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Pakistan Economy

Pakistan was born with marginal agri-culture and essentially no industry, having been until1947 mainly a source of raw materials for the rest of India. Its development then especially its industrial growth – has there-fore been something of a miracle. Since the early 1980s the country has had one of south Asia’s highest economic growth rates (over 6%), though over half of that has  been eaten up by one of Asia’s highest population growth rates, and the actual distribution of wealth (there is only a small middle class and a vast gap between the richest and poorest) has changed very little.

The biggest sector of the economy is agri-culture. Industry is growing faster but is hamstrung by chronic power shortages, as well as by ethnic violence in the industrial cities of Sind. Development in general is starved because the armed force gets an enormous share of all federal spending (about half of it under Benazir Bhutto, for example).

Despite signs of development, many Pakistanis express a sense of hopelessness. Prosperity in most sectors ids confined to a few family cartels, while unemployment grows among ordinary people. Per capital annul income is less than US$400. Ministers seem more interested in power games than in social justice.

Multiple blow rained on the country in  1990-92. Iraq’s invasion  of Kuwait wiped out the huge remittances home by Pakistani guest worked in the Persian Gulf, and imposed the extra cost of evacuating them all. It disrupted oil supplies from Kuwait, Pakistan’s main supplier, and drove oil prices up. On top of that came the USA’s suspension of aid over the issue of Pakistan’s alleged nuclear-weapons programme. Monsoon floods ravaged the country’s agri-culture in 1992.     

The economy is managed according to five-year plans. A major plank in the 1988-93 plan is reprivatisation and deregulation of big chunks of the economy – including banking, communication and manufacturingnationalized in 1972 by Z A Bhutto. Another is the repeal of many regulations on investment in Pakistan by foreigners.


Thanks to the world’s largest canal irrigation system,  built mostly since independence, a quarter of Pakistan’s land is now cultivated, almost all of it in the Indus plain. Farming, animal  husbandry and to a small extent fisheries and forestry directly employ over half the labour force and account for a quarter of gross domestic production (GDP), and 70% of exports.

Major crops are cotton, wheat, rice and sugar cane. Since the 1970s, mechanization, new irrigation techniques, ‘miracle’ seeds and fertilizers have made Pakistan self-sufficient in  wheat, rice, cane sugar and some smaller crops (though output has barely kept up with population growth), and one of Asia’s few net exporters of food. Other crops are maize, pulses, millet, barley, oil seeds tobacco, sugar beets, potatoes, onions, citrus fruits, mangoes and bananas. The country’s main export cash-earner is cotton, of which it is one of the world’s largest producers.

 Government support has turned animal husbandry into an important economic sector, with leather an export product. There are also rich marine and freshwater fisheries; about a tenth of the catch (mostly shellfish) is exported.

Farming struggles under a feudal system in Sind and Punjab. Over 90% of farmers own plots smaller than 10 hectares (one-third have less than two hectares) and most land is controlled by a few wealthy zamindars (landowners) who can manipulate water allocation, loans and other resources. Average per-hectare yields are among Asia’s lowest, and small-farm yields are among the world’s lowest. To make matters worse, almost two-thirds of arable two-thirds of arable land is already growing saline or waterlogged from irrigation, turning Sind slowly back into desert.

In September 1992, two weeks of extremely heavy monsoon rains unleashed Pakistan’s worst floods in a century. Flood waters rushing down the Indus, Jhelum, Chenab, Ravi and Sutlej rivers and converging in the plains of Punjab and Sind caused not only thousands of deaths and immense infrastructure damage, but ravaged the country’s agriculture. Particularly hard hit were its big export earners. Much of the rice losses (from what have been a record harvest) may have run as high as 50%.    


Pakistan’s manufacturing, concentrated around Karachi-Hyderabad and Lahore, employs 13% of the labour force and accounts for a fifth of GDP. The biggest sectors, textiles and yarn making, are still agriculture dependent, as are sugar refining and vegetable-oil production. Other important industries are cement, fertilizers and steel. Export-driven manufacturing includes lather, sporting goods (including, it’s said, some of the world’s best squash rackets and cricket bats) and carpets.


Pakistan generates two-thirds of its own energy needs, though it imports two-thirds of its oil, nearly all from Kuwait. Important domestic resources include natural gas (in north-west Sind and eastern Baluchistan),hydroelectric power (mainly from the giant dams at Tarbela and Mangla) and some low-quality coal. Half the available electricity comes from water power, but plans for new dams are entangled in water-rights disputes among Sind, the Punjab and the NWFP. The government is desperate to expand domestic resources to ease the bottleneck in industrial development.

Foreign Trade

In one form or another, cotton (raw cotton, yarn, fabrics and ready-made clothes) accounts for about half of  Pakistan’s officially for acknowledged export earnings. Other important  items are rice, leather, synthetic fabrics, carpets, sporting goods, and shellfish. Japan and the US are the biggest customers, followed be Germany and the UK.

An important export is labour. Several million Pakistanis abroad, mainly in the Middle East, sent back a whopping US$ 2.9 billion per year in the early 1980s. This has since declined, and nose dived after Iraq’s invasion of Kuwait, but it remains a big component of export income.

Imports include oil, machinery, chemicals and transport equipment. Japan and the USA are also the biggest suppliers, followed by Kuwait (for oil) and Germany. Pakistan is said to be the world’s biggest importer of Japanese cars! Lost of unofficial imports come through duty-free Afghanistan to the smugglers’ bazaars of the NWFP.

Pakistan  with the outside world almost since it was founded.

Foreign Aid  

As mandated by the US Congress’ Pressler Amendment, the USA in 1990 suspended US$ 564 million in economic and military aid because President Bush could no longer certify that Pakistan hadn’t developed a nuclear bomb. Pakistan’s remaining US$2 thousand million or so in aid comes from the World Bank, International Monetary Fund, Asian Development Bank and individual countries, especially the UK. About a quarter of all its export earnings go toward interest payments on foreign debt.


The State Bank of Pakistan is the central bank. The country ‘s five commercial bank and two investment banks are on the way to privatization and several new ones are to be licensed.

Following the 1990 failure of the bank of Commerce & Credit International (originally a Pakistani bank). Depositors began to grow uneasy about the county’s so-called co-operative societies – high-interest savings & loan outfits. Big deposits by family business cartels associated with top politicians – including prime Minister Nawaz Sharif and his interior Minister – were among the first to be pulled out, precipitating the co-operatives’ collapse and a major government scandal.

Islamic Banking    

In 1987 General Zia made ‘Islamic banking’ compulsory in Pakistan. An the paying and charging of interest are means that saving s accounts (except foreign-currency accounts) are now profit-sharing accounts, and lenders can only charge federally set ‘service charges’.

History of Pakistan
British Times
Pakistan After Independence

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