Pakistan

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March 2017

Pakistan lags behind most MENAP countries on measures of per capita income, creditworthiness and business climate.  Poor law and order, violence and power shortages have crimped annual growth. But growth has recovered, helped by cheap oil prices, robust remittances and the implementation of the government’s reform agenda. 

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Economic outlook

Growth has recovered, aided by falling commodity and fuel prices, increased energy availability and improved security conditions. The improved industrial performance is expected to partly offset weather-related setbacks in the agriculture sector. Moreover, the services sector is expected to also grow led by the financial sector, robust automobile retail sales, increased port activity, and higher telecom profits.

Poverty in Pakistan has more than halved over the last 15 years as 30% of the population now live under the poverty line compared to 64% in 2001-2002. This steady decline in poverty has occurred despite periods of moderate growth. The ongoing implementation of government reforms and favourable demography bode well for the long term outlook.

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Pakistan is a lower-middle-income economy. But the United Nation’s Human Development Index, a broader measure of prosperity as it includes metrics such as life expectancy and education, ranks Pakistan 147 out of 188 countries, putting it on par with most low-income economies. Access to education remains low and the completion rate for primary education is among the lowest in the world.

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Business climate

Pakistan has an OECD country credit grade of 7 and speculative grade sovereign debt ratings from two ratings agencies. These ratings underline Pakistan’s vulnerability to business, financial and economic setbacks. But Moody’s and S&P both upgraded Pakistan as the strengthening external position and structural reforms have improved creditworthiness.

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The World Bank gives Pakistan an ease of doing business rank of 144 out of 190 countries. It underperforms the regional average in most categories, but outperforms on protecting investors, getting credit and resolving insolvencies.

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Border conflicts with India over Kashmir, terrorist attacks and corruption undermine Pakistan’s prospects. Pakistan scores poorly on the World Bank’s governance indicators, languishing in the bottom quartile on most measures, and scoring particularly badly for political stability and violence.

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Bilateral relations

Pakistan is Australia’s 37th largest trading partner in 2015-2016. Export of goods and services to Pakistan were worth A$1.2b. Merchandise exports were comprised mainly of fertilisers and vegetables. Elders International, Selected Seeds, Australian Rural Exports and Bio-Ag are just some of the Australian exporters shipping food and fertilisers to Pakistan. Pakistan’s growing population opens the door for further agricultural trade.

Pakistan has extensive energy resources, including oil and natural gas reserves and the fourth-largest coal reserves in the world. This offers a wide range of business opportunities in hydro power, oil and gas, infrastructure and building and construction. Snowden Mining Consultants, BHPSMEC and CE Bartlett are Australian companies already involved in mining and infrastructure projects.

Australian imports from Pakistan were worth A$404m in 2015-2016 made up mostly of textiles and clothing.

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Service exports with Pakistan were worth A$572m. Pakistani student enrolments in Australia have been growing at a steady rate, with close to 16,000 students registered in 2015.

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Bilateral investment remains miniscule; Australian aid to Pakistan has eased to US$$53m in 2015 from US$113m in 2010.

Useful links

Department of Foreign Affairs
Country brief

Austrade
Market profile

Asialink Business
Market profile