Pakistan Country Profile


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Last updated: January 2024

Pakistan lags its Middle East and North African (MENAP) counterparts on measures of per capita income and creditworthiness, while measures of the business climate are in line with peers. A new nine-month US$3 billion stand-by arrangement (SBA) from the IMF, approved in July 2023, supports the government’s aim to stabilise the economy and implement reforms. Projected GDP growth is stronger than peers, but weak public and external finances, geopolitical tensions and adverse weather events remain key risks to the outlook.


The above chart is a cobweb diagram showing how a country measures up on four important dimensions of economic performance—per capita income, annual GDP growth, business climate rank and creditworthiness. Per capita income is in current US dollars. Annual GDP growth is the five-year average forecast between 2024 and 2028. Business climate is measured by the World Bank’s 2019 Ease of Doing Business ranking of 190 countries. Creditworthiness attempts to measure a country's ability to honour its external debt obligations and is measured by its OECD country credit risk rating. The chart shows not only how a country performs on the four dimensions, but how it measures up against other countries in the region.

Economic outlook

The IMF estimates Pakistan’s economy contracted 0.5% in 2023, reflecting declines in private investment, consumption and government spending amid global macroeconomic headwinds. Among key sectors, agriculture output grew in 2023 as damage to infrastructure and land following the 2022 floods remained an ongoing hurdle; import restrictions and higher production costs led to a contraction in industrial production; while the services sector shrank due to spillover effects of slower agriculture and industrial sector activity.

The IMF expects growth to recover to 2.5% in 2024, supported by further recovery in agriculture output following recent floods. Phased and gradual easing of import restrictions should support recovery in industrial sector activity. The services sector—particularly wholesale and retail trade, and transport and storage—should grow in line with the broader economic recovery. Economic growth should also receive support from continued bilateral financing inflows and financial support related to the IMF program. On the other hand, remittances are likely to decline marginally due to slower growth in host countries.

Progress has been made on IMF-led reforms, with Pakistan meeting nearly all of its latest quantitative and structural benchmarks, according to the IMF’s January 2024 review. The IMF noted economic growth, the fiscal position and foreign reserves have improved. But heightened political uncertainty and social tensions following recent elections suggests the new government is likely to face challenges implementing necessary reforms.

Risks to the outlook are tilted to the downside. Continuously large external debt payments, tight global financing conditions and the high domestic policy rate could put sharper than expected downward pressure on the economic recovery. Liquidity risks are high, as foreign reserves remain low and external debt payments are large. Import controls could be maintained, which hinders the ability of businesses to import critical inputs into export-oriented sectors. Protracted and elevated food and energy price inflation also remains a risk, alongside vulnerability to natural disasters.

The IMF projects real GDP to expand by an average of 4.5% per year between 2025-28. Longer term, infrastructure investments through projects in the China-Pakistan Economic Corridor (CPEC) and significant increases in power supply can help address some of Pakistan's economic constraints and strengthen its growth potential. Pakistan’s young and growing population presents both opportunities and challenges. IMF-led macroeconomic reforms, should they be maintained, would offer wider benefits to the economy and public and external finances. However, forecasts would be at risk if there is significant backsliding on reforms that exacerbates existing economic vulnerabilities.


A shrinking domestic economy, lower labour income, persistent inflation and lower remittances as a result of lower growth in host countries contributed to a decline in GDP per capita from US$1,650 in 2022 to US$1,470 in 2023. Economic recovery from 2024 is likely to support efforts to reduce poverty and boost incomes. Furthermore, the Ehsaas Program launched by the government in March 2019 acts as a social safety net to reduce poverty and provide financial support.


Country risk

Country risk in Pakistan is high. The OECD country risk grade is 7. The three major ratings agencies have sub-investment grade sovereign credit ratings. Pakistan’s credit risks have been amplified by tight global financing conditions, a weak exchange rate, low foreign reserves, high external payments and heightened political and social risks. This indicates a high risk that Pakistan will be unable and/or unwilling to meet its external debt obligations.


Pakistan underperforms most of the Middle East region on various measures of governance. Political stability remains an ongoing challenge. Corruption is perceived as high and widespread due to gaps in accountability and enforcement of penalties. Strengthening institutions and governance is an important part of the government’s reform agenda; this includes strengthening the effectiveness and independence of anti-corruption institutions.


The risk of expropriation in Pakistan is high. The US investment climate statements indicate that Pakistan has had instances of expropriation. This stems from long delays, lack of transparency, inconsistency of rules, and impartiality in the legal system which makes it difficult for private enterprises to seek legal recourse from the government. Legislation to protect foreign investment from expropriation and the 2013 Investment Policy underline the government’s commitment to protecting foreign investor interests and mitigate risks of expropriation.


Political risk is high. A large military influence and a volatile security situation remain constraints on the political and business environments. Policymakers face an environment of high liquidity risk and global economic uncertainty that challenges governability. Civil unrest remains an ever-present risk, and has the potential to disrupt economic growth and hinder reform implementation. 


Bilateral relations

Pakistan was Australia’s 41st largest trading partner in 2022. Total goods and services trade amounted to $2.5 billion in 2022. Major Australian exports to Pakistan include services, cotton, vegetables, oil seeds and oleaginous fruits, fertilisers and coal. Textiles, crude petroleum and rice are Australia’s largest imports from Pakistan. Bilateral trade has risen sharply recently. Australian exports to Pakistan have risen on the back of sharp increases in cotton exports due to favourable growing conditions and higher global prices. Moreover, Australian crude petroleum imports from Pakistan have increased because of higher global energy prices and lower domestic refining capacity and capability. Trade is supported by the Australian and Pakistan Joint Trade Committee, the primary forum for discussing bilateral trade and investment.


Services exports to Pakistan surpassed pre-pandemic levels in 2023 following another year of open international borders. Australia’s education sector has a long-standing relationship with South Asian nations including Pakistan, underpinned by high levels of student mobility, close government-to-government relationships and a significant diaspora within Australia.


Like in education, tourism has also recovered sharply in the past two years to surpass pre-pandemic levels. A competitive Australian dollar and another year of recovery in international travel should support further demand for Australian tourism, and broader services exports in 2024. 


Bilateral investment between Pakistan and Australia is small. Trade and investment opportunities may exist in education, agribusiness, processed foods, mining and IT and communication goods and services. As Pakistan’s food retail market becomes more dynamic, there exists a market entry opportunity for overseas producers. For example, the emergence of franchised quick service restaurants and ecommerce will increase demand for imported packaged food and beverages. That could benefit Australian agriculture exports, given Australia is regarded as a supplier of quality and healthy food products. The increasing focus on economic sustainability means opportunities may exist in water management and clean energy investments, such as wind and renewables. Pakistan also has large reserves in minerals essential for the shift to renewable energy, including copper, chromite, and zinc. Pakistan investment in Australia is small.