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Key Economic Data 
  2004 2003 2002 Ranking(2004)
Millions of US $ 96,100 82,300 73,300 44
GNI per capita
 US $ 600 520 480 160
Ranking is given out of 208 nations - (data from the World Bank)

Books on Pakistan

Update No: 085 - (26/04/13)

Summary: The Pakistani economy stands accused of being directionless, but private consumption keeps burgeoning, driven by an ever rising level of remittances. That will keep the economy afloat, but not necessarily the Pakistani state as remittances completely escape taxation. With the arrest of Musharraf the judiciary scores again and shows all its power; the parties which support it, like Imran Khan’s and the PML-N, are looking likely to have a majority in the future parliament, a fact which must contribute to embolden the judges who relish their position at a time when politicians generally are in low esteem.

Despite clear indications of the country shifting closer and closer to China in its long term economic planning, in the short term Islamabad has to cosy up to Washington in order to secure new loans. Efforts to expand Pakistan’s tax base are not achieving much in part because more and more of the economy is going under cover. The informal share of the economy seems to be growing, with even relatively large companies disconnecting from the state. New estimates place the size of the informal economy at 74% to 91% of the formal economy.

The outflow of foreign direct investment is becoming more and more worrying for Pakistan. It is now badly affecting even the telecommunications sector, which had dominated the foreign investment flow in the past. In the last eight months of the current fiscal year the sector lost US$320 million, the nest result of flow limited to just US$136 million and outflows of US$456 million. Telecommunications is not the only sector from which divestment is going on. The chemical industry is also suffering heavily, with an outflow of US$89 million. The only sectors which keep attracting large foreign direct investments is the oil and gas one, with a net inflow of almost US$340 million, and the financial sector, with a net inflow of US$202 million. The critical power sector, where investment is dramatically needed, saw a net inflow of less than US$16 million. Overall, net inflow was just around US$0.5 billion. The fiscal deficit stood at 2.6% last year only because of US$1.8 billion of US ‘Coalition’ support. The trade deficit was reduced thanks to falling imports and cheaper commodity prices.

The release of an ADB report on the Pakistan economy caused a stir because of its extremely negative assessment. Calling the Pakistani economy ‘directionless’ was a direct attack on the management of the PPP government. Indeed the current Prime Minister, Khoso, has long struggled to appoint a finance minister and the government is perceived as showing little interest in seriously addressing the problem of economic sluggishness. Eventually in April respected economist Dr Shahid Amjad Chaudhary, Rector of Lahore School of Economic, was appointed as finance minister, probably to lay the ground for a new loan agreement with the IMF.

A country of eager consumers
In fact the modest growth that Pakistan is still experiencing is driven by private consumption is also telling; private consumption expenditure grew by 11.6% in the latest fiscal year, while fixed investment is falling. It stood at 10.9% of GDP in the latest financial year, one of the lowest levels in all Asia. Car sales, for example, are growing at the rate of 14% a year, while new shopping malls are opening all the time. The growth in private consumption is in turn driven by the remittances of the almost 10 million Pakistanis who work abroad. In four years the level of remittances has almost doubled to US$13 billion a year. Many Pakistanis who benefit from them invest in the construction sector, which is also doing well.

Judiciary move to exclude Musharraf’s return to politics
On the political front the most widely noted development in April was the judiciary’s move against the renascent Musharraf. The former dictator and Army Chief Of Staff returned to Pakistan to run in the parliamentary elections, (not normally the behaviour of a dictator) but anyway the judiciary issued an arrest warrant against him and banned him from running. The move is widely seen as a sign of defiance of the judiciary vis-à-vis the army, these being the two most powerful sectors in the state, way ahead of the elected politicians.

The biggest unknown concerning the elections remains the performance of Imran Khan, whose possible success worries many because of his lack of political experience. In reality Khan has been surrounding himself with respected economic and political advisers. One key point of his programme is that he claims he will finally make the rich pay tax, a point which attracts him some support from the lower classes (and a round of applause from international institutions and friends of this nation). Although Khan is an open supporter of the Taliban in Afghanistan and wants to negotiate with the Pakistani Taliban as well, he claims to be planning to invest much of the cash raised through taxation in the education of girls.

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