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- GDP (PPP):
- $931.0 billion
- 4.2% growth
- 3.9% 5-year compound annual growth
- $5,000 per capita
- Inflation (CPI):
- FDI Inflow:
Pakistan has pursued reforms to improve its entrepreneurial environment and facilitate private-sector development. The financial sector has undergone modernization and restructuring. However, overall progress lags significantly behind other countries in the region. The tax system is complex and inefficient, although reforms to cut tax rates, broaden the tax base, and increase transparency have been undertaken.
The judicial system suffers from a serious backlog and poor security, and corruption continues to taint the judiciary and civil service. The state’s excessive involvement in the economy and restrictions on foreign investment are serious drags on economic dynamism. Ongoing political instability and the threat of terrorist violence have made the business operating environment more challenging in recent years.
Prime Minister Nawaz Sharif, elected in 2013, governs an unstable democracy that continues to face formidable threats from sectarian and terrorist violence. Tensions with India remain high, as evidenced by a January 2, 2016, attack by Pakistan-based militants on an Indian air base just six days after Indian Prime Minister Modi’s goodwill visit to Lahore. U.S.–Pakistan relations have deteriorated as well. In April 2016, Congress blocked U.S. subsidies for Pakistan’s purchase of additional F-16 fighter jets because of Islamabad’s failure to include the Haqqani network in its crackdown on militants.
Protection of property rights is weak. Although technically independent, the judiciary is subject to external influences, such as fear of reprisal from extremist elements in terrorism or blasphemy cases. Corruption is pervasive in politics, government, and law enforcement, and various politicians and public officeholders face allegations of corruption involving bribery, extortion, cronyism, nepotism, patronage, graft, and embezzlement.
The top personal income tax rate is 30 percent, and the top corporate tax rate is 33 percent. The overall tax burden equals 11.0 percent of total domestic income. Government spending has amounted to 20.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 6.2 percent of GDP. Public debt is equivalent to 64.4 percent of GDP.
Progress in improving the entrepreneurial environment has been modest. The cost of completing licensing requirements is still burdensome. A large portion of the workforce is underemployed in the informal sector. The IMF has commended Pakistan for making substantial progress in reducing untargeted energy subsidies from 2.3 percent of GDP in FY 2011–2012 to a budgeted 0.4 percent for FY 2015–2016 but also says that additional cuts are needed.
Trade is moderately important to Pakistan’s economy; the value of exports and imports taken together equals 28 percent of GDP. The average applied tariff rate is 8.9 percent. The judicial and regulatory systems can deter foreign investment, and state-owned enterprises distort the economy. A majority of the commercial banks are now in private hands, but the sector remains vulnerable to government influence in terms of budgetary support.