Economic situation Bleak outlook despite increasing growth rates

So far, Pakistan's economy has come through the COVID-19 pandemic relatively well. In 2021, the growth rate was 3.9 per cent. However, the country continues to be faced with comprehensive structural challenges. Public debt is rising, the balance of payments deficit is growing, and the inflation rate is too high.

In a textile factory in Faisalabad, Pakistan, cotton is tested for impurities.

In a textile factory in Faisalabad, Pakistan, cotton is tested for impurities.

In a textile factory in Faisalabad, Pakistan, cotton is tested for impurities.

Domestically, the government is under significant pressure because of the requirements of the current IMF reform programme. It is trying to tap alternative sources of funding. It must be expected that socio-economic development will be the main topic of the campaign for the parliamentary elections in 2023.

Pakistan's tax ratio of about 13 per cent is very low even by regional standards. This means that the government lacks the fiscal scope to invest sufficiently in vital social services. Private investors continue to be deterred by the tense security situation, widespread corruption, inefficient administrative bodies, a lack of legal certainty, and an inadequate energy supply.

In 2014, Pakistan was included in the European Union's Generalised System of Preferences Plus (GSP+). This gives Pakistan's export sector better access to the European market for various products, especially textiles. Within the EU, Germany had spoken in favour of admitting Pakistan to the system. In order to be granted GSP+ status a country needs to comply with 27 core international conventions. These also include the core labour standards of the International Labour Organization (ILO), which are not yet being sufficiently implemented in Pakistan's textile industry – a sector that is of vital importance for the country.