Is Pakistani economic growth a result of investment, domestic consumption, or export led growth? This is important because it will tell me whether or not Pakistan's growth spurt is just that...a spurt or rather if it is a sustainable growth that India and China have been able to achieve. Empirically speaking it seems to me that Pakistan's growth is being driven by export demand as it has almost doubled since 2000:

Exports:
2000: 8,900,000,000
2005:17,700,000,000

And it has grown at a faster rate then imports:

Imports:
2000:10,200,000,000
2005:17,200,000,000

Just wondering what is it that is driving Paksitan's economy?

Domestic consumption and investment according to recent news articles.

From the Bloomberg commentary that claims Pakistan will grow as fast as China:

"Inflation is at an eight-year high of 11 percent, a clear indication of an economy overheating from too much consumption."

"In 2005, what's helping sustain growth isn't U.S. largesse, but a revival of investor interest, which is evident from the list of bidders short-listed by the government for a proposed sale of 26 percent in state-owned Pakistan Telecommunication Co."

"Pakistan isn't yet ready to sustain 8 percent growth year after year -- not until it can push up its savings rate, which is languishing at 14 percent of gross domestic product."

The mega growth rate of Pakistani economy is based on increased domestic consumption, increased flow of remittances which fueled the demand of industrial goods for household and common middle income group consumptions e.g. Air Conditioner unit growth rate was 462%. And same is the case of other goods e.g. car production grew by 30%. Also the growth rate achieved in cotton production and wheat propelled us above 8pc.

Remaining factor our exports are growing by decent 15pc per annum and I forecast next year exports above 16 billion dollar as compared to this year 14 billion dollar expected.

the bumper crop outcomes could also have had a say in the growth.

i think our imports are higher then our exports. we have a trade deficit. So your figures of exports higher then imports are not correct.

These figures show there is no more a deficit between the import & export. Thats amazing!

I believe its 2 factors involved. Foriegn investment and privitization. Look at Shaukat Aziz visiting everywhere urging them to invest in Pakistan. Giving them huge benefits. I hope it stays the same and Pakistan surpasses the growth rate of china in next 10 years inshallah

Yaar in my article I never mentioned the imports of Pakistan the only comparison is between exports in fiscal yr 2004-05 and 2005-06. The imports for the year 2005-06 can exceed 20 billion dollars.

exports are not more than 14 billion(by the end of june)17.7 is not a correct figure and also the figure for export is less than it is going to be at the end of year.

1. Fiscal discipline: The major cause of Pakistan’s economic ills lay in the imprudence of fiscal policy where the governments indulged in excessive spending in relation to their revenues and incurred deficits in the range of 6 to 7 percent of GDP. These persistent imbalances led to accumulation of public debt that reached unsustainable level of 100 percent of GDP by 1999-2000. The Musharraf Government has taken tough measures to introduce fiscal discipline in the country and has been successful in bringing fiscal deficit down to 2.4 percent last year. How has this been achieved? There are three ingredients responsible for this outcome. First, revenue mobilization has doubled from almost $300 billion to $600 billion in this period through a combination of improved tax administration, reducing the discretion of tax collector and minimizing interaction between tax payer and tax collector, rationalizing the tax rates and structure and widening the tax base to some extent. Universal self assessment system for income tax has increased both the number of voluntary filers as well as tax collection. Second, the burden of debt servicing has been radically lowered. Five years ago, more than 50 percent of government revenues were preempted by interest rates. But, the carefully designed strategy of debt management implemented during this period has led to decline in this ratio to almost 25 percent with a downward moving trend. This has not only allowed lowering of fiscal deficit but provided fiscal space for doubling development expenditure. Third, the hemorrhage caused by the losses incurred by the public sector enterprises has been stopped and either these enterprises are being privatized or their performance has improved as a result of good governance and tighter management.

2. Financial sector reform and restructuring: The financial sector has become the lynchpin of the revival of economic growth in Pakistan. Not only that the sector has become sound and healthy and strong enough to withstand exogenous shocks but has played a major role in broadening access to the middle class and lower income groups. Average bank lending rates have come down to 6 percent from 15-16 percent five years ago and 21-22 percent in the 1990s. This decline is a result of lower demand for credit by the public sector as it reduced fiscal deficit and plugged in losses; the competition between the private sector owned and managed banks who now hold 80 percent of the banking assets; the removal of drag of non-performing loans by tackling them in a decisive way; the lowering of corporate tax rate on the banks; the assumption of affairs of banks by professional management and a vigilant role played by the Central Bank in supervision and regulation of the system. Lowering of interest rates gave a kick start to the private sector credit that, in turn, led to better capacity utilization and higher output in manufacturing sector recording growth rate of 17 percent last year. Higher manufacturing growth contributed towards the achievement of 6.4 percent GDP growth last year and is making similar contribution this year. Pakistan’s banking system by opening its doors for mortgage, automobile, consumer, credit cards, SMEs, agriculture and microfinance has broadened the borrower base and brought in its fold firms, farmers and individuals who had never used bank credit for their productive activities or financing needs. This movement is still in its infancy and a lot of efforts have to be made in order to maintain this momentum.

3. Macroeconomic stability: Even the worst critics of the present government do admit that Pakistan has been able to achieve macroeconomic stability although according to them the benefits have not trickled down to the common man. Macroeconomic stability that had eluded us for a long period of ten years in the 1990s is the foundation for sustainable economic growth. All indicators, whether current account balance, inflation, fiscal balance, exchange rate, interest rates, foreign exchange reserves, point clearly to a positive direction. The challenge for the economic managers is to maintain this stability so that private investors can make investment decisions with full knowledge of the expected profitability in an environment where there is little turbulence or swings in the key prices. The continuity, consistency, predictability and transparency of economic policies are essential to foster this environment. In this complex world of interdependence and interconnections there would be moments of tension and uncertainty but better communication, fuller disclosure of facts and information to the markets and regular interaction with the economic players will keep things under control.

4. External debt vulnerability: Along with high fiscal deficits, Pakistan was faced with rising and unmanageable external debt burden. By 1999/00 the external debt as a ratio of GDP had reached almost 52 percent. The new Government that assumed power took upon itself the task to bring down this burden to an acceptable level. It designed a strategy of debt management that consisted of a long term reprofiling of Paris Club bilateral debt, substitution of non-concessional loans from IFIs by concessional loans, early repayment of expensive commercial and short-term debt and fiscal consolidation. This strategy has been successfully implemented and the absolute stock of external debt and liabilities has, in fact, gone down from $38 billion to $35 billion. The ratio of external debt to GDP in 2004-05 is likely to be around 33-34 percent and is on a downward trajectory. Average interest rate on the stock of debt has more than halved and external interest payments as a proportion of foreign exchange receipts have gradually dwindled to less than 25 percent providing a breathing space and freeing the country from the undue pressures of crisis management.

5. Deregulation: In a number of areas such as petroleum, natural gas and agriculture inputs and outputs the prices and trade have been completely deregulated. Market forces determine the prices that are no longer controlled or administered by government decrees or regulations. Although the mindset of the administrators has not changed and instances of petty harassment and extortions by these officials are rampant, the government policy has been quite clearly articulated. For example, the cotton farmers are free to export their produce without any taxes or duties if there is excess supply domestically and no permits or licences are required. Similarly, the spinners are at liberty to import cotton at the prevailing international prices without any duties or barriers if they believe that the domestic crop is short. Government no longer imports petroleum and petroleum products but the task has been assigned to the private sector. Nor are the fortnightly prices of local POL products determined by the Ministry of Petroleum but by the distributors themselves. Subsidies on fertilizers have been removed and most of the production, marketing and imports or exports are carried out by the private sector. The prices of end products rise and fall according to the dynamics of supply and demand. Trading Corporation of Pakistan does step in on occasions but its main task is to intervene in the market where shortages or excesses threaten orderly market conditions in essential commodities. The most successful experience of deregulation has taken place in the telecom sector. The monopoly of the state owned PTCL has been broken and new licences have been issued for Local Loops, Long Distance and International Lines. Cellular telephone segment has shown highly impressive growth during the last few years and two new international investors have purchased licences through open auction. The subscriber base in cellular phone has jumped from 3 million to 7 million in the last one year and it is expected by 2005 the number will cross 15 million - an unprecedented feat.

6. Privatization: The Government has made it clear that it is not in the business of running enterprises and it is, therefore, divesting its interests in state owned enterprises by selling them to strategic investors in the private sector. Most of the banks, industrial companies, etc. have already been transferred to the private sector. The shares of some utilities and infrastructure companies have been floated through stock exchanges. But now is the turn to sell large ticket items such as PTCL, PSO, Power distribution and generation companies, integrated power utility such as KESC. The calendar for future privatization is quite crowded and it is expected that most of these companies will be off the books of the government by the end of year 2005. The efficiency gains, tax revenues accruing to the government instead of subsidizing their losses, improved customer service and expansion through new investment are some of the direct and indirect benefits to the economy from privatization.

7. Trade liberalization: Pakistan was known for its extremely high tariff rates that were used to raise government revenues and also to protect domestic industries. In the early 1990s the maximum tariff rate was more than 100 percent. These higher tariff walls, in fact, had highly pernicious effect as wide spread smuggling discouraged domestic production and promoted imported goods. Pakistan’s tariff rates have been gradually brought down to the current maximum rate of 25 percent. The average tariff rate is as low as 13-14 percent and should be further lowered. Contrary to conventional wisdom the reduction in tax rates has not only ended smuggling of a large number of imported goods and stimulated domestic production, but has also raised custom duty collection. Lower tax rates and absence of discretionary measures by the customs officials have, in fact, created disincentives for tax evasion and helped accurate declaration and classification of imported goods. It is seldom realized that high tariffs act as a tax on exports that are not able to obtain the required imports and raw materials for meeting their production in a cost effective manner.

8. Financial sovereignty: Pakistan had lost control on its economic management and thus virtually conceded the right to design policies to international financial institutions particularly the IMF. We had lost our credibility as a serious development partner because we entered into successive agreements and made commitments on policy reforms and institutional changes. But, we were good at drawing down the first tranche of the loan and then abandoning the programme. It is only since the year 2000 when Pakistan entered into a stand-by arrangement with the IMF (successfully completed in 2001) followed by a three-year PRGF programme that the country has shown serious mindedness and a commitment to fulfill its obligations. By the end of 2004 Pakistan had drawn down 12 tranches in succession on time without any hiatus and decided to forego the remaining two tranches voluntarily after the review was completed by the IMF Board. Pakistan has thus been able to regain its financial sovereignty and is no longer dependent on the whims and caprices of the international financial institutions or large bilateral creditor countries who control these institutions.

Pakistan exports currently are at $ 14.1 Billion in 2004-2005 from $ 7.1 in 1999.
Imports are near $19 Billion. Oil higher prices, higher imports of machinery and raw materials caused the import growth which was near 32%.

Machinery/Raw Material would translate in furthre growth. And Pakistan just have recently signed alot of FTA and PTA with other countries. And soon EU would reduce the duty on Pakistani items and also expect some favors from America. So that will translate in high export growth thus higher GDP growth for PAkistan.

According to the CIA World Fact Book: Pakistan's Exports are 15 billion and imports 14 billion. Hmmm...


http://www.cia.gov/cia/publications/factbook/geos/pk.html

Economy - overview:
Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since 2001, have generated solid macroeconomic recovery the last three years. The government has made substantial macroeconomic reforms since 2000, although progress on more politically sensitive reforms has slowed. For example, in the third and final year of its $1.3 billion IMF Poverty Reduction and Growth Facility, Islamabad has continued to require waivers for energy sector reforms. While long-term prospects remain uncertain, given Pakistan's low level of development, medium-term prospects for job creation and poverty reduction are the best in nearly a decade. Islamabad has raised development spending from about 2% of GDP in the 1990s to 4% in 2003, a necessary step towards reversing the broad underdevelopment of its social sector. GDP growth, spurred by double-digit gains in industrial production over the past year, has become less dependent on agriculture. Foreign exchange reserves continued to reach new levels in 2004, supported by robust export growth and steady worker remittances.
GDP:
purchasing power parity - $347.3 billion (2004 est.)
GDP - real growth rate:
6.1% (2004 est.)
GDP - per capita:
purchasing power parity - $2,200 (2004 est.)
GDP - composition by sector:
agriculture: 22.6%
industry: 24.1%
services: 53.3% (2004 est.)
Investment (gross fixed):
16.4% of GDP (FY03/04 est.)
Population below poverty line:
32% (FY00/01 est.)
Household income or consumption by percentage share:
lowest 10%: 4.1%
highest 10%: 27.6% (FY96/97)
Distribution of family income - Gini index:
41 (FY98/99)
Inflation rate (consumer prices):
4.8% (FY03/04 est.)
Labor force:
45.43 million
note: extensive export of labor, mostly to the Middle East, and use of child labor (2004 est.)
Labor force - by occupation:
agriculture 42%, industry 20%, services 38% (2004 est.)
Unemployment rate:
8.3% plus substantial underemployment (2004 est.)
Budget:
revenues: $13.45 billion
expenditures: $16.51 billion, including capital expenditures of NA (2004 est.)
Public debt:
71.4% of GDP (2004 est.)
Agriculture - products:
cotton, wheat, rice, sugarcane, fruits, vegetables; milk, beef, mutton, eggs
Industries:
textiles and apparel, food processing, pharmaceuticals, construction materials, paper products, fertilizer, shrimp
Industrial production growth rate:
13.1% (2004 est.)
Electricity - production:
75.27 billion kWh (2003)
Electricity - consumption:
52.66 billion kWh (2003)
Electricity - exports:
0 kWh (2003)
Electricity - imports:
0 kWh (2003)
Oil - production:
61,000 bbl/day (2004 est.)
Oil - consumption:
365,000 bbl/day (2004 est.)
Oil - exports:
NA
Oil - imports:
NA
Oil - proved reserves:
325.5 million bbl (2004 est.)
Natural gas - production:
23.4 billion cu m (2001 est.)
Natural gas - consumption:
23.4 billion cu m (2001 est.)
Natural gas - exports:
0 cu m (2001 est.)
Natural gas - imports:
0 cu m (2001 est.)
Natural gas - proved reserves:
695.6 billion cu m (2004)
Current account balance:
$1.4 billion (2004 est.)
Exports:
$15.07 billion f.o.b. (2004 est.)
Exports - commodities:
textiles (garments, bed linen, cotton cloth, and yarn), rice, leather goods, sports goods, chemicals, manufactures, carpets and rugs
Exports - partners:
US 21.3%, UAE 9.8%, UK 7.1%, Germany 5.2%, Hong Kong 4.2%, Saudi Arabia 4.1% (2004)
Imports:
$14.01 billion f.o.b. (2004 est.)
Imports - commodities:
petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper and paperboard, iron and steel, tea
Imports - partners:
China 10.8%, US 10.2%, UAE 9.3%, Saudi Arabia 9%, Japan 7%, Kuwait 5.3%, Germany 4.2% (2004)
Reserves of foreign exchange and gold:
$12.58 billion (2004 est.)
Debt - external:
$33.97 billion (2004 est.)
Economic aid - recipient:
$2.4 billion (FY01/02)
Currency:
Pakistani rupee (PKR)
Currency code:
PKR
Exchange rates:
Pakistani rupees per US dollar - 58.258 (2004), 57.752 (2003), 59.724 (2002), 61.927 (2001), 53.648 (2000)
Fiscal year:
1 July - 30 June

Most fingures reported by CIA Fack Book are estimated or too old.

Care to provide a link to more accurate data??