Economy of Pakistan

The economy of Pakistan is the 47th largest in the world in nominal terms and 27th largest in the world in terms of purchasing power parity (PPP). Pakistan has a semi-industrialized economy, which mainly encompasses textiles, chemicals, food, agriculture and other industries. Growth poles of Pakistan's economy are situated along the Indus River; diversified economies of Karachi and Punjab's urban centers coexist with lesser developed areas in other parts of the country. The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment, and a costly, ongoing confrontation with neighboring India. However, IMF-approved government policies, bolstered by foreign investment and renewed access to global markets, have generated solid macroeconomic recovery the last decade. Substantial macroeconomic reforms since 2000, most notably at privatizing the banking sector have helped the economy. GDP growth, spurred by gains in the industrial and service sectors, remained in the 68% range in 2004 06 due to economic reforms in the year 2000 by the Musharraf government. In 2005, the World Bank named Pakistan the top reformer in its region and in the top 10 reformers globally. Islamabad has steadily raised development spending in recent years, including a 52% real increase in the budget allocation for development in FY07, a necessary step toward reversing the broad underdevelopment of its social sector. The fiscal deficit the result of chronically low tax collection and increased spending, including reconstruction costs from the devastating Kashmir earthquake in 2005 was manageable. Inflation remains the biggest threat to the economy, jumping to more than 9% in 2005 before easing to 7.9% in 2006. In 2008, following the surge in global petrol prices inflation in Pakistan reached as high as 25.0%. The central bank is pursuing tighter monetary policy while trying to preserve growth. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit driven by a widening trade gap as import growth outstrips export expansion could draw down reserves and dampen GDP growth in the medium term.

Foreign trade, remittances, aid, and investment

Investment
Foreign direct investment (FDI) in Pakistan soared by 180.6 per cent year-on-year to US$2.22 billion and portfolio investment by 276 per cent to $407.4 million during the first nine months of fiscal year 2006, the State Bank of Pakistan (SBP) reported on April 24. During JulyMarch 200506, FDI year-on-year increased to $2.224 billion from only $792.6 million and portfolio investment to $407.4 million, whereas it was $108.1 million in the corresponding period last year, according to the latest statistics released by the State Bank. Pakistan has achieved FDI of almost $8.4 billion in the financial year 06/07, surpassing the government target of $4 billion. Foreign investment had significantly declined by 2010, dropping by 54.6% due to Pakistan's political instability and weak law and order, according to the Bank of Pakistan. Pakistan is now the most investment-friendly nation in South Asia. Business regulations have been profoundly overhauled along liberal lines, especially since 1999. Most barriers to the flow of capital and international direct investment have been removed. Foreign investors do not face any restrictions on the inflow of capital, and investment of up to 100% of equity participation is allowed in most sectors. Unlimited

remittance of profits, dividends, service fees or capital is now the rule. Business regulations are now among the most liberal in the region. This was confirmed by the World Bank's Ease of Doing Business Index report published in September 2009 ranking Pakistan (at 85th) well ahead of neighbors like China (at 89th) and India (at 133rd).

Ministry of Commerce
The department is entrusted with formulating and implementing the foreign trade policy and responsibilities relating to multilateral and bilateral commercial relations, state trading, export promotion measures, and development and regulation of certain export oriented industries and commodities. In order for the smooth functioning, the Department is divided into eight divisions: Administrative and General Division Finance Division Economic Division Trade Policy Division Foreign Trade Territorial Division State Trading & Infrastructure Division Supply Division Plantation Division

The subjects under the administrative control of the Department include: International trade Foreign Trade State trading Management of Trade Services Special Economic Zones

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