The State of Pakistan's Economy
The State of Pakistan's Economy
2.1 Macro Economy
2.1.1 Economic aggregate, economic growth rate, per capita GDP
In fiscal year 2020, Pakistan's annual gross domestic product (GDP) was 41.7 trillion rupees, with a growth rate of -0.4%, it was well below expectations of 3.4 per cent growth forecast and overall continuing the volatile downward trend since the PTI came to power. In February 2020, the COVID-19 outbreak in Pakistan had a comprehensive impact on the country's economy.
2.1.2 The share of primary, secondary and tertiary industries in GDP
Growth in all three major sectors of Pakistan's national economy was weaker than expected. The GDP of primary industry, secondary industry and tertiary industry accounted for 19%, 19% and 62% respectively. The output value of the primary industry increased by 2.67 percent year-on-year, with the exception of cotton, rice, corn, sugar and wheat.
All major crops increased production. The output value of the secondary industry decreased by 2.64 percent year on year, and the output of major industries all declined. The output value of large-scale manufacturing fell by 7.78 percent. The output of iron and steel, electronic products, textiles, leather and chemical products all declined to varying degrees. The output of the tertiary industry decreased by 0.59%, while the wholesale and retail industries, which account for the largest share, grew by -3.42% and the transportation and warehousing industry grew by -7.13%.
2.1.3 Shares of investment, consumption and net exports in GDP
From 2016 to 2020, the average ratio of consumption to GDP in Pakistan was about 93%, which decreased to 90.4% in 2020. Investment as a share of GDP averaged about 91.6%, and net exports as a share of GDP averaged about -9%, compared with -7.1% in 2020. Total capital formation increased by 75.5%, exports increased by 27% and imports increased by 37.8%. In fiscal 2020, the total fixed capital formation in Pakistan was 5.8 trillion rupees, a slight increase of 0.1% year-on-year. It attracted $2.56 billion of foreign direct investment, a substantial increase of 88% year-on-year, the top four industries with foreign capital inflows were energy (mainly coal and electricity power), telecommunications, oil and gas exploration and financial services.
2.1.4 State budget revenue and expenditure and deficit
In 2020, Pakistan's fiscal deficit further worsened. In fiscal 2020, the Federal Taxation Commission of Pakistan only achieved tax revenue of 4 trillion rupees, which was less than the budgeted target of 1.5 trillion rupees. After deducting transfer payments to the provincial government, the federal government actually received revenue of 3.3 trillion rupees.
In terms of expenditure, to combat the epidemic and stabilize the economy, the government has significantly increased fiscal expenditure, including a relief plan of 1.3 trillion rupees, with actual expenditure amounting to 6.8 trillion rupees. Despite this trend, the fiscal deficit reached 3.5 trillion rupees, widening from the previous fiscal year's 3.4 trillion deficit, accounting for 8.1% of GDP and marking the second consecutive year that the PTI government's fiscal deficit exceeded 8%.
2.1.5 Inflation rate
In 2020, price levels in Pakistan increased rapidly, with the inflation rate rising to 10.8%, the highest since fiscal 2012.
2.1.6 Unemployment rate
In 2020, according to a World Bank survey, Pakistan's unemployment rate stood at 9.7 percent, 0.9 percentage points lower than the same period last year.
2.1.7 Consumption and retail sales
In 2020, household final consumption expenditure in Pakistan is around 32.8 trillion rupees, and government consumption is around 5.5 trillion rupees, with combined consumption as a share of GDP of 91.6%.
2.1.8 Debt scale and structure
By the end of 2020, Pakistan's overall debt had climbed 9.9% year-on-year to 44.98 trillion rupees (281.8 billion U.S. dollars), or 98.7% of GDP. Of the total, domestic debt is 26.5 trillion rupees (about 166.08 billion U.S. dollars) and external debt 18.48 trillion rupees (about 115.76 billion U.S. dollars). Government debt of 37.5 trillion rupees (234.7 billion U.S. dollars) accounts for 83% of the total debt.
From the perspective of debt structure, the combination of long-term debt and short-term debt is more reasonable. The main component of domestic debt is long-term perpetual debt, accounting for 62.8%, followed by short-term debt (mainly national debt) accounting for 20.3%. Of the government's external debt, the proportion of long-term debt and short-term debt is 98.8% and 1.2% respectively.
From the perspective of debt sources, domestic debt accounts for more than half. Among the external debt, the main sources of public debt (government + central bank debt) are multilateral financial institutions (excluding IMF) with US $33.74 billion and IMF with US $7.48 billion, accounting for 45.5% of the total public debt. Paris Club members $11.55 billion, or 12.8% of the public external debt; Other bilateral debt of $14.6 billion, or 16.1% of the public external debt;
Commercial banks lent US $9.01 billion, accounting for 9.9%; Foreign exchange debt (including deposits from other countries' central banks in Pakistan, currency swaps, etc.) was $8.19 billion, accounting for 9%.
2.1.9 Sovereign credit rating
In August 2020, the international rating agency Moody's rated Pakistan's sovereign credit at B3 with a stable outlook. On May 27, 2021, international rating agency Fitch issued a B- rating to Pakistan's sovereign credit rating with a stable outlook. In August 2020, international rating agency Standard & Poor's (S&P) maintained Pakistan's rating at "B-" with a stable outlook.
2.2 Key/characteristic industries
2.2.1 industrial
According to data released by Pakistan's Statistics Department, the contribution of industry to the country's GDP in Fiscal 2019/20 was 19.29%, a year-on-year decrease of 0.456%. From the perspective of industrial composition, manufacturing industry is the pillar of Pakistan's economic development, accounting for 12.84% of GDP, mining industry accounting for 2.51 of GDP, power industry accounting for 1.76% of GDP, and construction industry accounting for 2.53% of GDP. In the manufacturing industry, the light textile industry accounts for a large proportion, machinery, electronic manufacturing industry development is insufficient.
【Textile industry】
Pakistan is the eighth largest textile exporter in Asia, the fourth largest cotton producer and the third largest cotton consumer in the world. The textile industry is the most important manufacturing sector in Pakistan, accounting for 40% of the workforce. There are over 400 textile enterprises in the country, 60% of which are concentrated in Punjab and 30% in Sindh. According to the Paksitan Economic Survey 2019-20, Pakistan's textile exports reached $10.413 billion in fiscal 2019/20, accounting for 59.69% of the country's total exports.
【Leather industry】
There are more than 720 leather manufacturing enterprises in Pakistan, among which there are more than 300 large ones. The famous enterprises include Hafeez Shafi Leather Co., LTD. According to the Paksitan Economic Survey 2019-20, Pakistan's leather industry exported US$552 million in Fiscal 2019/20, accounting for about 3.2% of Pakistan's total exports.
【Cement industry】
There are 31 large Cement enterprises in Pakistan, and key enterprises include Bestway Cement, Lucky Cement Ltd, Fauji Cement Company Ltd, etc. According to the Paksitan Economic Survey 2019-20, in Fiscal 2019/20, Pakistan's total cement production capacity was 30.4 million tons and exports were US$210 million, a year-on-year decrease of 5.1%.
【Sugar industry】
There are 81 Sugar manufacturing enterprises in Brazil, famous enterprises are: Dewan Sugar Mills Ltd, Faran Sugar Mills Ltd, etc. According to the Paksitan Economic Survey 2019-20, Pakistan produced about 4.81 million tons of sugar in fiscal 2019/20. Due to the high domestic demand, the country exported 180,000 tons of sugar with an export value of US$70.7 million.
【Fertilizer Industry】
There are 13 large Fertilizer companies in Pakistan, famous enterprises include Engro Chemical Ltd, FCC Jordan Fertilizer Company Ltd, etc. According to the Paksitan Economic Survey 2019-20, Pakistan's fertilizer production in the fiscal year 2019/20 was about 5.45 billion tons. Due to the large domestic demand for agricultural fertilizer, most of Pakistan's fertilizer production was sold domestically.
【Ship Breaking Industry】
In recent years, the ship-breaking industry has developed rapidly in Pakistan. According to the "2020 Global Shipping Report" issued by UNCTAD, Bangladesh, India and Pakistan are the three largest ship-breaking countries in the world, and Pakistan's share of global tanker dismantling is about one-fifth.
2.2.2 Agriculture
According to data released by the Pakistan Bureau of Statistics, in the fiscal year 2019/20, the total output value of agriculture in Pakistan was about 2.42 trillion rupees, accounting for 19.31% of the GDP and employing 35.8% of the total employed population. Pakistan's main crops are wheat, rice, corn, cotton, sugarcane, etc. The output value of main crops accounts for 4.2% of GDP, and the output value of other crops accounts for 2.72% of GDP. Livestock, forestry and fisheries accounted for 11.69%, 0.41% and 0.40% of GDP, respectively.
2.3 Infrastructure
Pakistan's infrastructure construction is relatively lagging behind, which is one of the main factors restricting its economic development. In recent years, the Pakistani government has increased investment in related fields and the infrastructure has improved.
2.3.1 Highway
Highway passenger transportation accounts for 90% of Pakistan's total passenger transport and road freight accounted for 96% of all freight. According to statistics, the total length of roads in Pakistan in fiscal year 2019/20 is 263,775km, of which 13,000km are national roads and expressways, 93,000km are provincial roads and the rest are district and rural roads. Pakistan's road density of 0.32 km/sq. km, is much lower than that of other South Asian countries (1.0 in India, 1.7 in Bangladesh and 1.5 in Sri Lanka). Pakistan has road connections with neighboring countries and has land border crossings.
Currently, NHA has about $4.4 billion worth of road construction projects under the China-Pakistan Economic Corridor (CPEC). The second phase of the Karakoram Highway upgrade (Hweliyan to Takot section) was completed by the end of February 2020. The Karachi-Lahore Expressway (Multan to Sukkur) project was inaugurated in November 2019. The Gwadar East Bay Expressway project is under construction.
2.3.2 Railway
Pakistan's railway track length is 11,881 kilometers, and the operating length is 7,791 kilometers, among which the operating length of double track is 1,409 kilometers, accounting for about 18% of the railway operating length. Electrified operation mileage of 293 km, less than 3.8 percent of the railway operating mileage. In the first eight months of fiscal year 2019/20, Pakistan transported 39.4 million passengers and 5.266 billion tons of goods. Pakistan's railway layout is unbalanced. The first is the north-south line, the three main trunk lines have the Ka (Laqi) - Bai (Shawa) line, the Ka (Laqi) - La (Heer) line, La (Heer) - Bai (Shawa) line, and the east-west only Su (Kul) - Kui (Ta) line and its branch lines. The second is "the east is dense and the west is sparse". The road network density in Punjab and Sindh in the east is relatively high, and the railway operation mileage accounts for about three-quarters of the country.
In the Vision 2030 Plan, the Government of Pakistan has set the goal of "making railway the primary form of transportation in the country, gradually making the transportation system profitable, and effectively contributing to the national economic development".
【Light Rail】
The Orange Line metro project in Lahore, which is being built by a Chinese company, is currently under construction. The main line of the project is 25.58km long, with a total of 26 stations. The project started in May 2016 and will be put into operation in October 2020. Under the China-Pakistan Economic Corridor (CPEC), the governments and companies of the two countries are discussing projects such as the ML-1 Pakistan Main Railway Line.
2.3.3 Air Freight
Pakistan has 9 international airports and 27 domestic airports, and more than 30 international routes. Before the epidemic, Pakistan's airports handled about 22.55 million passengers annually, 320,000 metric tons of cargo and 13,000 metric tons of mail. Islamabad, Lahore and Karachi are the air hubs of northern, central and southern Pakistan respectively. Pakistan International Airlines (PIA) handles 80% of the domestic air freight and almost all the freight. At present, Pakistan has signed bilateral aviation agreements with 94 countries and regions, and 32 foreign airlines operate regular flights to and from Pakistan.
There are direct flights between China and Pakistan, as well as transit via Thailand and the United Arab Emirates. Direct flights between the two countries are: Beijing -- Islamabad -- Karachi (Air China), Urumqi -- Islamabad (Southern Airlines), Urumqi -- Lahore (Southern Airlines), Guangzhou -- Lahore (Southern Airlines), Islamabad -- Kunming -- Guangzhou (Southern Airlines), Beijing -- Islamabad -- Lahore (Pakistan Airlines).
2.3.4 Water Transportation
Pakistan mainly relies on sea transportation for its waterway transportation, and more than 80% of its foreign trade is carried out by sea. The main seaports are Karachi port, Qasim port and Gwadar port. Due to the impact of COVID-19, in the first eight months of fiscal year 2019/20, the annual cargo throughput of Karachi Port and Qasim Port was 32.6 million tons and 39.18 million tons respectively, with 54.83% of the cargo trade going in and out of Qasim Port.
Pakistan's domestic shipping capacity is relatively weak. There are only 15 ocean-going freighters in the country, with a total load of 636,000 tons. Therefore, the import and export of goods mainly rely on foreign ships. Pakistan National Shipping Corporation (PNSC) is the only state-run shipping company in Pakistan with 9 cargo vessels of various types.
2.3.5 Communication
Pakistan began opening up its telecommunications sector to outsiders in 2000, spurring rapid growth. There are four major mobile operators in Pakistan: JAZZ, TELENOR, ZONG and UFONE, with a total subscriber base of 176 million.
Pakistan has 58 million broadband subscribers, 56 million 3G and 4G subscribers and about 2.65 million telephone subscribers. However, due to the influence of economic development level, population density, geological conditions and other factors, the communication network construction in northern high-altitude areas, tribal areas and remote rural areas is relatively backward.
In terms of postal services, Pakistan Postal Service Corporation is under the Ministry of Transport. It has about 13,000 post offices, mainly dealing with mail, foreign exchange and insurance, as well as additional services such as tax collection and collection of water, electricity, gas and telephone bills. In recent years, express services have developed rapidly, mainly including Postal Express, TCS, OCS and DHL.
2.3.6 Electricity
According to the data of Pakistan National Transmission and Distribution Corporation (NTDC), the total installed capacity of Pakistan was 38.72GW by the end of fiscal year 2019/20, with 100 power plants (including state-owned and private independent power generation enterprises) in operation, including 42 thermal power plants, 24 hydropower stations, 19 wind power stations and 4 solar power stations. There are 4 nuclear power plants and 7 bagasse power plants. According to NTDC calculation, Pakistan's maximum domestic power demand is 29.86GW, and the installed capacity can meet the domestic demand at present. In terms of electricity consumption, in fiscal year 2019/20, there were 29.6 million customers, who consumed 134.75 billion KWH of electricity. Pakistan's power grid is relatively old and not well connected to neighboring countries. In recent years, with the gradual improvement of domestic power generation, transmission and distribution has become the bottleneck of national power system. At present, there are 5,970 km of 500KV power transmission lines and 11,322 km of 220KV power transmission lines in Pakistan, and 16 500KV and 45 220KV substations, respectively. Pakistan's power grid loss is large, transmission and distribution link comprehensive line loss up to 20%. The Mertiari-Lahore ±660 kV DC transmission project under the China-Pakistan Economic Corridor (CPEC) is currently under construction and is expected to be put into operation in September 2021.
2.4 Price level
According to the data from the Federal Statistics Office of Pakistan, the inflation rate in Pakistan increased by 11.1% year-on-year from June 2020 to April 2021, and the CPI increased by 8.3% year-on-year.
2.5 Development Planning
【Competent authorities】
The Planning Commission (PC) is the government department responsible for the study and formulation of the national development strategy. In August 2007, the PC formulated and published the Vision 2030, the main contents of which are: take knowledge progress as the driving force, effectively use resources, adhere to the concept of rapid and sustainable development, and build a Pakistan with economic prosperity and social fairness and justice. The target is to reach a GDP of $700 billion by 2030, with a per capita GDP of $3,000 (at 2005 constant prices).
In May 2011, after approval by the Cabinet of the Government of Pakistan, the Planning Commission of Pakistan released the Framework for Economic Growth Pakistan. On the basis of summarizing the experience and existing problems of Pakistan's economic and social development in the past 10-20 years, the framework puts forward the thinking summary and strategic planning of Pakistan's economic development in the next 5-10 years. The core is to accelerate and maintain the economic development. The main measures are as follows: Gradually raise the annual growth rate of economic development from about 3% to 7%. Raise productivity, improve government efficiency, deepen reform, maintain policies openness, enhance market vitality and urban creativity, strengthen market connectivity, and strengthen youth education and community building, etc.
【Energy and electricity】
The competent authorities are the Ministry of Energy, the Ministry of Water Resources, etc. According to Vision 2030, the main objectives are:
(1) Adopt PPP, BOT and other methods to accelerate the construction of large and medium-sized hydropower stations on rivers, mainly the Indus River, and strive to increase the hydropower generation from the current 6.46 million kW to 32.66 million kW by 2030;
(2) Develop the Taer Coalfield, which has an estimated reserves of 180 billion tons, vigorously develop the construction of thermal power stations, and strive to reach the installed capacity of 20 million kilowatts by 2030;
(3) Intensify exploration and development of oil and gas resources, and increase the estimated exploitable reserves from the current 840 million barrels and 51.5 billion cubic feet to 27 billion barrels and 282 billion cubic feet respectively;
(4) By 2030, the installed capacity of nuclear power is 8.8 million kW, and the installed capacity of renewable energy is 9.7 million kW;
(5) Improve the efficiency of power transmission and grid management departments through privatization and other measures, and upgrade the power transmission network.
【Railway】
The competent authority is the Ministry of Railways. Pakistani government established in the "vision 2030" goals are "making railway became the main form of transportation in the country, making the transportation system gradually profitable, and vigorously promoting the country's economic development", through the purchase of new locomotives, upgrading existing track and signal system, a new part of the freight line, double line increase mileage, to build the railway connect gwadar region, to build and renovate a railways linking neighbouring countries.
【Metro Light Rail】
The competent authorities are mainly provincial governments. Four major metropolitan areas of Pakistan, Lahore, Karachi, Islamabad-Rawalpindi and Peshawar, all have the idea of constructing urban rail transit system. The Orange Line rail transit project in Lahore is under construction and has been put into operation in October 2020.
【Highway】
The main authorities are Pakistan's Ministry of Transport and the National Highways Authority (NHA). NHA formulated the "ten-year Investment plan" in 2009, which plans to comprehensively expand the highway network from 2010 to 2020, build or expand 8 new expressways and 4 national highways, increase the national highway density to 0.64 km/sq. km, increase the road running speed by 25%, reduce vehicle running costs by 10%, and reduce road faults by 50%. In January 2020, Pakistan launched a three-year development plan to be implemented in the 2020-23 financial year. In terms of road construction, the BOT mode will be used to build a 6-lane highway in Sukul-Hyderabad in Sindh province, while a 527 km long road linking Karachi and Peshawar will be built.
Relevant information can be found at:
https://www.homespakistan.com/blog/NHA-Initiates-Development-Work-on-53-Mega-Projects/ 12117
【Aviation】
The main competent authority is the Civil Aviation Authority of Pakistan (CAA). The major projects in recent years are the Lahore Airport expansion project and Gwadar Airport construction project.
【Telecommunications】
The telecommunications industry in Pakistanimplements a completely market-oriented operation and management policy, and there is no national master plan. The competent authority is the Ministry of Information Technology and Telecommunications of Pakistan, Telecommunication Authority (PTA).
