, reflecting robust demand, increased investment, and the ongoing digitalization of services. The rebound underscores the sector’s critical role in driving Pakistan’s overall economic growth and its capacity to adapt to changing circumstances. Collectively, these trends highlight the dynamic nature of Pakistan’s service economy and its centrality to the country’s development trajectory.

Following the deregulation of Pakistan’s telecommunications industry, the sector experienced exponential growth that transformed it into a vibrant and competitive market. Pakistan Telecommunication Company Ltd (PTCL), the state-owned incumbent operator, emerged as a major conglomerate during this period, achieving significant milestones. By 2005, PTCL had become a Forbes 2000 company, generating over US$1 billion in sales, a testament to the rapid expansion and modernization of Pakistan’s telecom infrastructure. This growth was driven by liberalization policies that encouraged private sector participation, foreign investment, and technological innovation, laying the foundation for a robust telecommunications ecosystem. The mobile telephone market in Pakistan witnessed particularly remarkable expansion starting in 2003. Over the following decade and a half, the subscriber base surged dramatically, reaching approximately 140 million users by July 2017. This rapid growth positioned Pakistan among the countries with the highest mobile teledensity rates globally, reflecting widespread adoption of mobile technology across urban and rural areas alike. The proliferation of affordable handsets and competitive pricing strategies by telecom operators played a crucial role in this expansion, enabling millions of Pakistanis to access mobile communication services for the first time. Recognition of Pakistan’s advancements in telecommunications came in 2006 when the country received the Government Leadership award from the GSM Association (GSMA). This prestigious accolade acknowledged the government’s proactive role in fostering a conducive regulatory environment, facilitating infrastructure development, and promoting digital inclusion. The award highlighted Pakistan’s commitment to integrating modern telecommunications technologies and expanding network coverage, which contributed to socio-economic development and connectivity enhancement. The mobile telecommunications landscape in Pakistan is dominated by several key operators, each backed by prominent international and domestic stakeholders. Jazz Pakistan, owned by VEON, a Netherlands-based multinational, stands as the largest mobile network operator in the country. Ufone operates under the ownership of PTCL and Etisalat, representing Pakistani and UAE interests respectively. Telenor Pakistan, a subsidiary of the Norwegian telecommunications giant Telenor Group, also commands a significant market share. Additionally, Zong, owned by China Mobile, represents Chinese investment in the sector and has been instrumental in introducing advanced mobile technologies. These operators have played pivotal roles in expanding network coverage, improving service quality, and driving competitive pricing in the market. By March 2009, Pakistan’s mobile subscriber base had reached 91 million, marking an increase of 25 million subscribers compared to the same period in 2008. This rapid growth underscored the accelerating adoption of mobile services across the country. Alongside mobile telephony, the fixed-line segment maintained a presence with approximately 3.1 million fixed telephone lines in operation. Furthermore, the Wireless Local Loop (WLL) technology, which provides fixed telephony services through wireless means, accounted for around 2.4 million connections. Together, these figures reflected a diversified telecommunications infrastructure catering to various consumer needs. The popularity of mobile phones in Pakistan is also reflected in the diverse range of handset brands available to consumers. Brands such as Sony Ericsson, Nokia, Motorola, Samsung, and LG have enjoyed widespread recognition and market penetration. These manufacturers offered a spectrum of devices ranging from basic feature phones to advanced smartphones, catering to different segments of the population. The availability of multiple brands contributed to competitive pricing and technological variety, further fueling mobile adoption. Between 2003 and 2007, Pakistan’s telecom sector attracted substantial foreign investment, amounting to over $9 billion. This influx of capital was instrumental in expanding network infrastructure, upgrading technology, and enhancing service delivery. In the fiscal year 2007–08 alone, the communication sector received $1.62 billion in Foreign Direct Investment (FDI), representing approximately 30% of the country’s total FDI during that period. This significant share underscored the sector’s attractiveness to international investors and its critical role in Pakistan’s economic development. During the 2008/2009 Christmas and New Year period, Pakistan distinguished itself in the Asia Pacific region by ranking among the top five countries in terms of SMS traffic. Approximately 763 million text messages were sent via Acision messaging systems within Pakistan during this festive season, contributing to a regional total of 6.37 billion messages. This high volume of SMS traffic illustrated the popularity of text messaging as a communication medium and the maturity of Pakistan’s mobile network infrastructure capable of handling large-scale data transmission. On 14 August 2010, Pakistan achieved a global telecommunications milestone by becoming the first country worldwide to experience EVDO RevB 3G technology. This advanced mobile broadband technology offered maximum download speeds of up to 9.3 Mbit/s, significantly enhancing mobile internet access and user experience. The introduction of EVDO RevB marked Pakistan’s entry into high-speed mobile data services, paving the way for subsequent generations of mobile technology and digital innovation. The simultaneous launch of 3G and 4G services on 23 April 2014 marked another pivotal moment in Pakistan’s telecommunications history. The licenses for these services were awarded through a Spectrum Management and Regulatory Authority (SMRA) auction, which saw Ufone, Mobilink (now Jazz), and Telenor obtaining 3G licenses. Meanwhile, China Mobile’s Zong secured licenses for both 3G and 4G services, positioning itself as a leader in next-generation mobile connectivity. This coordinated rollout of advanced mobile technologies facilitated widespread access to high-speed internet and enabled the growth of data-driven applications and services. In a notable departure from the auction process, Warid Pakistan did not participate in the 2014 spectrum auction but instead launched 4G LTE services on its existing 2G 1800 MHz spectrum under technology-neutral regulatory terms. This strategic move made Warid the world’s first telecom company to transition directly from 2G to 4G technology without an intermediate 3G phase. The innovative approach demonstrated regulatory flexibility and technological agility, contributing to enhanced competition and consumer choice in the market. By December 2017, the adoption of advanced mobile technologies had accelerated significantly, with Pakistan boasting 46 million 3G and 4G subscribers. This figure reflected growing consumer demand for high-speed mobile internet and the increasing availability of compatible devices and network infrastructure. The expansion of 3G and 4G services facilitated broader digital inclusion, enabling access to online education, e-commerce, social media, and other internet-based services. The implementation of the Device Identification Registration and Blocking System (DIRBS) in 2019 marked a significant regulatory advancement aimed at curbing the use of counterfeit and smuggled mobile devices. This system, combined with a comprehensive mobile manufacturing policy, fostered a favorable environment for local mobile device production by ensuring device authenticity and encouraging investment in domestic manufacturing capabilities. The DIRBS initiative helped protect consumer interests, enhance security, and promote the growth of Pakistan’s nascent mobile manufacturing industry. In 2021, Pakistan witnessed a historic milestone as local mobile phone manufacturing volumes surpassed imported mobile phone volumes for the first time. This achievement underscored the success of government policies aimed at developing the domestic manufacturing sector and reducing reliance on imports. The shift towards local production contributed to job creation, technology transfer, and the strengthening of Pakistan’s industrial base in the telecommunications domain. As of recent years, mobile device manufacturing licenses have been issued to 26 companies operating in Pakistan, reflecting the sector’s rapid expansion and diversification. Among these licensees are major global and regional brands such as Samsung, Redmi, Realme, Nokia, Oppo, TECNO, Infinix, Itel, Vgotel, and Q-Mobile. The presence of these manufacturers has enhanced competition, increased product variety, and improved affordability for consumers, further stimulating mobile device adoption. Data from the Pakistan Telecommunication Authority (PTA) illustrates the remarkable growth in teledensity over the past two decades. Teledensity, which measures the number of telephone connections per 100 inhabitants, increased from a mere 4.31% in 2003 to a peak of 84.6% in 2021. Although there was a slight decline to 80.5% by 2024, the overall trend reflects substantial progress in expanding telecommunication access across the country. This growth has been driven by widespread mobile network coverage and increased affordability of services. Similarly, the total number of telecom subscribers experienced exponential growth, rising from 2.4 million in 2003 to 197.2 million in 2021. By 2024, this figure saw a marginal decrease to 195.1 million, indicating a relatively saturated market. The expansion in subscriber numbers highlights the success of telecom operators in reaching diverse demographic segments and the increasing importance of telecommunications in everyday life. Broadband subscription figures also demonstrated significant upward trends. From a negligible base of 0.03 million subscribers in 2003, broadband users grew to 138.3 million by 2021. Correspondingly, broadband penetration increased from virtually 0.0% in 2003 to 57.0% in 2021, reflecting enhanced infrastructure, competitive pricing, and the growing demand for high-speed internet connectivity. This surge in broadband adoption has been critical in enabling digital services, online education, and e-commerce in Pakistan. The volume of cellular mobile data usage expanded dramatically, rising from 690 petabytes in 2017 to an astonishing 13,021 petabytes by 2021. This exponential increase underscores the shift towards data-centric mobile usage patterns, driven by the proliferation of smartphones, social media platforms, video streaming, and other bandwidth-intensive applications. The surge in data consumption has necessitated continuous upgrades in network capacity and technology. Financially, the telecom sector’s revenues have grown substantially over the years. Revenues increased from 118 billion Pakistani Rupees (PKR) in 2003 to 955 billion PKR in 2023, reflecting the sector’s expanding user base, diversified service offerings, and enhanced monetization strategies. This growth has positioned telecommunications as a key contributor to Pakistan’s economy. The sector’s contribution to the national exchequer also rose significantly, increasing from 30 billion PKR in 2003 to a peak of 341 billion PKR in 2022. By 2024, this figure experienced a slight decrease to 335 billion PKR. These contributions include various taxes, fees, and levies paid by telecom operators, underscoring the sector’s importance as a source of government revenue. Investment in the telecom sector has fluctuated over time, reflecting changing market dynamics and regulatory environments. Total telecom investment peaked at 4,109 million US dollars in 2005, coinciding with the sector’s rapid growth phase. By 2021, investment levels recorded 765 million US dollars, indicating a more mature market with a focus on network maintenance and incremental upgrades rather than large-scale expansion. The importation of completely built mobile units (CBUs) declined markedly, from 18.11 million units in 2003 to just 1.71 million units in 2020. This reduction corresponds with the rise in local assembly and manufacturing activities, which increased from 1.72 million units in 2003 to 31.38 million units in 2020. The growth in domestic production capacity reflects successful government initiatives to promote local manufacturing, reduce import dependency, and develop the telecommunications industrial ecosystem within Pakistan.

In 1955, Pakistan International Airlines (PIA) inaugurated its first scheduled international service, marking a pivotal moment in the development of Pakistan’s aviation sector. This inaugural flight connected Pakistan to London, with intermediate stops in Cairo and Rome, thereby establishing a vital air link between South Asia and Europe. The launch of this route not only symbolized Pakistan’s entry into the global civil aviation arena but also facilitated increased diplomatic, commercial, and cultural exchanges. This milestone underscored the country’s ambition to integrate with the international community through enhanced air connectivity, setting the stage for subsequent expansion of its airline operations. The year 1959 proved transformative for PIA when the Government of Pakistan appointed Air Commodore Nur Khan as the managing director. Nur Khan’s tenure is widely recognized for its visionary leadership and strategic reforms that propelled the airline to unprecedented heights. Within a span of six years, PIA evolved from a modest regional carrier into one of the world’s leading airlines, a period often celebrated as the “golden years of PIA.” Under his guidance, the airline expanded its fleet, improved service standards, and extended its route network significantly, thereby enhancing Pakistan’s stature in international aviation. Nur Khan’s initiatives also included modernizing operational procedures and fostering a corporate culture focused on excellence, which collectively contributed to PIA’s rapid ascent during this era. On 29 April 1964, PIA achieved another historic milestone by becoming the first airline from a non-communist country to operate a flight into the People’s Republic of China. This groundbreaking flight was conducted using a Boeing 720B aircraft, a jet airliner that represented advanced aviation technology at the time. The establishment of this air link not only symbolized a diplomatic breakthrough amid Cold War tensions but also expanded PIA’s international reach into East Asia. This pioneering route facilitated increased bilateral trade, tourism, and cultural exchange between Pakistan and China, further solidifying the airline’s role as a bridge between diverse geopolitical regions. In addition to PIA, the private sector in Pakistan’s aviation industry has seen significant growth, with airlines such as Airblue playing a prominent role. Airblue operates a comprehensive network of domestic flights that connect major urban centers across Pakistan, thereby enhancing internal mobility and economic integration. Beyond domestic operations, Airblue has extended its services to international destinations, particularly focusing on routes to the Persian Gulf region, which hosts a substantial Pakistani expatriate community. Furthermore, the airline operates flights to Manchester in the United Kingdom, catering to the large Pakistani diaspora in Europe and facilitating transcontinental travel. The emergence of private airlines like Airblue has introduced competition within Pakistan’s aviation market, contributing to improved service quality and expanded route options for passengers. An analysis of PIA’s operational data over recent decades reveals significant fluctuations in its route kilometers, reflecting changes in network size and flight frequency. According to PIA’s annual reports, the airline’s route kilometers stood at 290,129 km in 2003, indicating a moderate level of operational activity. This figure experienced a substantial increase over the following years, reaching a peak of 705,820 km in 2020. The expansion during this period can be attributed to route diversification and fleet augmentation aimed at capturing new markets. However, in 2022, the route kilometers declined sharply to 341,821 km, a reduction likely influenced by global disruptions such as the COVID-19 pandemic, which severely impacted international travel demand and operational capacity. Passenger traffic statistics for PIA similarly demonstrate variability corresponding to broader economic and geopolitical factors. In 2003, the airline carried approximately 4.556 million passengers, reflecting steady demand for air travel within and beyond Pakistan. Passenger numbers peaked at 5.617 million in 2008, coinciding with a period of relative stability and growth in the aviation sector. However, the onset of global disruptions, particularly the COVID-19 pandemic in 2020, precipitated a dramatic decline in passenger volumes to 2.541 million. This contraction underscored the vulnerability of the airline industry to external shocks. By 2022, passenger numbers showed signs of recovery, rebounding to 4.281 million as travel restrictions eased and demand gradually returned. Financially, PIA’s operating revenue exhibited an overall upward trend over the analyzed period, despite intermittent fluctuations. In 2003, the airline generated operating revenues amounting to 47.952 billion Pakistani rupees (PKR). This figure increased steadily over the years, culminating in a high of 172.038 billion PKR in 2022. The growth in revenue reflects efforts to expand route networks, adjust fare structures, and capitalize on rising passenger traffic during periods of stability. Nevertheless, the airline’s revenue trajectory was not immune to downturns, with noticeable dips occurring during times of global crisis, such as the pandemic-induced travel slump in 2020. Conversely, PIA’s operating expenses consistently outpaced its revenues in recent years, highlighting ongoing financial challenges. Operating costs rose from 42.574 billion PKR in 2003 to 183.354 billion PKR in 2022, indicating escalating expenditures related to fuel, maintenance, labor, and administrative overheads. The persistent increase in expenses reflects both inflationary pressures and inefficiencies within the airline’s operations. This imbalance between revenue and expenditure has placed considerable strain on PIA’s financial health, necessitating government subsidies and restructuring efforts to sustain operations. The airline’s profitability metrics further illustrate the severity of its fiscal difficulties. From 2008 onwards, PIA recorded financial losses after tax in the majority of years, with deficits deepening over time. In 2008, the airline reported a loss of 36.138 billion PKR, a figure that escalated dramatically to 88.008 billion PKR by 2022. These mounting losses underscore systemic issues such as operational inefficiencies, competition from private carriers, and external shocks impacting revenue streams. The persistent negative financial performance has raised concerns about the airline’s long-term viability and has prompted calls for comprehensive reforms within Pakistan’s aviation sector.

Pakistan Railways (PR) functions as a pivotal public sector transportation system within the country, playing a significant role in bolstering Pakistan’s economic development and promoting national cohesion. Its extensive network facilitates the movement of both passengers and freight across vast regions, thereby integrating various economic zones and cultural areas. The railway system’s contribution extends beyond mere transportation; it supports industrial growth, agricultural distribution, and trade facilitation, which collectively underpin the broader economic framework of Pakistan. The inception of railway transport in the region now known as Pakistan dates back to the mid-19th century, with the first railway line inaugurated on 13 May 1861. This initial route connected Karachi City, a major port and commercial hub, to Kotri, covering a distance of 169 kilometers. This pioneering line laid the foundation for subsequent railway expansion, enabling improved connectivity between coastal and inland areas. The establishment of this corridor was instrumental in accelerating trade and mobility, marking the beginning of a transformative era in regional transport infrastructure. In 1885, a significant consolidation occurred when the Sindh, Punjab, and Delhi Railways were acquired by the Secretary of State for India. This acquisition led to the integration of these lines along with other State Railways on 1 January 1886, resulting in the formation of the North Western State Railway. This newly unified entity was later renamed the North Western Railways (NWR). The amalgamation streamlined railway operations across a vast territory, enhancing administrative efficiency and operational coherence. It also facilitated standardized management practices and coordinated expansion strategies, which were crucial for meeting the growing demands of passenger and freight transport during the British colonial period. At the time of Pakistan’s independence in 1947, the North Western Railways underwent bifurcation in accordance with the partition of British India. The division allocated 1,847 route miles of railway infrastructure to India, while Pakistan inherited 5,048 route miles. This partition not only redefined territorial control over railway assets but also posed significant challenges in terms of operational continuity and asset management. Pakistan Railways had to rapidly adapt to the new geopolitical realities, reorganizing its network to serve the nascent state’s transportation needs while addressing the logistical disruptions caused by partition. By 2022, Pakistan Railways operated an extensive fleet comprising 467 locomotives, of which 462 were diesel engines and 5 were steam engines. This fleet serviced a route length totaling 7,479 kilometers, reflecting the scale and capacity of the railway system. The predominance of diesel locomotives indicated a shift towards more efficient and reliable traction methods, although the presence of steam engines underscored the retention of some legacy technology. The route length serviced by these locomotives encompassed major passenger corridors and freight lines, facilitating nationwide connectivity and commerce. The workforce of Pakistan Railways in 2022 numbered 60,643 employees, encompassing a diverse range of roles including operations, maintenance, administration, and customer service. This substantial human resource base was essential for managing the complexities of railway operations across the country. The employment figures also highlighted the railway’s role as a significant public sector employer, contributing to socio-economic stability by providing livelihoods to thousands of individuals and their families. Between 2016 and 2024, the route kilometers of Pakistan Railways exhibited relative stability, with minor fluctuations observed during this period. The route length was recorded at 7,479 kilometers in 2022, while in other years it reached up to 7,791 kilometers. This consistency suggested a focus on maintaining and optimizing existing infrastructure rather than extensive network expansion. The modest variations could be attributed to track realignments, closures of less profitable sections, or upgrades to improve operational efficiency. Track kilometers, which account for the total length of all tracks including multiple lines on the same route, were consistently reported at 11,881 kilometers from 2016 through 2021 and again from 2023 to 2024. However, a slight reduction to 11,492 kilometers was noted in 2022. This minor decrease may have resulted from temporary track removals, maintenance activities, or reclassification of certain track sections. The overall stability in track kilometers underscored Pakistan Railways’ commitment to sustaining its infrastructure capacity to meet transportation demands. Passenger carriage figures over the years revealed notable variations, reflecting changing travel patterns and external influences. In 2016, Pakistan Railways transported approximately 52,192,000 passengers, with numbers rising to a peak of 60,387,000 in 2019. This upward trend indicated growing reliance on rail transport for passenger mobility. However, the figures sharply declined to 28,424,000 in 2021, likely influenced by the global COVID-19 pandemic and associated travel restrictions. By 2024, passenger numbers had partially recovered to 42,103,000, signaling a gradual restoration of public confidence and demand for rail travel. The volume of goods transported by Pakistan Railways also experienced fluctuations during this period. Starting at 5,001,000 tonnes in 2016, freight tonnage increased significantly to a peak of 8,376,000 tonnes in 2019. This growth reflected enhanced freight operations and possibly greater industrial and agricultural output requiring rail transport. Subsequent years saw some variability, with 7,854,000 tonnes reported in 2024, indicating sustained but somewhat moderated freight activity. The capacity to handle substantial freight volumes underscored the railway’s critical role in supporting Pakistan’s supply chains and trade logistics. Financially, Pakistan Railways demonstrated an upward trajectory in operating revenue from 36.58 billion Pakistani Rupees (PKR) in 2016 to 88.73 billion PKR in 2024. Despite some intermediate fluctuations, this growth in revenue was indicative of increased operational scale, fare adjustments, and possibly improved efficiency in revenue collection. The rising revenue figures suggested efforts to enhance the financial sustainability of the railway system through expanded services and better asset utilization. Conversely, operating expenses also escalated over the same period, rising from 41.86 billion PKR in 2016 to 88.31 billion PKR in 2024. The increase in expenses reflected the growing costs associated with maintaining and operating an extensive railway network, including expenditures on fuel, labor, infrastructure upkeep, and administrative overheads. The parallel rise in both revenue and expenses highlighted the challenges of balancing operational demands with financial constraints in a public sector enterprise. Throughout this period, Pakistan Railways consistently reported net losses, underscoring ongoing financial challenges despite revenue growth. Losses ranged from 26.53 billion PKR in 2016 to 53.32 billion PKR in 2024, indicating that operating costs outpaced income. These persistent deficits pointed to structural issues such as pricing policies, operational inefficiencies, and the burden of legacy costs. The financial performance underscored the need for reforms and strategic investments to achieve long-term viability and reduce reliance on government subsidies.

The National Highway Authority (NHA) was established in 1991 through an Act of Parliament, marking a significant development in Pakistan’s transportation infrastructure management. This legislative action created a dedicated body responsible for the comprehensive oversight of the country’s National Highways and Strategic Roads. The NHA’s mandate encompassed the planning, development, operation, repair, and maintenance of these critical roadways, ensuring a centralized approach to managing the arterial routes that facilitate national connectivity and economic activity. Prior to the establishment of the NHA, road management responsibilities were more fragmented, which often led to inconsistencies in maintenance standards and development priorities. The creation of the NHA represented a strategic effort by the government to streamline and professionalize the management of key road networks essential for trade and mobility. The authority of the NHA extends specifically to highways and roads that are entrusted to it by the Federal Government, Provincial Governments, or other relevant authorities. This delegation of responsibility allows the NHA to operate with jurisdiction over a carefully defined subset of Pakistan’s road infrastructure, focusing on routes of national and strategic importance. The Federal Government typically assigns roads that are critical for inter-provincial connectivity and economic integration, while Provincial Governments may entrust certain highways to the NHA to benefit from its specialized expertise and resources. This collaborative framework ensures that the NHA can effectively coordinate with various levels of government, aligning road development projects with broader national transportation policies and regional development plans. Currently, the NHA manages an extensive network comprising 39 national highways, motorways, expressways, and strategic routes. This network collectively spans a total length of 12,131 kilometers, representing a significant portion of Pakistan’s major road infrastructure. The roads under NHA management include some of the most vital corridors facilitating long-distance travel, commercial transport, and strategic military movements. The inclusion of motorways and expressways under its jurisdiction highlights the NHA’s role in overseeing not only traditional highways but also modern, high-capacity roadways designed to support faster and more efficient vehicular movement. The strategic routes managed by the NHA are particularly important for national security and economic resilience, often connecting remote or sensitive regions to the broader transportation network. Despite the substantial length of the NHA-managed network, it constitutes only 4.6% of Pakistan’s total national roads network, which measures approximately 263,775 kilometers in length. This total includes a vast array of rural roads, provincial highways, and local thoroughfares that serve diverse transportation needs across the country. The relatively small percentage of the total network under NHA management underscores the specialized nature of the roads it oversees, which are primarily designed to handle high volumes of traffic and serve as the backbone of national connectivity. The broader road network, while extensive, often consists of lower-capacity routes that cater to regional and local traffic, contrasting with the strategic importance and higher standards maintained on NHA roads. Remarkably, although the NHA-managed roads represent only 4.6% of the total road network, they carry an overwhelming 80% of Pakistan’s commercial traffic. This disproportionate share of commercial vehicle movement highlights the critical role these highways and motorways play in the country’s economy. The concentration of freight and logistics traffic on this relatively small segment of the road network reflects the efficiency and capacity of NHA roads to support heavy and sustained commercial use. These routes facilitate the movement of goods between major urban centers, ports, industrial zones, and border crossings, thereby underpinning trade both domestically and internationally. The high commercial traffic volume also necessitates rigorous maintenance and continual upgrades to ensure safety, reduce transit times, and minimize transport costs, all of which are central to the NHA’s operational objectives. Among the roads managed by the NHA, the N-5 National Highway holds particular significance and is often described as the lifeline of Pakistan. This highway alone carries 65% of the commercial traffic load within the country, making it the most heavily trafficked and economically vital road corridor. The N-5 stretches from Karachi in the south to Torkham in the north, passing through major cities such as Hyderabad, Multan, Lahore, and Peshawar. Its role as a primary conduit for trade and passenger travel cannot be overstated, as it links the country’s largest port city with the northern frontier, facilitating the movement of goods across diverse regions and supporting economic integration. The highway’s capacity to handle such a substantial portion of commercial traffic underscores its importance in national logistics and supply chains, as well as its strategic value in connecting Pakistan internally and with neighboring countries. The prominence of the N-5 also places significant demands on the NHA in terms of maintenance and development. Given the highway’s heavy usage and critical economic role, the NHA prioritizes its upkeep and modernization to accommodate increasing traffic volumes and to enhance safety standards. Investments in widening, resurfacing, and constructing bypasses along the N-5 have been ongoing to reduce congestion and improve travel times. These efforts are complemented by the development of alternative routes and motorways to distribute traffic loads more evenly and to provide faster, more reliable corridors for commercial transport. The NHA’s stewardship of the N-5 exemplifies its broader mission to maintain and enhance Pakistan’s national road infrastructure, ensuring that key highways continue to support the country’s economic growth and regional connectivity effectively.

The Pakistan National Shipping Corporation (PNSC) functions as the national flag carrier of Pakistan, having been established in 1979 through the strategic merger of two pre-existing entities: the National Shipping Corporation and the Pakistan Shipping Corporation. This consolidation aimed to unify Pakistan’s maritime shipping capabilities under a single, state-owned enterprise, thereby enhancing operational efficiency and strengthening the country’s presence in the global shipping industry. The formation of PNSC marked a significant milestone in Pakistan’s maritime history, as it centralized the management and expansion of the nation’s merchant fleet, which had previously been divided between the two corporations. From its inception, PNSC focused primarily on operating within the dry bulk segment of the shipping market, a sector that involves the transportation of unpackaged bulk cargo such as coal, grain, and ores. Over the years, the corporation expanded its operational scope and diversified its services to meet evolving market demands. In 1998, PNSC broadened its portfolio by entering the liquid cargo transportation sector, thereby extending its shipping services to include the carriage of petroleum products and other liquid bulk commodities. This expansion allowed PNSC to operate both domestically within Pakistan’s coastal waters and internationally across major shipping routes, enhancing its competitive position and contributing to Pakistan’s maritime trade capabilities. The head office of the Pakistan National Shipping Corporation is located in Karachi, the largest city and principal seaport of Pakistan. Karachi’s strategic position on the Arabian Sea coast makes it an ideal hub for maritime operations, providing PNSC with direct access to major international shipping lanes and facilitating coordination with other national and international maritime stakeholders. The location of the head office in Karachi underscores the city’s importance as the economic and logistical center of Pakistan’s maritime industry, enabling PNSC to effectively manage its fleet operations, commercial activities, and regulatory compliance from this pivotal maritime gateway. As of the most recent data available, the PNSC fleet comprises a total of eleven vessels that vary in type and size, reflecting the corporation’s diversified shipping capabilities. The fleet includes five bulk carriers, which are specialized ships designed to transport dry bulk cargo efficiently across long distances. In addition to these, the fleet contains four Aframax tankers, a class of medium-sized crude oil tankers with a deadweight tonnage typically ranging between 80,000 and 120,000 metric tons, known for their versatility and ability to access ports with size restrictions. Complementing these vessels are two LR-1 Clean Product tankers, which are smaller tankers used primarily for the transportation of refined petroleum products such as gasoline, diesel, and jet fuel. This composition of the fleet enables PNSC to serve a broad spectrum of maritime cargo transportation needs, from raw materials to refined liquid products. The combined deadweight capacity of the PNSC fleet currently stands at 831,711 metric tons, a figure that represents the highest cargo carrying capacity the corporation has achieved since its establishment. Deadweight tonnage (DWT) is a critical measure in the shipping industry, indicating the maximum weight a vessel can safely carry, including cargo, fuel, crew, and provisions. The substantial deadweight capacity of PNSC’s fleet not only signifies the corporation’s growth in terms of fleet size and capability but also reflects its enhanced capacity to support Pakistan’s maritime trade and economic development. This increased cargo carrying capacity positions PNSC as a significant player in regional and international shipping markets, capable of handling large volumes of diverse cargoes efficiently and reliably.

Pakistan possesses a large and diverse banking system that has undergone significant transformation over the past several decades. This transformation began in 1974 when the government implemented a nationalization programme that led to the establishment of six government-owned banks. This move was aimed at increasing state control over the financial sector and expanding banking services to underserved areas, thereby promoting economic development. The nationalization period marked a shift from a predominantly private banking sector to one dominated by public ownership, which shaped the structure and operations of the banking industry throughout the 1970s and 1980s. During the 1990s, Pakistan’s banking landscape experienced another major shift as a privatization programme was introduced, allowing foreign-owned and local private banks to enter the market. This liberalization effort was part of broader economic reforms aimed at enhancing competition, improving efficiency, and attracting foreign investment. The entry of multinational banks alongside domestic private institutions diversified the sector, introduced new banking technologies and practices, and expanded the range of financial products available to consumers and businesses. This period also saw the gradual reduction of the government’s direct involvement in commercial banking, although several publicly-owned banks continued to operate. By 2010, the banking sector in Pakistan had evolved into a complex system comprising five publicly-owned commercial banks, 25 domestic private banks, six multinational banks, and four specialised banks. This composition reflected the coexistence of state-owned entities with a growing private sector presence, catering to a wide variety of financial needs across the country. The specialised banks focused on particular sectors such as agriculture, industry, and housing finance, thereby complementing the commercial banks’ broader services. The diversity of institutions allowed for greater financial inclusion and supported the expanding economy by providing tailored credit and deposit services. The city of Karachi, particularly its downtown area, serves as the financial hub of Pakistan and hosts the headquarters of many prominent Pakistani banks. Notable landmarks such as the MCB Tower and Habib Bank Plaza are situated in this district, symbolizing the central role Karachi plays in the country’s banking industry. These skyscrapers not only house the administrative and operational centers of major banks but also represent the modernization and growth of Pakistan’s financial sector. Karachi’s status as a commercial and industrial center has made it a natural focal point for banking activities, attracting both domestic and international financial institutions. Since the year 2000, Pakistani banks have aggressively marketed consumer finance products targeting the emerging middle class, which has contributed to a significant consumption boom. This surge in consumer credit availability has been exemplified by waiting lists exceeding seven months for certain popular car models, indicating robust demand for durable goods. Concurrently, the country experienced a construction boom fueled by increased access to housing finance and consumer loans. The expansion of credit facilities, including personal loans, auto financing, and mortgages, has played a critical role in stimulating domestic consumption and supporting economic growth by enabling households to increase their spending power. The resilience of Pakistan’s banking sector was notably demonstrated during the 2008 global financial crisis, a period when many banking systems worldwide faced severe stress. Despite the global turmoil, Pakistani banks maintained stability and strength, attracting significant foreign direct investment (FDI) into the sector. This influx of capital reflected international confidence in the soundness of Pakistan’s financial institutions and their ability to withstand external shocks. The crisis period underscored the effectiveness of regulatory frameworks and prudent risk management practices within the country’s banking industry. In June 2008, stress tests conducted on Pakistani banks revealed that large banks were relatively robust and well-capitalized to absorb potential losses. Meanwhile, medium and small-sized banks had strategically positioned themselves in niche markets, focusing on specialized services and customer segments to maintain profitability and reduce risk exposure. This segmentation within the banking sector allowed for diversification of risk and contributed to overall financial system stability. The stress tests provided valuable insights into the health of the banking system and guided regulatory oversight to ensure continued resilience. According to provisional data from the Pakistan Bureau of Statistics, the banking sector was valued at Rs.807,807 million in 2012, representing an extraordinary growth of over 510% since the year 2000. This rapid expansion reflected the sector’s increasing role in the national economy, driven by factors such as financial liberalization, technological advancements, and rising demand for banking services. The substantial growth in asset size and financial activity underscored the sector’s contribution to economic development and its capacity to mobilize savings and allocate credit efficiently. An econometric study published in the Journal of the Asia Pacific Economy by Mete Feridun of the University of Greenwich, London, and Abdul Jalil from Pakistan provided strong empirical evidence that financial development positively fosters economic growth in Pakistan. Their research highlighted the critical role that an efficient and well-functioning financial system plays in mobilizing resources, facilitating investment, and promoting productivity. The study underscored the importance of continued reforms and investments in the banking sector to sustain economic progress and improve living standards. The financial statements of major Pakistani banks in 2023 illustrate the scale and profitability of the sector. The State Bank of Pakistan reported total assets amounting to Rs.19,687 billion, revenue of Rs.1,218 billion, and a profit after tax of Rs.1,143.0 billion, reflecting its pivotal role as the country’s central bank. Habib Bank Ltd. held total assets of Rs.5,202 billion, generated revenue of Rs.277 billion, and posted a profit after tax of Rs.56.9 billion, making it one of the largest commercial banks. Meezan Bank, known for its Islamic banking services, reported total assets of Rs.3,012 billion, revenue of Rs.249 billion, and a profit after tax of Rs.84.5 billion, indicating strong performance in the Islamic finance segment. National Bank of Pakistan, another major public sector bank, held total assets of Rs.6,653 billion, with revenue of Rs.209 billion and a profit after tax of Rs.51.8 billion. MCB Bank Ltd. reported total assets of Rs.2,427 billion, revenue of Rs.181 billion, and a profit after tax of Rs.59.6 billion, while United Bank Limited showed total assets of Rs.5,575 billion, revenue of Rs.166 billion, and profit after tax of Rs.53.2 billion. Bank Alfalah maintained total assets of Rs.3,346 billion, revenue of Rs.154 billion, and profit after tax of Rs.36.5 billion, and Bank AL Habib held Rs.2,741 billion in assets, revenue of Rs.147 billion, and profit after tax of Rs.35.3 billion. Allied Bank Limited reported total assets of Rs.2,329 billion, revenue of Rs.138 billion, and profit after tax of Rs.40.7 billion. Standard Chartered Bank Ltd., a multinational institution, had total assets of Rs.1,002 billion, revenue of Rs.107 billion, and profit after tax of Rs.42.6 billion, while HabibMetro reported total assets of Rs.1,556 billion, revenue of Rs.87 billion, and profit after tax of Rs.24.4 billion. These figures collectively demonstrate the substantial scale, diversity, and profitability of Pakistan’s banking sector. In recent years, digital banking channels have gained significant popularity in Pakistan, revolutionizing the delivery of financial services by providing faster and more accessible options to a broad customer base. The adoption of internet banking and mobile banking has accelerated, driven by increased internet penetration, smartphone usage, and regulatory support for digital financial inclusion. Over the last five years, internet banking transactions have grown at a compound annual growth rate (CAGR) of 31%, while mobile banking transactions have surged even more rapidly, with a CAGR of 86%. This rapid growth reflects changing consumer preferences and the banking sector’s efforts to leverage technology to enhance convenience and efficiency. Data on payment system infrastructure from fiscal years 2020 to 2024 illustrates steady growth in banking facilities and digital usage. The total number of commercial banks and microfinance banks (MFBs) increased slightly from 44 in FY 2020 to 45 in FY 2024, indicating modest sector expansion. Bank branches grew from 16,067 to 18,450 during the same period, supporting greater physical access to banking services. Automated teller machines (ATMs) also increased from 15,612 in FY 2020 to 18,957 in FY 2024, facilitating cash withdrawals and other transactions. Internet banking users rose significantly from 3,983,000 in FY 2020 to 11,996,000 in FY 2024, while mobile phone banking users more than doubled, increasing from 8,452,000 to 18,678,000. The number of point of sale (POS) machines expanded from 49,067 to 125,593, reflecting growing acceptance of electronic payments. Credit cards in circulation grew from 1.66 million to 2.04 million, and debit cards increased substantially from 26.7 million to 48.3 million, highlighting the shift toward cashless transactions. Payment system transaction statistics from FY 2020 to FY 2024 reveal important trends in the usage of various payment channels. The Pakistan Real-time Interbank Settlement Mechanism (PRISM), which serves as the country’s real-time gross settlement (RTGS) system, experienced a significant rise in transaction volumes from 2.6 million in FY 2020 to 5.8 million in FY 2024. The value of transactions processed through PRISM increased dramatically from Rs.394.3 trillion to Rs.1,043.1 trillion, underscoring its critical role in facilitating large-value interbank transfers efficiently and securely. Paper-based transactions, while remaining relatively stable in volume at around 570 to 600 million transactions annually, saw the total transaction amount rise from Rs.185.6 trillion in FY 2020 to Rs.447.7 trillion in FY 2024, reflecting continued reliance on traditional payment methods alongside digital alternatives. Mobile banking transactions surged dramatically from 82.8 million in FY 2020 to 1,122.8 million in FY 2024, with the value of transactions increasing from Rs.1.8 trillion to Rs.46.3 trillion. This explosive growth highlights the transformative impact of mobile technology on financial inclusion and payment convenience. Similarly, e-commerce transactions increased from 10.2 million in FY 2020 to 39.9 million in FY 2024, with transaction values rising from Rs.34.9 billion to Rs.194.3 billion, indicating the expanding role of online commerce in Pakistan’s economy. The rapid adoption of digital payment platforms and the expansion of infrastructure have collectively contributed to a more integrated and efficient financial system. The Pakistan Real-time Interbank Settlement Mechanism (PRISM) functions as the country’s real-time gross settlement system, enabling the prompt and secure settlement of large-value interbank transactions. PRISM’s efficient processing capabilities are essential for maintaining liquidity and stability in the banking system, supporting the smooth operation of financial markets and payment systems. Its increasing transaction volumes and values reflect growing confidence in electronic settlement mechanisms and the modernization of Pakistan’s financial infrastructure. The continuous development of PRISM and other digital payment platforms is integral to the ongoing evolution of Pakistan’s banking sector and its capacity to meet the needs of a dynamic economy.

Since 2001, Pakistan’s property sector underwent a remarkable expansion, growing approximately 23 times in size over the subsequent two decades. This rapid growth was particularly pronounced in major urban centers such as Lahore, where rising urbanization and economic development fueled increased demand for residential and commercial real estate. The surge in construction activities and real estate transactions reflected broader trends of population growth, rural-to-urban migration, and rising incomes, which collectively stimulated the housing market. This expansion contributed significantly to the economy, creating employment opportunities in construction, materials supply, and related services, while also highlighting the critical importance of housing in Pakistan’s urban development trajectory. By late 2006, the Karachi Chamber of Commerce and Industry (KCCI) had conducted an assessment of the country’s housing needs and estimated that Pakistan required an annual production of approximately 0.5 million housing units to adequately address the existing housing backlog. At that time, the housing shortfall was estimated to be around 6.1 million units, a figure that underscored the severity of the housing deficit nationwide. Moreover, projections indicated that this shortfall would continue to grow over the next 20 years if production rates did not increase substantially. The KCCI emphasized that meeting this demand was crucial not only for improving living standards but also for supporting social stability and economic growth, as inadequate housing conditions were linked to broader issues such as poverty, health risks, and urban congestion. The challenge of Pakistan’s housing shortage was compounded by the aging condition of the existing housing stock. Estimates suggested that more than half of the country’s housing units were over 50 years old, reflecting decades of limited investment in maintenance and new construction. This aging infrastructure often failed to meet modern standards for safety, sanitation, and comfort, exacerbating the housing crisis. The deterioration of older homes increased the urgency for both replacement and renovation efforts, which required significant financial resources and strategic planning. The aging housing stock also highlighted the need for policies that would encourage sustainable urban renewal and the development of new housing that could accommodate growing populations while improving overall living conditions. Urban housing challenges in Pakistan were further intensified by the fact that approximately 50% of the urban population resided in slums and squatter settlements. These informal settlements typically lacked basic services such as clean water, sanitation, electricity, and secure tenure, exposing residents to various health and safety hazards. The prevalence of such settlements reflected the inability of formal housing markets and government programs to keep pace with rapid urbanization. This situation underscored the critical need for comprehensive urban planning and affordable housing initiatives that could integrate these marginalized communities into the formal housing sector. Addressing the conditions in slums and squatter areas was essential for improving social equity and ensuring sustainable urban development. The KCCI report highlighted that the financial requirements to both address the existing housing backlog and replace obsolete housing units far exceeded the fiscal capacity of the government alone. The scale of investment needed to construct new housing units and upgrade or replace aging structures was beyond what public funds could support, especially given competing demands on the national budget. This financial gap necessitated the involvement of the private sector and alternative sources of funding to mobilize the resources required for large-scale housing development. The report advocated for a multi-stakeholder approach that would leverage private capital, financial institutions, and non-governmental organizations to complement government efforts in expanding housing supply. To effectively tackle the housing shortage, there was a recognized need to establish a framework that would facilitate financing through the formal private sector and mobilize non-governmental resources. Developing a market-based housing finance system was seen as essential to channel private savings and investment into housing construction and purchase. Such a system would provide accessible and affordable credit to individuals and developers, enabling them to participate actively in the housing market. This approach aimed to reduce reliance on government subsidies and promote sustainable growth by encouraging the development of housing finance products tailored to the needs of low- and middle-income groups. The creation of a robust housing finance infrastructure was considered a key step toward addressing Pakistan’s housing deficit in a financially viable manner. In 2020, the State Bank of Pakistan (SBP) introduced the Government’s Mark-Up Subsidy Scheme, a policy initiative designed to promote affordable housing and home ownership among low to middle-income groups who did not currently own homes. This scheme aimed to reduce the cost of borrowing by subsidizing the mark-up (interest rate) on housing loans, thereby making financing more accessible and affordable for eligible individuals. The introduction of this subsidy was part of a broader government strategy to stimulate demand in the housing sector, encourage new construction, and improve home ownership rates among segments of the population traditionally underserved by formal financial institutions. By lowering the effective interest rates on housing loans, the scheme sought to incentivize both borrowers and lenders to participate more actively in the housing finance market. The Mark-Up Subsidy Scheme provided subsidized financing to individuals for the construction or purchase of new houses, which led to a significant increase in demand for housing finance from commercial banks. As a result, financial institutions expanded their housing loan portfolios, responding to the growing market opportunities created by the subsidy. This increase in demand reflected the scheme’s success in lowering barriers to home ownership and stimulating activity in the housing sector. The availability of subsidized loans encouraged more households to invest in housing, thereby contributing to the construction industry’s growth and the broader economy. The scheme also helped formalize housing finance by integrating more borrowers into the banking system, enhancing financial inclusion. Outstanding loans for consumer financing related to house building in Pakistan have fluctuated over the years, reflecting changing economic conditions, policy interventions, and market dynamics. In June 2006, outstanding loans amounted to 43.205 billion Pakistani Rupees (PKR), indicating a moderate level of housing finance activity at that time. By June 2010, this figure had increased to 54.500 billion PKR, demonstrating growth in housing credit availability over the four-year period. However, in June 2015, outstanding loans declined to 40.207 billion PKR, possibly due to economic challenges or shifts in lending policies during that period. The following year, June 2016, saw a recovery to 48.153 billion PKR, signaling renewed lending activity. The upward trend continued in June 2017, with outstanding housing-related loans reaching 60.688 billion PKR, followed by a substantial increase to 82.939 billion PKR in June 2018. This growth trajectory persisted into June 2019, when outstanding loans rose to 92.561 billion PKR, reflecting heightened demand for housing finance. Despite a slight dip in June 2020 to 79.803 billion PKR, likely influenced by the economic disruptions caused by the COVID-19 pandemic, the sector rebounded strongly in subsequent years. By June 2021, outstanding loans had surged to 103.631 billion PKR, and this momentum accelerated further to 200.765 billion PKR by June 2022. The most recent figures show that in June 2023, outstanding loans reached 212.315 billion PKR, followed by a slight decrease to 203.580 billion PKR in June 2024. These fluctuations illustrate the dynamic nature of Pakistan’s housing finance market and the impact of policy measures such as the Mark-Up Subsidy Scheme in stimulating credit growth and supporting the housing sector’s expansion.

Tourism in Pakistan has emerged as a prominent sector within the country’s economy, often described as the tourism industry’s “next big thing” due to its rich amalgamation of diverse cultures, ethnic groups, and strikingly varied landscapes. The nation’s geographical diversity ranges from the towering peaks of the Himalayas, Karakoram, and Hindu Kush mountain ranges to vast deserts, lush valleys, and historic urban centers, all of which contribute to its growing appeal among both domestic and international travelers. This cultural and natural wealth has attracted significant visitor interest, positioning Pakistan as a potentially major player in the global tourism market. Over the past decade, the country has witnessed a remarkable increase in tourist arrivals, with the total number of tourists reaching approximately 90 million, nearly doubling the figures recorded ten years earlier. This surge reflects not only an expansion in domestic tourism but also an increasing curiosity among foreign tourists drawn by Pakistan’s unique heritage sites, adventure tourism opportunities, and religious landmarks. Despite this substantial growth in tourist numbers, Pakistan’s performance in terms of tourism-generated income remains relatively modest on the global stage. The country is currently ranked 130th worldwide in tourist income, indicating that while visitor numbers have increased, the economic benefits derived from tourism have not risen proportionally. This discrepancy can be attributed to several factors, including the predominance of low-spending domestic tourists and the limited development of high-value tourism infrastructure that would attract wealthier international visitors. Furthermore, the tourism sector’s potential has been hindered by persistent security concerns, which have historically discouraged many foreign travelers from visiting Pakistan. The ongoing threat of terrorism within the country has been a significant impediment to the growth and stability of the tourism industry, contributing to a gradual decline in the number of foreign tourists over certain periods. One of the most notable events that adversely affected Pakistan’s tourism sector was the 2013 Nanga Parbat tourist shooting incident. This tragic attack involved the killing of several foreign climbers on Nanga Parbat, one of the world’s highest mountains and a popular destination for mountaineers. The incident sent shockwaves through the international community and severely damaged Pakistan’s reputation as a safe destination for adventure tourism. In the aftermath, many countries issued travel advisories warning their citizens against visiting Pakistan, which led to a sharp decline in foreign tourist arrivals. The Nanga Parbat attack underscored the vulnerability of the tourism sector to security challenges and highlighted the critical need for enhanced safety measures and international cooperation to restore confidence among potential visitors. Following this downturn, the tourism industry in Pakistan began a slow but steady recovery starting around 2016. Efforts by the government and private sector to improve security, develop tourism infrastructure, and promote the country’s cultural and natural attractions have contributed to this gradual revival. Initiatives such as the introduction of e-visa facilities, marketing campaigns targeting international tourists, and the organization of cultural festivals have played a role in attracting visitors back to the country. Despite these positive developments, Pakistan’s global ranking in tourism income remained at 130th as of 2016, reflecting the ongoing challenges in fully capitalizing on the sector’s potential. The recovery process has been marked by cautious optimism, with stakeholders recognizing that sustained improvements in security, infrastructure, and service quality are essential to achieving significant growth in tourism revenue and enhancing Pakistan’s standing in the international tourism market.

Foreign investment in Pakistan experienced a significant decline by the year 2010, with inflows dropping by 54.6% compared to previous years. This downturn was primarily attributed to the prevailing political instability and deteriorating law and order conditions within the country, as reported by the Bank of Pakistan. The volatile political environment created uncertainty among foreign investors, while frequent security challenges further undermined confidence in Pakistan’s investment climate. Consequently, these factors combined to substantially reduce the attractiveness of Pakistan as a destination for foreign capital during this period. Starting in 1999, Pakistan undertook a comprehensive overhaul of its business regulations, adopting a more liberal approach aimed at encouraging foreign direct investment (FDI). The government removed most barriers that previously restricted capital flows and international investment, thereby facilitating a more open economic environment. One of the key reforms allowed foreign investors to hold up to 100% equity participation in the majority of sectors, signaling a shift towards a more investor-friendly regime. This liberalization was intended to integrate Pakistan more fully into the global economy and stimulate economic growth by attracting foreign capital and expertise. In addition to equity participation, foreign investors in Pakistan faced no restrictions on capital inflow, enabling them to bring in funds without bureaucratic impediments. Furthermore, the regulatory framework permitted unlimited remittance of profits, dividends, service fees, or capital, providing investors with the flexibility to repatriate their earnings freely. This policy was designed to enhance investor confidence by ensuring that foreign entities could operate on equal footing with domestic players and manage their finances without undue constraints. These measures collectively aimed to create a more conducive environment for foreign investment and economic development. Despite these regulatory reforms, the overall ease of doing business in Pakistan deteriorated over the past decade. This decline was largely due to increasing political instability, domestic insurgency, and widespread insecurity, which compounded the challenges faced by businesses. Corruption remained pervasive, further complicating the operational landscape for both domestic and foreign investors. These factors contributed to a business environment marked by unpredictability and inefficiency, which undermined the potential benefits of the liberalized regulatory framework. As a result, many investors remained cautious or withdrew their commitments, reflecting the gap between policy intentions and ground realities. The World Bank’s Ease of Doing Business Index mirrored these challenges by downgrading Pakistan’s ratings annually since September 2009. This consistent decline in rankings highlighted the growing difficulties encountered by entrepreneurs and investors in navigating regulatory procedures, obtaining permits, and conducting day-to-day operations. The index served as an important benchmark for assessing the business climate and underscored the need for Pakistan to address structural impediments to improve its investment attractiveness. The downward trend also signaled to the international community the persistence of systemic issues affecting Pakistan’s economic potential. However, by 2020, Pakistan demonstrated signs of recovery in its business environment, as reflected in the World Bank and International Finance Corporation’s Ease of Doing Business Index. Pakistan was ranked 108th out of 190 countries, marking a notable improvement from its previous position of 136th place the year before. This upward movement in the rankings indicated successful implementation of certain reforms aimed at simplifying business procedures, enhancing regulatory transparency, and fostering a more investment-friendly climate. Although still facing significant challenges, these improvements suggested a gradual strengthening of Pakistan’s economic governance and institutional capacity. The top five countries in the Ease of Doing Business Index 2020 were New Zealand, Singapore, Denmark, Hong Kong, and South Korea. These nations consistently ranked highly due to their streamlined regulatory environments, robust legal frameworks, and efficient business procedures. Their performance provided a benchmark for Pakistan and other developing economies aspiring to enhance their competitiveness and attract greater foreign investment. The contrast between Pakistan’s position and these leading economies underscored the scope for further reforms and the importance of sustained efforts to improve the business landscape. Improved business conditions and government policies aimed at attracting investment generated interest from several major international automobile companies seeking to enter the Pakistani market. Notable among these were France’s Renault, South Korea’s Hyundai and Kia, China’s JW Forland, and Germany’s Volkswagen. These companies planned to establish joint ventures with local manufacturers such as Dewan Farooque Motors, Khalid Mushtaq Motors, and United Motors, leveraging domestic expertise and infrastructure to penetrate the growing automobile sector. The government’s investment-friendly stance and the potential of Pakistan’s expanding consumer base made the country an attractive destination for automotive industry expansion. As of March 2022, among these proposed automotive collaborations, only the joint venture between Hyundai and Nishat Motors had materialized. This partnership marked a significant milestone in Pakistan’s automotive industry, reflecting both the potential and challenges of foreign direct investment in the sector. The limited realization of other joint ventures highlighted ongoing obstacles such as bureaucratic delays, market uncertainties, and infrastructural constraints that continued to affect the pace of foreign investment. Nonetheless, the Hyundai-Nishat collaboration demonstrated the viability of international partnerships under conducive conditions. In the energy sector, the US oil and gas multinational Exxon Mobil re-entered the Pakistani market in May 2018 after an absence of nearly three decades. The company acquired a 25% stake in offshore drilling operations, signaling renewed confidence in Pakistan’s hydrocarbon potential. Initial surveys conducted by Exxon Mobil indicated the presence of significant hydrocarbon reserves offshore, which could contribute substantially to Pakistan’s energy security and economic growth. This re-entry by a major international player underscored the strategic importance of Pakistan’s energy sector and the opportunities available for foreign investment in exploration and production activities. To bolster Pakistan’s foreign-exchange reserves, which had been unstable, Qatar pledged a $3 billion investment package comprising deposits and direct investments. This financial support was aimed at stabilizing the country’s external accounts and providing a buffer against economic shocks. The first installment of $500 million from this package was transferred to Pakistan by the end of June 2019, reflecting Qatar’s commitment to strengthening bilateral economic ties and supporting Pakistan’s financial stability. Such international assistance played a critical role in maintaining investor confidence and facilitating ongoing economic reforms. Data from the State Bank of Pakistan (SBP) reveals the trajectory of foreign direct investment inflows in million US dollars over the fiscal years 2008 to 2024, illustrating fluctuations influenced by both domestic and international factors. In FY 2008, FDI inflows stood at $5,410 million, but this figure declined to $3,720 million in FY 2009 and further plummeted to $2,151 million by FY 2010. The downward trend continued into FY 2011 and FY 2012, with inflows dropping to $1,635 million and $821 million respectively, reflecting the adverse impact of political and security challenges. A modest recovery occurred in FY 2013 and FY 2014, with FDI rising to $1,457 million and $1,699 million, though it fell again to $1,034 million in FY 2015. From FY 2016 onwards, foreign direct investment showed signs of stabilization and gradual improvement, with inflows reaching $2,393 million in FY 2016 and $2,407 million in FY 2017. This upward trend continued into FY 2018, when FDI peaked at $2,780 million, before declining to $1,362 million in FY 2019 amid renewed economic and political uncertainties. The year FY 2020 saw a rebound with $2,598 million in FDI, followed by a decrease to $1,821 million in FY 2021. In FY 2022, inflows slightly increased to $1,936 million but dropped again to $1,627 million in FY 2023. The most recent data for FY 2024 indicates a modest recovery to $1,902 million. These fluctuations reflect the complex interplay of domestic reforms, geopolitical developments, and global economic conditions affecting Pakistan’s ability to attract sustained foreign investment.

The rapid expansion of Pakistan’s economy over recent decades has drawn considerable attention from foreign investors, particularly within the corporate sector. This influx of international capital has led to numerous multinational corporations acquiring majority stakes in a variety of Pakistani companies, reflecting growing confidence in the country’s market potential and economic prospects. These acquisitions span multiple industries, including finance, telecommunications, consumer goods, and energy, underscoring the diverse appeal of Pakistan’s economic landscape to global investors. One of the landmark foreign investments in Pakistan’s financial sector was the acquisition of the Pakistan Industrial Credit and Investment Corporation (PICIC) by Singapore-based Temasek Holdings. This transaction, valued at $339 million, marked a significant entry of a sovereign wealth fund into Pakistan’s banking and financial services industry. Temasek Holdings, known for its strategic investments globally, recognized the potential for growth in Pakistan’s financial markets and sought to leverage the expanding demand for credit and investment services. The acquisition not only infused capital into PICIC but also introduced international best practices and governance standards, thereby enhancing the institution’s operational efficiency and competitive positioning within the domestic market. Further illustrating the trend of foreign acquisitions in Pakistan’s banking sector was the purchase of Union Bank by Standard Chartered Bank for $487 million. Standard Chartered, a British multinational banking and financial services company with a longstanding presence in Asia, sought to consolidate its footprint in Pakistan through this acquisition. Union Bank, prior to the purchase, was a mid-sized player in the Pakistani banking industry, and its integration into Standard Chartered’s network facilitated enhanced product offerings, improved technological infrastructure, and expanded customer reach. This move exemplified the increasing consolidation within Pakistan’s banking sector, driven by foreign investors aiming to capitalize on the country’s growing economy and rising demand for sophisticated banking services. Similarly, the acquisition of Prime Commercial Bank by ABN Amro for $228 million further underscored the sustained foreign interest in Pakistan’s commercial banking industry. ABN Amro, a prominent Dutch bank with a global presence, viewed the Pakistani market as a strategic opportunity to expand its operations in South Asia. The acquisition enabled ABN Amro to access Prime Commercial Bank’s existing client base and branch network, thereby accelerating its market penetration. This transaction also highlighted the attractiveness of Pakistan’s banking sector, which was characterized by increasing financial inclusion, regulatory reforms, and a burgeoning middle class with growing banking needs. In the telecommunications sector, foreign investment played a pivotal role in shaping the industry’s growth trajectory. China Mobile’s investment of $460 million to acquire PakTel represented a substantial infusion of capital and expertise into Pakistan’s telecom market. PakTel, a key player in the domestic telecommunications landscape, benefited from China Mobile’s technological capabilities and operational experience, which facilitated network expansion and service improvements. This acquisition was part of a broader pattern of Chinese investment in Pakistan, reflecting the strategic economic partnership between the two countries and the importance of telecommunications infrastructure in supporting Pakistan’s digital economy ambitions. A more prominent transaction in the telecom sector was the acquisition of Pakistan Telecommunication Company Limited (PTCL) by Etisalat for $1.8 billion. This deal stood as one of the largest foreign investments in Pakistan’s telecommunications industry, underscoring the sector’s critical role in the country’s economic development. Etisalat, a major telecommunications services provider based in the United Arab Emirates, acquired a controlling stake in PTCL, Pakistan’s largest fixed-line operator and a significant player in broadband and mobile services. The acquisition facilitated the modernization of PTCL’s infrastructure, the introduction of innovative services, and the enhancement of customer experience, thereby strengthening Pakistan’s telecom ecosystem and contributing to increased connectivity nationwide. In the tobacco industry, Philip Morris International expanded its presence in Pakistan by purchasing an additional 57.6% of the shares of Lakson Tobacco Company for $382 million. This acquisition increased Philip Morris’s stake significantly, allowing it to consolidate control over one of Pakistan’s leading tobacco manufacturers. The investment reflected the multinational’s strategy to strengthen its position in emerging markets with growing consumer bases. Lakson Tobacco Company, known for its popular cigarette brands, benefited from Philip Morris’s global marketing expertise, research and development capabilities, and distribution networks, which facilitated product innovation and market expansion within Pakistan. The consumer goods sector also witnessed notable foreign acquisitions, exemplified by the 2016 purchase of Dawlance by Turkish appliance manufacturer Arçelik for $243 million. Dawlance, a prominent Pakistani home appliances company, had established a strong brand presence domestically, offering products such as refrigerators, air conditioners, and washing machines. Arçelik’s acquisition not only provided Dawlance with access to advanced manufacturing technologies and international supply chains but also reflected the growing appeal of Pakistan’s consumer market to regional players. This investment contributed to the modernization of Pakistan’s home appliances industry and enhanced the availability of quality products to consumers. In the food industry, FrieslandCampina, a Dutch multinational dairy company, acquired a 51% stake in Engro Foods for $446.81 million in 2016, marking a significant foreign acquisition in Pakistan’s agribusiness sector. Engro Foods, a leading Pakistani dairy and food products company, had been seeking strategic partnerships to expand its product portfolio and distribution capabilities. FrieslandCampina’s investment brought global expertise in dairy farming, processing, and marketing, which helped improve product quality and diversify offerings. This acquisition also underscored the potential of Pakistan’s food industry, driven by increasing domestic demand for processed and packaged food products amid rising urbanization and income levels. The energy sector experienced one of the largest foreign investments with the sale of a 66.4% stake in K-Electric, Pakistan’s largest private-sector power utility, by The Abraaj Group to Shanghai Electric for $1.77 billion in 2016. K-Electric, responsible for electricity generation, transmission, and distribution in Karachi, Pakistan’s largest city, was a critical asset in the country’s energy infrastructure. The Abraaj Group, a private equity firm with significant investments in emerging markets, had previously acquired the stake to improve operational efficiencies and expand capacity. The sale to Shanghai Electric, a Chinese multinational specializing in power generation and electrical equipment, reflected China’s growing role in Pakistan’s energy sector, particularly under the China-Pakistan Economic Corridor (CPEC) framework. This transaction was instrumental in securing capital for infrastructure upgrades and addressing Karachi’s chronic power shortages, thereby supporting economic growth and industrial activity. Collectively, these foreign acquisitions and mergers have generated substantial foreign exchange inflows into Pakistan, which have played a crucial role in strengthening the country’s external financial position. The capital brought in through these transactions has contributed to Pakistan’s ability to cover its current account deficit, a key macroeconomic indicator reflecting the balance between imports, exports, and financial flows. By bolstering foreign exchange reserves, these investments have supported macroeconomic stability, enabling the government to manage external vulnerabilities and maintain investor confidence. Furthermore, the presence of multinational corporations has facilitated technology transfer, improved corporate governance, and enhanced competitiveness across various sectors of Pakistan’s economy, thereby fostering sustainable economic development.

Pakistan achieved its highest export value of US$25.4 billion in the fiscal year (FY) 2011, marking a significant milestone in the country’s foreign trade performance. This peak reflected a period of robust global demand and favorable domestic conditions that supported export growth. However, the momentum did not sustain in the following years. From FY 2014 to FY 2016, Pakistan experienced a 12.4 percent decline in exports, a downturn primarily attributed to an international commodity slump that began in FY 2015. This global decline in commodity prices exerted downward pressure on Pakistan’s export revenues, particularly affecting sectors reliant on raw materials and manufactured goods. The export contraction was further exacerbated by domestic structural supply-side constraints, including persistent energy shortages that hampered industrial productivity, elevated input costs that reduced competitiveness, and an overvalued exchange rate that made Pakistani exports less attractive in international markets. The export growth trend during 2014 to 2016 closely paralleled global trade growth patterns, indicating that external factors played a significant role in shaping Pakistan’s export performance during this period. The slowdown in international trade volumes and demand, especially in key markets, limited opportunities for export expansion despite efforts to diversify export products and markets. In FY 2017, Pakistan’s merchandise trade exports grew marginally by only 0.1 percent, signaling a stagnation amid continued stress in the external sector. In contrast, imports surged by 18.0 percent compared to the previous year, highlighting an imbalance in trade dynamics that contributed to widening trade deficits. The sharp rise in imports was driven by increased demand for machinery, raw materials, and consumer goods, reflecting both domestic economic activity and investment requirements. Trade data on exports and imports are primarily provided by the State Bank of Pakistan (SBP), which compiles figures based on customs and banking records. However, these figures may differ from those compiled by the Pakistan Bureau of Statistics (PBS) due to methodological differences, timing of data collection, and classification criteria. Such discrepancies necessitate cautious interpretation of trade statistics, especially when analyzing short-term trends or making policy decisions. Examining the broader trajectory of Pakistan’s foreign trade from FY 2008 to FY 2024 reveals notable fluctuations in total exports denominated in billion US dollars. Exports started at US$24.01 billion in FY 2008, rose to a peak of US$31.11 billion in FY 2011, declined to US$27.43 billion in FY 2016, and subsequently rebounded to reach US$38.67 billion by FY 2024. This pattern underscores the cyclical nature of Pakistan’s export sector, influenced by global economic conditions, domestic policy measures, and structural reforms. Goods exports mirrored this trend closely, achieving a high of US$25.37 billion in FY 2011, dipping to US$21.97 billion in FY 2016, before recovering to US$30.98 billion in FY 2024. The recovery in goods exports post-2016 was supported by improved energy availability, exchange rate adjustments, and diversification efforts in export products. Services exports demonstrated a steady upward trajectory over the same period, increasing from US$3.56 billion in FY 2008 to US$7.69 billion in FY 2024. Although services exports experienced minor fluctuations throughout the years, the overall growth reflected expanding sectors such as information technology, telecommunications, and transportation services, which contributed to foreign exchange earnings and helped offset some of the volatility in goods exports. On the import side, total imports in billion US dollars exhibited a general upward trend marked by volatility. Imports rose from US$45.44 billion in FY 2008 to a peak of US$84.49 billion in FY 2022, before declining to US$63.96 billion in FY 2024. Goods imports followed a similar pattern, increasing from US$35.28 billion in FY 2008 to US$71.54 billion in FY 2022, then decreasing to US$53.16 billion in FY 2024. This growth in imports was driven by rising demand for raw materials, machinery, and consumer goods necessary to support industrialization and infrastructure development. Services imports fluctuated between US$6.99 billion in FY 2010 and US$12.94 billion in FY 2022, settling at US$10.80 billion in FY 2024, reflecting expenditures on travel, transportation, and other service-related imports. The widening trade deficit over the years is a critical aspect of Pakistan’s foreign trade dynamics. The deficit began at US$21.43 billion in FY 2008, narrowed to a low of US$12.46 billion in FY 2011 during the peak export period, then expanded sharply to US$44.89 billion in FY 2022 before narrowing again to US$25.29 billion in FY 2024. This expansion in the trade deficit was largely attributable to the rising trend in imports outpacing export growth, fueled by increased economic activity and investment. A significant factor behind the surge in imports was the China Pakistan Economic Corridor (CPEC), which stimulated demand for heavy machinery, construction materials, and energy sector equipment. The infrastructure projects under CPEC necessitated substantial imports to support the development of power plants, roads, and industrial zones, thereby contributing to the elevated import bill. The current phase of economic growth in Pakistan has been driven by a combination of investments and consumption, both of which have contributed to higher import levels. Increased domestic demand for consumer goods and capital equipment has led to greater reliance on imported products. This trend underscores the interconnectedness of domestic economic expansion and foreign trade patterns, where growth in one sector can induce pressures on the trade balance through import requirements. In FY 2018, Pakistan’s exports increased by 12.6 percent to US$24.8 billion compared to FY 2017, reflecting a rebound in export sectors following earlier stagnation. Concurrently, imports rose by 16.2 percent to US$56.6 billion, resulting in a trade deficit of US$31.8 billion, which was the highest deficit recorded in a decade. This widening gap between exports and imports highlighted ongoing challenges in achieving a sustainable trade balance despite export growth. The elevated trade deficit underscored the need for structural reforms aimed at enhancing export competitiveness and managing import demand. Pakistan’s goods exports reached a record high of US$25.6 billion in FY 2021, surpassing the previous peak of US$25.3 billion recorded in FY 2011. This milestone demonstrated the resilience and gradual strengthening of the export sector amid global economic uncertainties, including disruptions caused by the COVID-19 pandemic. The achievement reflected diversification efforts, improved market access, and supportive government policies aimed at boosting export-oriented industries. This record export performance also indicated potential for further expansion, contingent upon addressing persistent structural constraints and enhancing value addition in export products.

Between fiscal years 2015 and 2024, Pakistan’s export commodities reflected significant shifts across various key sectors, including textiles, agriculture, chemicals, and manufactured goods, with values reported in million US dollars. The textile sector, a cornerstone of Pakistan’s export economy, demonstrated notable growth and fluctuations in different product categories. Knitwear exports, for instance, experienced a substantial increase over this period. Starting at $2,264 million in FY 2015, knitwear exports steadily climbed, reaching a peak of $4,516 million in FY 2022. This growth underscored the rising global demand for Pakistan’s knitwear products, driven by competitive pricing and expanding manufacturing capacity. However, following this peak, knitwear exports saw a slight decline, falling to $4,018 million by FY 2024, which may be attributed to changing international market dynamics or domestic production challenges. Similarly, ready-made garments, another vital segment within the textile industry, showed consistent upward momentum during the same timeframe. Exports of ready-made garments increased from $2,044 million in FY 2015 to $3,698 million in FY 2022, reflecting sustained growth supported by improvements in production efficiency and diversification of export markets. Despite this robust growth, the sector experienced a minor decrease to $3,471 million by FY 2024, indicating potential pressures from global competition, supply chain disruptions, or shifts in consumer preferences. Bed wear exports followed a somewhat fluctuating trajectory; beginning at $2,207 million in FY 2015, these exports rose to $3,255 million in FY 2022, illustrating strong demand for Pakistani bed linens and related products. However, by FY 2024, bed wear exports had decreased to $2,790 million, suggesting a period of adjustment or increased competition in international markets. Agricultural exports, particularly rice, demonstrated significant variability but overall growth during this period. Rice exports commenced at $2,038 million in FY 2015 but experienced a decline to $1,575 million by FY 2017, possibly due to adverse weather conditions, domestic supply constraints, or changes in global rice prices. Following this dip, rice exports rebounded markedly, reaching $3,684 million by FY 2024. This resurgence highlighted Pakistan’s ability to capitalize on global demand for rice, benefiting from improved production techniques and expanded export infrastructure. In contrast, cotton cloth exports exhibited a downward trend over the decade. Starting at $2,487 million in FY 2015, cotton cloth exports gradually decreased to $1,898 million by FY 2024, with the lowest point recorded at $1,884 million in FY 2021. This decline may be linked to shifts in global textile manufacturing, competition from synthetic fabrics, or domestic challenges in raw material supply. The chemical and pharmaceutical sectors experienced moderate growth during this period, reflecting gradual expansion and diversification. Exports from these industries began at $1,250 million in FY 2015 and increased to $1,482 million in FY 2022. Despite this upward trend, there was a slight decrease to $1,420 million by FY 2024, which may have been influenced by regulatory changes, global market conditions, or domestic production costs. Cotton yarn exports, closely related to the textile sector, showed a consistent decline throughout the period. From $1,818 million in FY 2015, cotton yarn exports fell to $1,052 million by FY 2024, with the lowest export value of $870 million recorded in FY 2023. This downward trajectory suggests challenges in maintaining competitiveness or shifts in global demand patterns for raw textile inputs. Exports of towels, a specialized textile product, increased significantly from $716 million in FY 2015 to $1,080 million in FY 2022, reflecting growing international demand and improvements in production quality. However, this sector experienced a slight contraction to $954 million by FY 2024, indicating potential market saturation or increased competition. Leather manufactures, another important export category, showed modest fluctuations over the decade. Starting at $547 million in FY 2015, exports peaked at $649 million in FY 2022 before slightly declining to $606 million in FY 2024. This pattern suggests a relatively stable but competitive market environment for Pakistani leather goods. In contrast, sports goods exports faced a steady decline throughout the period. Beginning at $585 million in FY 2015, these exports consistently decreased to $439 million by FY 2024. The persistent downward trend may be attributed to increased competition from other manufacturing countries, changes in consumer preferences, or challenges in innovation and marketing. Surgical goods and medical instruments exports remained relatively stable, with a modest upward trend from $401 million in FY 2015 to $480 million in FY 2021. Following this peak, exports slightly decreased to $456 million by FY 2024, indicating a mature sector with steady demand but limited growth potential. Overall, the data from FY 2015 to FY 2024 illustrate a complex landscape of Pakistan’s export economy, characterized by growth in certain textile and agricultural products, moderate expansion in chemicals and pharmaceuticals, and challenges in sectors such as cotton yarn, sports goods, and some manufactured items. These trends reflect both the opportunities and constraints faced by Pakistan in integrating with global markets, adapting to changing demand patterns, and enhancing the competitiveness of its export commodities.

Between fiscal years 2014 and 2022, Pakistan’s import profile exhibited significant shifts across various major commodity categories, reflecting evolving domestic demand, global market conditions, and policy changes. The import data, expressed in million US dollars, reveals notable trends in energy resources, raw materials, machinery, and consumer goods, underscoring the dynamic nature of Pakistan’s external trade during this period. Petroleum products constituted a substantial portion of Pakistan’s imports, though their value experienced considerable fluctuations over the years. In FY 2014, imports of petroleum products stood at $9,020 million, marking a high point driven by robust energy needs and global oil prices. However, by FY 2020, this figure had declined sharply to $4,190 million, influenced by a combination of reduced international oil prices, shifts in domestic consumption patterns, and efforts to optimize energy imports. Following this downturn, petroleum product imports surged dramatically to $10,296 million by FY 2022, reflecting a rebound in global oil prices, increased industrial activity, and heightened energy demand within Pakistan’s economy. Crude petroleum imports followed a somewhat parallel trajectory but with distinct variations. Starting at $5,755 million in FY 2014, the value of crude oil imports declined steadily, reaching a low of $2,570 million in FY 2016. This decrease corresponded with a period of lower crude oil prices internationally and adjustments in Pakistan’s energy import strategy. Subsequently, crude petroleum imports increased again, rising to $4,602 million by FY 2022, indicating a partial recovery in crude oil procurement as global prices stabilized and domestic energy requirements grew. A noteworthy development during this period was the emergence and rapid growth of liquefied natural gas (LNG) imports, which were nonexistent in FY 2014. Starting from zero, LNG imports steadily increased each year, reflecting Pakistan’s strategic pivot towards cleaner and more efficient energy sources to address chronic power shortages and diversify its energy mix. By FY 2022, LNG imports had reached $3,681 million, underscoring the importance of LNG in Pakistan’s energy infrastructure and its role in meeting growing electricity demand. Plastic materials also demonstrated a consistent upward trend in import values. Beginning at $1,680 million in FY 2014, imports of plastics and related materials rose gradually with minor fluctuations, culminating in $3,251 million by FY 2022. This growth paralleled the expansion of Pakistan’s manufacturing sector, increased consumer demand for plastic products, and the rising use of plastics in packaging and industrial applications. Palm oil imports, a critical commodity for Pakistan’s food industry and household consumption, exhibited some variability but trended upward overall. Starting at $1,922 million in FY 2014, palm oil imports experienced periods of both decline and increase, influenced by global commodity price volatility, domestic demand shifts, and trade policies. By FY 2022, palm oil imports had reached $3,151 million, reflecting sustained demand in the edible oil sector and the reliance on imports to meet consumption needs. The importation of road vehicles showed a marked increase over the analyzed period, albeit with notable fluctuations. In FY 2014, imports of road vehicles were valued at $861 million, which rose significantly to $3,010 million by FY 2022. This growth was punctuated by variability, including a pronounced dip to $1,276 million in FY 2020, likely attributable to economic disruptions and import restrictions during the COVID-19 pandemic. The overall upward trend indicates expanding consumer purchasing power and growing demand for automobiles in Pakistan. Iron and steel imports also reflected an upward trajectory, rising from $1,540 million in FY 2014 to $2,854 million in FY 2022. However, this increase was not linear; a slight decrease occurred in FY 2020 when imports fell to $1,491 million. This dip coincided with global supply chain disruptions and reduced industrial activity during the pandemic. The subsequent recovery in iron and steel imports aligns with increased construction and infrastructure development projects within the country. Raw cotton imports experienced considerable fluctuations over the period. Initially valued at $532 million in FY 2014, raw cotton imports peaked at $1,342 million in FY 2020, reflecting heightened demand from the textile sector and potential domestic shortfalls in cotton production. By FY 2022, imports had further increased to $2,283 million, underscoring the critical role of raw cotton in Pakistan’s textile industry, which remains a key driver of the national economy and export earnings. Telecommunication imports remained relatively stable in the early years, hovering around $1,200 million. However, a significant increase occurred in FY 2021 when imports surged to $2,513 million, likely driven by the expansion of telecommunications infrastructure, increased consumer electronics demand, and technological upgrades. In FY 2022, telecommunication imports slightly decreased to $2,252 million but remained substantially higher than the initial years, indicating sustained investment in this sector. Electrical machinery and apparatus imports showed steady growth throughout the period, rising from $722 million in FY 2014 to $1,817 million in FY 2022. Despite some year-to-year variations, this upward trend reflects Pakistan’s increasing industrialization, electrification efforts, and the growing need for electrical components in various sectors including manufacturing, construction, and consumer electronics. Textile machinery imports demonstrated moderate growth over the years, starting at $658 million in FY 2014. A notable low point occurred in FY 2015 when imports dropped to $492 million, possibly due to economic or policy constraints. Nevertheless, the sector rebounded, with textile machinery imports reaching $1,212 million by FY 2022. This growth highlights ongoing investments in modernizing Pakistan’s textile industry, which is vital for enhancing productivity and maintaining competitiveness in global markets. Power generating machinery imports exhibited an initial increase from $675 million in FY 2014 to a peak of $1,577 million in FY 2018. This surge was likely driven by efforts to address Pakistan’s energy deficit through the acquisition of new power generation equipment and infrastructure development. However, following this peak, imports declined to $795 million by FY 2022, which may reflect the completion of major projects, shifts towards alternative energy sources, or changes in procurement strategies. Collectively, these import trends from FY 2014 to FY 2022 illustrate Pakistan’s evolving economic landscape, characterized by fluctuating energy imports, growing industrial inputs, and expanding consumer goods demand. The data underscores the country’s reliance on imported raw materials and machinery to support its industrial base, as well as the impact of global market dynamics and domestic policies on import patterns.

During the fiscal year 2017, Pakistan’s external account came under considerable pressure, largely driven by a notable increase in imports of capital equipment and fuel. This surge in imports reflected the country’s ongoing efforts to bolster infrastructure and industrial capacity, which necessitated the acquisition of machinery and energy resources from abroad. At the same time, a reversal in global oil prices during the same fiscal year led to a significant rise in the import bill for petroleum, oil, and lubricants (POL). The increase in POL imports, combined with a simultaneous decline in exports, exerted further strain on the trade balance. Consequently, the merchandise trade deficit expanded sharply by 39.4 percent, reaching a substantial figure of US$26.885 billion. This widening gap underscored the challenges Pakistan faced in balancing its external trade flows amid volatile global commodity prices and subdued export performance. Despite these pressures on the trade account, the overall current account experienced some mitigating factors. Although inflows from remittances and the Coalition Support Fund (CSF) declined slightly in FY 2017 compared to the previous year, the adverse impact was partially offset by an improvement in the income account. This improvement was primarily attributed to lower profit repatriations by oil and gas firms operating within Pakistan, which helped retain more earnings domestically. The reduction in outward income payments contributed positively to the current account balance, providing some relief from the growing trade deficit. However, these factors were insufficient to prevent the overall current account deficit from widening further in the subsequent fiscal year. In FY 2018, the current account deficit increased to US$19.2 billion, marking a continuation of the external imbalance challenges confronting Pakistan. This persistent deficit reflected ongoing structural issues, including reliance on imported energy and capital goods, coupled with limited export diversification. Despite the high deficit, the impact on Pakistan’s foreign exchange reserves was not as severe as might have been expected. This resilience was largely due to the availability of financial inflows that partially offset the current account shortfall, thereby helping to maintain relative stability in the exchange rate. These inflows included foreign direct investment, portfolio investment, and official financing, which collectively cushioned the external sector from more acute pressures. Net foreign direct investment (FDI) demonstrated a positive trend during the first nine months of FY 2018, growing by 12.4 percent to reach US$1.6 billion. This increase signaled rising investor confidence in Pakistan’s economic prospects and investment climate. The growth in FDI was complemented by a reversal in net foreign portfolio investment (FPI) flows, which amounted to US$631 million in FY 2018 after experiencing an outflow of US$393 million in the previous year. The return of portfolio investment inflows indicated renewed interest from international investors in Pakistan’s capital markets, reflecting improved market sentiment and perceived opportunities. The period also witnessed the completion of multiple merger and acquisition deals between local and foreign companies, highlighting growing foreign investor interest in Pakistan’s corporate sector. These transactions underscored the attractiveness of Pakistan’s market to international investors seeking to establish or expand their presence in the country. In addition, several foreign automakers announced plans to enter the Pakistani market, with some opting to form joint ventures with established local conglomerates. These developments further demonstrated Pakistan’s appeal as an investment destination and suggested a positive outlook for future FDI inflows, particularly in sectors with significant growth potential such as automotive manufacturing. The Pakistani government also achieved a notable milestone in external financing by successfully issuing a US$1.0 billion Sukuk in the international capital market. This issuance was accomplished at a relatively low interest rate of 5.5 percent, reflecting favorable borrowing conditions and investor confidence in Pakistan’s creditworthiness at that time. The Sukuk issuance provided the government with a cost-effective means of raising long-term financing to support development projects and fiscal needs, while also diversifying the country’s sources of external funding. In addition to market-based financing, Pakistan continued to receive support from international financial institutions (IFIs) such as the World Bank and the Asian Development Bank, as well as bilateral partners including China, especially during the post-Extended Fund Facility (EFF) period. These sources of official financing played a crucial role in supplementing Pakistan’s external resources and addressing balance of payments requirements. Net official loan inflows during this period amounted to US$1.1 billion, contributing significantly to the country’s external financing needs and helping to stabilize the external sector. By 4 May 2017, Pakistan’s foreign exchange reserves stood at US$20.8 billion, a level considered sufficient to finance approximately four months of import payments. This reserve position indicated a relatively stable external buffer that provided some assurance against external shocks and exchange rate volatility. Maintaining adequate foreign exchange reserves was critical for Pakistan to meet its short-term external obligations and to support confidence in the country’s external stability. An examination of the broader trends in Pakistan’s external accounts over the period from FY 2008 to FY 2024 reveals fluctuating patterns in credit, debit, and net external balances. Credit, representing inflows, increased from US$37.25 billion in FY 2008 to an estimated US$72.45 billion in FY 2024, reflecting growth in exports, remittances, and financial inflows over time. Conversely, debit, representing outflows, rose from US$51.12 billion in FY 2008 to US$74.14 billion in FY 2024, indicating increased import demand and external payments. Net balances remained negative for most years within this timeframe, with the peak deficit recorded at −US$19.20 billion in FY 2018, coinciding with the period of heightened external imbalances described earlier. However, by FY 2024, the net deficit had improved substantially to −US$1.69 billion, suggesting progress toward narrowing the external gap. When measured as a percentage of gross domestic product (GDP), the net external balance demonstrated a range of deficits, from a high of −8.9 percent in FY 2008 to a much lower deficit of −0.6 percent in FY 2021. This trend reflected some improvement in managing external imbalances relative to the size of the economy, although challenges remained. The reduction in the deficit-to-GDP ratio indicated efforts to enhance export competitiveness, diversify the economy, and attract foreign investment, which collectively contributed to a more sustainable external position over time. Nonetheless, maintaining this trajectory required continued policy focus on structural reforms and external sector management to mitigate vulnerabilities associated with external shocks and financing constraints.

Pakistan has historically received economic aid from a diverse array of sources, encompassing both loans and grants provided by international financial institutions such as the International Monetary Fund (IMF), the World Bank (WB), and the Asian Development Bank (ADB). These multilateral organizations have played a pivotal role in supporting Pakistan’s economic development and stabilization efforts, particularly during periods of fiscal distress or when undertaking large-scale infrastructure projects. The aid from these institutions often comes with policy conditions aimed at ensuring macroeconomic stability and promoting structural reforms within the country’s economy. Alongside multilateral assistance, Pakistan has also obtained substantial bilateral aid from developed countries and oil-rich nations, which has constituted a significant portion of the foreign aid inflows that bolster the Pakistani economy. This bilateral aid typically includes both financial support and technical assistance, reflecting strategic partnerships and geopolitical considerations that influence Pakistan’s international relations. Securing foreign aid has consistently remained a high priority for nearly every government in Pakistan’s history, underscoring the country’s reliance on external financial resources to meet its developmental and balance of payments needs. The Prime Minister of Pakistan has often taken a direct and proactive role in this process, personally leading delegations to negotiate aid packages and secure commitments from donor countries and international organizations. This hands-on approach reflects the critical importance attributed to foreign aid in sustaining economic growth, financing infrastructure projects, and managing fiscal deficits. The pursuit of aid has also been intertwined with broader diplomatic efforts, as Pakistan’s leadership seeks to maintain and expand its network of international partnerships to ensure a steady flow of financial support. During the period from 2006 to 2009, the Asian Development Bank committed approximately $6 billion in development assistance to Pakistan, demonstrating a significant multilateral investment in the country’s economic progress. This substantial financial commitment was aimed at supporting a range of development projects, including improvements in infrastructure, energy, and social sectors, thereby facilitating sustainable growth and poverty reduction. The ADB’s assistance during this timeframe reflected confidence in Pakistan’s potential for economic advancement and underscored the institution’s strategic interest in fostering regional development and stability. Complementing this, the World Bank launched a lending program of up to $6.5 billion for Pakistan under a new four-year aid strategy spanning the same period, 2006 to 2009. This program was largely focused on enhancing the country’s infrastructure, addressing critical bottlenecks in transportation, energy, and urban development to create a more conducive environment for private sector investment and economic diversification. Japan also emerged as a key bilateral donor during this period, pledging to provide $500 million annually in economic aid to Pakistan. This commitment was part of Japan’s broader engagement with Pakistan, aimed at supporting development initiatives that promote economic stability and social progress. The Japanese aid often targeted projects related to infrastructure, education, and health, reflecting Japan’s emphasis on human capital development alongside physical infrastructure. This steady flow of aid from Japan contributed to strengthening bilateral ties while supplementing the multilateral assistance Pakistan received from institutions like the ADB and the World Bank. In November 2008, the International Monetary Fund approved a substantial loan of $7.6 billion to Pakistan, designed to stabilize and rebuild the country’s economy amid a challenging fiscal environment. This loan was part of a broader effort to address macroeconomic imbalances, restore investor confidence, and support structural reforms aimed at enhancing economic resilience. The IMF’s intervention came at a critical juncture when Pakistan faced significant external shocks, including rising commodity prices and security-related expenditures, which strained public finances and the balance of payments. Between the fiscal years 2008 and 2010, the IMF extended loans totaling $5.2 billion to Pakistan, reflecting ongoing support to help the government manage its debt obligations and implement necessary economic adjustments. These loans were often accompanied by policy prescriptions focused on fiscal consolidation, monetary tightening, and improvements in governance to foster sustainable economic growth. In 2011, the Pakistani government made the decision to sever ties with the IMF, signaling a temporary departure from the institution’s financial assistance and conditionality framework. This move was influenced by domestic political considerations and concerns over the social impact of austerity measures typically associated with IMF programs. However, the government elected in 2013 reversed this stance by re-establishing relations with the IMF and negotiating a three-year aid package worth $6.6 billion. This agreement was aimed at addressing ongoing debt challenges and restoring macroeconomic stability, reflecting a renewed commitment to structural reforms and fiscal discipline. The 2013 program underscored the persistent need for external financial support in managing Pakistan’s economic vulnerabilities and highlighted the IMF’s continued role as a key partner in the country’s economic policy framework. In May 2019, Pakistan finalized a $6 billion foreign aid agreement with the IMF, marking the country’s 22nd bailout from the institution since its independence. This agreement was intended to provide Pakistan with the necessary financial resources to stabilize its economy, manage its external debt, and implement reforms to improve fiscal sustainability. The 2019 bailout reflected the cyclical nature of Pakistan’s economic challenges and the recurring reliance on IMF support to navigate balance of payments crises and structural weaknesses. The program included commitments to enhance revenue collection, rationalize subsidies, and strengthen monetary policy, aiming to create a more resilient economic environment capable of sustaining long-term growth. A significant component of Pakistan’s recent economic aid landscape has been the China–Pakistan Economic Corridor (CPEC), which is being developed primarily through concessionary loans from China under the broader framework of the Belt and Road Initiative (BRI). CPEC represents a transformative infrastructure and development project designed to enhance connectivity between China and Pakistan, encompassing energy, transportation, and industrial zones. The financing of CPEC through concessionary loans indicates favorable borrowing terms, often with lower interest rates and extended repayment periods, reflecting China’s strategic interest in fostering economic integration and regional development. The scale and scope of CPEC investments are extensive, involving multiple sectors and spanning several decades of planned development. The value of CPEC investments is challenging to quantify precisely in conventional monetary terms, as the initiative encompasses not only immediate infrastructure projects but also long-term industrial development and broader global economic influence. The corridor’s impact transcends traditional fiat currency valuation by integrating economic, geopolitical, and strategic dimensions that shape regional trade patterns and economic linkages. Consequently, CPEC is viewed as a multifaceted endeavor that extends beyond simple financial metrics to include considerations of economic transformation, technological advancement, and enhanced connectivity within the region. This complexity underscores the unique nature of China’s economic aid to Pakistan through CPEC, distinguishing it from conventional aid packages provided by multilateral institutions or bilateral donors.

Remittances sent by Pakistanis living abroad have long constituted a vital pillar of Pakistan’s economy, serving as a significant source of foreign exchange reserves and contributing substantially to the country’s balance of payments. Historically, Pakistanis settled in Western Europe and North America were the primary contributors to these inflows. However, beginning in 1973, the emergence of oil-rich Arab states as major destinations for Pakistani migrant workers dramatically reshaped the remittance landscape. The discovery and exploitation of vast oil reserves in countries such as Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar created a surge in labor demand, attracting millions of Pakistani workers seeking employment opportunities in these Gulf countries. This shift not only diversified the sources of remittances but also amplified the volume of funds sent back to Pakistan, reinforcing the importance of overseas Pakistanis to the national economy. The Pakistani diaspora, estimated to number approximately 9 million individuals worldwide, has been a critical driver of these remittance flows. In the fiscal year 2017, this extensive expatriate community contributed a total of US$19.3 billion to Pakistan’s economy. This substantial inflow underscored the diaspora’s role in supporting household incomes, financing consumption, and enabling investment in various sectors within Pakistan. The remittances sent by these overseas Pakistanis helped stabilize the country’s foreign exchange reserves and provided a buffer against external economic shocks. The diaspora’s financial contributions also alleviated balance of payments pressures, thereby facilitating macroeconomic stability and supporting economic growth. The major source countries for remittances to Pakistan encompass a broad geographic spectrum, reflecting the diverse destinations of Pakistani migrant workers and expatriates. Prominent among these are the United Arab Emirates (UAE) and the United States (US), both of which have sizable Pakistani communities engaged in a variety of professional and labor-intensive occupations. Saudi Arabia remains a key remittance source, given its longstanding role as a preferred destination for Pakistani labor migrants. Other Gulf Cooperation Council (GCC) countries, including Bahrain, Kuwait, Qatar, and Oman, also contribute significantly to remittance inflows. Beyond the Middle East, countries such as Australia, Canada, Japan, Norway, Switzerland, and the United Kingdom (UK), along with other European Union (EU) nations, have established Pakistani expatriate populations that actively remit funds. This wide dispersion of remittance origins highlights the global footprint of Pakistan’s diaspora and the multifaceted nature of its economic engagement with the homeland. In the fiscal year 2017, remittances to Pakistan experienced a contraction, registering a negative growth rate of 3.0% compared to the preceding year. This decline interrupted a period of rapid growth that had seen remittances reach an all-time high of US$19.9 billion in the previous fiscal year. The primary cause of this downturn was the adverse economic environment prevailing in Arabian and Gulf countries, which was largely triggered by the significant fall in global oil prices in 2016. The oil price slump led to budgetary constraints and austerity measures in these oil-dependent economies, resulting in reduced labor demand and, consequently, lower remittance outflows. This development underscored the vulnerability of Pakistan’s remittance inflows to external economic shocks, particularly those emanating from the Gulf region, which remains a cornerstone of the country’s remittance ecosystem. Despite this setback, several positive developments emerged that held the potential to revitalize remittance inflows in subsequent years. The hosting of the FIFA World Cup in Qatar, scheduled for 2022, was anticipated to generate substantial employment opportunities in the construction, hospitality, and service sectors, which traditionally employ large numbers of migrant workers from Pakistan. Similarly, the Dubai Expo, a major international event, was expected to stimulate economic activity and labor demand in the United Arab Emirates. Additionally, Saudi Arabia’s ambitious Vision 2030 plan, aimed at diversifying its economy away from oil dependency and fostering new industries, was projected to create new avenues for employment for Pakistani workers. Furthermore, diplomatic engagements, such as the recent visit of the Pakistani Prime Minister to Kuwait, were seen as instrumental in strengthening bilateral ties and facilitating labor agreements that could enhance remittance flows. Collectively, these developments underscored the dynamic nature of Pakistan’s remittance landscape and the potential for growth driven by regional economic initiatives and diplomatic efforts. According to data released by the State Bank of Pakistan (SBP), remittances witnessed a marked increase in 2021, reaching a significant milestone of US$29.4 billion. This surge represented a robust recovery and expansion of remittance inflows, reflecting both the resilience of the Pakistani diaspora and the effectiveness of policy measures implemented to encourage formal remittance channels. The increase in remittances during this period was particularly noteworthy given the global economic challenges posed by the coronavirus pandemic, which disrupted labor markets and international mobility. The ability of remittances to not only withstand but also grow amid such adversity highlighted their critical role in supporting Pakistan’s external sector and overall economic stability. The government of Pakistan, in collaboration with the State Bank of Pakistan, undertook a series of initiatives aimed at promoting the use of formal channels for remittance transfers. These measures included regulatory reforms, incentive schemes, and awareness campaigns designed to encourage overseas Pakistanis to remit funds through official banking and financial institutions rather than informal or unregulated means. Such efforts were complemented by the maintenance of stable foreign exchange market conditions, which enhanced the attractiveness and reliability of formal remittance channels. The combination of these factors contributed significantly to the rise in remittance inflows, ensuring that a greater proportion of funds reached the formal economy, thereby improving transparency, regulatory oversight, and the efficient allocation of resources within Pakistan. Despite the unprecedented global economic disruptions caused by the COVID-19 pandemic, remittances played a vital role in bolstering Pakistan’s external sector position. The inflows provided a steady source of foreign exchange, helping to offset declines in other external revenue streams such as exports and foreign direct investment. This financial support was crucial in maintaining macroeconomic stability during a period marked by heightened uncertainty and economic contraction worldwide. The sustained strength of remittances during the pandemic underscored their importance as a resilient and reliable source of external financing for Pakistan, enabling the country to navigate the economic challenges posed by the global health crisis. Comprehensive remittance data, compiled from the State Bank of Pakistan and the Ministry of Finance, reveals a consistent upward trajectory in workers’ remittances over the past decade and a half. In fiscal year 2008, remittances stood at US$6.4 billion, reflecting the growing engagement of the Pakistani diaspora in supporting the national economy. This figure increased steadily over the years, reaching US$19.9 billion in FY2016, followed by a slight dip to US$19.4 billion in FY2017 due to the aforementioned economic challenges in the Gulf region. The upward trend resumed with remittances climbing to US$29.5 billion in FY2021, and further to US$31.3 billion in FY2022. The most recent data for FY2024 indicates that remittances have continued to grow, reaching a record US$30.3 billion. This sustained growth trajectory highlights the expanding economic contributions of overseas Pakistanis and the increasing integration of remittance flows into Pakistan’s broader economic framework. A detailed breakdown of remittance inflows by source country for the fiscal year 2020/21 provides further insight into the geographic distribution of these funds. Saudi Arabia emerged as the largest single contributor, with remittances totaling US$7.667 billion, reflecting the country’s status as a major labor destination for Pakistani workers. The United Arab Emirates followed closely, contributing US$6.114 billion. The United Kingdom, home to one of the oldest and most established Pakistani expatriate communities, accounted for US$4.067 billion in remittances. Collectively, the Gulf Cooperation Council (GCC) countries contributed US$3.310 billion, underscoring the continued importance of this regional bloc. The United States remitted US$2.754 billion, while European Union countries collectively sent US$2.709 billion. Other notable contributors included Australia (US$0.594 billion), Canada (US$0.586 billion), Malaysia (US$0.204 billion), Norway (US$0.111 billion), Japan (US$0.085 billion), and Switzerland (US$0.041 billion). The remaining countries combined contributed US$1.130 billion. This detailed country-wise distribution illustrates the diverse and widespread nature of Pakistan’s diaspora and the multifaceted channels through which remittances flow into the country’s economy.

The 2022 Pakistan economic crisis was marked by profound financial instability, which was prominently reflected in the behavior of Pakistan government bonds across multiple maturities, including 1-year, 5-year, 10-year, and 20-year terms. These government securities, which serve as key indicators of investor sentiment and economic health, exhibited unusual yield patterns that underscored the severity of the crisis. The fluctuations in bond yields during this period mirrored the heightened uncertainty in Pakistan’s financial markets, as investors grappled with escalating inflation, currency depreciation, and fiscal imbalances. The yields on these bonds, which represent the return investors require to hold government debt, became a focal point for assessing the country’s economic trajectory amid mounting macroeconomic pressures. During the periods spanning 2019–2020 and again in 2022, Pakistan experienced an inverted yield curve, a relatively rare financial phenomenon in which shorter-term government bonds offered higher yields than their longer-term counterparts. Typically, longer-term bonds command higher yields to compensate for the greater risk associated with extended maturities. However, in an inverted yield curve scenario, the reversal signals market expectations of an impending economic downturn or heightened risk in the near term. In Pakistan’s case, the inversion of the yield curve indicated that investors demanded a premium for holding shorter-term debt, reflecting concerns about the country’s immediate economic prospects. This inversion was symptomatic of broader market unease, as participants anticipated deteriorating economic conditions and potential tightening of monetary policy. The inverted yield curve observed during these years was closely linked to rising inflation rates in Pakistan, which exerted significant pressure on the country’s economic stability and investor confidence. Inflation, the general increase in prices over time, erodes the purchasing power of money and can undermine the real returns on fixed-income securities such as government bonds. As inflation accelerated, it heightened uncertainty about the future value of returns, prompting investors to reassess the risk profiles of various maturities. The surge in inflation during this period not only diminished the attractiveness of longer-term bonds but also contributed to the inversion of the yield curve by pushing up yields on shorter-term instruments. This dynamic underscored the challenges Pakistan faced in maintaining economic equilibrium amid rising price levels. Inflation in Pakistan during the 2019–2020 and 2022 periods was a critical determinant influencing bond yields, as higher inflation rates directly impacted the real returns investors could expect from fixed-income securities. When inflation rises, the fixed nominal interest payments on bonds lose value in real terms, compelling investors to demand higher nominal yields to compensate for this erosion. This effect was particularly pronounced for shorter maturities, where investors sought to mitigate the risk of inflation outpacing returns over the near term. Consequently, bond yields on shorter-term government securities increased disproportionately relative to longer-term bonds, contributing to the observed yield curve inversion. The inflationary environment thus played a pivotal role in shaping investor behavior and the pricing of government debt instruments during the economic crisis. The economic crisis and the resulting bond market conditions in Pakistan during 2019–2020 and 2022 were reflective of broader macroeconomic challenges confronting the country. These challenges included persistent fiscal deficits, which arose from government expenditures exceeding revenues, thereby necessitating increased borrowing. Additionally, Pakistan experienced significant currency depreciation during this period, with the Pakistani rupee losing value against major foreign currencies. This depreciation exacerbated inflationary pressures by increasing the cost of imported goods and servicing external debt denominated in foreign currencies. External debt pressures further compounded financial distress, as Pakistan faced mounting obligations to repay or refinance loans amid constrained foreign exchange reserves. Together, these factors created a complex environment of economic vulnerability that was mirrored in the behavior of government bond yields and investor sentiment. The interplay between inflation dynamics and bond yield curves in Pakistan during these years served as a crucial indicator of the underlying economic vulnerabilities and the market’s anticipation of future monetary policy adjustments by the State Bank of Pakistan. Investors closely monitored inflation trends and yield curve patterns to infer the central bank’s likely responses, such as interest rate hikes or liquidity management measures aimed at curbing inflation and stabilizing the currency. The inverted yield curve, in particular, signaled expectations that the State Bank of Pakistan might implement tighter monetary policies to combat inflationary pressures, which could, in turn, slow economic growth. This anticipation influenced demand for government bonds across different maturities, as market participants adjusted their portfolios in response to expected shifts in policy and economic conditions. The 2022 economic crisis in Pakistan underscored the urgent need for structural reforms and effective economic management to restore investor confidence and stabilize the country’s financial markets amid persistent inflationary pressures and fiscal imbalances. Policymakers faced the challenge of addressing deep-rooted issues such as inefficient public sector enterprises, tax collection shortfalls, and reliance on external borrowing. Without comprehensive reforms, the cycle of inflation, currency depreciation, and fiscal deficits risked perpetuating financial instability and deterring investment. The crisis highlighted the importance of coordinated fiscal and monetary policies, enhanced transparency, and institutional strengthening to create a more resilient economic framework capable of withstanding external shocks and fostering sustainable growth. Efforts to implement such reforms were seen as critical to reversing negative market trends and rebuilding trust among domestic and international investors.

Corruption has remained a persistent and deeply entrenched problem within Pakistan’s government, affecting various levels of public administration and law enforcement. Numerous claims and reports have highlighted that anti-corruption initiatives have frequently targeted government officials and the lower echelons of the police force, reflecting an ongoing struggle to address systemic graft. Despite efforts to combat corruption, these measures often faced criticism for their limited scope and selective enforcement, with accusations that high-ranking officials and influential figures frequently evaded scrutiny. The persistence of corruption has had significant implications for governance, public trust, and economic development, complicating Pakistan’s efforts to establish transparent and accountable institutions. In the early 2010s, Pakistan’s standing on international measures of corruption was notably poor, as evidenced by its consistent low scores on Transparency International’s Corruption Perceptions Index (CPI). The CPI, which ranks countries based on perceived levels of public sector corruption on a scale from 0 (highly corrupt) to 10 (very clean), recorded Pakistan’s scores as 2.5 in 2011, 2.3 in 2010, and 2.5 in 2009. These figures underscored the widespread perception of corruption within Pakistan’s public institutions during this period. The low scores reflected persistent challenges, including lack of transparency, weak enforcement of anti-corruption laws, and the prevalence of bribery and nepotism across various sectors. In 2011, Pakistan was ranked 134th out of 183 countries on the CPI, indicating a high level of perceived corruption relative to other nations. Although this placed Pakistan among the more corrupt countries globally, it was noteworthy that 42 countries were ranked worse, highlighting the global scale of corruption issues. This ranking reflected the entrenched nature of corruption in Pakistan’s public sector and the difficulties faced by reformers in achieving significant progress. The country’s position on the CPI served as a barometer for international investors and development partners, often influencing foreign aid and investment decisions. The situation deteriorated further in 2012 when Pakistan’s CPI ranking fell from 134th to 139th place, marking a decline in its perceived integrity. This drop positioned Pakistan as the 34th most corrupt country worldwide, tied with nations such as Azerbaijan, Kenya, Nepal, and Nigeria, all of which faced similar governance challenges. The decline in ranking suggested that anti-corruption efforts were either insufficient or ineffective in reversing the public perception of corruption. Factors contributing to this included political instability, weak institutional frameworks, and the lack of an independent judiciary capable of holding corrupt actors accountable. A marked improvement in Pakistan’s CPI rankings occurred during the tenure of the Sharif regime from 2013 to 2017. Under the leadership of Prime Minister Nawaz Sharif, Pakistan’s position on the CPI improved significantly, rising to 117th out of 180 countries by 2017. This advancement was accompanied by a gradual increase in the CPI score, which moved from 28 in 2013 to 32 in both 2016 and 2017. The improvement in rankings and scores suggested a perceived reduction in corruption or at least greater efforts to combat it. The Sharif government implemented various reforms aimed at strengthening anti-corruption institutions and enhancing transparency in public procurement and administration. However, critics argued that these improvements were modest and that corruption remained pervasive, particularly among political elites. In 2017, Pakistan’s CPI score of 32 placed it on par with Egypt and ahead of 59 other countries in terms of perceived corruption. This positioning indicated a relative improvement compared to previous years but still reflected significant challenges. The score suggested that while some progress had been made, Pakistan continued to grapple with endemic corruption that undermined governance and economic development. The comparative ranking with countries like Egypt highlighted common regional challenges, including political interference in anti-corruption agencies and limited judicial independence. The establishment of the National Accountability Bureau (NAB) in 1999 represented a critical institutional response to the detrimental effects of corruption on Pakistan’s economy and governance. NAB was created as an autonomous federal institution tasked with investigating and prosecuting corruption cases involving public officials and private individuals. Its formation was driven by the recognition that corruption had severely impeded economic growth, distorted public administration, and eroded public confidence in government institutions. NAB’s creation marked a significant step toward institutionalizing anti-corruption efforts within Pakistan’s legal and administrative framework. NAB’s primary mandate focused on recovering looted money from corrupt individuals and entities and ensuring that these funds were deposited into the national exchequer. This recovery process involved tracing illicit assets, initiating legal proceedings, and coordinating with other law enforcement agencies to enforce accountability. NAB was also empowered to prevent corruption through awareness campaigns and by recommending policy reforms. Over time, NAB’s role expanded to include monitoring compliance with anti-corruption laws and collaborating with international organizations to address cross-border financial crimes. Between 2018 and 2020, NAB achieved a record recovery of Rs 502 billion from corrupt elements, marking a significant milestone in Pakistan’s anti-corruption efforts. This substantial recovery underscored the bureau’s enhanced capacity to trace and reclaim assets siphoned off through corrupt practices. The recovered funds were intended to bolster the national treasury and finance developmental projects, thereby mitigating some of the economic damage caused by corruption. This period of increased recovery reflected both improved investigative techniques and a more assertive stance against corruption under the prevailing government. Since its inception, NAB has recovered a total of Rs 814 billion either directly or indirectly from corrupt sources, surpassing the recovery amounts of other comparable anti-corruption organizations globally. This cumulative recovery positioned NAB as one of the most successful institutions in terms of asset reclamation, highlighting its central role in Pakistan’s fight against corruption. The bureau’s achievements in recovering stolen public funds contributed to its reputation, although it continued to face criticism regarding selective prosecutions and political bias. Nonetheless, NAB’s recoveries represented a tangible outcome in the broader struggle to reduce corruption and enhance governance in Pakistan.

In 2017, Pakistan was ranked 57th globally in terms of public external debt according to data compiled by the CIA World Factbook. By 2019, the country’s external debt was estimated to be approximately $107.527 billion, which represented a significant portion of its economic output, amounting to 67.1% of its gross domestic product (GDP) as measured in 2017. This ranking and debt level reflected Pakistan’s growing reliance on foreign borrowing to finance its fiscal and development needs within the broader context of its economic challenges. The accumulation of external debt during this period was influenced by various factors, including budget deficits, infrastructure investments, and balance of payments pressures. The primary repository for data concerning Pakistan’s government debt and liabilities is the State Bank of Pakistan, the country’s central bank. The institution plays a critical role in monitoring, managing, and reporting on the government’s debt obligations, both domestic and external. It provides detailed statistical releases and reports that track the evolution of debt levels, servicing costs, and related fiscal indicators. This data is essential for policymakers, researchers, and international financial institutions to assess Pakistan’s debt sustainability and economic health. Gross public debt in Pakistan demonstrated a consistent upward trajectory over the past decade. In June 2010, the gross public debt stood at 9,010 billion Pakistani Rupees (PKR), a figure that saw a steady increase over the years due to persistent fiscal deficits and borrowing requirements. By June 2024, projections estimated that this figure would reach 71,246 billion PKR, indicating a nearly eightfold increase in nominal terms over a 14-year period. This rise encapsulates both domestic and external debt components, reflecting the government’s growing financial obligations. Similarly, total government debt, which includes liabilities owed by the federal and provincial governments, also increased substantially. From 8,411 billion PKR recorded in June 2010, total government debt was estimated to reach 65,080 billion PKR by June 2024. This rise in government debt underscores the increasing fiscal pressures faced by the government, including expenditures on public services, subsidies, and infrastructure projects, which have often outpaced revenue generation. The growth in debt levels has implications for fiscal sustainability and the government’s ability to finance its obligations without compromising economic stability. Public external debt, denominated in US dollars, exhibited notable fluctuations during the same period. In June 2010, Pakistan’s external debt stood at $53.6 billion. This figure increased steadily, reaching a peak of $100.0 billion in June 2022. The surge in external debt was driven by increased borrowing from multilateral institutions, bilateral creditors, and international capital markets to support development projects and balance of payments needs. However, by June 2024, the external debt was projected to slightly decline to $98.3 billion, reflecting efforts to manage external borrowing and repayments. When analyzed as a percentage of GDP, gross public debt showed significant variation over time. It ranged from 58.9% in June 2011 to a high of 76.6% in June 2019. The peak in 2019 was indicative of heightened fiscal deficits and borrowing requirements during that period. However, projections suggested a decline in gross public debt to 67.2% of GDP by June 2024. This anticipated reduction points to potential improvements in fiscal management, economic growth, and debt servicing capacity, which could help stabilize the debt-to-GDP ratio. Total government debt as a share of GDP followed a similar pattern, varying from 54.3% in June 2011 to a peak of 69.9% in June 2019. The increase during this period was consistent with the overall rise in government liabilities and economic challenges. By June 2024, forecasts indicated a decrease in total government debt to 61.4% of GDP. This forecasted decline reflects government initiatives aimed at fiscal consolidation and enhanced revenue mobilization, alongside efforts to contain expenditure growth. Public external debt as a percentage of GDP experienced a downward trend from 30.8% in June 2010 to 19.5% in June 2017. This reduction was likely influenced by a combination of economic growth, exchange rate movements, and external debt repayments. However, after 2017, the external debt-to-GDP ratio rose again, reaching 32.3% in June 2023. This resurgence in external debt relative to GDP was driven by increased borrowing to finance development projects and balance of payments support amid economic challenges. Nonetheless, projections for June 2024 suggested a decline to 25.8%, indicating a possible stabilization of external debt levels relative to the size of the economy. Pakistan’s external debt servicing obligations encompass both the repayment of principal amounts borrowed and the payment of accrued interest on outstanding debt. These obligations are critical components of the country’s fiscal expenditures and have significant implications for foreign exchange reserves and overall economic stability. Efficient management of debt servicing is essential to maintain investor confidence and access to international financial markets. Principal repayments on Pakistan’s external debt have shown considerable variation over the fiscal years. In the fiscal year 2010 (FY2010), principal repayments amounted to $3,140 million. This figure increased substantially over time, reaching a peak of $15,061 million in FY2023. The sharp rise in repayments reflects the maturing of loans contracted in previous years and the accumulation of new borrowings. However, projections for FY2024 indicated a decrease in principal repayments to $9,273 million, suggesting a temporary easing of debt servicing pressures or restructuring of repayment schedules. Interest payments on external debt also increased significantly during this period. From $1,015 million in FY2010, interest payments were projected to rise to $5,457 million in FY2024. The upward trend in interest payments is attributable to the growing stock of external debt and changes in interest rates on new and existing borrowings. Notably, the recent years have seen pronounced increases in interest costs, which place additional strain on Pakistan’s fiscal resources and foreign exchange reserves. The total external debt servicing burden, which combines both principal and interest payments, rose markedly from $4,155 million in FY2010 to a peak of $19,482 million in FY2023. This escalation underscores the increasing cost of servicing Pakistan’s external obligations amid rising debt levels. However, the total external debt servicing was projected to decline to $14,730 million in FY2024, reflecting the anticipated reduction in principal repayments and possibly favorable refinancing or debt management strategies. Managing the external debt servicing burden remains a critical challenge for Pakistan’s economic policymakers, as it directly impacts the country’s fiscal space and external sector stability.