Pakistan has been facing an economic crisis since gaining independence. Partition-related issues, a lack of an industrial environment, the need for basic infrastructure, and the influx of millions of migrants from India have all contributed to these economic problems. In the British era, the British government primarily focused on Indian infrastructure. The current ruler prioritized the installation of technical machinery, textile industries, basic road networks, and other facilities in India, but the British government was unable to offer these same facilities to Pakistan. This was also a major contributing factor to Pakistan’s economic crisis, which in turn led to further economic challenges in the future. Due to a shortage of education and technical skills, Pakistan was unable to effectively address these issues at the time. Despite these difficulties, Pakistan managed to resolve some issues during this period, but they had an impact on the country’s economy.
We will use various factors such as GDP per capita or annual, inflation, unemployment, and trade (imports and exports) to thoroughly analyze the economy of Pakistan since its independence.
Pakistan's economy during 1947–1960
The Pakistani government concentrated on agricultural development, the textile industry, and other small-scale industries during this era, but due to limited resources, Pakistan was unable to successfully achieve its set goals. At that time, the GDP stood at 10 billion rupees annually, with a GDP per capita of $86 (172 pkr).
The economy of Pakistan during 1960-1970
Known as the “Era of Rapid Growth,” Pakistan made significant strides in the agricultural field, textile industries, and small and large-scale industrial revolutions. This period also saw success in attracting foreign investment, which helped stabilize the country’s economy. Pakistan started to export major crops and embarked on big projects, including the largest earth-filled Tarbela dam. This era saw the establishment of most major dams and industries. This period witnessed an average GDP growth rate of 6.7%. At the end of this decade, the Pakistani economy fluctuated due to some political instability and the Pakistan-India War of 1965.
The Indo-Pak War in 1965 had a significant impact on Pakistan's economy
According to economic experts, the war may have ended 59 years ago, but its effects are still felt today. It served as a speed breaker for Pakistan’s economy, which had a 6.7% average GDP. Foreign investment drastically slowed down, affecting large-scale production and Pakistani exports. These factors had a bad impact on the country’s economic progress.
The separation of "East Pakistan" in 1971 led to economic crises
| YEAR | GDP | GDP PER CAPITA | GROWTH RATE |
|---|---|---|---|
1973 |
$ 6.38 B |
$ 99 |
76% |
1972 |
$ 9.42 B |
$ 151 |
0.82% |
1971 |
$10.67B |
$175 |
0.47% |
1970 |
$10.03B |
$169 |
11.35% |
1969 |
$8.68B |
$151 |
5.51% |
The declaration of nuclear power has led to economic sanctions.
In 1999, Pakistan’s economy experienced a significant decline following its declaration as a nuclear power. Pakistan began developing nuclear weapons in response to India’s nuclear program and to protect national security. Due to regional instability, Pakistan has had to allocate a significant portion of its budget to its nuclear program for the past two decades, and continues to do so today. Due to the Indo-Pak conflict, billions of dollars have been used or have been used in defense. If there were peace, both countries could use money to industrialize the country and grow their economies better. In 1998, after conducting the nuclear tests, the international community, including America, imposed an economic sanction on Pakistan. The United States suspends economic and military support for Pakistan. The IMF and other financial institutions stopped providing loans and other economic support. Pakistan also faced trade restrictions, which created more economic instability. During that period, Pakistan had to face economic crises.
The economic crises in Pakistan in the new century are a significant concern.
Economic crises were temporarily resolved. After the 9/11 attack, Pakistan received substantial economic and military aid from the USA, and economic sanctions due to the declaration of nuclear weapons were removed after 9/11 attack, After that Pakistan implemented economic reforms that included privatization and financial sector reforms. These policies and reforms led to an economic growth of approximately 6-7% in Pakistan, an increase in direct foreign investment, and a record-breaking peak in the stock market. As a partner in the USA-Afghanistan war, Pakistan initially benefited from American assistance in the form of “USA-AID” and military support. However, due to the Afghan Taliban’s response, Pakistan faced a lengthy series of bomb blasts and suicide attacks. Ongoing terrorism and security challenges also affected economic progress. Economic and security experts estimate that the regular conflict cost Pakistan 160–200 billion US dollars and resulted in 80,000 deaths due to terror.
In 2010, Pakistan also faced an energy crisis, a power shortage that reduced industrial production. Due to these problems, many industries shifted to neighboring countries, leading to inflation and economic crises in Pakistan.
Corruption significantly impacts the economy of Pakistan; it directly affects foreign investment, public trust in the government, and decreases the overall growth of the economy. According to international reports on transparency, Pakistan is the 133rd corrupt nation out of 180 countries.
The China-Pakistan Economic Corridor (CPEC) has been a major initiative. It has boosted infrastructure development, energy production, and port trade routes, which have positively impacted the economy of Pakistan.
Despite these crises, Pakistan continued reforms and increased its tax collection and revenue, but unfortunately, country expenditure also increased.
FAQS
These are the major reasons for the economic crises including corruption, political instability, poor productivity, budget deficit, trade imbalance, terrorism, and lack of quality education.
The economy of Pakistan can be stabilized by some basic and structural reforms in the Financial sector and by reducing the trade deficit as well as the budget deficit. To further growth in the economy, Pakistan should boost its exports and productivity.The government and security institutions should work on security issues in Pakistan and create an environment that attracts foreign investment(fdi) and tourism to the country.
The China-Pakistan Economic Corridor (CPEC) has significantly boosted Pakistan’s economy through large-scale infrastructure development, including roads, highways, and railways, which enhance connectivity and reduce transportation costs. Supporting industrial growth and attracting foreign investment.CPEC will be a game-changer for Pakistan.
