This information comes from the assessment conducted in country for the Pakistan report, which was published in March 2008.
For decades, Pakistan has suffered from low levels of foreign investment, costly confrontation with India over the disputed Kashmir territory, and domestic political instability. Following President Musharraf’s rise to power in 1999, however, the country has endeavored to turn around its faltering economy. Beginning in 2002 – and coinciding with the appointment of a new Finance Minister, institution of IMF-approved government policies, generous foreign assistance, and new access to global markets – Pakistan has enjoyed solid macroeconomic recovery and overall economic growth.
The government has privatized the banking sector and made other substantial macroeconomic reforms, including a 52 percent real increase in budget allocation for development spending in FY2007. Poverty levels have decreased by 10 percent since 2001, and GDP has been growing at a rate of 6 percent to 8 percent since 2004.
Indeed, the recent strengthening of Pakistan’s economy is regarded as a regional success story. As one scholar noted, a “stable, prosperous, progressive Pakistan could trigger a new spurt of South Asian development.” Compared to its neighbors, Pakistan fares relatively well as a destination for “doing business,” which means that companies are more able to join the formal sector, access credit, pay taxes, employ workers, invest, and engage in other functions that contribute to sustained economic growth. Specifically, in the World Bank’s most recent Doing Business survey, the country ranks 74th out of 175 countries, better than all other South Asian economies except Nepal.
Yet Pakistan is hardly free from legal and institutional encumbrances that constrain its ability to emerge from its status as a low-income, high-poverty country. Also, the World Bank’s high-level review of major categories of concern to business indicates that the momentum of certain reforms may be slowing down. Only in the areas of paying taxes and trade across borders has Pakistan exhibited very recent progress in comparison to other countries.
