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- GDP (PPP):
- $488.6 billion
- 2.4% growth
- 3.7% 5-year compound annual growth
- $2,787 per capita
- Inflation (CPI):
- FDI Inflow:
Pakistan’s economic freedom score is 55.1, making its economy the 121st freest in the 2013 Index. Its score is 0.4 point higher this year, with modest gains in half of the economic freedoms, including the control of government spending and business freedom. Pakistan is ranked 24th out of 41 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.
Pakistan continues to lag significantly behind other countries in the region in advancing reform. Lingering social and political instabilities undercut meaningful progress in installing a stable macroeconomic environment, and the institutional capacity to uphold the foundations of economic freedom has deteriorated. Property rights are severely undermined by a weak and ineffective judiciary susceptible to political interference. Corruption, endemic throughout the economy, remains a serious drag on long-term economic development.
The overall regulatory environment continues to be affected by convoluted administrative bureaucracy, and there is little commitment to opening markets. Tariff and non-tariff barriers, coupled with burdensome and non-transparent investment regulations, hamper development of a dynamic private sector and modernization of the economic base.
Pakistan, the world’s second-largest Muslim-majority country, is plagued by political instability and violence. Civilian and military leaders continuously jockey for power, and the nation is beset by terrorism and a well-organized insurgency along the border with Afghanistan. Devastating floods in July 2010 dislocated millions of people and caused billions of dollars in damages. The May 2011 U.S. raid that killed Osama bin Laden and a November NATO air strike that accidentally killed 24 Pakistani soldiers along the Afghan border sparked a crisis in U.S.–Pakistan relations. Pakistan has privatized some state-run industries, but the economy is still heavily regulated, and the highly volatile security situation discourages foreign investment. Other problems include rising energy shortages and food prices.
The rule of law is unstable across the country. The independence of the legal system is poorly institutionalized, and judicial procedures tend to be protracted, costly, and subject to political pressure. Property rights are not protected effectively. Pervasive corruption persists. Swiss authorities are investigating allegations that the current president accepted kickbacks from Swiss firms in the 1990s.
The top income tax rate is 25 percent, and the top corporate tax rate is 35 percent. Other taxes include a general sales tax (GST) and an interest tax. The overall tax burden equals 10.1 percent of total domestic income. Government spending is equivalent to 19.1 percent of GDP. The deficit remains over 5 percent of GDP, and public debt is about 60 percent of GDP. The fiscal account is unsteady, and Pakistan’s relationship with the IMF has been strained.
Progress in improving the entrepreneurial environment has been modest. Starting a business takes an average of 21 days, although no minimum capital is required. Completing licensing requirements still costs over twice the level of average annual income. The labor market remains stagnant. A large portion of the workforce is underemployed in the informal sector. Inflation is still high but has moderated somewhat. Monetary stability is weak.
The trade-weighted average tariff rate is very high at 9.5 percent, and complex non-tariff barriers further constrain trade freedom. The investment regime remains inefficient. Foreign direct investment has been declining, discouraged by political instability, sectarian conflict, and heavy bureaucracy. A majority of commercial banks are private, but the banking sector remains vulnerable to state interference. Capital markets are underdeveloped.