Pakistan is on the northwest border of India and also shares borders with Iran, Afghanistan, and China. The country emerged in 1947 from the partition of India when the British left. Pakistan is an active member of the United Nations. With a population of 169.3 million, it is the sixth-most-populous country and the second-most-populous Muslim country in the world.
The coastal region of modern-day Pakistan has been a center of extensive trade since ancient times, as archaeological work on the Indus Valley civilization has revealed. Goods from around the Indian Ocean, and even farther afield, were brought in and traded for many centuries. Following the collapse of the civilization, northern Pakistan found itself astride the Silk Road, which facilitated trade between Europe and China. As a result, that region enjoyed increased wealth, and its people developed close familial ties with people in Afghanistan.
During the period of British colonial rule, from the mid-19th century to 1947, Britain stationed many soldiers in the region, with Quetta emerging as a major garrison town. Many Pakistanis also enlisted in the British Indian Army during the World War I and World War II periods; as a result, many villages survived on army remittances. After independence in 1947, Pakistan found itself in a difficult position both politically and economically. Its first aim was ensuring a stronger economic position, which it achieved by developing Karachi into a major port. Karachi remains the largest city in the country, with a population of 9.34 million (2007), which is nearly twice that of the next-largest city, Lahore. The Pakistani government was eager to encourage a sense of national identity, however, so it moved the capital first to Rawalpindi and then to Islamabad.
Some 42 percent of the workforce is employed in the agricultural sector, which provides some 22 percent of Pakistan’s gross domestic product (GDP); services make up 38 percent of the workforce and 53 percent of the GDP. In industry—coal, iron, steel production, scrap metal, and oil—some 20 percent of the workforce accounts for 25 percent of the GDP.
In terms of international trade, the country runs up a large balance-of-payments deficit, exporting textiles, rice, and some other agricultural produce, and importing machinery, petroleum, petroleum products, transport equipment, chemicals, edible oils, grains, and flour. Some 21 percent of the nation’s exports go to the United States, and 11 percent of its imports are from China.
Pakistan experienced rapid economic growth in the 1960s, with West Pakistan becoming the powerhouse of the country’s economy. East Pakistan (modern-day Bangladesh) continued to have a largely agricultural economy. To protect Pakistan’s new industries, the government introduced several exchange rates to make it harder for imports to compete with locally produced products.
The country has had a variety of governments, with a military coup d’état overthrowing the elected government of Zulfikar Ali Bhutto in 1977; Bhutto was executed two years later. Great political instability followed. General Pervez Musharraf staged a coup in 1999 and ruled the country until his resignation in August 2008 and replacement by President Asif Ali Zardari, who was elected the next month. This instability has led to many foreign companies being nervous about investing in the country.
After the attacks on the World Trade Center and the Pentagon on September 11, 2001, the U.S. military took a great deal of interest in the radical Muslim movements in Pakistan, leading to tensions between the pro-Western Musharraf government and many Pakistanis on both the left and the right, leading to further instability and frightening many would-be investors. Despite Pakistan’s political problems, the economy of the cities generally has held up, with inflation reaching 7.9 percent in 2006. By contrast, poverty is widespread in the countryside. The country’s per capita GDP is $830 (128th in the world).
- Viqar Ahmed and Rashid Amjad, The Management of Pakistan’s Economy 1947–82 (Oxford University Press, 1984);
- Russell Andrus and Azizali F. Mohammed, Trade, Finance and Development in Pakistan (Oxford University Press, 1966);
- Mumtaz Anwar and Katharina Michaelowa, “The Political Economy of US Aid to Pakistan,” Review of Development Economics (v.10/2, 2006);
- Irfan-ul-Haque, A Compendium of Pakistan’s Economy (Royal Book Co., 1987);
- Shahid Kardar, The Political Economy of Pakistan (Progressive Publishers, 1987);
- Alain Lefebre, Kinship, Honour, and Money in Rural Pakistan (RoutledgeCurzon, 1999);
- A. Meenai, Money and Banking in Pakistan (Oxford University Press, 1984);
- Gustav F. Papanek, Pakistan’s Development: Social Goals and Private Incentives (Harvard University Press, 1967).
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