CONTEMPORARY

ISSUES
OF
PAKISTAN ECONOMY
Pakistan's economy is currently facing a number of significant
challenges that are impacting its growth and stability. Here are
some of the key contemporary issues:
1.Inflation,
2. External Debt,
3. Energy Crisis,
4. Unemployment,
5. Political Instability.
6.Trade Imbalances,
7. Issues in Agriculture,
8. Climate Change,
9. Security Concerns,
10. Digital Economy and Technology Gap
 AGRICULTURE
SECTOR
The agriculture sector in Pakistan plays a vital
role in the country's economy, providing
employment to a significant portion of the
population and contributing to food security and
exports.
Key Issues in Pakistan's Agriculture Sector:
1. Water Scarcity
Issue: Pakistan is facing severe water shortages due to the over-
extraction of water from rivers, inefficient irrigation systems, and
reduced water flow from its sources like the Indus River.
Cause: Climate change, poor water management practices, and a
growing population that demands more water.
Impact: Reduced agricultural productivity, particularly in water-
intensive crops like rice and cotton.
2. Outdated Farming Practices
Issue: Many farmers still use traditional farming methods that limit
productivity and are inefficient.
Cause: Limited access to modern farming equipment, technology,
and agricultural education.
Impact: Low yields, higher labor costs, and inefficient use of
resources.
3. Poor Infrastructure
Issue: The agricultural supply chain in Pakistan suffers from
inadequate infrastructure, including poor transportation networks,
storage facilities, and processing plants.
Cause: Insufficient investment in rural infrastructure and lack of
planning.
Impact: Post-harvest losses, high transportation costs, and
difficulty accessing markets for farmers, which affects their
income.
4. Lack of Access to Credit and Financing
Issue: Small-scale farmers often do not have access to affordable
credit or financial services.
Cause: Limited access to banking and financial institutions, and a
lack of collateral among small farmers.
Impact: Inability to invest in improved seeds, fertilizers, or
modern equipment, leading to low productivity.
5. Land Degradation
Issue: Overuse of land, poor agricultural practices, and lack of
proper crop rotation have led to soil degradation.
Cause: Excessive use of chemical fertilizers, deforestation, and
waterlogging.
Impact: Reduced soil fertility and declining crop yields over
time.
6. Pests and Diseases
Issue: Pests and diseases are a significant threat to crops,
particularly cotton, wheat, and rice.
Cause: Climate change, lack of pest management systems, and
reliance on traditional methods of pest control.
Impact: Reduced crop yields and increased production costs.
7. Climate Change
Issue: Pakistan’s agriculture is highly vulnerable to climate change,
which leads to unpredictable weather patterns, droughts, floods,
and extreme temperatures.
Cause: Global climate change, particularly affecting rainfall
patterns and temperatures.
Impact: Increased risk of crop failure, reduced agricultural
productivity, and food insecurity.
8. Low Yield of Key Crops
Issue: The yield of staple crops like wheat, rice, and cotton is lower
than in many other countries.
Cause: Inefficient farming practices, outdated seeds, and
insufficient research and development in agriculture.
Impact: Reduced agricultural output, affecting both food security
and export potential.
 Major crops of
pakistan
Pakistan's agriculture sector is a vital part of its economy,
with several major crops grown across the country. The
climate, fertile soil, and irrigation systems like the Indus
River basin play a crucial role in supporting these crops.
Here are the major crops of Pakistan:
1. Wheat
Importance: Wheat is one of the most important staple foods in
Pakistan, and the country is among the top producers globally.
Regions: Major wheat-producing areas include Punjab, Sindh, and
Khyber Pakhtunkhwa.
Season: It is usually sown in the Rabi season (winter) from November
to December and harvested in the spring (April–May).
Contribution: It is the primary food grain for consumption in Pakistan.
2. Rice
Importance: Rice is a key food crop and an important export product
for Pakistan, particularly Basmati rice.
Regions: The main rice-growing regions are Punjab (especially the
areas along the Chenab and Jhelum rivers) and parts of Sindh.
Season: Rice is typically grown during the Kharif season (summer)
from April to July and harvested from September to November.
Varieties: Basmati is the most famous variety, known for its aroma
and long grains.
3. Cotton
Importance: Cotton is a crucial cash crop in Pakistan, contributing
significantly to the economy through exports and supporting the textile
industry.
Regions: Cotton is predominantly grown in Sindh and the southern
regions of Punjab.
Season: The cotton-growing season begins in the spring (March–April)
and is harvested in the summer (October–November).
Challenges: Pakistan faces challenges like pest infestations (e.g., the
cotton bollworm) and water scarcity affecting cotton production.
4. Sugarcane
Importance: Sugarcane is a significant cash crop, serving as the raw
material for sugar production and other by-products like ethanol.
Regions: Major sugarcane-producing areas are Sindh, Punjab, and
parts of Khyber Pakhtunkhwa.
Season: Sugarcane is grown in the Kharif season (summer) and
harvested in late autumn to winter (October to March).
5. Maize (Corn)
Importance: Maize is an important crop used as food, fodder, and for
industrial purposes (such as corn syrup and oil).
Regions: Major maize-growing areas include Khyber Pakhtunkhwa,
Punjab, and parts of Sindh.
Season: Maize is grown in the summer (Kharif season) and harvested
in late summer to early autumn (August–September).
6. Barley
Importance: Barley is used for food, fodder, and in brewing
industries.
Regions: Barley is mainly grown in the cooler regions, particularly in
Khyber Pakhtunkhwa and parts of Balochistan.
Season: Barley is typically a Rabi crop, sown in November–December
and harvested in the spring (March–April).
7. Fruits
Citrus Fruits (Oranges, Kinnow): Pakistan is a significant producer of
citrus fruits, especially Kinnow (a variety of mandarin orange).
Regions: The major citrus-growing areas are Punjab, particularly in
Sargodha.
Season: Harvested in winter months.
Mangoes: Pakistan is one of the largest producers of mangoes,
particularly the Sindhri variety.
Regions: Major mango-producing regions are Sindh, Punjab, and
parts of Khyber Pakhtunkhwa.
Season: Mangoes are harvested during the summer months.
Other Fruits: Apples (in Balochistan and Swat), pomegranates (in
Balochistan), and dates (in Sindh and Balochistan) are also important.
8. Pulses
Importance: Pulses, such as lentils, chickpeas, and mung beans, are
vital for food security and nutrition.
Regions: Pulses are grown mainly in Punjab, Sindh, and parts of
Khyber Pakhtunkhwa.
9. Oilseeds (Sunflower and Canola)
Importance: Oilseeds like sunflower and canola are crucial for oil
extraction, though Pakistan still relies on imports for a large part of its
edible oil consumption.
Regions: Sunflower is grown in Punjab, while canola is mainly
cultivated in Punjab and Sindh.
Season: Sunflower and canola are usually grown in the Rabi season
(winter).
10. Potatoes
Importance: Potatoes are a widely consumed vegetable in Pakistan,
used both domestically and for export.
Regions: Major potato-growing areas include Punjab, Khyber
Pakhtunkhwa, and parts of Sindh.
Season: Potatoes are planted in the Rabi season and harvested in
spring to early summer (March–May).
 Agricultural credit
In Pakistan plays a crucial role in supporting the
agricultural sector by providing farmers with the
necessary financial resources to purchase inputs like
seeds, fertilizers, machinery, and other essentials. Access
to credit is vital for improving productivity, expanding
farming operations, and ensuring food security. Here's a
breakdown of agricultural credit in Pakistan:
 INDUSTRY
An industry refers to the sector of an economy that is involved in
the production of goods or services. It includes all the activities,
businesses, and organizations that engage in the manufacturing,
processing, and distribution of products or services. Industries are
typically categorized based on the type of goods or services they
produce.
There are several types of industries, including:
Primary Industry: This involves the extraction and collection of natural
resources directly from the earth, such as agriculture, mining, fishing, and
forestry.
Secondary Industry: This focuses on the transformation of raw materials
into finished goods or products, such as manufacturing, construction, and
textile production.
Tertiary Industry: Known as the service sector, this involves the provision
of services rather than goods, including retail, healthcare, education,
entertainment, and financial services.
Quaternary Industry: This involves knowledge-based activities, such as
research, information technology, and innovation.
Quinary Industry: This includes high-level decision-making and services
related to intellectual pursuits, like education, healthcare, culture, and
scientific research.
In short, industries represent different branches of economic activity that
collectively contribute to the production, distribution, and consumption of
goods and services
The Industrial Revolution
Pakistan, like in many parts of the world, is a significant
transformation in the country's economy and society, although it
occurred in a different timeline and form than the original revolution in
Europe. The period of industrialization in Pakistan began after its
independence in 1947, as the country sought to modernize and grow its
economy. Here's an overview of key aspects of industrial development
in Pakistan:
1. Early Developments (Post-Independence Era - 1950s to
1960s)
Agriculture-Based Economy: Pakistan's economy was primarily
agricultural at the time of independence. The government
focused on strengthening the agrarian sector while also working
to build infrastructure.
Initial Industrial Growth: The first steps toward
industrialization in Pakistan involved setting up textile mills and
other small industries. The government encouraged investment in
basic industries such as cement, chemicals, and steel, and it
implemented policies to foster industrial development.
Industrialization Plans: The first industrial plans, such as the
First Five-Year Plan (1955-1960), emphasized creating
infrastructure and developing industries to reduce dependence on
foreign imports.
2. Expansion of Industrialization (1970s - 1980s)
State-Owned Enterprises: In the 1970s, Pakistan took steps to
nationalize many industries, such as banks, steel mills, and textile
mills, in an effort to centralize control and promote economic
growth.
Focus on Heavy Industry: Pakistan’s government during this
period prioritized large-scale industries like steel production (e.g.,
the establishment of the Pakistan Steel Mills in Karachi), cement,
and power generation.
Shift Towards Export-Oriented Growth: In the 1980s, policies
started to focus on export-oriented industries. Pakistan’s textile
industry, which had been growing since the 1960s, began to see
an increase in production, with a significant boost in the textile
and garment sectors.
3. The 1990s and Privatization
Privatization Drive: In the 1990s, Pakistan began privatizing many state-
owned industries to increase efficiency and stimulate private-sector growth.
This was part of an economic liberalization and structural adjustment program.
Private Sector Growth: The private sector expanded, particularly in textiles,
manufacturing, and pharmaceuticals. However, the privatization process was
not without challenges, including concerns about mismanagement and
corruption.
4. Challenges and Modern Industry (2000s - Present)
Energy Crisis: One of the significant challenges to industrial growth in
Pakistan has been the energy crisis, with frequent power shortages and
unreliable supply, affecting industrial productivity.
Industrial Policy Reforms: In the 2000s, the government began working on
policies to promote industrial development, focusing on sectors like
information technology (IT), telecommunications, and renewable energy.
China-Pakistan Economic Corridor (CPEC): One of the major
developments in recent years is the China-Pakistan Economic Corridor (CPEC),
a multi-billion-dollar infrastructure and industrial project, which has led to
significant investment in transportation, energy, and industrial zones.
5. Current Status
Textile Industry: The textile industry remains a dominant
sector, contributing significantly to Pakistan’s exports.
Pakistan is one of the largest exporters of textiles and
garments globally.
Manufacturing: Manufacturing in sectors like cement, steel,
and chemicals continues to grow, though it faces challenges
from energy shortages and limited access to new technology.
Emerging Technologies: Industries related to IT, software
development, and telecommunications have also seen growth,
with major tech hubs emerging in cities like Lahore and
Karachi.
Key Challenges to Industrialization:
Energy Supply: The lack of reliable electricity and natural gas
has been a major hindrance to industrial growth.
Infrastructure: Pakistan has struggled with inadequate
infrastructure, including poor transportation networks and
inefficient logistics.
Political Instability: Political uncertainty and governance
issues have contributed to an unstable environment for
industrial growth and investment.
Labor and Skills: While labor is abundant, there is a need for
higher skills development and better labor conditions to
compete globally.
 WATER
CRISES
IN

PAKISTAN
Pakistan is facing a severe water crisis, which is
primarily driven by a combination of increasing
water scarcity, poor water management,
climate change, population growth, and
unsustainable agricultural practices. Water
scarcity in Pakistan has reached alarming levels, and
the situation is expected to worsen if effective
measures are not taken.
Key Drivers of the Water Crisis in Pakistan:
Depleting Water Resources
Pakistan's primary water sources are the Indus River System and its
tributaries, which are being over-exploited. The country relies heavily on
this system, but water levels are declining due to inefficient water
management and excessive extraction.
The total available water per capita has decreased dramatically over the
last few decades. In 1951, it was around 5,000 cubic meters per capita, but
by 2021, it had dropped to below 1,000 cubic meters, classifying Pakistan
as a water-stressed country.
Climate Change and Extreme Weather
Climate change is affecting the flow of the Indus River System by altering
rainfall patterns and snowmelt in the Himalayas. Reduced snowfall, erratic
monsoon rains, and higher temperatures have led to changes in the timing
and volume of water availability, resulting in water shortages during crucial
agricultural periods.
The country is also experiencing increased instances of droughts and
flooding, both of which impact the availability and quality of water
resources.
Poor Water Management
Water management inefficiencies are another major factor contributing to
Pakistan's water crisis. There is significant water wastage due to outdated
irrigation systems, lack of proper maintenance of canals, and poor
distribution.
Pakistan's irrigation system is one of the largest in the world, but losses in
the system are massive due to water seepage, evaporation, and
unregulated water use.
Over-extraction of Groundwater
Groundwater extraction, especially for agriculture, is rapidly increasing. As
surface water becomes scarce, farmers are turning to groundwater to meet
irrigation needs, which is causing the depletion of aquifers. This over-
extraction leads to salinity and the drying up of wells.
According to the Pakistan Council of Research in Water Resources
(PCRWR), about 60% of groundwater in Pakistan is being used for
agriculture, which is unsustainable in the long term.
Pollution of Water Sources
Pollution of freshwater sources is a significant issue. Industrial effluents,
untreated sewage, and agricultural runoff are polluting rivers, lakes, and
groundwater.
In urban areas, the lack of proper waste treatment systems means that
sewage and industrial waste are being directly discharged into water
bodies, leading to contamination and making water unsafe for consumption.
Chemicals, heavy metals, and pathogens in water not only harm human
health but also lead to a reduction in the usable water supply.
Population Growth and Urbanization
Pakistan’s population is growing rapidly, and this places increased pressure
on existing water resources. More people mean higher demand for drinking
water, agricultural use, and industrial consumption.
Urbanization is also contributing to the depletion of water resources, with
many urban areas experiencing groundwater depletion due to excessive
extraction for domestic and industrial use.
Inadequate Infrastructure
The lack of investment in modern water infrastructure—such as dams,
reservoirs, water treatment plants, and pipelines—has further
exacerbated the water crisis. Despite the construction of some dams like
Tarbela and Mangla, Pakistan's storage capacity is insufficient to meet the
growing demand.
Pakistan's water storage capacity is among the lowest in the world.
Currently, Pakistan can store only about 30 days' worth of water,
compared to 1,000 days for other countries with large-scale water storage
systems.
Agricultural Water Use
Agriculture consumes about 90% of Pakistan's water resources, and
inefficient irrigation practices are a key contributor to the water crisis.
Traditional methods, such as flood irrigation, waste vast amounts of water.
Modern techniques like drip irrigation and sprinkler systems are not
widely adopted due to lack of awareness, investment, and technical know-
how.
Crop selection is also a major issue; water-intensive crops like rice and
sugarcane are grown in regions where water is already scarce.
Consequences of the Water Crisis in
Pakistan
Food Insecurity
The water crisis severely affects Pakistan's agricultural sector, leading to
reduced crop yields and making food production less reliable. Given that
agriculture is the main source of livelihood for a large portion of the
population, water shortages can directly lead to food insecurity and
poverty.
Health Risks
Waterborne diseases are on the rise due to the contamination of water
sources. Diarrhea, cholera, and typhoid are common in areas where
people rely on polluted water sources for drinking and sanitation.
Lack of access to clean water also affects sanitation and hygiene, leading
to further public health challenges.
Energy Shortages
Water shortages directly impact Pakistan’s hydropower generation
capacity, which supplies a significant portion of the country's electricity
needs. With less water in rivers and reservoirs, the ability to generate
hydroelectric power diminishes, contributing to energy shortages.
Economic Losses
The water crisis has resulted in substantial economic losses due to reduced
agricultural output, higher costs for water, and inefficiencies in industrial
production. Lower agricultural productivity impacts exports,
particularly in rice, cotton, and wheat, which are key exports for Pakistan.
Migration and Displacement
As water resources become scarcer, people from rural areas, especially in
water-stressed regions like Sindh and Balochistan, are migrating to urban
centers in search of water and employment opportunities, creating
internal displacement and putting additional strain on urban
infrastructure.
Solutions to the Water Crisis
Water Conservation and Management
There is a strong need to improve water management systems, especially
for agriculture. Efficient irrigation techniques like drip irrigation and
sprinklers should be promoted.
Water conservation campaigns should be launched to raise awareness
about the importance of reducing water wastage in daily life and in
industries.
Rehabilitation and Modernization of Water Infrastructure
Pakistan needs to invest in modernizing its water infrastructure. This
includes building new dams, expanding reservoir capacity, and repairing
existing irrigation networks to reduce losses.
Investment in water treatment plants to purify water and make it safe for
consumption is crucial.
Promotion of Water-Efficient Crops
Water-efficient crops should be promoted to replace water-guzzling crops
like rice and sugarcane. There should be a focus on crops that require less
water, such as maize, pulses, and barley.
Reforestation and Catchment Area Management
Planting more trees in catchment areas can help in water conservation.
Trees help in improving soil quality and increasing water retention, which can
improve water availability in the long run.
Desalination Technology
Pakistan has access to seawater, and desalination technology could be a
viable option to meet the growing demand for freshwater, especially for
coastal areas.
Water Pricing and Regulation
Water pricing reforms can incentivize more responsible water use. This
includes regulating the cost of water used for agriculture and domestic
purposes to encourage conservation.
International Cooperation
Pakistan needs to enhance regional cooperation on water-sharing
agreements, particularly with neighboring countries like India and
Afghanistan, to ensure sustainable use of shared water resources.
 ENERGY
CRISES
IN
PAKISTAN
Pakistan is currently facing a severe energy crisis, which
has far-reaching consequences for the country's economic
growth, social well-being, and national development. The
energy sector in Pakistan is marked by energy shortages,
inefficiencies, and unmet demand, which affect both the
industrial and domestic sectors. This crisis has been
ongoing for years, and despite some efforts to improve the
situation, it continues to present significant challenges.
Key Factors Contributing to the Energy Crisis
in Pakistan
Power Shortage
Pakistan is facing a power deficit, with demand outstripping supply. The
demand for electricity, particularly during the summer months, has surged,
but the power generation capacity has failed to keep pace.
According to estimates, Pakistan's power shortfall can range from 4,000 to
7,000 MW at peak times, leading to frequent load shedding (planned
power outages) in various regions.
Over-reliance on Fossil Fuels
A significant portion of Pakistan’s electricity is generated from fossil fuels,
primarily oil and natural gas, which are both expensive and
environmentally unsustainable.
The rising prices of oil and natural gas in international markets have
further strained Pakistan’s ability to generate affordable electricity.
The country imports a large amount of oil and gas, and energy security is a
concern due to its reliance on foreign sources for fuel.
Inefficient Energy Infrastructure
Pakistan's energy infrastructure is outdated, inefficient, and poorly
maintained. Many of the country’s power plants, especially thermal power
plants, have low efficiency rates and consume more fuel than necessary.
Transmission and distribution losses are high, with estimates suggesting
that up to 20-30% of electricity generated is lost due to technical issues
(like poor infrastructure) and theft.
The energy distribution system is also poorly managed, which leads to
frequent breakdowns, outages, and delays in the delivery of electricity to
consumers.
Circular Debt
The issue of circular debt is one of the most critical problems plaguing
Pakistan’s energy sector. Circular debt arises when the energy
generation companies are unable to receive payments from the
distribution companies, and in turn, these companies struggle to pay their
suppliers (such as oil and gas companies).
The lack of payment causes a vicious cycle where energy companies delay or
halt power generation, leading to power shortages and increased debt
accumulation. The circular debt in Pakistan's energy sector is estimated to
be around Rs 2.3 trillion (approximately $10 billion).
Energy Mix and Lack of Diversification
Pakistan's energy mix is not sufficiently diversified, with a heavy reliance on
hydropower and fossil fuels. While Pakistan has significant potential for
renewable energy (such as solar, wind, and biomass), these resources are
underutilized.
The country has limited development of nuclear energy and renewable
sources, which could be key to addressing its energy shortages in the long
term.
Low Investment in the Energy Sector
There has been insufficient investment in the energy sector, particularly in
modernizing power plants, improving transmission systems, and building new
infrastructure.
The country’s energy policy has faced challenges such as political instability,
lack of long-term planning, and bureaucratic inefficiency, which have hindered
investment in key energy projects.
Population Growth and Urbanization
With rapid population growth and urbanization, the demand for energy
has steadily increased. As more people migrate to cities and the middle class
grows, the demand for electricity, transportation, and fuel continues to
rise.
Pakistan’s existing infrastructure is unable to meet this growing demand,
leading to energy shortages and overburdened grids.
Climate Change and Water Scarcity
Climate change has led to water shortages, particularly in hydropower
generation, which contributes significantly to Pakistan’s electricity supply.
Droughts and irregular rainfall patterns have reduced water availability for the
country’s hydroelectric power plants.
This further exacerbates the energy crisis, as Pakistan’s reliance on
hydropower for a substantial portion of its electricity generation has been
hindered by low water levels in major reservoirs.
Impact of the Energy Crisis on Pakistan
Economic Growth
The energy crisis is one of the major obstacles to economic growth in
Pakistan. Frequent power outages disrupt industrial activities, manufacturing,
agriculture, and services.
Power shortages lead to a decrease in industrial productivity, which affects
exports, job creation, and foreign investment.
The cost of doing business in Pakistan is significantly higher due to the need
for backup generators, which adds an additional financial burden on
businesses.
Social Impact
The energy crisis has a direct impact on the daily lives of citizens. Power
outages disrupt daily activities, including education, healthcare,
communication, and access to clean water.
In rural areas, electricity shortages affect access to basic services, hindering
development and contributing to poverty and social inequality.
Load shedding during the hot summer months affects air conditioning and
cooling systems, leading to public health risks, especially among the elderly
and children.
Political Instability
Energy shortages have led to public protests and social unrest, which
further destabilize the political situation. The government is often blamed for
its failure to address the energy crisis effectively, leading to a loss of public
confidence in leadership.
Political instability makes it difficult to implement long-term energy reforms or
attract foreign investments into the sector.
Environmental Impact
Pakistan’s reliance on fossil fuels for energy generation has resulted in high
carbon emissions, contributing to global climate change. The inefficient
use of resources in power plants and transmission systems also adds to the
environmental degradation.
The use of inefficient power generation methods also leads to air
pollution, contributing to public health problems.
Solutions to the Energy Crisis in Pakistan
Energy Sector Reforms
Structural reforms are needed to address the inefficiencies and
corruption in the energy sector. This includes improving management
practices, reducing transmission and distribution losses, and
implementing more accountability in energy distribution.
The government needs to tackle the circular debt issue by improving the
collection of payments from consumers and ensuring timely payments to
energy producers and suppliers.
Diversification of Energy Mix
Diversifying Pakistan’s energy mix is essential to reduce dependence on
fossil fuels and hydropower. Renewable energy sources such as solar, wind,
and biomass should be prioritized.
Pakistan has vast potential for solar power, especially in its southern
regions, and could significantly reduce its reliance on imported oil by
harnessing these renewable resources.
Nuclear energy can also play a more prominent role in meeting the energy
needs, as the country has already made strides in nuclear power generation.
Investment in Infrastructure
Pakistan needs to modernize its power generation plants, increase the
efficiency of its existing power stations, and expand its energy transmission
and distribution networks.
Investment in smart grids and energy storage systems can help reduce
energy wastage and improve the reliability of power supply.
Promotion of Energy Efficiency
Promoting energy efficiency through programs that encourage energy-
saving technologies, the use of LED lighting, and energy-efficient
appliances can help reduce demand and alleviate pressure on the energy
supply.
The government can incentivize businesses and consumers to adopt energy-
saving practices by offering rebates or tax breaks for energy-efficient
equipment.
Enhanced Public-Private Partnerships
Pakistan needs to foster public-private partnerships (PPP) to attract
private investment into the energy sector, particularly in renewable energy
projects and infrastructure development.
International financial institutions and investors can play a key role in funding
large-scale energy projects in Pakistan, particularly those focused on solar
and wind energy.
Development of Hydropower Projects
While Pakistan’s dependence on hydropower has decreased due to climate
variability, there is still untapped potential in the water resources of the
country. The development of small and medium-sized dams and
hydropower projects can help stabilize the energy supply, especially in the
northern regions.
Exploring Alternative Fuels
Exploring alternative fuels like LNG (Liquefied Natural Gas) and
biofuels could offer short-term solutions to ease energy shortages,
especially in power generation and transportation sectors.
 CPEC
China-Pakistan
Economic
Corridor
Definition: A flagship project under China’s
Belt and Road Initiative (BRI) aimed at
enhancing connectivity between Gwadar
Port (Pakistan) and Xinjiang (China).
Sectors Covered:
Infrastructure (roads, railways, ports)
Energy (power plants, transmission lines)
Industrial development (Special Economic
Zones – SEZs)
Communication and technology
Introduction
Launched: 2015
Estimated Investment: Over $62 billion
(initial estimates were around $46 billion)
Objective: Improve infrastructure, energy,
and economic development in Pakistan while
giving China direct access to the Arabian Sea.
Key Components of CPEC
a. Infrastructure Development
Construction of highways, motorways, and railways (e.g., upgrading the
Karachi–Peshawar Railway Line).
Development of the Gwadar Port, providing China with access to the
Arabian Sea.
b. Energy Projects
Coal, solar, wind, and hydropower projects to reduce Pakistan’s energy
shortages.
Major energy projects include Sahiwal Coal Power Plant, Port Qasim
Power Plant, and Hydropower projects in Gilgit-Baltistan.
c. Special Economic Zones (SEZs)
Planned zones across Pakistan to attract foreign and domestic
investment.
Examples: Rashakai SEZ (Khyber Pakhtunkhwa), Dhabeji SEZ (Sindh).
d. Fiber Optic and Communication Links
Laying of a fiber optic cable from China to Pakistan to improve digital
connectivity.
Strategic Importance
For China:
Shortens trade route from western China to
the Middle East and Africa.
Reduces dependence on the Strait of
Malacca.
For Pakistan:
Promotes economic development and
industrialization.
Improves energy infrastructure and creates
jobs.
Contemporary Challenges
1. Debt Sustainability
Issue: Rising external debt linked to CPEC loans, mostly in
the form of commercial and sovereign loans.
Concern: Pressure on Pakistan’s foreign exchange
reserves and debt servicing capacity.
IMF Involvement: Questions about transparency of
CPEC-related liabilities.
2. Security Concerns
Threats: Militant attacks on Chinese workers and
infrastructure (especially in Balochistan).
Response: Creation of special security divisions (e.g.,
Special Security Division - SSD), but long-term threat
remains.
3. Provincial Disparities
Issue: Perception that Punjab and certain urban centers benefit more
than underdeveloped regions like Balochistan and KP.
Result: Political tensions, resistance from local groups.
4. Lack of Transparency
Criticism: Limited public access to the terms of agreements and
contracts.
Impact: Mistrust among stakeholders, including the public and
opposition parties.
5. Delays in Implementation
Causes:
Land acquisition issues
Coordination problems between federal and provincial governments
Effect: Missed deadlines, cost overruns, underperformance
6. Economic and Trade Imbalance
Issue: Trade heavily favors China; Pakistan’s
exports remain low.
Impact: Widening trade deficit with China despite
improved infrastructure.
7. Environmental and Social Impact
Concerns: Displacement of communities,
environmental degradation (especially around
Gwadar and SEZs).
Need: Stronger environmental impact assessments
and sustainable development practices.
Way Forward
Strengthen transparency and governance in CPEC
projects
Improve inter-provincial coordination and benefit-
sharing
Enhance local industry and export capacity to
balance trade
Ensure environmental safeguards and inclusive
development
Strengthen security measures with local
community support
 Corruption and
Impact Of
Corruption on Pak
Economy
Definition: Corruption is the abuse of entrusted
power for private gain. It can be political,
administrative, or financial.
Forms in Pakistan:
Bribery
Nepotism and favoritism
Kickbacks in public procurement
Misuse of public office
Tax evasion and money laundering
Causes of Corruption in Pakistan
Weak institutions (e.g., judiciary, accountability
bodies)
Lack of transparency in governance
Low public sector wages
Political interference in bureaucracy
Inadequate enforcement of anti-corruption
laws
Cultural acceptance and low public
awareness
Impact of Corruption on the
Economy
a. Reduced Foreign Direct Investment (FDI)
Investors hesitate to invest due to unstable and non-
transparent business environments.
Example: Delays or withdrawal of international companies
from energy or infrastructure projects.
b. Loss to Public Revenue
Corruption in tax collection and customs results in billions
in lost revenue annually.
Widespread tax evasion increases the fiscal deficit.
c. Poor Public Services and Infrastructure
Funds meant for education, health, and infrastructure are
embezzled or misused.
Leads to low-quality services and infrastructure decay.
d. Increased Cost of Doing Business
Bribes inflate the cost of licenses, permits, and contracts.
Corruption acts as an informal “tax” on businesses,
discouraging startups.
e. Widening Inequality
Benefits of economic growth are not equally distributed.
Poor governance leads to elite capture, where wealthy
and powerful groups benefit the most.
f. Weakening of Institutions
Undermines the effectiveness of key institutions (NAB, FBR,
FIA).
Politicization of accountability processes erodes public trust.
4. Sector-Specific Impacts
Construction Sector: Kickbacks and ghost projects.
Energy Sector: Overbilling and inflated tariffs.
Customs and Imports: Under-invoicing and smuggling due
to bribed officials.
Healthcare and Education: Ghost employees, fake bills,
misallocation of budgets.
5. Social Impact
Erodes public trust in government and legal system.
Creates a culture of impunity and weakens moral values.
Discourages meritocracy and innovation.
6. Measures Taken by Pakistan
Establishment of NAB (National Accountability
Bureau)
Right to Information Laws
Digitalization of government services
Efforts to reform FBR and customs
Participation in global initiatives (e.g., UN
Convention Against Corruption)
7. Recommendations to Curb Corruption
Strengthen institutions and ensure
independence
Promote transparency through e-governance
Enhance public sector salaries and
accountability
Enforce whistleblower protection laws
Educate the public about the cost of
corruption
INTERNATIONAL
TRADE IN
PAKISTAN
TRADE
Trade refers to the buying and selling of
goods and services between individuals,
businesses, or countries. It allows producers and
consumers to exchange what they have for what
they need, promoting economic activity and
growth.
Types of Trade:
1. Domestic Trade (Internal Trade):
Trade that takes place within the borders of a country.
Wholesale Trade – Buying goods in large quantities from producers and selling to retailers.
Retail Trade – Selling goods in small quantities directly to consumers.
2. International Trade (External Trade):
Trade that occurs between two or more countries.
Import Trade – Buying goods/services from another country.
Export Trade – Selling goods/services to another country.
Entrepot Trade – Importing goods for the purpose of re-exporting them after some processing or re-
packaging.
Exports of Pakistan
A. Exports
Pakistan primarily exports agriculture-based and textile goods.
Major Export Items:
Textiles and garments (Cotton yarn, bed linen, readymade garments)
Rice (especially Basmati)
Leather products
Surgical instruments
Sports goods
Fruits and vegetables (mangoes, oranges)
Top Export Destinations:
USA
China
United Kingdom
Germany
United Arab Emirates
Imports OF Pakistan
Pakistan relies heavily on imports of fuel, machinery, and
raw materials.
Major Import Items:
Petroleum products (crude oil, LNG)
Machinery and electrical equipment
Vehicles and auto parts
Pharmaceuticals
Food items (edible oil, tea, pulses)
Top Import Partners:
China
UAE
Saudi Arabia
Indonesia
USA
Balance of Trade (BOT)
Definition:
The difference between exports and imports of goods.
BOT = Exports – Imports
Pakistan’s Scenario:
Pakistan usually runs a trade deficit, meaning imports exceed exports.
Main reason: Reliance on oil, machinery, and luxury imports while exports are
concentrated in low-value goods.
Example:
If exports = $30 billion and imports = $55 billion →
BOT = -$25 billion (Trade Deficit)
Balance of Payments (BOP)
Definition:
A broader concept that includes all economic transactions between
residents of Pakistan and the rest of the world.
BOP = Current Account + Capital Account + Financial Account +
Errors & Omissions
Components of BOP:
A. Current Account
Includes trade in goods and services, remittances, and investment
income.
Pakistan often faces a current account deficit, though remittances
help reduce it.
B. Capital and Financial Account
Records foreign direct investment (FDI), portfolio investment,
loans, and currency reserves.
Pakistan receives loans and aid from institutions like IMF, World Bank,
and friendly countries.
C. Errors and Omissions
Adjustments for unrecorded or misreported transactions.
Pakistan’s BOP Trends
Volatile due to:
Rising oil prices
High debt servicing
Low export growth
Fluctuating remittance inflows
Sometimes supported by IMF bailouts, foreign
aid, or bilateral support (China, Saudi Arabia,
UAE).
Indicator Status
Export Value ~$30–35 billion

Import Value ~$50–60 billion

Trade Balance (BOT) Negative (Deficit)

BOP Often in deficit, IMF-supported

Major Exports Textiles, rice, leather

Major Imports Oil, machinery, vehicles

Remittances ~$25–30 billion/year (helpful)

 IMF
AND World
Bank
Definition of IMF (International
Monetary Fund)
The IMF is an international financial
institution that provides short-term loans and
policy advice to countries facing balance of
payments problems, with the goal of
promoting global monetary cooperation,
financial stability, and economic growth.
International Monetary Fund (IMF)
Overview
Founded: 1944 (Bretton Woods Conference)
Headquarters: Washington, D.C., USA
Members: 190+ countries
Main Purpose: Ensure global financial stability by
providing short-term financial assistance and
policy advice.
Key Functions
Monetary cooperation
Surveillance of economic policies
Financial assistance to member countries
facing balance of payments problems
Capacity building and technical assistance
Tools Used
Loans & Programs: e.g., Extended Fund
Facility (EFF), Stand-By Arrangement (SBA)
Economic Surveillance: Article IV
Consultations
Technical Assistance: Fiscal policy, central
banking, statistics
IMF and Pakistan
Pakistan has approached the IMF more than 20
times.
Reasons include:
Trade and fiscal deficits
Foreign exchange crises
Rising debt burden
Recent Programs:
2019 EFF ($6 billion)
2023 SBA ($3 billion)
Pros Cons

Stabilizes economy in crisis Harsh loan conditions

Supports currency reserves Cuts in subsidies & social spending

May slow growth and increase

Builds investor confidence
inflation
Definition of World Bank
The World Bank is an international
development organization that provides long-
term loans, grants, and technical assistance
to developing countries to help reduce
poverty and support infrastructure,
education, health, and economic
development.
World Bank
Overview
Founded: 1944 (also at Bretton Woods)
Headquarters: Washington, D.C., USA
Main Goal: Reduce poverty and support
development by providing long-term funding for
development projects.
Main Institutions
IBRD (International Bank for Reconstruction
and Development) – lends to middle-income
countries
IDA (International Development Association)
– provides low-interest or interest-free loans
to the poorest countries
Key Areas of Focus
Infrastructure (roads, electricity, water)
Education and health
Climate change and environment
Agriculture and rural development
Social protection and governance
World Bank and Pakistan
Pakistan is a long-standing client of the World
Bank.
Areas of Support:
Energy sector reforms
Water resource management (e.g., Dasu
Hydropower Project)
Education and public health
Urban development and poverty alleviation
Is Debt Creation
Always Bad?
Debt
is a financial obligation that one party
(the borrower) owes to another (the
lender), typically involving the
repayment of a borrowed amount (the
principal) along with interest over a
specified period.
Key Features of Debt:
Parties Involved:
Borrower: The one who receives the money or
credit.
Lender: The one who provides the funds (can be
a bank, government, individual, etc.).
Principal: The original amount borrowed.
Interest: The cost of borrowing, usually expressed
as a percentage of the principal.
Maturity: The time period over which the debt
must be repaid.
Repayment Terms: Schedule and structure of
how and when the debt is to be paid back.
Types of Debt:
Public Debt: Borrowed by governments
(e.g., through bonds or loans).
Corporate Debt: Borrowed by businesses
for operations or investment.
Personal Debt: Borrowed by individuals
(e.g., credit cards, mortgages, student
loans).
When Debt Creation Can Be
Good:
Economic Growth: Governments and businesses borrow
to invest in infrastructure, education, technology, or
expansion, leading to increased productivity and GDP
growth.
Stimulus During Recession: Public debt can finance
stimulus packages to revive economic activity and reduce
unemployment during downturns.
Business Leverage: Companies use debt to finance
profitable projects, which can generate returns higher
than the cost of debt (positive leverage).
Personal Investment: Individuals may borrow for
education, homes, or businesses—long-term assets that
enhance earning capacity or quality of life.
When Debt Creation Can Be
Bad:
Unsustainable Levels: Excessive debt, especially when
used to cover ongoing deficits or consumption, can lead to
fiscal crises or defaults.
Crowding Out: Government borrowing can raise interest
rates, reducing private investment (particularly in
developing countries).
Dependency and Inflation: Over-reliance on debt
monetization (printing money) can erode currency value
and lead to inflation or hyperinflation.
Debt Traps: For developing countries, high external debt
can lead to dependency on lenders and restrict
development (e.g., debt servicing crowds out social
spending).
Key Factors to Consider:
Purpose of the Debt: Productive vs.
consumptive.
Ability to Repay: Debt-to-GDP ratio, fiscal
discipline.
Terms of Debt: Interest rates, maturity,
currency.
Institutional Capacity: Governance and
transparency in using borrowed funds.