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- GDP (PPP):
- $882.3 billion
- 4.1% growth
- 3.6% 5-year compound annual growth
- $4,736 per capita
- Inflation (CPI):
- FDI Inflow:
Despite some progress in moving forward much-needed reforms, Pakistan still lags behind other countries in the region in enhancing competitiveness. Lingering social and political instability further undercuts sustainable advancement in installing a stable macroeconomic environment and the institutional capacity to realize the country’s relatively untapped potential for growth.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 55.9 (up 0.3 point)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 126th
- Regional Ranking: 26th in the Asia–Pacific Region
- Notable Successes: Monetary Freedom
- Concerns: Rule of Law and Regulatory Efficiency
- Overall Score Change Since 2012: +1.2
Prime Minister Nawaz Sharif, elected in 2013, governs an unstable democracy laboring under constant threat from Islamic extremists. Demonstrations in August and September 2014 led by Tehreek-e-Insaf party chief Imran Khan and religious leader Tahir ul-Qadri increased civil–military tensions. A December 2014 terrorist attack on a military school in Peshawar prompted Sharif to introduce a 20-point anti-terrorist National Action Plan. In early 2015, deteriorating Indo–Pakistani relations led to increased incidents along the border and sharp rhetoric between Pakistani and Indian officials. Pakistan’s release of terrorist mastermind Zakiur Rehman Lakvi from jail in April 2015 further strained Indo–Pakistani relations. Pakistan has privatized some state-run industries, but the economy is still heavily regulated, and poor security discourages foreign investment.
Pakistan is a repressed economy with regard to the rule of law and suffers from widespread corruption, lack of transparency, and little (if any) protection for property rights. Political and military interference in the inefficient judicial system is also prevalent. The National Accountability Bureau has made little progress in tackling official graft, largely because of inadequate political will and institutional capacity.
The top personal income tax rate is 30 percent, and the top corporate tax rate is 33 percent. The overall tax burden equals 10.5 percent of total domestic income. Government spending amounts to 21.4 percent of GDP. The deficit equals over 4 percent of total domestic product, and public debt equals 64.2 percent of GDP. To ease pressure on finances, the government has taken steps to privatize state-owned enterprises.
Progress in improving the entrepreneurial environment has been only modest. The cost of completing licensing requirements is still over twice the average annual income. A large portion of the workforce is underemployed in the informal sector. In May 2015, the IMF and the government agreed that Pakistan should move gradually to full cost recovery in the power sector, increase electricity rates, and privatize power distribution.
Pakistan’s average tariff rate is 10 percent. Some imports of agricultural products are restricted. State-owned enterprises are active in the air transport, railway, and steel industries. Investment levels in some sectors of the economy are capped. A majority of commercial banks are private, but the banking sector remains vulnerable to state interference. Capital markets are underdeveloped.