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Pakistan
The Economy
PAKISTAN'S CULTIVATION OF THE RICH alluvial soil of the Indus
River basin is its single most important economic activity. Because
of extensions and improvements to the irrigation system, waters
of the Indus River and its tributaries flow to the fields, a necessity
because of scant rainfall. The Indus irrigation system is the
world's largest, but there are many problems because of inadequate
water management and use. Farmers continue to employ traditional
cultivation practices, and support services, such as research
and development, are inadequate, although high-yield seeds and
fertilizers are fairly widely used. Yields of most crops, with
the significant exception of cotton, are low by international
standards and substantially below the area's potential. Many farms
are too small to support a family using existing agricultural
practices. The landless often sharecrop or work as agricultural
laborers. A flood in September 1992 temporarily displaced as many
as 3 million people and destroyed many irrigation networks. Its
effects are expected to limit agricultural production, particularly
cotton, in the 1990s.
Since Pakistan became independent in 1947, its leaders have generally
sought to increase the role of industry in the nation's economy.
They achieved a remarkable degree of success toward this end.
A broad industrial base is now in place, producing a wide range
of products for both consumer and industrial use. Industrialization,
however, has failed to create sufficient jobs for the rapidly
expanding urban population. Construction and service-sector activities,
especially in trade, transportation, and government, have expanded
and now provide more employment than industry. Nonetheless, underemployment
remains prevalent throughout the economy. An outdated infrastructure
is another problem facing the economy. Frequent electricity shortages,
for example, hamper industrial development and production.
Most central government administrations have sought to raise
the majority of the population's low standard of living through
economic growth rather than through the redistribution of wealth.
The gross domestic product (GDP--see Glossary) in constant prices
increased an average of 5.3 percent per year between 1950 and
1993, roughly 2 percent per year faster than population growth.
In fiscal year (FY--see Glossary) 1993, GDP amounted to the equivalent
of US$50.8 billion, or roughly US$408 on a per capita basis. Income,
however, has never been evenly distributed. Furthermore, the unequal
income distribution pattern has been a political issue since the
late 1960s and is expected to remain controversial throughout
the 1990s. Social development indicators reflect long-standing
problems in providing basic health and education services. Only
just over one third of all children of primary school age attended
school in 1989, a rate well below the average for low-income countries
(see Education , ch. 2). It was estimated in 1992 that 28 percent
of the population lived below the official poverty line, which
is based on the government's estimate of an income sufficient
to provide basic minimum needs.
A pressing problem facing the economy is the government's chronically
high budget deficit, which has adverse implications for the nation's
balance of payments, inflation and exchange rates, capital formation,
and overall financial stability. The government has been attempting
to restore fiscal balance through a multiyear structural adjustment
program designed to increase revenues, control spending, and stabilize
monetary growth. In addition, the government has privatized public-sector
industrial enterprises, financial institutions, and utilities;
eliminated state monopolies in banking, insurance, shipping, telecommunications,
airlines, and power generation; and liberalized investment and
foreign exchange regulations. As of early 1994, not all these
programs had been implemented as quickly as planned, however,
and the deficit and the associated structural problems persisted.
Data as of April 1994
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