Download PDF

PAKISTAN
Economic Freedom Score
25
World Rank:
121
Regional Rank:
25
Least
free 0
akistan’s economic freedom score is 55.6, making its
Pincreased
economy the 121st freest in the 2015 Index. Its score has
by 0.4 point since last year, reflecting improvements
50
75
Most
100 free
55.6
Freedom Trend
57
in investment freedom and freedom from corruption that are
largely counterbalanced by deteriorations in labor freedom
and business freedom. Pakistan is ranked 25th out of 42 countries in the Asia–Pacific region, and its overall score is below
the world and regional averages.
56
55
Pakistan’s economic freedom has advanced modestly in
recent years. Since 2011, economic freedom in Pakistan has
increased by 0.5 point, led by advances in investment freedom, monetary freedom, and freedom from corruption. However, gains have been outnumbered by losses among the 10
economic freedoms.
Large sections of the population live in poverty and survive through subsistence agriculture. Inefficient regulatory
agencies inhibit business formation. Access to bank credit
also undermines entrepreneurship, and the financial sector’s seclusion from the outside world has slowed innovation
and growth.
BACKGROUND: Prime Minister Nawaz Sharif took office in
June 2013 and has had to contend with terrorism, sectarian
violence, and a well-organized insurgency along the border
with Afghanistan. The army stepped up its military operations
in North Waziristan in June 2014 following a major attack on
the Karachi airport that killed nearly 36 people. Sustained
street demonstrations in August and September 2014 led by
Tehreek-e-Insaf party chief Imran Khan and religious leader
Tahir ul-Qadri have weakened Sharif and increased civil–military tensions. Pakistan has privatized some state-run industries, but the economy is still heavily regulated, and poor
security discourages foreign investment.
How Do We Measure Economic Freedom?
See page 475 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
54
53
2011
2012
2013
2014
2015
Country Comparisons
55.6
Country
World
Average
60.4
Regional
Average
58.8
Free
Economies
84.6
0
20
40
60
80
100
Quick Facts
Population: 182.6 million
GDP (PPP): $575.0 billion
3.6% growth in 2013
5-year compound annual growth 2.9%
$3,149 per capita
Unemployment: 5.2%
Inflation (CPI): 7.4%
FDI Inflow: $1.3 billion
Public Debt: 63.1% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.
349
PAKISTAN (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 30.0
Freedom from Corruption 28.0
0
20
40
60
80
Rank
1–Year
Change
94th
132nd
0
+5.3
100
Corruption, lack of accountability, and lack of transparency continue to pervade all levels of
government, politics, and the military despite some improvements in democratic processes.
Oversight mechanisms remain weak. Property rights are not protected effectively. The functioning of the higher judiciary has improved, but delays, corruption, intimidation, and political
interference are endemic in the broader justice system.
Fiscal Freedom 77.7
GOVERNMENT
Government Spending 86.1
SIZE
106th
29th
0
20
40
60
80
–2.9
–2.2
100
Pakistan’s top individual income tax rate is 35 percent. The rate for salaried employment is
lower. The top corporate tax rate is 35 percent. Other taxes include a value-added tax and a tax
on interest. Overall tax revenue equals 10.4 percent of domestic income. Public expenditures
amount to 21.5 percent of domestic output, and public debt equals 63 percent of GDP.
REGULATORY
EFFICIENCY
Business Freedom 65.6
Labor Freedom 42.1
Monetary Freedom 71.2
88th
165th
141st
0
20
40
60
80
–3.8
–5.2
+2.7
100
Starting a business takes an average of 19 days and 10 procedures. Completing licensing requirements still takes about 250 days. The rigid labor market keeps a large portion of the workforce
in the informal sector. The government controls fuel prices but in 2014 reduced electric power
subsidies to narrow the budget deficit and meet the terms of IMF conditionality.
OPEN
MARKETS
Trade Freedom 65.6
Investment Freedom 50.0
Financial Freedom 40.0
145th
109th
106th
0
20
40
60
80
+0.8
+10.0
0
100
Pakistan’s average tariff rate is 9.5 percent. Imports may face additional bureaucratic barriers.
Pakistan’s “Investment Policy 2013” was designed to facilitate foreign direct investment, but
the security environment is a deterrent. The financial system remains subject to government
interference, and the state retains considerable ownership in the banking sector. The government often directs banks’ lending to priority sectors.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
350
–40.0
+18.0
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
+18.6
+4.0
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom +10.6
Labor Freedom
–17.5
Monetary Freedom +1.3
Trade Freedom
+33.2
Investment Freedom –20.0
Financial Freedom
–30.0
2015 Index of Economic Freedom