Economy of Pakistan

Inception In the late 1940s, upon its establishment, Pakistan had an agrarian-based economy. Agriculture constituted 53% of the country's GDP in 1947 and slightly increased to 53.2% in 1949–50. With a population of approximately 30 million, including around 6 million residing in urban areas, about 65% of the labor force was engaged in agriculture. The agricultural sector played a crucial role, contributing to 99.2% of exports and making up nearly 90% of foreign exchange earnings. Despite possessing significant land and mineral resources in both East and West Pakistan, including natural gas, crude oil, coal, limestone, and marble, Pakistan faced numerous challenges. In 1950, its per capita income was around $360 (in 1985 international dollars), and the literacy rate was only 10%. The nation encountered a lack of economic infrastructure, financial resources, and an industrial foundation, particularly with poverty rates ranging from 55% to 60% in the West Pakistan region. Due to limited capital in the small private sector, the government opted to focus on the public sector to foster economic and industrial development. In the fiscal year 1949–50, Pakistan recorded a national savings rate of 2%, a foreign savings rate of 2%, and an investment rate of 4%. Manufacturing contributed 7.8% to the GDP, while services, trade, and other sectors accounted for a significant 39%, reflecting a policy centered around import-substituting industrialization. The trade balance of payments indicated a deficit of 66 million rupees (Rs) during the period spanning 1949-50 to 1950-51. 1950s The 1950s marked the initiation of planned development in Pakistan, with the introduction of the Colombo Plan in 1951 leading to a series of Five-Year Plans from 1955 to 1998. Concurrently, a Ten-Year Perspective Plan was implemented, complemented by a rolling Three-Year Development Plan. During the 1950s, Pakistan pursued a policy of import-substituting industrialization. Notably, the Korean War (1950–1953) brought substantial merchant profits to Pakistan's public and emerging private sectors, fueling industrialization. In 1952, Pakistan imposed bans on the imports of cotton textiles and luxury goods, followed by comprehensive import regulations in 1953, propelling the country into the ranks of the fastest-growing nations. However, biased policies against agriculture and unfavorable trade terms between agriculture and industry led to a decline in the annual growth rate of agriculture. By the late 1950s, Pakistan achieved self-sufficiency in cotton textiles, emphasizing export development. The influx of US military and economic aid amounting to US$500 million during 1955–58 contributed to Pakistan's growth reliant on foreign aid. In 1959, after a military coup d'état in 1958, the martial law regime introduced export bonus vouchers as import licenses and exempted certain goods from licensing. During this period, Pakistan faced a worsening trade balance, with deficits increasing from −831 million Rupees in 1950/51 to −1043 million rupees in 1959/60. Economically, agriculture grew at an annual rate of 1.6%, while manufacturing expanded impressively at 7.7% per annum during the 1950s. In the fiscal year 1959–60, the Per Capita Gross National Product (GNP) stood at Rs. 355 in West Pakistan and Rs. 269 in East Pakistan, indicating a growing economic disparity between the two regions. Economic crises hit Pakistan in 2008, primarily influenced by the 2008 financial crisis. Economic growth in 2009 reached 4.1%, with positive contributions from various sectors, including a 2% growth in agriculture, 4.9% growth in industrial output, 4.4% growth in large-scale manufacturing, and a 4.6% expansion in the services sector. Amid these economic dynamics, Pakistan underwent a structural transition. In late 2021, Pakistan entered a severe economic crisis as inflation surged, the rupee plunged in value, gas supplies dried up, foreign reserves declined and debt increased significantly. In 2025, Pakistan's economic output was estimated at approximately $410 billion, with a growth rate of about 2.7% and GDP per capita near $1,707 driven by improvements in fiscal discipline, remittance inflows, and external sector performance. Remittances from overseas Pakistanis increased by over 31% that year, bolstering foreign exchange reserves and contributing to a current account surplus. == Data ==

Gross domestic product (GDP) The table below displays key economic indicators from 1980 to 2025. Stock market , 2009 In the first four years of the twenty-first century, Pakistan's KSE 100 Index was declared the best-performing stock market index in the world by the international magazine "Business Week". The stock market capitalization of listed companies in Pakistan was valued at $5,937 million in 2005 by the World Bank. On 11 January 2016, with the aim of reducing market fragmentation and creating a strong case for attracting strategic partnerships necessary for providing technological expertise, all three stock exchanges, including Karachi Stock Exchange, Lahore Stock Exchange, and Islamabad Stock Exchange, were inducted into a unified Pakistan Stock Exchange. Informal economy The informal economy in Pakistan comprises economic activities and assets that are not fully captured by formal regulation, taxation, or national accounts. Estimates of its size vary according to methodology and definitions, but multiple sources indicate that the informal sector remains a substantial component of the country’s economic structure. A Dawn analysis noted that the documented economy was estimated at about US $340 billion in 2023, whereas the informal economy was projected at roughly US $457 billion, indicating that the informal economy may exceed the formal economy in overall size. According to a recent labour force survey, 72.1% of non-agricultural employment was classified as informal in 2024–25, with informal work particularly prevalent in rural areas. The informal economy in Pakistan includes a wide range of activities such as unregistered manufacturing, retail, construction, transport, domestic work, and small enterprises. While it provides livelihoods for many households, its unrecorded nature complicates taxation and regulation, and policymakers have periodically highlighted the challenges and fiscal implications of informality. Households also accumulate physical commodities such as gold and jewellery as part of their saving strategies; a significant portion of savings in Pakistan resides in informal instruments and physical assets, including gold, which are not entirely captured by formal statistics. Historical estimates once suggest Pakistanis might hold 3,000 to 5,000 tonnes of gold, indicating a possible range of US $40 billion to US $70 billion in household gold wealth as of 2025. Middle class , M.T. Khan Road , according to the Wall Street Journal, citing estimates largely based on income and the purchase of consumption goods, had suggested that as many as 42% of Pakistan's population may now belong to the upper and middle classes. If these numbers are correct, or even indicative in any broad sense, then 87 million Pakistanis belong to the middle and upper classes, a population size which is larger than that of Germany. Official figures also show that the proportion of households that own a motorcycle and washing machines has grown impressively over the past 15 years. Furthermore, the IBA-SBP Consumer Confidence Index recorded its highest-ever level of 174.9 points in January 2017, showing an increase of 17 points from July 2016. Separately, consumer financing recorded at Rs. 179 billion during FY 2022. Auto finance continued to be the dominant segment, followed by house building, which showed remarkable growth after the Mera Pakistan Mera Ghar scheme initiated by the State Bank of Pakistan in December 2020. Poverty alleviation expenditures The Pakistan government spent over 1 trillion rupees (about $16.7 billion) on poverty alleviation programs during the past four years, reducing poverty from 35% in 2000–01 to 29.3% in 2013 and further to 17% in 2015. Rural poverty remains a pressing issue, as development in those areas has been significantly slower than in major urban areas. However, according to a World Bank report released in June 2025, around 45% of Pakistan's population was living below the poverty line. The updated figure was based on revised poverty thresholds and survey data from 2018 to 2019. The report also noted a sharp rise in extreme poverty, with the proportion increasing from 4.9% to 16.5%. As of 2025, the World Bank cautioned that over 10 million additional individuals in Pakistan faced the looming threat of descending into poverty. Employment The high population growth in the past few decades has led to a significant number of young people entering the labor market. Although Pakistan is among the six most populous Asian nations, excessive red tape in the past made firing from jobs, and consequently hiring, difficult. Significant progress in taxation and business reforms has ensured that many firms are no longer compelled to operate in the underground economy. Government revenues and expenditures in Karachi, 2019 Although the country is a Federation with constitutional division of taxation powers between the Federal Government and the four provinces, the revenue department of the Federal Government, the Federal Board of Revenue, collects more than 80% of the entire national tax collection. The government's revenue streams primarily stem from two sources: taxation and non-tax revenue. Taxation, which includes income tax, sales tax, and customs duties, constitutes a substantial portion of revenues, bolstering both federal and provincial government finances. Non-tax revenue sources, such as mark-up from state enterprises, surplus profits from the State Bank of Pakistan, and royalties on oil and gas, further contribute significantly to the fiscal framework. == Currency ==

Rupee The basic unit of currency is the rupee, ISO code PKR, and abbreviated Rs, which is divided into 100 paisas. Currently, the 5,000 rupee note is the largest denomination in circulation. From 13 August 2005, the SBP started introducing its fifth generation design of banknotes with additional security features, with the Rs. 20 note being the first issuance. New designs of Rs. 5 (July 2008, later replaced by a coin), 10 (May 2006), Rs. 20 (March 2008, new color scheme), Rs. 50 (July 2008), Rs. 100 (November 2006), Rs. 500 (January 2010), Rs. 1000 (February 2007), and Rs. 5000 (May 2006) were gradually introduced. The Pakistani rupee was pegged to the pound sterling until 1982, when the government of General Zia-ul-Haq, changed it to a managed float regime. As a result, the rupee devalued by 38.5% between 1982/83, and many of the industries built by his predecessor suffered a huge surge in import costs. After years of appreciation under Zulfikar Ali Bhutto and despite huge increases in foreign aid, the rupee depreciated. == Major sectors ==

Agriculture The majority of the population, directly or indirectly, is dependent on this sector, contributing about 23.0% of the gross domestic product (GDP) and accounting for 37.4% of the employed labor force in 2021. It is the largest source of foreign exchange earnings. The most important crops are wheat, sugarcane, cotton, and rice, accounting for more than 75% of the value of total crop output. Pakistan's largest food crop is wheat. In 2017, Pakistan produced 26,674,000 tonnes of wheat, almost equal to all of Africa (27.1 million tonnes) and more than all of South America (25.9 million tonnes), according to the FAOSTAT. In the market year of 2018/19, Pakistan exported a record 4.5 million tonnes of rice. Industry in Pakistan Pakistan's industrial sector accounts for approximately 19.12% of GDP. In 2021, it recorded a growth of 7.81%, compared to the negative 5.75% in 2020. The government is privatizing large-scale industrial units, and the public sector accounts for a shrinking proportion of industrial output, while growth in overall industrial output (including the private sector) has accelerated. Government policies aim to diversify the country's industrial base and bolster export industries. Large Scale Manufacturing is the fastest-growing sector in the Pakistani economy. Major industries include textiles, fertiliser, cement, oil refineries, dairy products, food processing, beverages, construction materials, clothing, paper products, and shrimp. Manufacturing Manufacturing is the largest of Pakistan's industrial sectors, accounting for approximately 12.13% of GDP. The manufacturing sub-sector is further divided into three components: large-scale manufacturing (LSM) with a share of 79.6% in the manufacturing sector, small-scale manufacturing with a share of 13.8% in the manufacturing sector, while slaughtering contributes 6.5% to manufacturing. Major sectors in industries include cement, fertiliser, edible oil, sugar, steel, tobacco, chemicals, machinery, food processing, and medical instruments, primarily surgical. Pakistan is one of the largest manufacturers and exporters of surgical instruments. Pakistan's largest corporations are primarily engaged in utilities such as oil, gas, electricity, automobile, cement, food, chemicals, fertilizer, civil aviation, textile, and telecommunication. Their assets, sales, and profit/loss for the year 2023 are listed below: Defence industry -built Al-Khalid tank on display, 2012|284x284px The defence industry of Pakistan, under the Ministry of Defence Production, was established in September 1951 to promote and coordinate the array of military production facilities that have emerged since independence. It is actively engaged in numerous joint production projects, such as the Al Khalid 2 tank, advanced trainer aircraft, combat aircraft, artillery systems like MRLS, combat and surveillance drones like GIDS Shahpar-1 and Shahpar-2, battle management and surveillance radars, electronic warfare systems, navy ships, and submarines. Pakistan manufactures and sells weapons to over 40 countries, including European customers, generating $620 million annually. The country's sophisticated arms imports increased by 119 percent between 2004–2008 and 2009–13, with China providing 54 percent and the USA 27 percent of Pakistan's imports. Textiles industry , 2005 Most of the textile industry is concentrated in Punjab. Before 1990, the industry was predominantly located in Karachi. The industry comprises two main segments: a highly organized large-scale sector and a considerably fragmented cottage/small-scale sector. The organized sector mainly includes integrated Textile Mills, housing numerous spinning units and a limited number of shuttle-less loom units. Conversely, the unorganized sector encompasses downstream industries like Weaving, Finishing, Garment, Towels, and Hosiery, all of which possess significant export potential. Within this sector, certain enterprises have expanded to an international scale and exhibit progressive business philosophies. As of June 2021, the Pakistani textile industry comprised 517 textile units, including 40 composite units and 477 spinning units. This landscape also included 28,500 shuttle-less looms and 375,000 conventional looms. The growth of the spinning sector has been fueled by export demands and cotton production, with subsequent growth observed in the weaving and processing sector. Notably, independent air-jet weaving units have emerged, both as standalone entities and in conjunction with spinning or processing units. Automobile industry in Karachi The auto sector constituted about 7 percent of LSM in 2021, contributing significantly to the country's industrial output. Given government support and the removal of obstacles, the industrial expansion is expected to yield positive results soon. Many new investors have joined with commercial production, while existing players have already made substantial investments, with more in the pipeline. Among the automakers yet to start production, Proton, MG, and Volkswagen are poised to make a significant impact in the local passenger vehicle market. Meanwhile, KIA, Hyundai, Changan, and Prince DFSK have already commenced productions in Pakistan. Mining in the Jhelum District Pakistan is endowed with significant mineral resources and is emerging as a very promising area for prospecting/exploration for mineral deposits. In the wake of the 18th amendment to the constitution, all the provinces are free to exploit and explore the mineral resources within their jurisdiction. Mining and quarrying contribute 13.19% to the industrial sector, with its share in GDP being 2.4%. Energy , Sindh The main sources of Pakistan's primary energy supplies are gas, oil, coal, liquefied natural gas (LNG), and hydroelectricity, with shares of 29%, 24%, 15%, 10%, and 11% respectively in 2022. Since coal mining began in the Thar desert and LNG imports from Qatar, coal and imported LNG increased their shares manyfold in just five years in the primary energy supplies of the country. The share of gas has decreased from 50% in 2005 to 24% in 2022, and oil, since 2015, from 35% to 27% in 2022, being largely replaced by coal and LNG. As Pakistan intends to generate around 8,800 megawatts of nuclear power by 2030, its share is also increasing gradually. Services Pakistan's service sector contributes approximately 61.7% to the GDP. Pakistan won the prestigious Government Leadership award of GSM Association in 2006. Information technology Transportation Air linkage in Karachi|195x195px The year 1955 marked the inauguration of the Pakistan airline's first scheduled international service – to London, via Cairo and Rome. In 1959, the Government of Pakistan appointed Air Commodore Nur Khan as the managing director of PIA. With his visionary leadership, PIA 'took off' and within a short span of 6 years, gained the stature and status of one of the world's frontline carriers. In aviation circles, this period has often been referred to as the "golden years of PIA". On 29 April 1964, with a Boeing 720B, PIA earned the distinction of becoming the first airline from a non-communist country to fly into the People's Republic of China. Private sector airlines in Pakistan include Airblue, which serves the main cities within Pakistan in addition to destinations in the Persian Gulf and Manchester in the United Kingdom. Maritime linkage in Sindh Pakistan National Shipping Corporation (PNSC) is a national flag carrier. It was formed through the merger of the National Shipping Corporation and Pakistan Shipping Corporation in 1979. PNSC has had worldwide operations in the dry bulk segment of the shipping market since its inception, and has been involved in the transportation of liquid cargo since 1998, both locally and internationally. The corporation's head office is located in Karachi. Currently, the PNSC fleet comprises eleven vessels of various types and sizes (five bulk carriers, four Aframax tankers, and two LR-1 Clean Product tankers) with a total deadweight capacity (cargo carrying capacity) of 831,711 metric tons, the highest ever carrying capacity since the inception of PNSC. Finance , Showing the MCB Tower and Habib Bank Plaza, 2004 Pakistan has a large and diverse banking system. In 1974, a nationalization programme led to the creation of six government-owned banks. A privatization programme in the 1990s led to the entry of foreign-owned and local banks into the industry. , tourism has begun to recover in Pakistan, albeit gradually, with a current global rank of 130. == Foreign trade ==

Investment in BalochistanForeign investment significantly declined by 2010, dropping by 54.6% due to Pakistan's political instability and weak law and order, according to the Bank of Pakistan. Economic aid Pakistan receives economic aid from several sources as loans and grants. The International Monetary Fund (IMF), World Bank (WB), and the Asian Development Bank (ADB) provide long-term loans to Pakistan. Pakistan receives bilateral aid from developed and oil-rich countries. Foreign aid has been one of the main sources of money for the Pakistani economy. Remittances The remittances of Pakistanis living abroad have played an important role in Pakistan's economy and foreign exchange reserves. Pakistanis settled in Western Europe and North America are significant sources of remittances to Pakistan. Since 1973, Pakistani workers in the oil-rich Arab states have been sources of billions of dollars of remittances. The 9 million-strong Pakistani diaspora contributed US$19.3 billion to the economy in 2017. Remittances sent home by overseas Pakistanis in the fiscal year 2021 are as follows: == Economic issues ==

Taxation In fiscal year 2023, tax exemptions and concessions granted to influential sectors such as real estate, manufacturing and energy, cost the state 4.61 percent of GDP. particularly at the government and lower levels of police forces. 2.3 in 2010, and 2.5 in 2009 Military interference The Pakistani military maintains significant influence over the country's economy, as illustrated by a July 2025 meeting between foreign exchange company representatives and a senior intelligence official, Major General Faisal Naseer of the Inter-Services Intelligence (ISI), to discuss the depreciation of the Pakistani rupee. While monetary policy and currency regulation traditionally fall under civilian institutions such as the State Bank of Pakistan, the involvement of a high-ranking military officer reflects the broader role the military plays in national economic matters. Poverty and Income inequality In 1965, Pakistan’s chief economist Mahbub ul Haq asserted that 22 families dominated the country’s economic and financial sectors. He contended that these families controlled roughly two-thirds of industrial assets, 80 percent of banking, and 79 percent of insurance assets. In 2015, Pakistan's pre-tax income distribution was highly concentrated at the top, with estimates indicating that the richest 1 percent received 30.2 percent of national income, the top 0.1 percent received 13.4 percent, and the top 0.01 percent received 5.1 percent. Debt According to the CIA World Factbook, in 2017, Pakistan ranked 57th in the world in terms of public external debt to various international monetary authorities (owing ~$107.527 billion in 2019), accounting for a total of 67.1% of GDP (in 2017). Government debt and liabilities data is sourced from the State Bank of Pakistan. Pakistan's external debt servicing includes the repayment of both the principal amount borrowed and the accrued interest. == See also ==