Monitoring Country Progress in Pakistan Program Office OAPA & USAID/Pakistan U.S. Agency for International Development Pakistan Institute for Development Economics September, 21 st, 211
Economic Reforms Figure 1 Economic Reform vs. Democratic Reforms 5. Pakistan and its neighbors are among the slowest reformers globally 4. Eastern Europe & Eurasia Israel Thailand 3. Latin America & Caribbean Kyrgyz Republic Kazakhstan Middle East & North Africa Mongolia 2. Laos Uzbekistan Turkmenistan Afghanistan China Vietnam Cambodia Tajikistan Pakistan Nepal Sri Lanka Indonesia Philippines East Timor Bangladesh 1. 1. 2. 3. 4. 5. Democratic Reforms egional averages are estimates. World Bank, World Development Indicators (April 211); Doing Business in 211 (November 21); Freedom House, Freedom in the World (211 nd earlier editions); Freedom in the Press (21); and World Bank Institute, Governance Matters Indicators (21). India
Rank of 1 to 183 Figure 2 Doing Business in Pakistan 18 29 21 16 14 12 Pakistan has weak tax policy and scores very poorly on reforms that increase confidence in foreign & domestic investment as estimated by the World Bank. 118 126 139 145 156 155 1 12 98 8 6 61 65 67 56 78 81 69 85 4 2 27 28 Protecting Investors Getting Credit World Bank, Doing Business in 211 (November 21). Closing a Business Trading Across Borders Starting a Business Dealing with Construction Permits Registering Property Paying Taxes Enforcing Contracts
Economic Performance Figure 3 5. Economic Performance vs. Human Capital 4. Cambodia Vietnam Mongolia China Turkmenistan Thailand Uzbekistan Kazakhstan 3. Afghanistan India Bangladesh Laos Middle East & North Africa Latin America & Caribbean Tajikistan Indonesia Philippines Kyrgyz Republic Sri Lanka Eastern Europe & Eurasia Israel Pakistan Nepal 2. Sub Saharan Africa East Timor 1. 1. 2. 3. 4. 5. Human Capital Regional averages are estimates. World Bank, World Development Indicators (April 211); UNICEF, Save the World s Children (21) and UNDP, Human Development Report.
U.S. Dollars Billion US$ Billion Figure 4 Size of Pakistan s Economy 18 16 14 12 6 5 4 3 2 1 GDP 175 1 8 6 4 2 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 IMF, World Economic Outlook: October Update (October 21)
GDP % Change Figure 5 9 8 Pakistan Economic Growth 7.4 7.7 From 25 to 21, Pakistan averaged 4.9% GDP growth, proving its resilience in the face of multiple adverse events. 7 6 6.1 5.6 5 4.9 4.8 4 3 3.2 3.4 2.4 2 1.6 1 22 23 24 25 26 27 28 29 21 211 IMF, World Economic Outlook (April 211) and Economist Intelligence Unit, Pakistan Country Report (August 211).
Figures 6-7 Population in Pakistan (in millions) Pakistan is currently the 6 th most populous country 2 152.4 Million 25 29.9 Million Male Female Male Female The population is estimated to nearly double in 5 years US Census, International Database (January 211).
Percent Change Figure 8 25 2 Inflation in Pakistan Inflation is driven by surging government budgetary borrowing. Government borrowing from banks in the first seven months of the financial year 21-11 increased 62% from the previous year. 2.8 28 surge in global petrol prices 15 1 Earthquake Flood 5 Drought Inflation rose at double digit rates for over 35 consecutive months (with one exception) 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 IMF, World Economic Outlook (April 211) and Economist Intelligence Unit, Pakistan Country Report (August 211).
U.S. Dollars Billion Figure 9 Top Remittances Receiving Developing Countries 5 45 Remittances in Pakistan are estimated at 5.2% of GDP 4 35 3 25 2 15 1 5 World Bank, World Development Indicators (April 211); State Bank of Pakistan, FY 21 Annual Report-Statistical Supplement (21). *State Bank of Pakistan reports remittances at $8.9 Billion US for FY 21.
Percent of GDP World Bank, World Development Indicators (April 211). Research in Pakistan shows that remittances are predominantly used to meet daily expenses such as food, clothing and health care; however, funds are also spent on building or improving housing, buying land, cattle or durable consumer goods, the repayment of loans for migration and to fund pilgrimages to Mecca (Suleri and Savage, Remittances in Crisis: A Case Study from Pakistan (November 26)). Figure 1 8 Remittances in Pakistan from 2-211 7 6 Flood 5 4 Earthquake 3 2 1 Drought While historically importantly to the economy, remittances in recent years have soared; more than quadrupling since 2 bolstering foreign exchange reserves and inflation 2 21 22 23 24 25 26 27 28 29 21 211 Q1
Net Migration Percent of GDP Figure 11 Remittances & Migration in Pakistan 1,, 6 8, Remittances (right axis) 6, 5 4, 4 2, 3-2, -4, Migration (left axis) 2-6, 1-8, -1,, 2 21 22 23 24 25 26 27 28 29 21 World Bank, World Development Indicators (April 211).
Percent of GDP Figure 12 5.5 Growth in Remittances & Agriculture GDP in Pakistan 7 5.3 5.1 Remittances (left axis) 6 4.9 5 4.7 4 4.5 4.3 3 4.1 2 3.9 3.7 3.5 A cross-country IMF study argues that agricultural GDP is a good indicator of economic hardship, which makes a lot of sense for Pakistan (one-fifth of GDP). The study concludes, when agricultural GDP in these countries falls, workers remittances tend to increase. Agriculture GDP Growth (right axis) 23 24 25 26 27 28 29 1 World Bank, World Development Indicators (April 211).
Percent of GDP Figure 13 5 45 44.6 Tax Revenue in 29 Pakistan is one of the top 2 worst tax revenue generating countries in the world. Only 2 million or 1.1 percent of the Pakistani population pay income tax. 4 35 33.5 3 27.7 25 21.8 2 18.6 15 16 14.1 13.3 1 1.5 1.4 1.2 8.8 5 3 Heritage Foundation, Index of Economic Freedom 211 (January 211).
Percent of GDP Figure 14 15 Tax Revenue in Pakistan 14 13.8 13 13.3 13.2 1999 marks the fall of Benazir Bhutto & Nawaz Sharif s civilian government 12 11 1.8 1 1.1 9 8 Pakistan s low revenue collection is a burden on the already significant budget deficit and a threat to devolution of authority to the line ministries 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 9.3 World Bank, World Development Indicators (April 211). Note that taxes in absolute terms are increasing.
% of GDP Figures 15 8 Exports Earnings in 29 7 68 6 5 5 4 3 2 1 27 24 21 14 13 11 Thailand South Korea China Indonesia India Haiti Pakistan Ethopia Ethiopia In July-April 21 Pakistan s Exports only accounted for 9% of GDP. World Bank, World Development Indicators (December 2 th, 21) and Pakistan Federal Bureau of Statistics.
Percent of GDP Figure 16 6 4 2 Current Account Balance in Pakistan The IMF states that a current account deficit of greater than (3%) of GDP for three or more years is a cause for concern. Pakistan has run a current account deficit of greater than 3% for the last 5 years. -2-4 -6-8 -1 The widening trade gap could draw down foreign exchange reserves and dampen GDP growth in the medium term 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 World Bank, World Development Indicators (April 211) and IMF, World Economic Outlook October (April 211).
U.S. Dollars Billion Figure 17 6 5 Foreign Direct Investment in Pakistan The global recession combined with a worsening business environment discourages FDI. Surge resulting from investment in telecom & privatization of banks 4 3 2 1 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 World Bank, World Development Indicators, (April 211)
US$ Million Figure 18 Subsidies in Pakistan 25 21 28/9 29/1 2 15 132 1 79 5 IMF, Pakistan (January 211). 24 19 13 11 3 Power Wheat Oil Food (non wheat)
PRs/khw Asia Development Bank, Integrated Energy Sector Recovery Report & Plan (October 21). Figure 19 Electricity Subsidies 9 8 The burden of energy subsidies has tripled in the last 3 years to over 2.5 rupees per kwh as measured by the ADB. Cost of Service 7 6 Retail Price 5 4 Energy subsidies account for 1.4% of GDP. 3 24/5 25/6 26/7 27/8 28/9 29/1
Technical & Distribution Losses as % of net system energy World Bank, World Development Indicators (April 211). Figure 2 Energy Losses 3 25 1/5 of energy produced in Pakistan is lost in technical and distribution. In addition, Pakistan experiences losses due to administrative loss (including theft) and circular debt. 25 25 28 2 19 19 17 15 1 9 1 11 12 13 13 14 5 6 6 7 7 7
Thousands of GigaWatts Government of Pakistan, Ministry of Finance, Pakistan Economic Survey 29-1 (21). % change in energy supply Figure 21 35 3 Energy Supply in Pakistan 9.3 Energy Supply % change (right axis) 1 8 25 6 2 15 4 1 2 5 ADB estimates that the energy shortfall (including load shedding) is estimated to have reduced GDP growth by 2.-2.5%. 1998-99 1999-2-1 21-2 22-3 23-4 24-5 25-6 26-7 27-8 28-9 -.58-2
# of hours, per customer, per year Figure 22 45 4 35 3 25 Load Shedding in Pakistan (hours each customer experiences electrical power outage) Losses in the industrial sectors are estimated at $2.5 billion per year because of load shedding, costing 4, jobs. In the past 3 years, NEPRA estimated that customers went from experiencing the equivalent of 2 weeks to 22 weeks a year with no power 2 15 1 5 25/6 26/7 27/8 28/9 National Electric Power Regulatory Authority, State of the Industry Report (29-1). This crisis is in part due to T&D losses, theft, and pricing policy that does not generate enough revenue to cover power generation costs (GoP 21).
Government of Pakistan, Ministry of Finance, Pakistan Economic Survey 29-1 (21). Estimates for agriculture consumption are as high as 9% of water resources with potentially 6% of which is wasted due to aging and poorly maintained infrastructure and irrigation management that is largely unresponsive to the needs of the bulk of the country s farmers. Figures 23-24 Water Vulnerability in Pakistan Water Uses Domestic uses 8% 6 5 Water availability has fallen 8% in the last 5 years Water Availability Per Capita 4 Industry 23% M 3 3 Agriculture 69% 2 1 1951 1961 1971 1981 1991 22 21 22 Agricultural dependence on a sharply declining water supply will lead to crop competition over water and will exacerbate food insecurity
Millions of hectares Woodrow Wilson International Center for Scholars, Running on Empty, Pakistan s Water Crisis (29). Nearly 5% of the population was affected by food insecurity in 29, and is likely substantially higher after the 21 floods. Figure 25 Water Consumption of Major Crops in Pakistan 8 7 Pakistan is the 1 th -largest sugar producing nation but sugarcane is an extremely water-intensive crop Hectares (left axis) Water (right axis) 8 7 6 6 5 4 5 4 Water m 3 3 3 2 2 1 1 Water intensive crops driving food insecurity
Percent of GDP Figure 26 Composition of GDP over Decades in Pakistan 1 9 8 7 38.2 4.8 45.6 48.8 5.7 54.9 6 13.7% of total labor force 5 15.6 22.3 Services Industry 4 24.9 25.2 23.3 Agriculture 3 24.3 2 1 46.2 36.8 29.5 51.7% of total labor force, 15.7 million workers 26 25.9 2.8 45.1% of total labor force, 23.1 Millions workers 196 197 198 199 2 29 World Bank, World Development Indicators (April 211). ADB, Key Indicators for Asia and the Pacific 21 Country Tables (21). Agriculture is constrained by insufficient investment over many years, inappropriate policies, and an impending water crisis.
% of Population US Census, International Database (August 211). 57% of the population is under 25. 27 25 25 24 24 Figure 27 Proportion of Population Under 15 5 5 47 46 46 46 45 44 44 Three million people enter the labor market every year. 43 42 41 4 38 37 36 35 35 34 34 33 3 3 3 29 28 28 23 22 21 2 2 2 2 19 18 17 16 16 15 14 14 12 1
Percent Figure 28 1 Labor Force Participation Rates 9 Men Women 8 77 7 71 7 65 6 5 4 3 29 26 2 18 1 12 Punjab Sindh Balochistan KPK Brookings, Pakistan Index, Tracking Variables of Reconstruction & Security (December 8 th, 21) derived from the Government of KPK Finance Department (June 29).
Percent Figure 29 Poverty Rates in 26 (population living under 2$ a day) 1 9 8 73.6 8.4 84. 7 68.5 6 5 4 41.6 3 2 1 Pakistan s high poverty rates are partially driven by low literacy, poor access to basic health care services and a significant youth bulge. Sri Lanka Nepal Pakistan India Bangladesh World Bank, Sparing Lives, Better Reproductive Health for Poor Women in South Asia (March 29).
% of Population over age 15 Figure 3 1 9 97 Adult Literacy in 27 94 94 93 93 92 91 9 9 85 8 7 66 6 5 57 57 54 5 4 3 2 Pakistan s low literacy rate is accentuated by weak rural and female literacy. It is estimated that less than half of the rural (48%) and female population are literate (44%). 28 UNDP, Human Development Report (21).
% of Population over age 1 Figure 31 1 9 Male Adult Literacy in Pakistan by Gender Female 8 7 65 67 69 6 59 58 52 5 4 4 42 45 3 26 3 32 2 1 1995-96 1998-99 21-2 24-5 26-7 28-9 Pakistan Federal Bureau of Statistics, Pakistan Social and Living Standards Measurement Survey 28-9 (August 21).
Gross Enrollment Figure 32 1 Primary Age Student Not in School 9 8 7 6 5 42.5 4 37.2 35.3 38. 33.8 33.9 33.6 3 2 1 Pakistan s poor education attainment is intensified by low female enrollment. The survival rate of females to grade 5 was only 6% in 29. 23 24 25 26 27 28 29 UNESCO, Institute for Statistics (21).
Percent of Schools Government of Pakistan, Ministry of Finance, Pakistan Economic Survey 29-1 (21). Figure 33 Public School Facilities 1 9 8 Total Urban Rural 7 66 6 6 5 4 3 36 37 41 34 3 39 2 1 7 No Electricity No Latrines No Drinking Water
% of GDP Figure 34 8 7 7.9 7.8 7. Public Health Expenditure in 29 UNICEF estimates that annual public healthcare only amounts to $4 per person. 6 5.3 5 4.5 4.3 4 4. 3.9 3.8 3.8 3.5 3.3 3.3 3 3.1 3. 2.8 2.7 2.7 2.5 2.5 2.5 2.3 2.2 2.1 2. 2 1.8 1.8 1.6 1.6 1.6 1.6 1.6 1.4 1.3 1.2 1.2 1.1 1.9.8 World Bank, World Development Indicators (April 211). The Health Budget 26: The Policy Context estimates that 75% of health costs are financed out-of-pocket.
Deaths per 1, Live Births Figure 35 25 Under 5 Mortality Nearly 1 in 1 children die before the age of 5 2 15 1 Pakistan 5 Bangladesh Indonesia Philippines Pakistan is committed to reaching the MDG of an Under Five Mortality rate of 52 deaths per 1 by 215 198 1985 199 1995 2 25 26 27 28 29 UNICEF, State of the World s Children 211 (211); World Bank, World Development Indicators (April 211).
Deaths per 1, Live Births Figure 36 16 Maternal Mortality Ratio (reported 25-29) 1,6 14 12 1 8 6 46 4 2 16 23 25 28 28 35 5 6 12 15 21 29 31 34 38 39 55 75 Pakistan is committed to reaching the MDG of a Maternal Mortality ratio of 14 deaths by 215 UNICEF, State of the World s Children 21 (21).
Births per woman Figure 37 9 Total Fertility Rate 8 7 Afghanistan 6 5 4 India Bangladesh Pakistan 3 Indonesia 2 Global Replacement Rate = 2.1 1 Pakistan s fertility rate is not estimated to reach replacement rate until 23 1975-198 198-1985 1985-199 199-1995 1995-2 2-25 25-21 21-215 United Nation Population Division, World Population Projections 21 Revision (April 211).
Figures 38-4 Male 199 118.8 Million Population in Pakistan (in millions) Female Male 21 184.4 Million Female Demographic Indicators for Pakistan 199 21 23 Population Midyear population (in thousands) 118816 18445 242862 Growth rate (percent) 2.9 1.6 1.2 Fertility Total fertility rate (births per woman) 6.5 3.3 2.1 Crude birth rate (per 1, population) 42 25 18 Mortality Life expectancy at birth (years) 57 66 72 Infant mortality rate (per 1, births) 17 65 33 Under 5 mortality rate (per 1, births) 162 87 42 Crude death rate (per 1, population) 13 7 6 Migration Net migration rate (per 1, population) -1-2 - Net number of migrants (in thousands) -162-435 -5 Male 23 242.9 Million Female US Census, International Database (April 211).