By Dr. Nayyer Ali

July 01, 2011

Pakistan’s Weak Economy


The fiscal year ending this week came in with very weak growth of only 2.4%, barely ahead of population growth, and far behind the 9% growth in India. 

This follows 3.8% in the prior year and less than 2% in the year before.  Ever since this government has come to power, the economy has been moribund.  It is in sharp contrast to the rapid growth seen under Shaukat Aziz from 2002 to 2008, when all sectors were growing briskly, and the government could fund a major increase in development spending.  Investment, which was running at 22% of GDP in the last three years of Aziz, climbed down to 13% of GDP this year.  The country cannot have any real growth when no one wants to invest. 

The one strong sector last year has been trade.  Exports surged to 25 billion dollars, an increase of over 25%.  Meanwhile, very strong remittance flows of over 10 billion dollars helped maintain the value of the rupee against the dollar despite the high inflation of over 10%.  Debt as a share of GDP has declined to 58%, better than 10 years ago, but worse than 2008, when it reached a low of 50%.  Interest payments on the debt are down to 3.9% of GDP, and defense spending is 2.4%.

The number of vehicles on the road rose to 10.4 million, double of what it was 10 years ago.  Mobile phone numbers were up a bit to 104 million.  The infant mortality rate is down to 63 per thousand births, from 85 ten years ago, and literacy is now up to 58%, with female literacy up to 45% compared to 35% in 1999.  The under age 5 mortality rate is 8.9%, and life expectancy is 67 years, compared with 64 in India.

Education remains under-funded, with the government spending only 2% of GDP on education, rather than a more appropriate 4% for a young developing country.  Despite that, primary school enrollment increased 300,000 students to 19 million.  University enrollment over the last ten years has soared from 250,000 to 850,000 students. 

Internet use continues to rise, with broadband subscribers up to 1.2 million, from 900,000 last year, and only 400,000 two years ago.  In fact, total Internet user rates are 11% of the population in Pakistan compared with 5% in India.

The energy sector remains a major problem with continued heavy load-shedding as electricity demand far exceeds supply.  Much of the supply problem is not lack of generating capacity, but inability of power companies to get paid.  Actually there is a huge problem of “circular debt” where major Pakistani energy companies are owed large sums and owe large sums to each other.  The lack of liquidity for these firms causes financial headaches for all of them, and retards growth and investment.  Despite that the total quantity of electricity produced in Pakistan has soared from 50 gigawatts hours ten years ago, to over 75 now.  Installed generating capacity is 21 gigawatts, with plans to add 14 gigawatts in the next five years, and another 75 gigawatts in the 15 years after that.  By 2030, Pakistan is supposed to have 5 times as much electricity as it does today.  Over 10,000 villages have been electrified in the past year, raising the total to 160,000 villages, up from 100,000 villages five years ago.

In population terms, a census is to be conducted in the next year.  Total population is currently estimated at 166 million with a growth rate of 2.1%.  Total fertility rate (births per woman on average) is still high at 4.0, but has been declining steadily.  One factor that handicaps Pakistan when compared to India is its much larger percentage of children in the population.  The dependency ratio in India is 57%, but Pakistan is much higher at 69%, and China in comparison is only 39%.  38% of Pakistan’s children are underweight, compared with 48% in India.  Malaria is less prevalent but TB is worse than in India.

In the next year the government is hoping that growth accelerates to 4.5%.  That would be the best performance so far of the PPP government, but that is still way too slow to absorb the expanding workforce, and to substantially reduce poverty.  Growth needs to accelerate to 8%.  Investment needs to rise toward 25% of GDP, spending on health needs to double to 1% of GDP and education to double to 4% of GDP.  The country needs to focus on human development and economic growth.  A prosperous Pakistan is the most effective way to create a nation that can defend itself and its interests, regardless of the intentions of its neighbors. 

The Army needs to support a domestic environment that allows for business expansion, which means we must have domestic peace.  The terrorist groups that have wreaked havoc on Pakistan need to be stamped out, and the double-game of supporting some fanatics who will fight in Afghanistan or Kashmir while opposing others is not tenable.  They are all interlinked and need to be stopped.

The massive flood of 2010 disrupted the economy and caused a burst of inflation due to loss of crops and food shortages. Assuming no new natural disaster this coming year should be much better.  But Pakistan still has a long way to go before it gets back on a path of self-sustaining rapid economic growth.  All attention should be focused on reaching that goal as soon as possible.


Deflating Japan

Bush’s Axis of Evil

Speaking to Non-Muslims

If Arafat Were Jinnah

The Shape of Things to Come

South Asia Expert Calls for Negotiations on Kashmir

Kashmir After the Cold War

Kashmir Quagmire: How It Started

Kashmir: Where We’ve Been

Make Way for the Euro

Will there Be a Muslim Palestine?

Careful, Careful

Our Growing Community

Pakistan’s Golden Opportunity

Musharraf’s Reform Plans

Pakistan’s Afghan Dilemma

Humanity on the Move

Strategies of America, Pakistan and Benazir

Winners and Losers

America’s Strategy Defang the Fundamentalists

The Noose Tightens

Pakistan in America

Musharraf’s Moment

A Sad Day for America, A Sad Day for Islam

Repeal the Blasphemy Law

Bush’s Stem Cell Compromise

The Depressing Stock Market

An Evening on Human Development

“Benazir” Takes Over in Indonesia

Race Riots in Britain

Global Warming or Just Hot Air?

Milosevic on Trial

Russia’s Collapse

Economic Recovery in Pakistan?

President Khatami’s Re-election

Lifting Sanctions on Pakistan

Israel’s Moral Burden

A Break in the Logjam?

The Second American Century

Pakistan’s Constitution

Dr. Lodhi in Los Angeles

Literacy: The Road Forward

Why Yusuf Can't Read

Literacy: The Glass is Half Full

Blowing Up Buddha

A Truth and Reconciliation Commission for Pakistan

Did You See the Moon?

Cornrows, Ali Khan, and Culture

Will the Children Go To Harvard?

Muslim Political Progress

Information Technology Gets A Boost

Sand and Oil

On Lieberman

Pakistan Builds A Tank

Kashmir in the Nuclear Age

Full Speed Ahead on Privatization

A Muslim France?

Too Much Food

Watching the Election Why Are We Hollywood’s Villains?

A Tyrant Falls

Taliban Victorious

The Walking Whale of Pakistan
The Joy of Air Travel?

The Amazing American Economy
Arafat and Jerusalem

Names For The Children

Population: Too Many or Too Few?

It Does Matter

Aziz Goes For Growth

The Military Government's First Budget

L'Affaire Salam

End Sanctions on Iraq

Third World Democracy

Light Weapons Trade on the Rise

Iran Reforms

Back to the Future

The Saudis and OPEC Mature

How Can We Help Pakistan Develop?

Report Card on Musharraf

IMF Vs Pakistan

A Candid Discussion on Foreign Policy Issues

A Sad Tale of Missed Opportunities

Cold War In Kashmir

Whither Afghanistan?

National Security and Literacy

Pakistan Votes

The People Win

What is an Islamist?

Selling the Crown Jewels

Still Not Government

One Year After the Taliban

Benazir's Folly

Iraq and Oil

Saddam and Iraq - I

Saddam and Iraq - 2

Muslim Democracy

Zakat and Capitalism

Zakat and Capitalism - 2

The Economy Picks Up

The American Military: Power without Limit?

Good Foreign Policy is Good Anti-Terrorism Policy

The Arrest of Khalid Shaikh Mohammad

Bush Takes a Gamble

Bush Attacks

Besieging Baghdad

Darkness in Saddam's Bunker

Piccadilly It Aint Qissa Khani Is Still Qissa Kahani

Ed Asner and Afghanistan's Progress

Bush Delivers a Roadmap

Liberation or Imperialism

The Roadmap

Economic Rebound

Musharraf in Los Angeles

Economic Growth will lead to Democracy

Trapped by Myths and Fantasies

The Surge in Karachi Stocks

Bush's Busted Budget

America's Broken Healthcare

Time to Buy Stocks?

Islam, the State, and Human Rights

30 Years after the Oil Shock

The Future of Oil Wealth

Pakistan, India and Human Development

Pakistan's Eid Present

Iraq, Democracy and Islam

The End of Saddam Hussein

Three Wins for Pakistan

The Islamabad Declaration

Kerry's Big Wins

Repeal Hudood and Blasphemy

Bush's Growing Vulnerability

What Has Aziz Done?

Bits and Pieces

The Growth of India

Chaos in Iraq

Bush Caves in to Sharon

Abuse at Abu Ghraib

Too Harsh, Musharraf

The BJP Loses

What Do the Jihadis Want?

The Pak Economy: Bigger than We Think

Is America Richer than Europe?

Prime Minister Aziz

Unbundling WAPDA

Musharraf's Uniform

Chess Game in Kashmir

Three States, Three Debates

What's Wrong with the Democrats?

Can Elections Bring Peace to Iraq?

Elections in Iraq

Can Generals Yield to Democrats?

IMF Give Pakistan an “A”

Improve Higher Education in Pakistan

A Framework for Reconciliation

Iraq’s Elections By

Privatizing Power

Bullish in Karachi

Palestinians Should Abandon Suicide Bombings

The F-16’s

Bush’s Social Security Plan

Growth and Investment

Patronage Versus Policy

Aziz, the PML, and 2007

Are We Running out of Oil?

Purchasing Power

Economic Progress

Social Progress

PTCL and the Privatization Roller-coaster

Bombing in Britain

The Ummah is Not a Tribe

Is the US Oppressing the Muslims?

Is Iraq Dissolving?

Sharon Retreats

Pakistan and Israel

The Earthquake

The Other Earthquakes

The Battle for the Supreme Court

Pakistan’s Physician Exports

Beginning of the End in Palestine

Intelligent Design and Other Religious Beliefs

Shifting Populations in South Asia

Sharon’s Stroke

Building Dams

Hamas in Charge

Free Elections in 2007

Muslim Perspectives on Zionism

Iraq Falls Apart

Big Successes in Privatization

Iran’s Nuclear Ambitions

Global Warming

Dennis Ross on the Middle East

What Makes an Islamic State?

The Iraq War

Strong Growth, Falling Poverty

Buffett and His Billions

Why Peace Is Elusive in the Middle East

How Poor is Poor?

How Poor is Poor?
Pakistan’s Growth Moment

Declare a Palestinian State

The London Bomb Plot

Who Won the Lebanon War?

Iran, Israel, and the Bomb

The Pope’s Speech

Democrats Win!

The Republicans Lick Their Wounds

Finally, Some Enlightened Moderation

The Error in the War on Terror

Economic Challenges for Pakistan

Reshaping the Middle East - Part 1

Reshaping the Middle East - Part Two

The Surge to Defeat

Whither Palestinians?

Pakistan and Afghanistan

Blind to the Future?

Musharraf Goes Too Far

Letter from Lahore

Can Musharraf Escape His Own Trap?

Will Healthcare Swallow the Economy?

Israel’s Surprise Offer

The Economy Surges Again

Al Gore Should Run

Pakistan’s Arms Industry

Any Exit from Iraq?

Deal, No Deal, or Many Deals

Nawaz Comes and Goes

Will Musharraf Wriggle Through?

Can We Stop Global Warming?

Bush’s Sputtering “War on Terror” Loses Again

Mental Health at Guantanamo Bay

What a Mess!

Will Musharraf’s Errors Prove Fatal?

How About Some Good News?

Anyone but Nawaz

China, India, and Pakistan: Whose Citizens Live Best?

Electing the Next President

Benazir’s Tragedy

Pakistan Election

Democracy and Pakistan

False Hopes in Palestine

Dinner with Shaukat Aziz

How Real Were Aziz’s Reforms?

The State of Pakistan

A Real Debate on Iraq

Stop Negotiating

Severe Challenges Face Pakistan’s Economy

Mindless Obsession with Musharraf

After Musharraf, More Musharraf?

Can Obama Do It?

Pakistan’s Poverty Profile

Economic Crisis in Pakistan

Can Obama Beat McCain?

Was the Aziz Boom a Mirage?

Pakistan’s Presidency

The Failed Presidency of George W. Bush

McCain Is Not Finished

The Economic Meltdown

A Year after the Annapolis Peace Conference

The Significance of Obama’s Win

Pakistan’s Economic Challenge

New Finds in Qur’anic History

The Assault on Gaza

Is a Trillion Dollar Stimulus Really Needed?

Bush’s Economic Legacy

How Big a Problem is Global Warming?

The Collapse of Oil Prices

Barack and the Banks

Pakistan Surrenders to the Taliban

The Collapse of the Republicans

Will Debt Defeat Obama?

Will Debt Defeat Obama?

The Torture Debate

Israel and Iran: Tyrants Cling to Power

Healthcare Reform

Is Israel Held to A Higher Standard?

Pak Economy Needs Growth

How to Really Control Health Care Costs

Do Not Attack Iran

Obama Confronts Failure in Afghanistan

Why Does the Islamic World Under-perform?

Final Chance for Palestine?

What Killed the Pak Economy in 2008?

Should Obama Fight Global Warming?

Obama’s Good Start

The Twisted Logic of the Extremists

Should France Ban the Burqa?

Slow Progress in Pakistan

Palestinians Resume Negotiations

The Farce of Islamic Creationism

Obama’s Secret Plan to Raise Taxes

Democratic Steps in Pakistan

Faisal Shahzad and the Taliban

Can Obama Win in Afghanistan?

The Meaning of Israeli Piracy

Annual Economic Survey of Pakistan

Nostalgia for Musharraf

No Good Choices for Netanyahu

The Attacks on Islam

The Trends in American Politics

Immigration Reshaping US and Europe

Pointless Peace Talks with Netanyahu

Another Episode of Military Rule?

Pakistan ’s Misguided Afghan Strategy

The Middle East in Wikileaks

Brazil Recognizes Palestine

Obama’s Tax Deal

Republicans, Tax Cuts, and Bad Math

Pakistan in Chaos

The Tunisian Revolution

The Arabs and Democracy

The Palestinians and Peace

The Arab Spring Continues

Bin Laden is Dead

Can We Go Back to Normal?

Obama and the 1967 Borders for Palestine

Was Pakistan Helping bin Laden?

Can the American Economy Be Fixed?

Editor: Akhtar M. Faruqui
© 2004 . All Rights Reserved.