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Things you should know about Pakistan’s Economy

Pakistan has been bestowed with significant strategic gifts and natural resources, which promise a high development potential.

Things you should know about Pakistan economy

Things You Should Know About Pakistan’s Economy:

Pakistan is an economy that was initially based on agriculture and is slowly diversifying. In 2019, agriculture contributed slightly less than one-fourth of the GDP (22.04%). 18.34% originated from the industry (manufacturing segment). Trade and services sector generated about half of the economy’s GDP. This article talks about the things you should know about Pakistan’s Economy.


Pakistan has been bestowed with significant strategic gifts and natural resources, which promise a high development potential.

It is rich in fertile land, which explains why a greater portion of the population lives in rural areas, producing and selling crops such as sugarcane, wheat, cotton, and rice, exported to other countries. On the Economic Policy front, historically, several economic models have been experimented with. During the early years of its inception, the economy was mainly based on private enterprises. In the 1970s, the government enforced the nationalization policy. Many sectors, including transportation, financial services, and manufacturing, were taken under public administrations.

During the military regime of General Zia (1980s), an Islamic model of the economy was introduced, which forbade practices such as charging interest on loans (Riba) and imposed mandatory payments of Zakat (state Tax) and Ushr (land tax). The practice of nationalization had been severely criticized, and by the 1990s, many of the sectors were being privatized again.

Five Year Plans:

The first five-year plan was approved in 1950. It aimed at rapid and intensified industrialization, expansion of banking and financial services, with a significant focus on heavy industry. The program failed miserably. The second five-year plan came in 1960 during the military regime of General Ayub Khan. Owing to better planning and generous foreign aid infusion, the plan is perhaps the only one in Pakistan’s immensely successful history.

There were a total of eight five year plans in the period from1950 till 1999. Most of which failed to achieve the set targets either due to weak administrations or political turmoil. As new governments came, they abandoned the plans established by their predecessors. The five-year plans were later upgraded to the ‘Medium Term Development Framework (MTDF)’ under Prime Minister Shaukat Aziz‘s term (2004 – 2007).

Current Statistics:

In Things you should know about Pakistan’s Economy, statistics are the primary facts. As of the latest statistics (World Bank and Asian Development Bank estimates), the GDP growth rate had declined from 5.5% in 2018 to 1.9% in 2019. For FY 20, the output of large-scale manufacturing contracted by 3.4 % in July-Jan. The agriculture sector, however, registered growth in the rice and livestock sub-sectors.

Pakistan’s population growth rate is around 2.0 % annually (total population – 1999 = 216 million). The increasing proportion of the younger population in Pakistan’s demographics presents a potential demographic dividend and a challenge to provide adequate facilities and employment opportunities.

In July 2019, IMF extended a 39-month Extended Fund Facility (EFF) arrangement to Pakistan. Stabilization measures under the EFF are expected to ease the aggregate demand pressures in the economy. The global economic slowdown due to the COVID-19 pandemic will continue to impact growth beyond the current fiscal year. The projected GDP growth by the end of 2020 is around -0.50%.

Overall Strengths and Weaknesses:

Pakistan has been plagued with domestic insecurity and geopolitical tensions. Its informal sector makes up about 40% of the GDP, resulting in low tax to GDP ratios. Severe deficiencies in infrastructure, energy, health, and education sectors. As a more significant portion of the population is dependent on agriculture, water shortage and weather uncertainties have dire impacts on their incomes and work patterns.

On the other hand, Pakistan has a flourishing domestic market with significant remittances from abroad sent by ex-pat workers. It can provide large and low-cost labour. A budding Islamic Finance industry, the potential for tourism development, and positive growth prospects with projects like CPEC are the strengths the government can build upon.


When you research the things you should know about Pakistan’s economy, you will find many components needing attention. However, the base needs to be strong. Pakistan has always been an agriculture-backed economy. Recent statistics show that this sector has been ignored when it comes to policymaking. Given the current condition of Pakistan’s economy, the agriculture sector required phenomenal reforms. It is essential for further and stable growth and development of Pakistan’s economy.

Written by Neelma Faraz

Managed and Edited by Javeria Qadeer

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Currently working as the Editor and Head of the Commerce Department at the Hub Daily, Javeria holds 8 years of experience as a writer, proofreader/editor, and translator. She holds a degree in Economics and specializes in writing on economy, business, policymaking, and politics. She is an avid reader with hobbies like research, creative writing, listening to music, and swimming.



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