Economy Review: The Good News from Pakistan

Posted on May 19, 2009
Filed Under >Kathay Kalame, Economy & Development
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Kathay Kalame

Too often one hears of a gloomy prognosis predicting doom for the Pakistani economy. Lets see what kind of story the actual numbers tell in comparison to more advanced economies of the world.

In March 2009, Pakistan’s trade deficit narrowed by almost 50%, as imports declined faster than exports. Good news for the currency one would think.

Worker remittances were a record high in March 2009 at US$743 million an increase of 23% over last year. Cheerful news that.

While Japan’s exports plummeted by 50%, China’s by 26% and India’s by 33%, Pakistan’s exports were down by 25%. Even though, the competitive peer group is formidable, Pakistan is the best performer.

On the corporate profitability front, during the worst global down turn in a century, Pakistan’s corporate profitability of listed companies declined by a mere 3% in aggregate in the 3rd quarter of 2009.

Now let’s focus our attention on what is believed to be the most important measure of the long term health of an economy, Total debt to GDP. Total debt is defined as all debt in an economy including domestic and foreign, public and private. As the credit crunch has duly reminded the world, the best of human endeavor cannot endure the burden of debt. The largest, most technologically advanced, most innovative, most well governed countries in the world have fallen victim to the debt trap. How ironic.

Pakistan’s total debt is around US$113 billion. US$45 billion foreign debt plus US$37 billion domestic bank credit plus US$45 billion domestic government debt minus US$14 billion of domestic government debt held by banks. Pakistan 2008 GDP at current exchange rate was about US$160 billion. As a percentage of GDP Pakistan’s total debt is roughly 70% of GDP. USA’s government debt alone is around 100% of GDP. Total debt, domestic and foreign, public and private is about US$53 trillion or about 378% of GDP.

USA owes US$11 Trillion in government debt [9], US$17 Trillion in financial sector debt, US$13.8 Trillion in household debt, and US$11.10 trillion in corporate non financial debt. UK’s personal debt (mortgage, credit cards, auto loans to households) alone is more than a 100% of UK’s GDP, and government debt is an additional 52% of GDP. Total domestic credit is about US$5.4 trillion or about 250% of GDP. However, UK’s external debt around US$10.5 trillion or roughly 500% of GDP, a staggering number–UK GDP is around US$2.2 trillion. A soft reminder that a pull back by foreigners on the their deposits can create nothing short of mayhem in the country. Japan’s government debt is about 170% of GDP, total domestic credit (less euphemistically known as domestic debt) is about US$10 trillion or about 210% of GDP. Japan’s GDP is about US$4.8 trillion.

The developed economies have paid for their progress through a mountain of debt and that mountain is starting to slide. If you follow the debate on the subject amongst the experts, the consensus is that there is no honest way out of it, bail out packages notwithstanding. The viability of these economies is now an open question.

USA, Japan and UK economies are going to shrink by between 5-10% over this year. Pakistan’s is expected to grow by about 2%.

I think the numbers bear testimony to the resilience of this nation. It takes a beating, but keeps on going. Yet if anyone concludes from the above that things are not as bad as they seem and therefore no need to get all worked up it would be the wrong conclusion. For the same reason that a doctor puts the most effort in a patient that has a hope for survival, and not in the one that is almost dead, Pakistanis must focus their efforts on Pakistan. Exactly how, is up to their imagination and resolve.

Pakistan has issues, very serious ones and most of them are related to governance. It is nothing short of a miracle that with such serious governance issues the economy is doing better than some top economies in some specific yet critical areas. Compared to the task that the OECD economies face, which has technical intractibilities, the resolution of Pakistan’s problems require political will. In other words Pakistan has the luxury to be able to choose and it has a fighting chance. It can choose to reform and decide which direction it is going to go. If, the country makes the right choice, it can emerge as a major global power house in 20 years or less.

Maulana Rum said, if an ant seeks the rank of Solomon, don’t smile contemptuously upon its quest. Everything you possess of skill, and wealth and handicraft, wasn’t it first merely a thought and a quest?

Pakistan is no ant, out of 233 countires in the world, it is 6th largest in terms of population, 45th in term of GDP and 34th in terms of area. But maybe it needs to be as industrious.

Let the thought flourish, let the quest begin.

37 Comments on “Economy Review: The Good News from Pakistan”

  1. jk says:
    May 19th, 2009 10:39 am

    Pakistan has always had the potential to be a great, peaceful, and prosperous country. Unfortunately, terrible mistakes have been made continuously, over and over, since many decades. What right choices are being made today?

    This is no time for patting ourselves on the back.
    These numbers mean nothing since the average Pakistani is an uneducated person living in poverty with no relief in sight. There is no accountability. There aren’t even proper service standards for power companies and they can’t even lay wires correctly. Citizens of China, Japan, Germany etc do their jobs with pride. Things are made with high quality. Many individuals don’t have the “good enough”, or “sab chalta hay” attitude. No one here strives for perfection and when you respectfully demand perfection they either get angry or they laugh. There is no unity amongs different provinces, etc. There is extreme violence, hatred, and racism.

    These things that I have listed will have to be first fixed before we will ever get to a point where we have good governance.

    Percentages during a period of recession don’t mean anything. A 50% decrease in exports for Japan is not as bad as a 25% decrease in exports in Pakistan. There are many more factors involved in the health of a nation than just the GDP to debt ratio.

    I am all for supporting pakistan and supporting progress but just fooling ourselves into some stupid false sense of security is useless.

  2. X0 says:
    May 19th, 2009 11:25 am

    JK your comments can be summarized as follows :

    Until everthing is perfect main nahain khailta.

    Missing the point aren’t you. These numbers are there despite all the crap and numbers do count for something.

  3. ASAD says:
    May 19th, 2009 11:36 am

    I admire the intent of the article – that there are good things in the economy despite all the bad, but I have not in my life seen a worse case of misuse of economic statistics.

    All the numbers are chosen in the aftermath of the global economic crisis and suggest that the growing economies of the world are doing worse in this crisis than Pakistan. What is the surprise, or pride, in that.

    When the stock market goes down the rich loose more than the poor be case the poor have nothing invested in the market. Does that mean we all want to be poor! I hope not.

    What this is showing is just how isolated the Pakistan economy is. I DO AGREE THAT THERE ARE GOOD THINGS HAPPENING IN PAKISTAN ECONOMY. But these are not those things.

    And, for anyone who has taken Economics 101, comparing personal debt of UK and Pakistan is beyond ridiculous (it will get you an F)… think about what you take personal debt for…. The personal debt in Somalia is nearly zero, would you rather have Somalia’s economy or the UK’s?

  4. jk says:
    May 19th, 2009 12:24 pm

    X0 > My previous comment can be summarized as:

    “Pakistan has a lot of potential however, false sense of security and undeserved pride only makes us less likely to achieve true progress. The numbers are only feel good numbers that don’t mean anything. We must be realistic and work hard to actually fix things instead of comparing how horribly we are doing compared to how horribly everyone else is doing.”

    I agree with Asad.

  5. Ali says:
    May 19th, 2009 12:49 pm

    These numbers are irrelevant. The “growth” in Pakistan’s economy is HEAVILY inflated by the authorities. For example, during Shaukat Aziz’s time as Finance Minister, he pointed out that machine imports grew by 20% wihch would indicate industrialization, but he included leisure items such as cell phones and iPods into the the definition of “machine imports” so it was heavily deceptive.

    Also, as jks pointed out, these figures mean nothing to the average Pakistani for whom even the most basic necessities of life are slowly but surely slipping out of his reach. Poverty and inflation are at an all-time high, the new government’s fiscal policies are disastrous and the govt. itself is HIGHLY corrupt. The tourism industry is almost dead, industrialists and entrepreneurs are packing up and leaving for other countries, as are skilled and qualified young people.

  6. KASHIF says:
    May 19th, 2009 12:55 pm

    I am in same camp as Asad. I think there is a lot of good things happening in Pakistan.

    For example, the lawyers movement. For example, Edhi. For example, Sungi. For example the patriotism of the young. For example the good work being done in response to IDPs crisis. For example, women are entering work force. For example, media. For example, lots of private business starting. For example, cell phones. For example, more people getting education.

    Lets focus on real good things rather than this silly comparison with USA, Uk or China on numbers that economically mean nothing. This looks like a childish attempt to find any number, whether relevant or not, where we can compare Pakistan to the big guys and then getting a cheap thrill out of it. Just because their numbers are bad right now because of global financial crisis you can make silly comparisons.

    Lets make comarisons that count. Not to make us seem good r bad but to REALLY see how we are REALLY doing and then lets all work to make things better. Otherwise this hildish naara baazi will take us nowhere.

  7. morbid fascination says:
    May 19th, 2009 6:55 pm

    The personal debt in Somalia is nearly zero, would you rather have Somalia

  8. Riaz Haq says:
    May 19th, 2009 8:17 pm

    Amidst major counterinsurgency operations in and around Swat Valley and growing refugee crisis, there are signs of optimism by investors and bond holders in Pakistan’s economy. The KSE-100, Karachi’s stock index, is up 27 percent this year, compared with a 12 percent gain in MSCI

  9. WhatWhyWhere says:
    May 19th, 2009 8:49 pm

    The most important factor is the GDP per capita. And for that I think we are 137 or 138 nation in the world. Just one or two point behind our –ever so progressing neighbor– India.

    Tell the things as they are, don’t hide behind fudged data….

    Lastly, in the debt based economies you mentioned, money is created via debt. Put simply, money won’t be there if they do not have such debt…So in effect as long as the whole financial system does not come crumbling down, the economies who are going to advance will have more debt. Except for a few resource rich nations aka KSA, UAE etc..

    Lastly it is all an illusion, and what matters is, if every person in Pakistan is respected, have an honorable means of living, and can provide and cater for his/her family, which includes food, shelter, education, medical at minimum. If we are able to do that then these notions of castes and sects will no longer appeal to masses. Imagine if a ‘musli’ has the same opportunities as a ‘Chaudry’, in every aspect of life. I hope I could see that happening this in my lifetime.

  10. Usman says:
    May 19th, 2009 9:20 pm

    I agree with people that the measures you have chosen have little economic logic, but your point is teh right one.

    The economy is actually doing well. Partly because we were in a bad shape which also meant we were less dependent on the global system and therefore the global crisis impacted us less.

    The KSE index is on the rise again and that is a good sign. The currency has lost serious ground and inflation is bad because of insecurity. But we are generally saving people and that is helping.

    If the integrity of the financial institutions stays we will do OK or better.

  11. Riaz Haq says:
    May 20th, 2009 12:27 am

    Pakistan’s per-capita gdp or income being lower than India’s is a myth being perpetrated by some Indians and their buddies in the financial press.

    The most recent real per capita income data as calculated and reported by Asian Development Bank. The report says that Pakistan had the highest per capita income at HK$ 13,528 in South Asia. It reports India’s per capita as HK $12,090

    The “real” here refers to the actual purchasing power and living standard comparisons, not international exchange rates.

    Check out complete list in Table H at s.pdf

    As this ADB report explains, “The most celebrated example of a PPP is the

  12. Riaz Haq says:
    May 20th, 2009 12:48 am

    Response to Asad’s Comment: “When the stock market goes down the rich loose more than the poor be case the poor have nothing invested in the market. ”

    Actually, I disagree with this statement. The fact is that when investors become shy and stop driving the market up, the poor person working for companies where the investors stop investing (or lending to) ends up losing his or her job. The loss of basic livelihood for an average Abdul is a far bigger loss than the millions of dollars lost by the rich investors when the they lose confidence or consumers stop spending and the stock markets nosedive.

    If you are interested to learning more about Pak-Indian or South Asian economy, please visit

  13. KK says:
    May 20th, 2009 2:12 am

    Rupee has not depreciated, dollar has appreciated.

    There is a difference between the two phenomenon. If rupee had depreciated it would also depreciate against other major currencies which it has not.

    Rupee has actually strenghtened against the EURO and GBP (Pound), while declining against the dollar and that is because dollar has appreciated against those currencies. The only currency that has appreciated against the dollar in the past year is the yen and guess what, the rupee has depreciated against the yen as well.

    In July 2008 Dollar was Rs72 Euro was Rs114 and GBP was Rs143. Today Dollar is Rs81 Euro is Rs110 and GBP is Rs125.

    In short rupee has depreciated against he dollar, but actually appreciated against the EURO and GBP. WHY ?

    In July 2008 Euro was USD1.57 and GBP was USD2
    Today Euro is USD1.36 and GBP is USD1.54.

    I hope it is clear now why rupee would be lower against the Euro and GBP as well had dollar appreciation been due specific and isloated weakness in the rupee.

  14. X0 says:
    May 20th, 2009 2:21 am

    By GDP per capita (PPP) Pakistan is no 130 ( US$2739) 23 dollars behind no 129 India ( US$2762) as per IMF numbers from wikipedia.

  15. Arjun says:
    May 20th, 2009 2:47 am

    Pakistanis should stop beating themselves up too much. Their economy is fine, though could be better.

    If you want to feel good about it, you can compare with India (Indian GDP is about the same as the Pakistani one, even after our so-called “high and rapid” growth!).

    If you want to see where you should go, compare yourself with Turkey, Malaysia,or other culturally similar countries that are doing really well economically.

  16. Arjun says:
    May 20th, 2009 2:50 am

    I should clarify that I mean GDP per capita (ie. per person). This value is about the same across South Asia. We are all equally poor and rank at the bottom of the world rankings.

  17. X0 says:
    May 20th, 2009 4:27 am

    JK : Apologies if my earlier comment sounded a bit militant. I agree with your point relating to false sense of security.

  18. --- Naseer says:
    May 20th, 2009 4:34 am

    – I feel just elated and very happy over anything which goes even slightly favouring Pakisatan.
    Yes, we should feel good and let ‘others’ see it too.
    We can always watch the hyper TV channels whenever we want to, which too wants to ” sell , sell and sell ”, no matter at what or on whose cost.
    Jeevay Jeevay Pakistan


  19. Yawar says:
    May 20th, 2009 7:09 am

    It’s good that you put that disclaimer lest people think that our problems aren’t magninomous in size.

    Maybe our economy isn’t that bad but it’s not doing that well either.

    PS: Where did you get the figures for your stats. I’m curious.

  20. KK says:
    May 20th, 2009 8:26 am

    Yawar > Sources are given at the bottom of the post

  21. calculating_misfit says:
    May 20th, 2009 9:03 am


  22. Saadia says:
    May 20th, 2009 9:18 am

    What it actually needs is a serious land redistribution programme, so that it speople can actually see the fruits of their labour. The ordinary people are more than industrious – they have no choice but to work their fingers to the bone. Your critique is probably aimed at the upper classes. What we need is a better educated, healthier work force. We need better infrastructure, especially electricity. We need to break the hold of the old power elite, esepcially the army and the landowners. The political will for that will not magically appear at the top, since our rulers are shortsighted enough to kill the goose that lays the golden eggs if left to themselves. The push for all this has to come from us.

  23. Hamza says:
    May 20th, 2009 1:36 pm

    A couple of comments.

    1. For purposes of comparison, Pakistan’s economic trends should not be compared to the United States or Japan. Other developing countries such as India, Indonesia, South Africa, Brazil, etc should be used as a point of comparison. For e.g. comparing Pakistan’s debt/GDP ratio to the U.S. doesn’t tell the reader anything, due to the unique circumstances of the U.S. debt. Developing countries are more vulnerable to a debt crisis, so, in order to get a better a comparison, we should examine Pakistan’s figures with respect to another developing country.

    2. Similarly, comparing Pakistan’s growth rates to the U.S. doesn’t tell us anything. Our economy was not linked to the global financial system in the same way, so Pakistan did not face the adverse impact of the financial crisis. Once again, a comparison with the BRIC countries would be more effective.

    3. Finally, getting cheerful about a rise in worker remittances isn’t a good idea. Remittances are, at best, a temporary source of foreign income, and should never be considered an integral part of a country’s development strategy.

  24. Riaz Haq says:
    May 20th, 2009 7:33 pm

    If you are interested in seeing an OECD graph showing Pakistan’s economic performance over three decades under both civilian and military governments, please visit:

  25. Arjun says:
    May 21st, 2009 12:22 am

    The posts back and forth fighting over Indian and Pakistani per capita GDP are quite amusing. It’s like two beggars with torn clothes fighting over who has an extra inch, while the well-dressed gentlemen and ladies watch them amused.

    Folks, whether it’s 2800 vs 2600 PPP, or 800 vs 1000, or 2367 over 2359, or who has a couple of extra dollars is irrelevant when both numbers are near the bottom of the pile in the rankings. Other neighbouring developing Asian countries like Malaysia for instance have twice or thrice our GDPs – what are we stuck fighting over a hundred here or there! They are the ones countries in South Asia should be comparing against – not with each other.

  26. TAHIR ZAHEER says:
    May 21st, 2009 3:31 am

    Well done, whatever is performed

  27. Ishtiaq says:
    May 21st, 2009 10:33 am

    Good general point, and I like the writer’s patriotism. Wish the writer also had a basic understanding of macro-economics and which measures and comparisons are and are not meaningful. The writer gets just about everything wrong on that count. But I like the general sentiment anyhow.

  28. Riaz Haq says:
    May 21st, 2009 10:43 am

    I think basic issue here is whether you see the glass half-full or half-empty.

    Pakistan’s “base” on a per capita basis is actually higher than our neighbors.


  29. Riaz Haq says:
    May 21st, 2009 11:14 am

    @ Misfit:

    Instead of just looking at wiki numbers for comparison, I suggest you try and understand how these numbers are calculated. The difficulty is in terms of conversion for various currencies for their local purchasing power. For example, the Big Mac index uses the price of a hamburger for PPP calculation. But it doesn’t make sense because most people don’t eat hamburgers all the time for food.

    So the ADB came up with this methodology that uses a basket of 800 goods/services used in various Asian countries to come up with real GDP and real income numbers in terms of actual living standards and consumption patterns. Please go to the ADB link I posted and read it.

    The numbers you quoted are based on Big Mac index PPP calcs . They don’t have any real meaning.

  30. X0 says:
    May 21st, 2009 11:39 am

    Well said Arjun !

    In your experience do you find the Pakistani elite more self critical / negative or Indian. OR would you say its a tie.

    In my experience I find Pakistanis to be more negative / self critical.

  31. Arjun says:
    May 21st, 2009 9:51 pm

    “Well said Arjun !

    In your experience do you find the Pakistani elite more self critical / negative or Indian. OR would you say its a tie.

    In my experience I find Pakistanis to be more negative / self critical.”

    Thanks, XO.

    To be honest, as an Indian, I’m usually perplexed at why Pakistan isn’t doing much better economically. It has a nicely sized moderate population (150 or so million, I think – large enough to generate economic activity, small enough to have a good standard of living given the country’s size), a vast landmass, a lot of it highly fertile, the two largest markets in the world right next door, a strategic geographic location that could be a highly enriching hub of Indian, Iranian and Central Asian economic activity given half a chance, a population and state united in one religion and no dearth of natural or human resources in general. Pakistan should theoretically be able to be as well off as Malaysia quite easily, even if all it did was sell basic goods to India and China, and other countries around Asia and the world.

    It should be relatively fairly easy to raise the standard of living and economic well-being of a small population like Pakistan’s.

    When you compare that with the astronomical scale of problems that India faces every day, with its ginormously unmanageable population of 1.1 billion, squeezed in and living cheek-by-jowl, diverse and often divided along religious, linguistic, regional, tribal and caste-based lines, with various insurgencies and deprivement situations draining the exchequer, it is a wonder the country even gets a percent of growth or upliftment of its population, let alone 7. To me, Pakistan’s economic problems look trivial by comparison; its social problems, self-created. That it doesn’t perform stellarly economically and the reasons thereof are quite instructive.

    Disclaimer: This is just the opinion of one person here and you may choose to disagree. Please do not make the mistake of taking this as “the Indian opinion” or “how Indians think” as so often happens. It is an individual opinion and that’s what it should remain.

  32. Arjun says:
    May 21st, 2009 10:02 pm

    I forgot to answer your question about negativity – I think it’s a tie. We Indians are unbelievably cynical about our own country, and in many cases, justifiably so (I’m one of them remember ;)).

  33. Wahab says:
    May 22nd, 2009 8:37 am

    There is plenty of good news in Pakistan but that will go nowhere until the bad news from Pakistan is taken care of. These cursed TALIBAN. Until we deal with them all else will be submerged. The tragedy is that we have jokers like Zaradri who are incapable and unwilling to crush the Taliban fully.

  34. B.A.Q. says:
    May 22nd, 2009 3:42 pm

    I am sorry but this author has no idea of economics. just throwing a bunch of numbers that cannot be reasonably compared does not make analysis. Sorry to see such shoddy work appear at ATP.

  35. X0 says:
    May 23rd, 2009 5:29 am

    B.A.Q please elaborate.

  36. Nasir says:
    January 10th, 2010 7:58 pm

    Pakistan economy is one of the best economy in the world. It has more potential to grow and expand the size of economy, if it is given right direction. Pakistan is on 17th position of world economy in term of punching power and has the strength of 2% grow in fy 2010, which enables it to emerge in world’s fast economy.

  37. Anwer says:
    October 24th, 2010 10:59 pm

    I feel Pakistan is the greatest place in the world and above all its our Mother Land. This mother land will remain the same until and unless we all become serious to make a difference everyday.

    I belong to no party, I feel Mr. Zardari could be a blessing in disguise and if he really want and put his foot down can change the table around.

    Also we have to give democracy a chance to grow. Democracy is going through its tender age but surely it will mature with due course of time.

    Love you Pakistan


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