Economic resilience

Economic resilience

Historically, Pakistan's overall economic output (GDP) has grown every year since a 1951 recession. Despite this record of sustained growth, Pakistan's economy had, until a few years ago, been characterized as unstable and highly vulnerable to external and internal shocks. However, the economy proved to be unexpectedly resilient in the face of multiple adverse events concentrated into an eight-year period —

• the Asian financial crisis;
• economic sanctions — according to Colin Powell, Pakistan was "sanctioned to the eyeballs"^[11];
• lop recession;
• severe rioting in the port city of Karachi;
• a severe drought — the worst in Pakistan's history, lasting about four years;
• heightened perceptions of risk as a result of military tensions with India — with as many as 1 million troops on the border, and predictions of impending (potentially nuclear) war;
• the military actions against militants in parts of the country;

Despite these adverse events, Pakistan's economy kept growing, and economic growth accelerated towards the end of this period. This resilience has led to a change in perceptions of the economy, with leading international institutions such as the IMF, World Bank, and the ADB praising Pakistan's performance in the face of adversity.

Additional confirmation that the country's economy is not as weather-sensitive as had been previously perceived comes from a 2008 analysis that "examined 68 countries, quantifying their sensitivity to fluctuations in weather, using figures on GDP by industry sector and the sensitivity of particular sectors to given weather variables." The analysis found that of the 68 countries, the "least weather-sensitive country was Pakistan."

Pakistan emerged as one of the best performers in the wake of the global financial crisis, even as a country waged a costly war against militants. Its domestically-driven economy was minimally affected and its banking sector boasted surplus liquidity while remaining unharmed.

Tax evasion

Unfortunately for Pakistan, the level of tax evasion is very high amongst the population and there are apparently no laws against tax evasion or punishments against tax evaders. Out of a total population of 170 million people, fewer than 1.7 million pay taxes. This means only 1% of the total population pay taxes. To make matters worse, since Pakistan first gained independence in 1947, not a single person has ever been sent to prison for tax evasion. As a result of this chronic low tax collection, Pakistan is still a third world country which heavily relies on foreign aid. This has also seriously hampered Pakistan's economic development. Corruption within the authorities combined with illiteracy and ignorance among the population has not made things any better. Any attempts into solving this problem is almost impossible because it is believed that roughly 70% of Pakistan's population are living off the grid