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PROFILE
Geography
Area: 803,943 sq. km. (310,527 sq. mi.); almost twice the size of California.
Cities: Capital--The city of Islamabad (pop. 800,000) and adjacent Rawalpindi (1,406, 214) comprise the national capital area with a combined population of 3.7 million. Other cities--Karachi (11,624,219) (2005 est.), Lahore (6,310,888) (2005 est.), Faisalabad (1,977,246) and Hyderabad (1,151,274).
People
Nationality: Noun and adjective--Pakistan(i).
Population (July 2008 est.): 167,762,040.
Annual population growth rate (2008 est.): 1.81%.
Ethnic groups: Punjabi, Sindhi, Pashtun, Baloch, Muhajir (i.e., Urdu-speaking immigrants from India and their descendants), Saraiki, and Hazara.
Religions: Muslim 97%; small minorities of Christians, Hindus, and others.
Languages: Urdu (national and official), English, Punjabi, Sindhi, Pashto, Baloch, Hindko, Brahui, Saraiki (Punjabi variant).
Education: Literacy (2005 est.)--49.9%; male 63%; female 36%.
Health: Infant mortality rate (2008 est.)--66.95/1,000. Life expectancy (2008 est.)--men 63.07 yrs., women 65.24 yrs.
Work force (2004 est.): Agriculture--42%; services--38%; industry--20%.
Government
Type: Parliamentary democracy.
Independence: August 14, 1947.
Branches: Executive--president (chief of state), prime minister (head of government). Legislative--bicameral Parliament or Majlis-e-Shoora (100-seat Senate, 342-seat National Assembly). Judicial--Supreme Court, provincial high courts, Federal Islamic (or Shari'a) Court.
Political parties: Pakistan People's Party (PPP), Pakistan Muslim League-Nawaz (PML-N), Awami National Party (ANP), Pakistan Muslim League (PML), Muttahid Majlis-e-Amal (umbrella group) (MMA), and Muttahida Qaumi Movement (MQM).
Suffrage: Universal at 18.
Political subdivisions: 4 provinces (Punjab, Sindh, Balochistan, and Khyber-Pakhtunkhwa (formerly known as the North-West Frontier Province or NWFP)); also the Federally Administered Tribal Areas (composed of 7 tribal agencies--Bajaur, Mohmand, Khyber, Kurram, Orakzai, North Waziristan, and South Waziristan) and the Pakistani-administered portion of the disputed Jammu and Kashmir region (Azad Kashmir and the Northern Areas).
Economy
Real GDP growth rate (2009 est.): 2.7%.
Per capita GDP (year ending 2009, purchasing power parity): $2,600.
Natural resources: Arable land, natural gas, limited oil, substantial hydropower potential, coal, iron ore, copper, salt, limestone.
Agriculture: Products--wheat, cotton, rice, sugarcane, eggs, fruits, vegetables, milk, beef, mutton.
Industry: Types--textiles & apparel, food processing, pharmaceuticals, construction materials, shrimp, fertilizer, and paper products.
Trade (2009 est.): Exports--$17.87 billion: textiles (garments, bed linen, cotton cloth, and yarn), rice, leather goods, sports goods, carpets, rugs, chemicals and manufactures. Major partners (2008)--U.S. 16%, United Arab Emirates 11.7%, Afghanistan 8.6%, U.K. 4.5%, China 4.2%. Imports--$28.31 billion: petroleum, petroleum products, machinery, plastics, paper and paper board, transportation equipment, edible oils, pulses, iron and steel, tea. Major partners (2008)--China 14.1%, Saudi Arabia 12%, U.A.E. 11.2%, Kuwait 5.4%, India 4.8%, U.S. 4.7%, Malaysia 4.1%.
PEOPLE
The majority of Pakistan's population lives in the Indus River valley and in an arc formed by the cities of Faisalabad, Lahore, Rawalpindi/Islamabad, and Peshawar. Although Urdu is an official language of Pakistan, it is spoken as a first language by only 8% of the population; 48% speak Punjabi, 12% Sindhi, 10% Saraiki, 8% Pashto, 3% Baloch, and 3% other. Urdu, Punjabi, Pashto, and Baloch are Indo-European languages. English is the other official language, and is widely used in government, commerce, the officer ranks of the military, and in many institutions of higher learning.
HISTORICAL OVERVIEW
Pakistan, along with parts of western India, contains the archeological remains of an urban civilization dating back 4,500 years. Alexander the Greats empire included the Indus Valley in 326 B.C. His successors founded the Indo-Greek kingdom of Bactria based in what is today Afghanistan and extending to Peshawar. Following the rise of the Central Asian Kushan Empire in later centuries, the Buddhist culture of Afghanistan and Pakistan, centered on the city of Taxila just west of Islamabad, experienced a cultural renaissance known as the Gandhara period.
The arrival of Muslim traders in Sindh also introduced Islam to Pakistan in the 8th century. The collapse of the Mughal Empire in the 18th century provided an opportunity for the English East India Company to extend its control over much of the subcontinent. The Sikh adventurer, Ranjit Singh, carved out a dominion that extended from Kabul to Srinagar and Lahore, encompassing much of the northern area of modern Pakistan. British rule replaced the Sikhs in the first half of the 19th century. In a decision that had far-reaching consequences, the British permitted the Hindu Maharaja of Kashmir, a Sikh appointee, to continue in power.
Pakistan emerged from an extended period of agitation by Muslims in the subcontinent to express their national identity free from British colonial domination as well as domination by what they perceived as a Hindu-controlled Indian National Congress. Muslim anti-colonial leaders formed the All-India Muslim League in 1906. Initially, the League adopted the same objective as the Congress--self-government for India within the British Empire--but Congress and the League were unable to agree on a formula that would ensure the protection of Muslim religious, economic, and political rights.
Pakistan and Partition
The idea of a separate Muslim state in British India first emerged in the 1930s. On March 23, 1940, Muhammad Ali Jinnah, leader of the Muslim League, formally endorsed the "Lahore Resolution," calling for the creation of an independent state in regions where Muslims constituted a majority. At the end of World War II, the United Kingdom moved with increasing urgency to grant India independence. The Congress Party and the Muslim League, however, could not agree on the terms for a Constitution or establishing an interim government. In June 1947, the British Government declared that it would bestow full dominion status upon two successor states--India and Pakistan, formed from areas in the subcontinent in which Muslims were the majority population. Under this arrangement, the various princely states could freely join either India or Pakistan. On August 14, 1947, Pakistan, comprising West Pakistan with the provinces of Punjab, Sindh, Balochistan, and the North-West Frontier Province (now Khyber-Pakhtunkhwa), and East Pakistan with the province of Bengal, became independent. East Pakistan later became the nation of Bangladesh in 1971.
The Maharaja of Kashmir was reluctant to make a decision on accession to either Pakistan or India. However, armed incursions into the state by tribesmen from Khyber-Pakhtunkhwa led him to sign accession papers in 1947 and allow Indian troops into the state. The Government of Pakistan, however, refused to recognize the accession and campaigned to reverse the decision. The status of Kashmir remains in dispute to this day.
Independence
With the death in 1948 of its first head of state, Muhammad Ali Jinnah, and the assassination in 1951 of its first prime minister, Liaqat Ali Khan, political instability and economic difficulty became prominent features of post-independence Pakistan. On October 7, 1958, President Iskander Mirza, with the support of the army, suspended the 1956 Constitution, imposed martial law, and canceled the elections scheduled for January 1959. Twenty days later, the military sent Mirza into exile to Britain, and Gen. Mohammad Ayub Khan assumed control of a military dictatorship. After Pakistan's loss in the 1965 war against India, Ayub Khan's power declined. Subsequent political and economic grievances inspired agitation movements that compelled his resignation in March 1969. He handed over responsibility for governing to the commander in chief of the army, General Agha Mohammed Yahya Khan, who became President and Chief Martial Law Administrator.
General elections held in December 1970 polarized relations between the eastern and western sections of Pakistan. The Awami League, which advocated autonomy for the more populous East Pakistan, swept the East Pakistan seats to gain a majority in Pakistan as a whole. The Pakistan Peoples Party (PPP), founded and led by Ayub Khan's former Foreign Minister Zulfikar Ali Bhutto, won a majority of the seats in West Pakistan, but the country was completely split with neither major party having any support in the other area. Negotiations to form a coalition government broke down. On March 26, 1971, following a bloody crackdown by the Pakistan Army, Bengali nationalists declared an independent People's Republic of Bangladesh. As fighting grew between the army and the Bengalis, an estimated 10 million Bengalis sought refuge in India. On April 17, 1971, Bengali nationalists formed a provisional government in an area bordering India, and in November 1971, India sent its military into East Pakistan to intervene on the side of the Bangladeshis. On December 16, Pakistani forces surrendered in Dhaka, and East Pakistan became the new nation of Bangladesh. Yahya Khan then resigned the presidency and handed over leadership of the western part of Pakistan to Bhutto, who became President and the first civilian Chief Martial Law Administrator.
Bhutto moved decisively to restore national confidence and pursued an active foreign policy, taking a leading role in Islamic and Third World forums. Although Pakistan did not formally join the Non-Aligned Movement until 1979, the position of the Bhutto government coincided largely with that of the non-aligned nations. Domestically, Bhutto pursued a populist agenda and nationalized major industries and the banking system. In 1973, he promulgated a new Constitution accepted by most political elements and relinquished the presidency to become prime minister. Although Bhutto continued his populist and socialist rhetoric, he increasingly relied on Pakistan's urban industrialists and rural landlords. Over time the economy stagnated, largely as a result of the dislocation and uncertainty produced by Bhutto's frequently changing economic policies. When Bhutto proclaimed his own victory in the March 1977 national elections, the opposition Pakistan National Alliance (PNA) denounced the results as fraudulent and demanded new elections. Bhutto resisted and later arrested the PNA leadership.
Muhammad Zia ul-Haq
With the increasing anti-government unrest, the army grew restive. On July 5, 1977, the military removed Bhutto from power and arrested him, declared martial law, and suspended portions of the 1973 Constitution. Chief of Army Staff Gen. Muhammad Zia ul-Haq became Chief Martial Law Administrator and promised to hold new elections within 3 months.
Zia released Bhutto and asserted that he could contest new elections scheduled for October 1977. After it became clear that Bhutto's popularity had survived his government, Zia then postponed the elections and began criminal investigations of the senior PPP leadership. Subsequently, Bhutto was convicted and sentenced to death for an alleged conspiracy to murder a political opponent. Despite international appeals on his behalf, Bhutto was hanged on April 6, 1979.
Zia assumed the presidency and called for elections in November. However, fearful of a PPP victory, Zia banned political activity in October 1979, and postponed national elections. He also passed into law the Hudood Ordinance, which implemented harsh Quranic punishments for violations of Shari'a (Islamic law).
In 1980, most center and left parties, led by the PPP, formed the Movement for the Restoration of Democracy (MRD). The MRD demanded Zia's resignation, an end to martial law, new elections, and restoration of the Constitution, as it existed before Zia's takeover. In early December 1984, President Zia proclaimed a national referendum for December 19 on his "Islamization" program. After non-party based polls were held for the National and Provincial Assemblies in 1985, President Zia appointed Muhammad Khan Junejo as the Prime Minister. He implicitly linked approval of "Islamization" with a mandate for his continued presidency. Zia's opponents, led by the MRD, boycotted the elections. When the government claimed a 63% turnout, with more than 90% approving the referendum, many observers questioned the figures.
Sharif and Bhutto Civilian Governments
On August 17, 1988, a plane carrying President Zia, American Ambassador Arnold Raphel, U.S. Brig. General Herbert Wassom, and 28 Pakistani military officers crashed on a return flight from a military equipment trial near Bahawalpur, killing all on board. In accordance with the Constitution, Chairman of the Senate Ghulam Ishaq Khan became Acting President and announced that elections scheduled for November 1988 would take place. Elections were held on a party basis. On one side was an eight-party alliance and on the other, the PPP. The PPP won 94 seats out of 207 and the Islamic Democratic Alliance (IJI) won 54. Muhammad Khan Junejo lost his home constituency. The president was bound to invite the PPP to form the government. However, Khan delayed doing so for 2 weeks in order to give the IJI time to muster the support of other groups. Ultimately, the president asked PPP Co-chairperson Benazir Bhutto to form a government.
The PPP, under Benazir Bhutto's leadership, succeeded in forming a coalition government with several smaller parties, including the Muttahida Qaumi Movement (MQM).
Differing interpretations of constitutional authority, debates over the powers of the central government relative to those of the provinces, and the antagonistic relationship between the Bhutto administration and opposition governments in Punjab and Balochistan seriously impeded social and economic reform programs. Ethnic conflict, primarily in Sindh province, exacerbated these problems. A fragmentation in the governing coalition and the military's reluctance to support an apparently ineffectual and corrupt government were accompanied by a significant deterioration in law and order.
In August 1990, President Khan, citing his powers under the eighth amendment to the Constitution, dismissed the Bhutto government and dissolved the national and provincial assemblies. New elections in October 1990 confirmed the political ascendancy of the IJI. In addition to a two-thirds majority in the National Assembly, the alliance won control of all four provincial parliaments and enjoyed the support of the military and of President Khan. Muhammad Nawaz Sharif, as leader of the PML, the most prominent party in the IJI, was elected prime minister by the National Assembly.
Sharif emerged as the most secure and powerful Pakistani prime minister since the mid-1970s. Under his rule, the IJI achieved several important political victories. Sharif's economic reform program of privatization, deregulation, and encouragement of private sector economic growth greatly improved Pakistan's economic performance and business climate. The passage into law in May 1991 of a Shari'a bill, providing for widespread Islamization, legitimized the IJI government among much of Pakistani society.
However, Nawaz Sharif was not able to reconcile the different objectives of IJI's constituent parties. The largest religious party, Jamaat-i-Islami (JI), abandoned the alliance because of its antagonism to what it regarded as PML hegemony. The government was weakened further by the military's suppression of the MQM, which had entered into coalition with the IJI to contain PPP influence, and allegations of corruption directed at Nawaz Sharif. In April 1993, President Khan, citing "maladministration, corruption, and nepotism" and espousal of political violence, dismissed the Sharif government. The following month, however, the Pakistan Supreme Court reinstated the National Assembly and the Nawaz Sharif government. Continued tensions between Sharif and Khan resulted in governmental gridlock and the Chief of Army Staff brokered an arrangement under which both the President and the Prime Minister resigned their offices in July 1993.
An interim government, headed by Moeen Qureshi took office with a mandate to hold national and provincial assembly elections in October. Despite its brief term, the Qureshi government adopted political, economic, and social reforms that generated considerable domestic support and foreign admiration.
In the October 1993 elections, the PPP won a plurality of seats in the National Assembly, and Benazir Bhutto was asked to form a government. However, because it did not acquire a majority in the National Assembly, the PPP's control of the government depended upon the continued support of numerous independent parties, particularly the PML/J (Pakistan Muslim League-Junejo). The unfavorable circumstances surrounding PPP rule--the imperative of preserving a coalition government, the formidable opposition of Nawaz Sharif's PML/N (Pakistani Muslim League-Nawaz) movement, and the insecure provincial administrations--presented significant difficulties for the government of Prime Minister Bhutto. Despite these conditions, the election of Prime Minister Bhutto's close associate, Farooq Leghari, as President in November 1993 gave her a stronger power base.
In November 1996, President Leghari dismissed the Bhutto government, charging it with corruption, mismanagement of the economy, and implication in extrajudicial killings in Karachi. Elections in February 1997, resulted in an overwhelming victory for the PML/N, and President Leghari called upon Nawaz Sharif to form a government. In March 1997, with the unanimous support of the National Assembly, Sharif amended the Constitution, stripping the President of the power to dismiss the government and making his power to appoint military service chiefs and provincial governors contingent on the "advice" of the Prime Minister. Another amendment prohibited elected members from "floor crossing" or voting against party positions. The Sharif government also engaged in a protracted dispute with the judiciary, culminating in the storming of the Supreme Court by ruling party loyalists and the engineered dismissal of the Chief Justice and the resignation of President Leghari in December 1997.
The new President elected by Parliament, Rafiq Tarar, was a close associate of the Prime Minister. A one-sided, anti-corruption campaign was used to target opposition politicians and critics of the regime. Similarly, the government moved to restrict press criticism and ordered the arrest and beating of prominent journalists. As domestic criticism of Sharif's administration intensified, Sharif attempted to replace Chief of Army Staff General Pervez Musharraf on October 12, 1999, with a family loyalist, Director General of the Interservice Intelligence Directorate, Lt. Gen. Ziauddin. Although General Musharraf was out of the country at the time, the army moved quickly to depose Sharif.
Pervez Musharraf
Following the October 12, 1999 nonviolent coup and subsequent ouster of the government of Prime Minister Nawaz Sharif, the military-led government stated its intention to restructure the political and electoral systems. On October 14, 1999, General Pervez Musharraf declared a state of emergency and issued the Provisional Constitutional Order (PCO), which suspended the federal and provincial Parliaments, held the Constitution in abeyance, and designated Musharraf as Chief Executive. Musharraf appointed an eight-member National Security Council to function as Pakistan's supreme governing body, with mixed military/civilian appointees; a civilian Cabinet; and a National Reconstruction Bureau to formulate structural reforms. On May 12, 2000, Pakistan's Supreme Court unanimously validated the October 1999 coup and granted Musharraf executive and legislative authority for 3 additional years. On June 20, 2001, Musharraf named himself as president and was sworn in.
After the World Trade Center and the Pentagon were attacked on September 11, 2001, Musharraf pledged complete cooperation with the United States in counterterrorism efforts, which included locating and shutting down terrorist training camps within Pakistan's borders, cracking down on extremist groups and withdrawing support for the Taliban regime in Afghanistan. In a referendum held on April 30, 2002, Musharraf's presidency was extended by 5 more years. The handover from military to civilian rule came with parliamentary elections in November 2002, and the appointment of a civilian prime minister, Mir Zafarullah Khan Jamali. Having previously promised to give up his army post and become a civilian president, General Musharraf announced in late 2004 that he would retain his military role. In August 2004, Shaukat Aziz was sworn in as prime minister, having won a parliamentary vote of confidence, 191 of 342 votes, in which the opposition abstained.
On October 6, 2007, Musharraf was elected president for a 5-year term. On November 4 he declared a state of emergency, suspending the countrys Constitution and firing the chief justice of the Supreme Court, Iftikhar Muhammad Chaudhry. In November 2007, Musharraf also relinquished his army post.
After the conclusion of a 3-month-long state of emergency, legislative elections were held in February 2008. The elections brought to power former opposition parties, led by the PPP, in a coalition government; Yousuf Gilani was elected prime minister and head of government on March 24, 2008. Musharraf resigned as president on August 18, 2008, as the Parliament prepared for impeachment proceedings. Of the 13 Supreme Court justices whom Musharraf dismissed in November 2007, by the end of 2008, the new government reinstated five under a fresh oath of office. Three other judges either retired or resigned and five remained off the bench. The newly elected government also removed media restrictions adopted during the 2007 state of emergency and lifted curbs on unions imposed during Musharrafs tenure.
Asif Ali Zardari
On September 6, 2008, Asif Ali Zardari, widower of assassinated Pakistan Peoples Party (PPP) leader Benazir Bhutto, was elected president and head of state. The PPP-led coalition government moved forward on long-awaited constitutional reforms. In particular, on April 19, 2010, Zardari signed into law the 18th Amendment to the Pakistani Constitution. The amendment realigns executive powers by restoring the prime minister as the premier civilian official and returning the presidency to its original, more ceremonial role as head of state, which largely eliminates constitutional changes made by former President Musharraf to strengthen the presidency. The reform package also abolishes the two-term limit on prime ministers; restricts the presidents power over judicial appointments; and reorganizes center-province relations, empowering provincial assemblies to elect their own chief ministers. The amendment also renamed the North-West Frontier Province to Khyber-Pakhtunkhwa, which means Khyber side of the land of the Pakhtuns, in a nod to the regions ethnic Pashtun majority.
GOVERNMENT AND POLITICAL ORGANIZATION
The president is chosen for a 5-year term by an electoral college consisting of the Senate, National Assembly, and the provincial assemblies. The prime minister is selected by the National Assembly for a 4-year term. The bicameral parliament--or Majlis-e-Shoora--consists of the Senate (100 seats; members are indirectly elected by provincial assemblies) and the National Assembly (342 seats; 60 seats reserved for women, 10 seats reserved for minorities). Each of the four provinces--Punjab, Sindh, Khyber-Pakhtunkhwa, and Balochistan--has a Chief Minister and provincial assembly. The Northern Areas, Azad Kashmir, and the Federally Administered Tribal Areas (FATA) are administered by the federal government but enjoy considerable autonomy. The cabinet, National Security Council, and governors serve at the president's discretion.
The judicial system comprises a Supreme Court, provincial high courts, and Federal Islamic (or Shari'a) Court. The Supreme Court is Pakistan's highest court. With the 18th Amendment now in place, the president names the most senior Supreme Court justice to be chief justice; also, the courts and Parliaments influence are increased through a new judicial commission to oversee judges appointments. Each province, as well as Islamabad, has a high court, the justices of which are appointed by the president after conferring with the chief justice of the Supreme Court and the provincial chief justice. The judiciary is proscribed from issuing any order contrary to the decisions of the president. Federal Sharia Court hears cases that primarily involve Sharia, or Islamic law. Legislation enacted in 1991 gave legal status to Sharia. Although Sharia was declared the law of the land, it did not replace the existing legal code.
According to the constitution, Pakistan is a federation of four provinces: Balochistan, Khyber-Pakhtunkhwa, Punjab, and Sindh. Governors appointed by the president head the provinces. There is also the Federally Administered Tribal Areas (FATA), comprised of seven agencies, and the Islamabad Capital Territory, which consists of the capital city of Islamabad. These areas and territory are under the jurisdiction of the federal government. The Northern Areas are administered as a de facto "Union Territory" and are treated as an integral part of Pakistan. The Pakistani-administered portion of the disputed Jammu and Kashmir region includes Azad Kashmir, a separate and autonomous government that maintains strong ties to Pakistan.
Principal Government Officials
President (head of state)--Asif Ali Zardari
Prime Minister (head of government)--Yousef Raza Gilani
Minister of Foreign Affairs--Makhdoom Shah Mahmood Qureshi
Ambassador to the U.S.--Husain Haqqani
Ambassador to the UN--Abdullah Hussain Haroon
Pakistan maintains an embassy (web site: Pakistan Embassy in Washington DC, USA welcomes you) in the United States at 3517 International Court NW, Washington, DC 20008 (tel. 202-243-6500). It has consulates in Los Angeles, New York, Chicago, and Houston.
NATIONAL SECURITY
Pakistan has the world's eighth-largest armed forces, which is generally well-trained and disciplined. However, budget constraints and nation-building duties have reduced Pakistan's training tempo, which if not reversed, could affect the operational readiness of the armed forces. Likewise, Pakistan has had an increasingly difficult time maintaining its aging fleet of U.S., Chinese, U.K., and French equipment. While industrial capabilities have expanded significantly, limited budget resources and sanctions have significantly constrained the government's efforts to modernize its armed forces.
Until 1990, the United States provided military aid to Pakistan to modernize its conventional defensive capability. The United States allocated about 40% of its assistance package to non-reimbursable credits for military purchases, the third-largest program behind Israel and Egypt. The remainder of the aid program was devoted to economic assistance. Sanctions put in place in 1990 denied Pakistan further military assistance due to the discovery of its program to develop nuclear weapons. Sanctions were tightened following Pakistan's nuclear tests in response to India's May 1998 tests and the military coup of 1999. Pakistan has remained a non-signatory of the Nuclear Non-Proliferation Treaty.
The events of September 11, 2001, and Pakistan's agreement to support the United States led to a waiver of the sanctions, and military assistance resumed to provide spare parts and equipment to enhance Pakistan's capacity to police its western border with Afghanistan and address its legitimate security concerns. In 2003, President George W. Bush announced that the United States would provide Pakistan with $3 billion in economic and military aid over 5 years. This assistance package commenced during FY 2005.
ECONOMY
The World Bank considers Pakistan a low-income country. GDP is around $166 billion at the official exchange rate. The population numbered some 167 million in 2008 with a 1.81% growth rate. No more than 55.0% of adults are literate, and life expectancy is about 64 years. In FY 2008-2009, the GDP growth rate was 3.7%, and unemployment was estimated at 14%. Year-over-year consumer price inflation averaged 13.6% in 2009. Main inflation drivers include food and utility prices, the Pakistani rupees depreciation versus the U.S. dollar, and higher international commodity prices. Low levels of spending in the social services and high population growth have contributed to persistent poverty and unequal income distribution. Pakistan's extreme poverty and underdevelopment are key concerns, especially in rural areas. The countrys economy remains vulnerable to internal and external shocks due to internal security concerns and the global financial crises.
Reform, Aid, and Debt
Despite its economic and political difficulties, Pakistan has taken some steps over the years to liberalize its trade and investment regimes, either unilaterally or in the context of commitments made with the World Trade Organization (WTO), International Monetary Fund (IMF), and the World Bank. Pakistan has received significant loan/grant assistance from international financial institutions (e.g., the IMF, the World Bank, and the Asian Development Bank (ADB)) and bilateral donors, particularly after it began using its military/financial resources in counterterrorism efforts.
In 2000, the government made significant macroeconomic reforms: privatizing Pakistan's state-subsidized utilities, reforming the banking sector, instituting a world-class anti-money laundering law, cracking down on piracy of intellectual property, and moving to quickly resolve investor disputes. After the September 11, 2001 terrorist attacks in the United States and Pakistan's proclaimed commitment to fighting terror, many international sanctions, particularly those that had been imposed by the United States, were lifted. Pakistan's economic prospects began to increase significantly due to unprecedented inflows of foreign assistance at the end of 2001, and the trend was expected to continue through 2009. In 2002, the United States led Paris Club efforts to reschedule Pakistan's debt on generous terms, and in April 2003 the United States reduced Pakistan's bilateral official debt by $1 billion. In 2004, approximately $500 million more in bilateral debt relief was granted. Foreign exchange reserves and exports grew to record levels after a sharp decline. The IMF lauded Pakistan for its commitment in meeting lender requirements for a $1.3 billion IMF Poverty Reduction and Growth Facility loan, which it completed in 2004, forgoing the final permitted tranche. The Government of Pakistan was successful in issuing sovereign bonds; it issued $600 million in Islamic bonds, putting Pakistan back on the investment map.
On October 8, 2005, a magnitude 7.6 earthquake struck Pakistan, India, and Afghanistan. The epicenter of the earthquake was near Muzaffarabad, the capital of Pakistani-administered Kashmir, and approximately 60 miles north-northeast of Islamabad. An estimated 75,000 people were killed and 2.5 million people were left homeless. The disaster of such a huge magnitude galvanized an international rescue and reconstruction effort in support of the affected region. The earthquake cost Pakistan $1.1 billion in resettling those affected. Despite the 2005 earthquake, GDP growth remained strong at 6.6% in fiscal year 2005-2006. Consumer price inflation eased slightly to an average of 8% in 2005-2006 from 9.3% in 2004-2005.
In 2008, the ratio of total debt and liabilities to GDP, a broad measure of the country's capacity to sustain debt, saw an end to a 7-year declining trend, rising in FY 2008 to 60%. The stock of Pakistan's total debt and liabilities increased by 27% year on year in 2008, to PKR 6,417.4 billion (U.S. $80.7 billion at 79.5 rupees per dollar), with a commensurate deterioration in debt sustainability indicators. The fiscal deficit widened from 5.6% of GDP in 1994-95, to 7.7% in 1997-98, and to 5.4% in 2008-2009. Support for loss-making, state-owned enterprises; fuel subsidies; and a weak domestic tax base have been critical elements in the recurring fiscal deficits.
In October 2008, Pakistan entered into a 23-month Stand-By Arrangement with the IMF in order to keep the country solvent and to support its foreign exchange reserves, which had fallen to precariously low levels. The $11.3 billion IMF loan supports two key objectives of restoring macroeconomic stability and confidence in the economy through a significant tightening of macroeconomic policies and ensuring social stability and adequate support for the poor. Other reforms include improvements in banking and tax legislation, phasing out electricity subsidies, and reducing foreign exchange market intervention by the State Bank of Pakistan. A contingency plan for handling problem banks has been prepared and is being strengthened; an action plan to reform tax policy and administration has been adopted and will be implemented with technical assistance from the IMF and the World Bank.
Pakistan remains dependent on IMF and other international assistance for budgetary support and to keep the country more or less solvent. So far, Pakistan has met some of the IMF benchmarks, most recently implementing a 13.6% increase in electricity prices in January 2010. In 2009, Pakistan also received $2.11 billion in aid from the Friends of Pakistan group of allies, who pledged $5.7 billion in total.
Agriculture and Natural Resources
Pakistan's principal natural resources are arable land, water, hydroelectric potential, and natural gas reserves. About 28% of Pakistan's total land area is under cultivation and is watered by one of the largest irrigation systems in the world. Agriculture accounts for about 21% of GDP and employs about 42% of the labor force. The most important crops are cotton, wheat, rice, sugarcane, fruits, and vegetables, which together account for more than 75% of the value of total crop output. Despite intensive farming practices, Pakistan remains a net food importer. Pakistan exports rice, fish, fruits, and vegetables and imports vegetable oil, wheat, cotton (net importer), pulses, and consumer foods.
The economic importance of agriculture has declined since independence, when its share of GDP was around 53%. Following the poor harvest of 1993, the government introduced agriculture assistance policies, including increased support prices for many agricultural commodities and expanded availability of agricultural credit. From 1993 to 1997, real growth in the agricultural sector averaged 5.7% but declined to 4.7% in FY 2008-2009.
Pakistan has extensive energy resources, including fairly sizable natural gas reserves, some proven oil reserves, coal, and large hydropower potential. However, exploitation of energy resources has been slow due to a shortage of capital and domestic and international political constraints. For instance, domestic gas and petroleum production totals only about half the country's energy needs, and dependence on imported oil contributes to Pakistan's persistent trade deficits and shortage of foreign exchange.
Industry
Pakistan's manufacturing sector accounts for about 25% of GDP. Cotton textile production and apparel manufacturing are Pakistan's largest industries, accounting for about 51.4% of total exports. Other major industries include food processing, beverages, construction materials, clothing, and paper products. Manufacturing sector growth has slowed in the last 2 years due to energy shortages and capacity constraints. However, the sector is forecast to grow 5.5% for FY 2010. Despite government efforts to privatize large-scale parastatal units, the public sector continues to account for a significant proportion of industry. The government seeks to diversify the country's industrial base and bolster export industries. Net foreign investment in Pakistani industries is only 0.5% of GDP. Pakistan's search for additional foreign direct investment has been hampered by concerns about the security situation, domestic and regional political uncertainties, and questions about judicial transparency.
Foreign Trade
Weak world demand for its exports and domestic political uncertainty have contributed to Pakistan's high trade deficits. In FY 2008, the trade deficit was over $15 billion. In the 2008-2009 budget, the Government of Pakistan raised the maximum tariffs from the 20%-25% range to the 30%-35% range on 300 luxury items due to the large trade gap and growing current account deficit. In the 2009-2010 fiscal year, Pakistans trade deficit decreased to $10.92 billion as a result of a decline in imports and a slight increase in exports.
Major imports, which fell to $28.4 billion in 2009, include petroleum and petroleum products, edible oil, wheat, chemicals, fertilizer, capital goods, industrial raw materials, and consumer products. Energy imports account for nearly 30% of Pakistan's imports, and the total gap between electricity supply and demand in Pakistan is over 4,800 megawatts (MW). The ongoing energy crisis and security concerns, together with a decline in global demand, have hampered Pakistans textile-reliant export base. Pakistan's exports continue to be dominated by cotton textiles and apparel, despite government diversification efforts.
FOREIGN RELATIONS
After September 11, 2001, Pakistan's prominence in the international community increased significantly, as it pledged its alliance with the U.S. in counterterrorism efforts and made a commitment to eliminate terrorist camps on its territory. Historically, Pakistan has had difficult and volatile relations with India, long-standing close relations with China, extensive security and economic interests in the Persian Gulf, and wide-ranging bilateral relations with the United States and other Western countries. It expresses a strong desire for a stable Afghanistan.
India
Since partition, relations between Pakistan and India have been characterized by rivalry and suspicion. Although many issues divide the two countries, the most sensitive one since independence has been the status of Kashmir.
At the time of partition, the princely state of Kashmir, though ruled by a Hindu king, had an overwhelmingly Muslim population. When the king hesitated in acceding to either Pakistan or India in 1947, some of his Muslim subjects revolted in favor of joining Pakistan. In exchange for military assistance in containing the revolt, the Kashmiri ruler offered his allegiance to India. Indian troops occupied the eastern portion of Kashmir, including its capital, Srinagar, while the western part came under Pakistani control.
India submitted this dispute to the United Nations on January 1, 1948. One year later, the UN arranged a cease-fire along a line dividing Kashmir but leaving the northern end of the line not demarcated and the Valley of Kashmir (with the majority of the population) under Indian control. India and Pakistan agreed to a UN-supervised plebiscite to determine the state's future. This plebiscite has not occurred because the main precondition, the withdrawal of both nations' forces from Kashmir, has failed to take place. Pakistan has since fought three wars with India over Kashmir, in 1948, 1965, and the Kargil conflict in 1999.
In July 1972, following the 1971 Indo-Pakistan war, which resulted in the creation of an independent Bangladesh, President Zulfiqar Ali Bhutto and Indian Prime Minister Indira Gandhi met in the hill station of Shimla, India, and agreed to a line of control in Kashmir. Both leaders endorsed the principle of settlement of bilateral disputes through peaceful means. In 1974, Pakistan and India agreed to resume postal and telecommunications linkages and to enact measures to facilitate travel. Trade and diplomatic relations were restored in 1976 after a hiatus of 5 years.
India's nuclear test in 1974 generated great uncertainty in Pakistan and is generally acknowledged to have been the impetus for Pakistan's nuclear weapons development program. In 1983, the Pakistani and Indian Governments accused each other of aiding separatists in their respective countries--Sikhs in India's Punjab state and Sindhis in Pakistan's Sindh province. In April 1984, tensions erupted after troops were deployed to the Siachen Glacier, a high-altitude, desolate area close to the Chinese border not demarcated by the cease-fire agreement (Karachi Agreement) signed by Pakistan and India in 1949.
Tensions diminished after Rajiv Gandhi became Prime Minister in November 1984 and after a group of Sikh hijackers was brought to trial by Pakistan in March 1985. In December 1985, President Zia and Prime Minister Gandhi pledged not to attack each other's nuclear facilities. A formal "no attack" agreement was signed in January 1991. In early 1986, the Indian and Pakistani Governments began high-level talks to resolve the Siachen Glacier border dispute and to improve trade.
Bilateral tensions increased in early 1990, when Kashmiri militants began a campaign of violence against Indian Government authority in Jammu and Kashmir. Subsequent high-level bilateral meetings relieved the tensions between India and Pakistan, but relations worsened again after the destruction of the Ayodhya mosque by Hindu extremists in December 1992 and terrorist bombings in Bombay in March 1993. Talks between the Foreign Secretaries of both countries in January 1994 ended in deadlock.
The relationship improved markedly when Indian Prime Minister Vajpayee traveled to Lahore for a summit with Nawaz Sharif in February 1999. There was considerable hope that the meeting could lead to a breakthrough. However, any breakthrough that was made was negated when in spring 1999, infiltrators from Pakistan occupied positions on the Indian side of the Line of Control in the remote, mountainous area of Kashmir near Kargil. By early summer, serious fighting flared in the Kargil sector of Kashmir. The infiltrators withdrew following a meeting between Prime Minister Sharif and President Bill Clinton in July. Subsequently, relations between India and Pakistan became particularly strained during the 1999 coup in Islamabad. Then, on December 13, 2001 just weeks after the September 11, 2001 terrorist attacks in the United States, an attack on India's Parliament further strained this relationship.
The prospects for better relations between India and Pakistan improved in early January 2004 when a summit meeting of the South Asian Association for Regional Cooperation (SAARC) permitted India's Prime Minister Vajpayee to meet with President Musharraf. Both leaders agreed to reestablish the Composite Dialogue to resolve their bilateral disputes. The Composite Dialogue focuses on eight issues: confidence building measures, Kashmir, Wullar barrage, promotion of friendly exchanges, Siachen glacier, Sir creek, terrorism and drug trafficking, and economic and commercial cooperation. The first round in this renewed Composite Dialogue was held in New Delhi on June 27-28, 2004.
Relations further improved when President Musharraf met Indian Prime Minister Manmohan Singh in New York in October 2004. Additional steps aimed at improving relations were announced when Indian Foreign Minister Natwar Singh visited Islamabad in February 2005 and in April 2005 when President Musharraf traveled to India to view a cricket match and hold discussions. In a further display of improved relations, bus service commenced from Pakistan-controlled Kashmir to Srinagar in April 2005. After a destructive earthquake hit the Kashmir region in October 2005, the two countries cooperated with each other to deal with the humanitarian crisis.
However, the July 2008 bombing of the Indian Embassy in Kabul, followed in November 2008 by terrorist attacks in Mumbai, brought the bilateral Composite Dialogue to a halt. Pakistan agreed to foreign secretary-level talks in New Delhi, which occurred February 25, 2010. On April 29, 2010, Singh and Pakistani Prime Minister Yousuf Raza Gilani met on the sidelines of the 16th South Asian Association for Regional Cooperation (SAARC) Summit and signaled they would work toward resuming dialogue. Following the meeting, Pakistani officials assured India that Pakistan would not allow its territory to be used for terrorist activity directed against India. Pakistan also said it would expedite the trial of suspects implicated in the Mumbai attacks.
Afghanistan
Following the 1979 Soviet invasion of Afghanistan, the Pakistani Government played a vital role in supporting the Afghan resistance movement and assisting Afghan refugees. After the Soviet withdrawal in February 1989, Pakistan, with cooperation from the world community, continued to provide extensive support for displaced Afghans. Continued turmoil in Afghanistan prevented the refugees from returning to their country. In 1999, more than 1.2 million registered Afghan refugees remained in Pakistan. Pakistan was one of three countries to recognize the Taliban regime of Afghanistan. International pressure after September 11, 2001, prompted Pakistan to reassess its relations with the Taliban regime and support the U.S. and international coalition in Operation Enduring Freedom to remove the Taliban from power. Pakistan has publicly expressed its support to Afghanistan's President Karzai and has pledged $100 million toward Afghanistan's reconstruction. Both nations are also working to strengthen cooperation and coordination along their shared rugged border.
People's Republic of China
In 1950, Pakistan was among the first countries to recognize the People's Republic of China (P.R.C.). Following the Sino-Indian hostilities of 1962, Pakistan's relations with China became stronger; since then, the countries have regularly exchanged high-level visits resulting in various agreements. China has provided economic, military, and technical assistance to Pakistan. Favorable relations with China have been a pillar of Pakistan's foreign policy. The P.R.C. strongly supported Pakistan's opposition to Soviet involvement in Afghanistan and is perceived by Pakistan as a regional counterweight to India and Russia.
Iran and the Persian Gulf
Historically, Pakistan has had close geopolitical and cultural-religious linkages with Iran. However, strains in the relationship appeared following the Iranian revolution. Pakistan and Iran supported different factions in the Afghan conflict. Also, some Pakistanis suspect Iranian Government support for the sectarian violence that has plagued Pakistan. However, relations between the countries have improved since their policies toward Afghanistan have converged with the fall of the Taliban. Both countries contend that they are on the road to strong and lasting friendly relations.
Pakistan has also provided military personnel to strengthen Gulf-state defenses and to reinforce its own security interests in the area.
U.S.-PAKISTAN RELATIONS
The United States and Pakistan established diplomatic relations in 1947. The U.S. agreement to provide economic and military assistance to Pakistan and the latter's partnership in the Baghdad Pact/CENTO and SEATO strengthened relations between the nations. However, the U.S. suspension of military assistance during the 1965 Indo-Pakistan war generated a widespread feeling in Pakistan that the United States was not a reliable ally. Even though the United States suspended military assistance to both countries involved in the conflict, the suspension of aid affected Pakistan much more severely. Gradually, relations improved, and arms sales were renewed in 1975. Then, in April 1979, the United States cut off economic assistance to Pakistan, except food assistance, as required under the Symington Amendment to the Foreign Assistance Act of 1961, due to concerns about Pakistan's nuclear program.
The Soviet invasion of Afghanistan in December 1979 highlighted the common interest of Pakistan and the United States in peace and stability in South Asia. In 1981, the United States and Pakistan agreed on a $3.2 billion military and economic assistance program aimed at helping Pakistan deal with the heightened threat to security in the region and its economic development needs.
Recognizing national security concerns and accepting Pakistan's assurances that it did not intend to construct a nuclear weapon, Congress waived restrictions (Symington Amendment) on military assistance to Pakistan. In March 1986, the two countries agreed on a second multi-year (FY 1988-93) $4 billion economic development and security assistance program. On October 1, 1990, however, the United States suspended all military assistance and new economic aid to Pakistan under the Pressler Amendment, which required that the President certify annually that Pakistan "does not possess a nuclear explosive device."
Several incidents of violence against American officials and U.S. mission employees in Pakistan have marred the relationship. In November 1979, false rumors that the United States had participated in the seizure of the Grand Mosque in Mecca provoked a mob attack on the U.S. Embassy in Islamabad in which the chancery was set on fire resulting in the loss of life of American and Pakistani staff. In 1989, an attack on the American Center in Islamabad resulted in six Pakistanis being killed in crossfire with the police. In March 1995, two American employees of the consulate in Karachi were killed and one wounded in an attack on the home-to-office shuttle. In November 1997, four U.S. businessmen were brutally murdered while being driven to work in Karachi. In March 2002 a suicide attacker detonated explosives in a church in Islamabad, killing two Americans associated with the Embassy and three others. There were also unsuccessful attacks by terrorists on the Consulate General in Karachi in May 2002. Another bomb was detonated near American and other businesses in Karachi in November 2005, killing three people and wounding 15 others. On March 2, 2006, a suicide bomber detonated a car packed with explosives as a vehicle carrying an American Foreign Service officer passed by on its way to Consulate Karachi. The diplomat, the Consulate's locally-employed driver and three other people were killed in the blast; 52 others were wounded. In September 2008, a truck bomb at Islamabads Marriott Hotel killed three Embassy staff. On April 5, 2010, heavily armed terrorists in two vehicles hurled bombs and fired at security men near Consulate Peshawar, killing four Pakistanis.
The decision by India to conduct nuclear tests in May 1998 and Pakistan's matching response set back U.S. relations in the region, which had seen renewed U.S. Government interest during the second Clinton Administration. A presidential visit scheduled for the first quarter of 1998 was postponed and, under the Glenn Amendment, sanctions restricted the provision of credits, military sales, economic assistance, and loans to the government. The October 1999 overthrow of the democratically elected Sharif government triggered an additional layer of sanctions under Section 508 of the Foreign Appropriations Act, which include restrictions on foreign military financing and economic assistance. U.S. Government assistance to Pakistan was subsequently limited mainly to refugee and counter-narcotics assistance.
The U.S.-Pakistan relationship changed significantly once Pakistan agreed to support the U.S. campaign to eliminate the Taliban in Afghanistan and to join the United States in efforts against terrorism. Since September 2001, Pakistan has provided extensive assistance in counterterrorism efforts by capturing more than 600 al-Qaida members and their allies. The United States has stepped up its economic assistance to Pakistan, providing debt relief and support for a major effort for education reform. During President Musharraf's visit to the United States in 2003, President Bush announced that the United States would provide Pakistan with $3 billion in economic and military aid over 5 years. This assistance package commenced during FY 2005.
Following the region's tragic October 8, 2005 earthquake, the United States responded immediately and generously to Pakistan's call for assistance. The response was consistent with U.S. humanitarian values and our deep commitment to Pakistan. At the subsequent reconstruction conference in Islamabad on November 19, 2005, the U.S. announced a $510 million commitment to Pakistan for earthquake relief and reconstruction, including humanitarian assistance, military support for relief operations, and anticipated U.S. private contributions.
In 2004, the United States recognized closer bilateral ties with Pakistan by designating Pakistan as a Major Non-NATO Ally. President Bush visited Pakistan in March 2006, where he and President Musharraf reaffirmed their shared commitment to a broad and lasting strategic partnership, agreeing to continue their cooperation on a number of issues including: counterterrorism efforts, security in the region, strengthening democratic institutions, trade and investment, education, and earthquake relief and reconstruction. The United States concluded the sale to Pakistan of F-16 aircrafts in late 2006, further reflecting the deepening strategic partnership.
The Barack Obama administration has reaffirmed a U.S. strategic partnership with Pakistan. In particular, the U.S. Congress passed the Kerry-Lugar-Berman (KLB) legislation to authorize $1.5 billion in non-military assistance to Pakistan annually for 5 years, which President Obama signed into law on October 15, 2009.
Along with the passage of KLB, in late October 2009, Secretary of State Hillary Clinton visited Pakistan, setting the stage for a renewed engagement with the Pakistani Government and people. During the Secretarys visit, she and Foreign Minister Mahmood Shah Qureshi agreed to a Strategic Dialogue to be held at the ministerial level for the first time. Following through on this commitment, the Secretary and Foreign Minister Qureshi co-hosted the U.S.-Pakistan Strategic Dialogue on March 24-25, 2010 in Washington, DC.
At the Dialogue, the Pakistani delegations and their U.S. counterparts engaged in sessions on agriculture, defense and security, economic development and finance, social issues, energy and water, and communications. The participants constructed deliverable goals on the issues that are crucial to both countries. In particular, these objectives included agriculture infrastructure assistance through a $30 million allocation; a pledge for the United States to work with Pakistan to make progress in the timely implementation of tax system and energy financing reforms; continued and expanded collaboration on improving quality of and access to education; cooperation on a range of technological advances to include information technologies and telecommunications such as eLearning, eGovernance, telemedicine, and mobile banking; and mapping out progress on natural gas development and agendas for future discussions on water. A letter of intent was also signed to upgrade major road infrastructure in northwest Pakistan, as well as implementation agreements for three thermal power station rehabilitation projects that will aid in combating electricity shortages in the country.
Principal U.S. Embassy Officials
Ambassador--Cameron Munter
Deputy Chief of Mission--Gerald M. Feierstein
Counselor for Political Affairs--Theodore Craig
Counselor for Economic Affairs--Christian DeAngelis
Counselor for Public Affairs--Larry Schwartz
Consul General--Christopher Richard
Defense Attaché--Rear Admiral Michael LeFevre
Consul General, Lahore--Carmela Conroy
Consul General, Peshawar--Elizabeth Rood
Consul General, Karachi--William Martin
Geography
Area: 803,943 sq. km. (310,527 sq. mi.); almost twice the size of California.
Cities: Capital--The city of Islamabad (pop. 800,000) and adjacent Rawalpindi (1,406, 214) comprise the national capital area with a combined population of 3.7 million. Other cities--Karachi (11,624,219) (2005 est.), Lahore (6,310,888) (2005 est.), Faisalabad (1,977,246) and Hyderabad (1,151,274).
People
Nationality: Noun and adjective--Pakistan(i).
Population (July 2008 est.): 167,762,040.
Annual population growth rate (2008 est.): 1.81%.
Ethnic groups: Punjabi, Sindhi, Pashtun, Baloch, Muhajir (i.e., Urdu-speaking immigrants from India and their descendants), Saraiki, and Hazara.
Religions: Muslim 97%; small minorities of Christians, Hindus, and others.
Languages: Urdu (national and official), English, Punjabi, Sindhi, Pashto, Baloch, Hindko, Brahui, Saraiki (Punjabi variant).
Education: Literacy (2005 est.)--49.9%; male 63%; female 36%.
Health: Infant mortality rate (2008 est.)--66.95/1,000. Life expectancy (2008 est.)--men 63.07 yrs., women 65.24 yrs.
Work force (2004 est.): Agriculture--42%; services--38%; industry--20%.
Government
Type: Parliamentary democracy.
Independence: August 14, 1947.
Branches: Executive--president (chief of state), prime minister (head of government). Legislative--bicameral Parliament or Majlis-e-Shoora (100-seat Senate, 342-seat National Assembly). Judicial--Supreme Court, provincial high courts, Federal Islamic (or Shari'a) Court.
Political parties: Pakistan People's Party (PPP), Pakistan Muslim League-Nawaz (PML-N), Awami National Party (ANP), Pakistan Muslim League (PML), Muttahid Majlis-e-Amal (umbrella group) (MMA), and Muttahida Qaumi Movement (MQM).
Suffrage: Universal at 18.
Political subdivisions: 4 provinces (Punjab, Sindh, Balochistan, and Khyber-Pakhtunkhwa (formerly known as the North-West Frontier Province or NWFP)); also the Federally Administered Tribal Areas (composed of 7 tribal agencies--Bajaur, Mohmand, Khyber, Kurram, Orakzai, North Waziristan, and South Waziristan) and the Pakistani-administered portion of the disputed Jammu and Kashmir region (Azad Kashmir and the Northern Areas).
Economy
Real GDP growth rate (2009 est.): 2.7%.
Per capita GDP (year ending 2009, purchasing power parity): $2,600.
Natural resources: Arable land, natural gas, limited oil, substantial hydropower potential, coal, iron ore, copper, salt, limestone.
Agriculture: Products--wheat, cotton, rice, sugarcane, eggs, fruits, vegetables, milk, beef, mutton.
Industry: Types--textiles & apparel, food processing, pharmaceuticals, construction materials, shrimp, fertilizer, and paper products.
Trade (2009 est.): Exports--$17.87 billion: textiles (garments, bed linen, cotton cloth, and yarn), rice, leather goods, sports goods, carpets, rugs, chemicals and manufactures. Major partners (2008)--U.S. 16%, United Arab Emirates 11.7%, Afghanistan 8.6%, U.K. 4.5%, China 4.2%. Imports--$28.31 billion: petroleum, petroleum products, machinery, plastics, paper and paper board, transportation equipment, edible oils, pulses, iron and steel, tea. Major partners (2008)--China 14.1%, Saudi Arabia 12%, U.A.E. 11.2%, Kuwait 5.4%, India 4.8%, U.S. 4.7%, Malaysia 4.1%.
PEOPLE
The majority of Pakistan's population lives in the Indus River valley and in an arc formed by the cities of Faisalabad, Lahore, Rawalpindi/Islamabad, and Peshawar. Although Urdu is an official language of Pakistan, it is spoken as a first language by only 8% of the population; 48% speak Punjabi, 12% Sindhi, 10% Saraiki, 8% Pashto, 3% Baloch, and 3% other. Urdu, Punjabi, Pashto, and Baloch are Indo-European languages. English is the other official language, and is widely used in government, commerce, the officer ranks of the military, and in many institutions of higher learning.
HISTORICAL OVERVIEW
Pakistan, along with parts of western India, contains the archeological remains of an urban civilization dating back 4,500 years. Alexander the Greats empire included the Indus Valley in 326 B.C. His successors founded the Indo-Greek kingdom of Bactria based in what is today Afghanistan and extending to Peshawar. Following the rise of the Central Asian Kushan Empire in later centuries, the Buddhist culture of Afghanistan and Pakistan, centered on the city of Taxila just west of Islamabad, experienced a cultural renaissance known as the Gandhara period.
The arrival of Muslim traders in Sindh also introduced Islam to Pakistan in the 8th century. The collapse of the Mughal Empire in the 18th century provided an opportunity for the English East India Company to extend its control over much of the subcontinent. The Sikh adventurer, Ranjit Singh, carved out a dominion that extended from Kabul to Srinagar and Lahore, encompassing much of the northern area of modern Pakistan. British rule replaced the Sikhs in the first half of the 19th century. In a decision that had far-reaching consequences, the British permitted the Hindu Maharaja of Kashmir, a Sikh appointee, to continue in power.
Pakistan emerged from an extended period of agitation by Muslims in the subcontinent to express their national identity free from British colonial domination as well as domination by what they perceived as a Hindu-controlled Indian National Congress. Muslim anti-colonial leaders formed the All-India Muslim League in 1906. Initially, the League adopted the same objective as the Congress--self-government for India within the British Empire--but Congress and the League were unable to agree on a formula that would ensure the protection of Muslim religious, economic, and political rights.
Pakistan and Partition
The idea of a separate Muslim state in British India first emerged in the 1930s. On March 23, 1940, Muhammad Ali Jinnah, leader of the Muslim League, formally endorsed the "Lahore Resolution," calling for the creation of an independent state in regions where Muslims constituted a majority. At the end of World War II, the United Kingdom moved with increasing urgency to grant India independence. The Congress Party and the Muslim League, however, could not agree on the terms for a Constitution or establishing an interim government. In June 1947, the British Government declared that it would bestow full dominion status upon two successor states--India and Pakistan, formed from areas in the subcontinent in which Muslims were the majority population. Under this arrangement, the various princely states could freely join either India or Pakistan. On August 14, 1947, Pakistan, comprising West Pakistan with the provinces of Punjab, Sindh, Balochistan, and the North-West Frontier Province (now Khyber-Pakhtunkhwa), and East Pakistan with the province of Bengal, became independent. East Pakistan later became the nation of Bangladesh in 1971.
The Maharaja of Kashmir was reluctant to make a decision on accession to either Pakistan or India. However, armed incursions into the state by tribesmen from Khyber-Pakhtunkhwa led him to sign accession papers in 1947 and allow Indian troops into the state. The Government of Pakistan, however, refused to recognize the accession and campaigned to reverse the decision. The status of Kashmir remains in dispute to this day.
Independence
With the death in 1948 of its first head of state, Muhammad Ali Jinnah, and the assassination in 1951 of its first prime minister, Liaqat Ali Khan, political instability and economic difficulty became prominent features of post-independence Pakistan. On October 7, 1958, President Iskander Mirza, with the support of the army, suspended the 1956 Constitution, imposed martial law, and canceled the elections scheduled for January 1959. Twenty days later, the military sent Mirza into exile to Britain, and Gen. Mohammad Ayub Khan assumed control of a military dictatorship. After Pakistan's loss in the 1965 war against India, Ayub Khan's power declined. Subsequent political and economic grievances inspired agitation movements that compelled his resignation in March 1969. He handed over responsibility for governing to the commander in chief of the army, General Agha Mohammed Yahya Khan, who became President and Chief Martial Law Administrator.
General elections held in December 1970 polarized relations between the eastern and western sections of Pakistan. The Awami League, which advocated autonomy for the more populous East Pakistan, swept the East Pakistan seats to gain a majority in Pakistan as a whole. The Pakistan Peoples Party (PPP), founded and led by Ayub Khan's former Foreign Minister Zulfikar Ali Bhutto, won a majority of the seats in West Pakistan, but the country was completely split with neither major party having any support in the other area. Negotiations to form a coalition government broke down. On March 26, 1971, following a bloody crackdown by the Pakistan Army, Bengali nationalists declared an independent People's Republic of Bangladesh. As fighting grew between the army and the Bengalis, an estimated 10 million Bengalis sought refuge in India. On April 17, 1971, Bengali nationalists formed a provisional government in an area bordering India, and in November 1971, India sent its military into East Pakistan to intervene on the side of the Bangladeshis. On December 16, Pakistani forces surrendered in Dhaka, and East Pakistan became the new nation of Bangladesh. Yahya Khan then resigned the presidency and handed over leadership of the western part of Pakistan to Bhutto, who became President and the first civilian Chief Martial Law Administrator.
Bhutto moved decisively to restore national confidence and pursued an active foreign policy, taking a leading role in Islamic and Third World forums. Although Pakistan did not formally join the Non-Aligned Movement until 1979, the position of the Bhutto government coincided largely with that of the non-aligned nations. Domestically, Bhutto pursued a populist agenda and nationalized major industries and the banking system. In 1973, he promulgated a new Constitution accepted by most political elements and relinquished the presidency to become prime minister. Although Bhutto continued his populist and socialist rhetoric, he increasingly relied on Pakistan's urban industrialists and rural landlords. Over time the economy stagnated, largely as a result of the dislocation and uncertainty produced by Bhutto's frequently changing economic policies. When Bhutto proclaimed his own victory in the March 1977 national elections, the opposition Pakistan National Alliance (PNA) denounced the results as fraudulent and demanded new elections. Bhutto resisted and later arrested the PNA leadership.
Muhammad Zia ul-Haq
With the increasing anti-government unrest, the army grew restive. On July 5, 1977, the military removed Bhutto from power and arrested him, declared martial law, and suspended portions of the 1973 Constitution. Chief of Army Staff Gen. Muhammad Zia ul-Haq became Chief Martial Law Administrator and promised to hold new elections within 3 months.
Zia released Bhutto and asserted that he could contest new elections scheduled for October 1977. After it became clear that Bhutto's popularity had survived his government, Zia then postponed the elections and began criminal investigations of the senior PPP leadership. Subsequently, Bhutto was convicted and sentenced to death for an alleged conspiracy to murder a political opponent. Despite international appeals on his behalf, Bhutto was hanged on April 6, 1979.
Zia assumed the presidency and called for elections in November. However, fearful of a PPP victory, Zia banned political activity in October 1979, and postponed national elections. He also passed into law the Hudood Ordinance, which implemented harsh Quranic punishments for violations of Shari'a (Islamic law).
In 1980, most center and left parties, led by the PPP, formed the Movement for the Restoration of Democracy (MRD). The MRD demanded Zia's resignation, an end to martial law, new elections, and restoration of the Constitution, as it existed before Zia's takeover. In early December 1984, President Zia proclaimed a national referendum for December 19 on his "Islamization" program. After non-party based polls were held for the National and Provincial Assemblies in 1985, President Zia appointed Muhammad Khan Junejo as the Prime Minister. He implicitly linked approval of "Islamization" with a mandate for his continued presidency. Zia's opponents, led by the MRD, boycotted the elections. When the government claimed a 63% turnout, with more than 90% approving the referendum, many observers questioned the figures.
Sharif and Bhutto Civilian Governments
On August 17, 1988, a plane carrying President Zia, American Ambassador Arnold Raphel, U.S. Brig. General Herbert Wassom, and 28 Pakistani military officers crashed on a return flight from a military equipment trial near Bahawalpur, killing all on board. In accordance with the Constitution, Chairman of the Senate Ghulam Ishaq Khan became Acting President and announced that elections scheduled for November 1988 would take place. Elections were held on a party basis. On one side was an eight-party alliance and on the other, the PPP. The PPP won 94 seats out of 207 and the Islamic Democratic Alliance (IJI) won 54. Muhammad Khan Junejo lost his home constituency. The president was bound to invite the PPP to form the government. However, Khan delayed doing so for 2 weeks in order to give the IJI time to muster the support of other groups. Ultimately, the president asked PPP Co-chairperson Benazir Bhutto to form a government.
The PPP, under Benazir Bhutto's leadership, succeeded in forming a coalition government with several smaller parties, including the Muttahida Qaumi Movement (MQM).
Differing interpretations of constitutional authority, debates over the powers of the central government relative to those of the provinces, and the antagonistic relationship between the Bhutto administration and opposition governments in Punjab and Balochistan seriously impeded social and economic reform programs. Ethnic conflict, primarily in Sindh province, exacerbated these problems. A fragmentation in the governing coalition and the military's reluctance to support an apparently ineffectual and corrupt government were accompanied by a significant deterioration in law and order.
In August 1990, President Khan, citing his powers under the eighth amendment to the Constitution, dismissed the Bhutto government and dissolved the national and provincial assemblies. New elections in October 1990 confirmed the political ascendancy of the IJI. In addition to a two-thirds majority in the National Assembly, the alliance won control of all four provincial parliaments and enjoyed the support of the military and of President Khan. Muhammad Nawaz Sharif, as leader of the PML, the most prominent party in the IJI, was elected prime minister by the National Assembly.
Sharif emerged as the most secure and powerful Pakistani prime minister since the mid-1970s. Under his rule, the IJI achieved several important political victories. Sharif's economic reform program of privatization, deregulation, and encouragement of private sector economic growth greatly improved Pakistan's economic performance and business climate. The passage into law in May 1991 of a Shari'a bill, providing for widespread Islamization, legitimized the IJI government among much of Pakistani society.
However, Nawaz Sharif was not able to reconcile the different objectives of IJI's constituent parties. The largest religious party, Jamaat-i-Islami (JI), abandoned the alliance because of its antagonism to what it regarded as PML hegemony. The government was weakened further by the military's suppression of the MQM, which had entered into coalition with the IJI to contain PPP influence, and allegations of corruption directed at Nawaz Sharif. In April 1993, President Khan, citing "maladministration, corruption, and nepotism" and espousal of political violence, dismissed the Sharif government. The following month, however, the Pakistan Supreme Court reinstated the National Assembly and the Nawaz Sharif government. Continued tensions between Sharif and Khan resulted in governmental gridlock and the Chief of Army Staff brokered an arrangement under which both the President and the Prime Minister resigned their offices in July 1993.
An interim government, headed by Moeen Qureshi took office with a mandate to hold national and provincial assembly elections in October. Despite its brief term, the Qureshi government adopted political, economic, and social reforms that generated considerable domestic support and foreign admiration.
In the October 1993 elections, the PPP won a plurality of seats in the National Assembly, and Benazir Bhutto was asked to form a government. However, because it did not acquire a majority in the National Assembly, the PPP's control of the government depended upon the continued support of numerous independent parties, particularly the PML/J (Pakistan Muslim League-Junejo). The unfavorable circumstances surrounding PPP rule--the imperative of preserving a coalition government, the formidable opposition of Nawaz Sharif's PML/N (Pakistani Muslim League-Nawaz) movement, and the insecure provincial administrations--presented significant difficulties for the government of Prime Minister Bhutto. Despite these conditions, the election of Prime Minister Bhutto's close associate, Farooq Leghari, as President in November 1993 gave her a stronger power base.
In November 1996, President Leghari dismissed the Bhutto government, charging it with corruption, mismanagement of the economy, and implication in extrajudicial killings in Karachi. Elections in February 1997, resulted in an overwhelming victory for the PML/N, and President Leghari called upon Nawaz Sharif to form a government. In March 1997, with the unanimous support of the National Assembly, Sharif amended the Constitution, stripping the President of the power to dismiss the government and making his power to appoint military service chiefs and provincial governors contingent on the "advice" of the Prime Minister. Another amendment prohibited elected members from "floor crossing" or voting against party positions. The Sharif government also engaged in a protracted dispute with the judiciary, culminating in the storming of the Supreme Court by ruling party loyalists and the engineered dismissal of the Chief Justice and the resignation of President Leghari in December 1997.
The new President elected by Parliament, Rafiq Tarar, was a close associate of the Prime Minister. A one-sided, anti-corruption campaign was used to target opposition politicians and critics of the regime. Similarly, the government moved to restrict press criticism and ordered the arrest and beating of prominent journalists. As domestic criticism of Sharif's administration intensified, Sharif attempted to replace Chief of Army Staff General Pervez Musharraf on October 12, 1999, with a family loyalist, Director General of the Interservice Intelligence Directorate, Lt. Gen. Ziauddin. Although General Musharraf was out of the country at the time, the army moved quickly to depose Sharif.
Pervez Musharraf
Following the October 12, 1999 nonviolent coup and subsequent ouster of the government of Prime Minister Nawaz Sharif, the military-led government stated its intention to restructure the political and electoral systems. On October 14, 1999, General Pervez Musharraf declared a state of emergency and issued the Provisional Constitutional Order (PCO), which suspended the federal and provincial Parliaments, held the Constitution in abeyance, and designated Musharraf as Chief Executive. Musharraf appointed an eight-member National Security Council to function as Pakistan's supreme governing body, with mixed military/civilian appointees; a civilian Cabinet; and a National Reconstruction Bureau to formulate structural reforms. On May 12, 2000, Pakistan's Supreme Court unanimously validated the October 1999 coup and granted Musharraf executive and legislative authority for 3 additional years. On June 20, 2001, Musharraf named himself as president and was sworn in.
After the World Trade Center and the Pentagon were attacked on September 11, 2001, Musharraf pledged complete cooperation with the United States in counterterrorism efforts, which included locating and shutting down terrorist training camps within Pakistan's borders, cracking down on extremist groups and withdrawing support for the Taliban regime in Afghanistan. In a referendum held on April 30, 2002, Musharraf's presidency was extended by 5 more years. The handover from military to civilian rule came with parliamentary elections in November 2002, and the appointment of a civilian prime minister, Mir Zafarullah Khan Jamali. Having previously promised to give up his army post and become a civilian president, General Musharraf announced in late 2004 that he would retain his military role. In August 2004, Shaukat Aziz was sworn in as prime minister, having won a parliamentary vote of confidence, 191 of 342 votes, in which the opposition abstained.
On October 6, 2007, Musharraf was elected president for a 5-year term. On November 4 he declared a state of emergency, suspending the countrys Constitution and firing the chief justice of the Supreme Court, Iftikhar Muhammad Chaudhry. In November 2007, Musharraf also relinquished his army post.
After the conclusion of a 3-month-long state of emergency, legislative elections were held in February 2008. The elections brought to power former opposition parties, led by the PPP, in a coalition government; Yousuf Gilani was elected prime minister and head of government on March 24, 2008. Musharraf resigned as president on August 18, 2008, as the Parliament prepared for impeachment proceedings. Of the 13 Supreme Court justices whom Musharraf dismissed in November 2007, by the end of 2008, the new government reinstated five under a fresh oath of office. Three other judges either retired or resigned and five remained off the bench. The newly elected government also removed media restrictions adopted during the 2007 state of emergency and lifted curbs on unions imposed during Musharrafs tenure.
Asif Ali Zardari
On September 6, 2008, Asif Ali Zardari, widower of assassinated Pakistan Peoples Party (PPP) leader Benazir Bhutto, was elected president and head of state. The PPP-led coalition government moved forward on long-awaited constitutional reforms. In particular, on April 19, 2010, Zardari signed into law the 18th Amendment to the Pakistani Constitution. The amendment realigns executive powers by restoring the prime minister as the premier civilian official and returning the presidency to its original, more ceremonial role as head of state, which largely eliminates constitutional changes made by former President Musharraf to strengthen the presidency. The reform package also abolishes the two-term limit on prime ministers; restricts the presidents power over judicial appointments; and reorganizes center-province relations, empowering provincial assemblies to elect their own chief ministers. The amendment also renamed the North-West Frontier Province to Khyber-Pakhtunkhwa, which means Khyber side of the land of the Pakhtuns, in a nod to the regions ethnic Pashtun majority.
GOVERNMENT AND POLITICAL ORGANIZATION
The president is chosen for a 5-year term by an electoral college consisting of the Senate, National Assembly, and the provincial assemblies. The prime minister is selected by the National Assembly for a 4-year term. The bicameral parliament--or Majlis-e-Shoora--consists of the Senate (100 seats; members are indirectly elected by provincial assemblies) and the National Assembly (342 seats; 60 seats reserved for women, 10 seats reserved for minorities). Each of the four provinces--Punjab, Sindh, Khyber-Pakhtunkhwa, and Balochistan--has a Chief Minister and provincial assembly. The Northern Areas, Azad Kashmir, and the Federally Administered Tribal Areas (FATA) are administered by the federal government but enjoy considerable autonomy. The cabinet, National Security Council, and governors serve at the president's discretion.
The judicial system comprises a Supreme Court, provincial high courts, and Federal Islamic (or Shari'a) Court. The Supreme Court is Pakistan's highest court. With the 18th Amendment now in place, the president names the most senior Supreme Court justice to be chief justice; also, the courts and Parliaments influence are increased through a new judicial commission to oversee judges appointments. Each province, as well as Islamabad, has a high court, the justices of which are appointed by the president after conferring with the chief justice of the Supreme Court and the provincial chief justice. The judiciary is proscribed from issuing any order contrary to the decisions of the president. Federal Sharia Court hears cases that primarily involve Sharia, or Islamic law. Legislation enacted in 1991 gave legal status to Sharia. Although Sharia was declared the law of the land, it did not replace the existing legal code.
According to the constitution, Pakistan is a federation of four provinces: Balochistan, Khyber-Pakhtunkhwa, Punjab, and Sindh. Governors appointed by the president head the provinces. There is also the Federally Administered Tribal Areas (FATA), comprised of seven agencies, and the Islamabad Capital Territory, which consists of the capital city of Islamabad. These areas and territory are under the jurisdiction of the federal government. The Northern Areas are administered as a de facto "Union Territory" and are treated as an integral part of Pakistan. The Pakistani-administered portion of the disputed Jammu and Kashmir region includes Azad Kashmir, a separate and autonomous government that maintains strong ties to Pakistan.
Principal Government Officials
President (head of state)--Asif Ali Zardari
Prime Minister (head of government)--Yousef Raza Gilani
Minister of Foreign Affairs--Makhdoom Shah Mahmood Qureshi
Ambassador to the U.S.--Husain Haqqani
Ambassador to the UN--Abdullah Hussain Haroon
Pakistan maintains an embassy (web site: Pakistan Embassy in Washington DC, USA welcomes you) in the United States at 3517 International Court NW, Washington, DC 20008 (tel. 202-243-6500). It has consulates in Los Angeles, New York, Chicago, and Houston.
NATIONAL SECURITY
Pakistan has the world's eighth-largest armed forces, which is generally well-trained and disciplined. However, budget constraints and nation-building duties have reduced Pakistan's training tempo, which if not reversed, could affect the operational readiness of the armed forces. Likewise, Pakistan has had an increasingly difficult time maintaining its aging fleet of U.S., Chinese, U.K., and French equipment. While industrial capabilities have expanded significantly, limited budget resources and sanctions have significantly constrained the government's efforts to modernize its armed forces.
Until 1990, the United States provided military aid to Pakistan to modernize its conventional defensive capability. The United States allocated about 40% of its assistance package to non-reimbursable credits for military purchases, the third-largest program behind Israel and Egypt. The remainder of the aid program was devoted to economic assistance. Sanctions put in place in 1990 denied Pakistan further military assistance due to the discovery of its program to develop nuclear weapons. Sanctions were tightened following Pakistan's nuclear tests in response to India's May 1998 tests and the military coup of 1999. Pakistan has remained a non-signatory of the Nuclear Non-Proliferation Treaty.
The events of September 11, 2001, and Pakistan's agreement to support the United States led to a waiver of the sanctions, and military assistance resumed to provide spare parts and equipment to enhance Pakistan's capacity to police its western border with Afghanistan and address its legitimate security concerns. In 2003, President George W. Bush announced that the United States would provide Pakistan with $3 billion in economic and military aid over 5 years. This assistance package commenced during FY 2005.
ECONOMY
The World Bank considers Pakistan a low-income country. GDP is around $166 billion at the official exchange rate. The population numbered some 167 million in 2008 with a 1.81% growth rate. No more than 55.0% of adults are literate, and life expectancy is about 64 years. In FY 2008-2009, the GDP growth rate was 3.7%, and unemployment was estimated at 14%. Year-over-year consumer price inflation averaged 13.6% in 2009. Main inflation drivers include food and utility prices, the Pakistani rupees depreciation versus the U.S. dollar, and higher international commodity prices. Low levels of spending in the social services and high population growth have contributed to persistent poverty and unequal income distribution. Pakistan's extreme poverty and underdevelopment are key concerns, especially in rural areas. The countrys economy remains vulnerable to internal and external shocks due to internal security concerns and the global financial crises.
Reform, Aid, and Debt
Despite its economic and political difficulties, Pakistan has taken some steps over the years to liberalize its trade and investment regimes, either unilaterally or in the context of commitments made with the World Trade Organization (WTO), International Monetary Fund (IMF), and the World Bank. Pakistan has received significant loan/grant assistance from international financial institutions (e.g., the IMF, the World Bank, and the Asian Development Bank (ADB)) and bilateral donors, particularly after it began using its military/financial resources in counterterrorism efforts.
In 2000, the government made significant macroeconomic reforms: privatizing Pakistan's state-subsidized utilities, reforming the banking sector, instituting a world-class anti-money laundering law, cracking down on piracy of intellectual property, and moving to quickly resolve investor disputes. After the September 11, 2001 terrorist attacks in the United States and Pakistan's proclaimed commitment to fighting terror, many international sanctions, particularly those that had been imposed by the United States, were lifted. Pakistan's economic prospects began to increase significantly due to unprecedented inflows of foreign assistance at the end of 2001, and the trend was expected to continue through 2009. In 2002, the United States led Paris Club efforts to reschedule Pakistan's debt on generous terms, and in April 2003 the United States reduced Pakistan's bilateral official debt by $1 billion. In 2004, approximately $500 million more in bilateral debt relief was granted. Foreign exchange reserves and exports grew to record levels after a sharp decline. The IMF lauded Pakistan for its commitment in meeting lender requirements for a $1.3 billion IMF Poverty Reduction and Growth Facility loan, which it completed in 2004, forgoing the final permitted tranche. The Government of Pakistan was successful in issuing sovereign bonds; it issued $600 million in Islamic bonds, putting Pakistan back on the investment map.
On October 8, 2005, a magnitude 7.6 earthquake struck Pakistan, India, and Afghanistan. The epicenter of the earthquake was near Muzaffarabad, the capital of Pakistani-administered Kashmir, and approximately 60 miles north-northeast of Islamabad. An estimated 75,000 people were killed and 2.5 million people were left homeless. The disaster of such a huge magnitude galvanized an international rescue and reconstruction effort in support of the affected region. The earthquake cost Pakistan $1.1 billion in resettling those affected. Despite the 2005 earthquake, GDP growth remained strong at 6.6% in fiscal year 2005-2006. Consumer price inflation eased slightly to an average of 8% in 2005-2006 from 9.3% in 2004-2005.
In 2008, the ratio of total debt and liabilities to GDP, a broad measure of the country's capacity to sustain debt, saw an end to a 7-year declining trend, rising in FY 2008 to 60%. The stock of Pakistan's total debt and liabilities increased by 27% year on year in 2008, to PKR 6,417.4 billion (U.S. $80.7 billion at 79.5 rupees per dollar), with a commensurate deterioration in debt sustainability indicators. The fiscal deficit widened from 5.6% of GDP in 1994-95, to 7.7% in 1997-98, and to 5.4% in 2008-2009. Support for loss-making, state-owned enterprises; fuel subsidies; and a weak domestic tax base have been critical elements in the recurring fiscal deficits.
In October 2008, Pakistan entered into a 23-month Stand-By Arrangement with the IMF in order to keep the country solvent and to support its foreign exchange reserves, which had fallen to precariously low levels. The $11.3 billion IMF loan supports two key objectives of restoring macroeconomic stability and confidence in the economy through a significant tightening of macroeconomic policies and ensuring social stability and adequate support for the poor. Other reforms include improvements in banking and tax legislation, phasing out electricity subsidies, and reducing foreign exchange market intervention by the State Bank of Pakistan. A contingency plan for handling problem banks has been prepared and is being strengthened; an action plan to reform tax policy and administration has been adopted and will be implemented with technical assistance from the IMF and the World Bank.
Pakistan remains dependent on IMF and other international assistance for budgetary support and to keep the country more or less solvent. So far, Pakistan has met some of the IMF benchmarks, most recently implementing a 13.6% increase in electricity prices in January 2010. In 2009, Pakistan also received $2.11 billion in aid from the Friends of Pakistan group of allies, who pledged $5.7 billion in total.
Agriculture and Natural Resources
Pakistan's principal natural resources are arable land, water, hydroelectric potential, and natural gas reserves. About 28% of Pakistan's total land area is under cultivation and is watered by one of the largest irrigation systems in the world. Agriculture accounts for about 21% of GDP and employs about 42% of the labor force. The most important crops are cotton, wheat, rice, sugarcane, fruits, and vegetables, which together account for more than 75% of the value of total crop output. Despite intensive farming practices, Pakistan remains a net food importer. Pakistan exports rice, fish, fruits, and vegetables and imports vegetable oil, wheat, cotton (net importer), pulses, and consumer foods.
The economic importance of agriculture has declined since independence, when its share of GDP was around 53%. Following the poor harvest of 1993, the government introduced agriculture assistance policies, including increased support prices for many agricultural commodities and expanded availability of agricultural credit. From 1993 to 1997, real growth in the agricultural sector averaged 5.7% but declined to 4.7% in FY 2008-2009.
Pakistan has extensive energy resources, including fairly sizable natural gas reserves, some proven oil reserves, coal, and large hydropower potential. However, exploitation of energy resources has been slow due to a shortage of capital and domestic and international political constraints. For instance, domestic gas and petroleum production totals only about half the country's energy needs, and dependence on imported oil contributes to Pakistan's persistent trade deficits and shortage of foreign exchange.
Industry
Pakistan's manufacturing sector accounts for about 25% of GDP. Cotton textile production and apparel manufacturing are Pakistan's largest industries, accounting for about 51.4% of total exports. Other major industries include food processing, beverages, construction materials, clothing, and paper products. Manufacturing sector growth has slowed in the last 2 years due to energy shortages and capacity constraints. However, the sector is forecast to grow 5.5% for FY 2010. Despite government efforts to privatize large-scale parastatal units, the public sector continues to account for a significant proportion of industry. The government seeks to diversify the country's industrial base and bolster export industries. Net foreign investment in Pakistani industries is only 0.5% of GDP. Pakistan's search for additional foreign direct investment has been hampered by concerns about the security situation, domestic and regional political uncertainties, and questions about judicial transparency.
Foreign Trade
Weak world demand for its exports and domestic political uncertainty have contributed to Pakistan's high trade deficits. In FY 2008, the trade deficit was over $15 billion. In the 2008-2009 budget, the Government of Pakistan raised the maximum tariffs from the 20%-25% range to the 30%-35% range on 300 luxury items due to the large trade gap and growing current account deficit. In the 2009-2010 fiscal year, Pakistans trade deficit decreased to $10.92 billion as a result of a decline in imports and a slight increase in exports.
Major imports, which fell to $28.4 billion in 2009, include petroleum and petroleum products, edible oil, wheat, chemicals, fertilizer, capital goods, industrial raw materials, and consumer products. Energy imports account for nearly 30% of Pakistan's imports, and the total gap between electricity supply and demand in Pakistan is over 4,800 megawatts (MW). The ongoing energy crisis and security concerns, together with a decline in global demand, have hampered Pakistans textile-reliant export base. Pakistan's exports continue to be dominated by cotton textiles and apparel, despite government diversification efforts.
FOREIGN RELATIONS
After September 11, 2001, Pakistan's prominence in the international community increased significantly, as it pledged its alliance with the U.S. in counterterrorism efforts and made a commitment to eliminate terrorist camps on its territory. Historically, Pakistan has had difficult and volatile relations with India, long-standing close relations with China, extensive security and economic interests in the Persian Gulf, and wide-ranging bilateral relations with the United States and other Western countries. It expresses a strong desire for a stable Afghanistan.
India
Since partition, relations between Pakistan and India have been characterized by rivalry and suspicion. Although many issues divide the two countries, the most sensitive one since independence has been the status of Kashmir.
At the time of partition, the princely state of Kashmir, though ruled by a Hindu king, had an overwhelmingly Muslim population. When the king hesitated in acceding to either Pakistan or India in 1947, some of his Muslim subjects revolted in favor of joining Pakistan. In exchange for military assistance in containing the revolt, the Kashmiri ruler offered his allegiance to India. Indian troops occupied the eastern portion of Kashmir, including its capital, Srinagar, while the western part came under Pakistani control.
India submitted this dispute to the United Nations on January 1, 1948. One year later, the UN arranged a cease-fire along a line dividing Kashmir but leaving the northern end of the line not demarcated and the Valley of Kashmir (with the majority of the population) under Indian control. India and Pakistan agreed to a UN-supervised plebiscite to determine the state's future. This plebiscite has not occurred because the main precondition, the withdrawal of both nations' forces from Kashmir, has failed to take place. Pakistan has since fought three wars with India over Kashmir, in 1948, 1965, and the Kargil conflict in 1999.
In July 1972, following the 1971 Indo-Pakistan war, which resulted in the creation of an independent Bangladesh, President Zulfiqar Ali Bhutto and Indian Prime Minister Indira Gandhi met in the hill station of Shimla, India, and agreed to a line of control in Kashmir. Both leaders endorsed the principle of settlement of bilateral disputes through peaceful means. In 1974, Pakistan and India agreed to resume postal and telecommunications linkages and to enact measures to facilitate travel. Trade and diplomatic relations were restored in 1976 after a hiatus of 5 years.
India's nuclear test in 1974 generated great uncertainty in Pakistan and is generally acknowledged to have been the impetus for Pakistan's nuclear weapons development program. In 1983, the Pakistani and Indian Governments accused each other of aiding separatists in their respective countries--Sikhs in India's Punjab state and Sindhis in Pakistan's Sindh province. In April 1984, tensions erupted after troops were deployed to the Siachen Glacier, a high-altitude, desolate area close to the Chinese border not demarcated by the cease-fire agreement (Karachi Agreement) signed by Pakistan and India in 1949.
Tensions diminished after Rajiv Gandhi became Prime Minister in November 1984 and after a group of Sikh hijackers was brought to trial by Pakistan in March 1985. In December 1985, President Zia and Prime Minister Gandhi pledged not to attack each other's nuclear facilities. A formal "no attack" agreement was signed in January 1991. In early 1986, the Indian and Pakistani Governments began high-level talks to resolve the Siachen Glacier border dispute and to improve trade.
Bilateral tensions increased in early 1990, when Kashmiri militants began a campaign of violence against Indian Government authority in Jammu and Kashmir. Subsequent high-level bilateral meetings relieved the tensions between India and Pakistan, but relations worsened again after the destruction of the Ayodhya mosque by Hindu extremists in December 1992 and terrorist bombings in Bombay in March 1993. Talks between the Foreign Secretaries of both countries in January 1994 ended in deadlock.
The relationship improved markedly when Indian Prime Minister Vajpayee traveled to Lahore for a summit with Nawaz Sharif in February 1999. There was considerable hope that the meeting could lead to a breakthrough. However, any breakthrough that was made was negated when in spring 1999, infiltrators from Pakistan occupied positions on the Indian side of the Line of Control in the remote, mountainous area of Kashmir near Kargil. By early summer, serious fighting flared in the Kargil sector of Kashmir. The infiltrators withdrew following a meeting between Prime Minister Sharif and President Bill Clinton in July. Subsequently, relations between India and Pakistan became particularly strained during the 1999 coup in Islamabad. Then, on December 13, 2001 just weeks after the September 11, 2001 terrorist attacks in the United States, an attack on India's Parliament further strained this relationship.
The prospects for better relations between India and Pakistan improved in early January 2004 when a summit meeting of the South Asian Association for Regional Cooperation (SAARC) permitted India's Prime Minister Vajpayee to meet with President Musharraf. Both leaders agreed to reestablish the Composite Dialogue to resolve their bilateral disputes. The Composite Dialogue focuses on eight issues: confidence building measures, Kashmir, Wullar barrage, promotion of friendly exchanges, Siachen glacier, Sir creek, terrorism and drug trafficking, and economic and commercial cooperation. The first round in this renewed Composite Dialogue was held in New Delhi on June 27-28, 2004.
Relations further improved when President Musharraf met Indian Prime Minister Manmohan Singh in New York in October 2004. Additional steps aimed at improving relations were announced when Indian Foreign Minister Natwar Singh visited Islamabad in February 2005 and in April 2005 when President Musharraf traveled to India to view a cricket match and hold discussions. In a further display of improved relations, bus service commenced from Pakistan-controlled Kashmir to Srinagar in April 2005. After a destructive earthquake hit the Kashmir region in October 2005, the two countries cooperated with each other to deal with the humanitarian crisis.
However, the July 2008 bombing of the Indian Embassy in Kabul, followed in November 2008 by terrorist attacks in Mumbai, brought the bilateral Composite Dialogue to a halt. Pakistan agreed to foreign secretary-level talks in New Delhi, which occurred February 25, 2010. On April 29, 2010, Singh and Pakistani Prime Minister Yousuf Raza Gilani met on the sidelines of the 16th South Asian Association for Regional Cooperation (SAARC) Summit and signaled they would work toward resuming dialogue. Following the meeting, Pakistani officials assured India that Pakistan would not allow its territory to be used for terrorist activity directed against India. Pakistan also said it would expedite the trial of suspects implicated in the Mumbai attacks.
Afghanistan
Following the 1979 Soviet invasion of Afghanistan, the Pakistani Government played a vital role in supporting the Afghan resistance movement and assisting Afghan refugees. After the Soviet withdrawal in February 1989, Pakistan, with cooperation from the world community, continued to provide extensive support for displaced Afghans. Continued turmoil in Afghanistan prevented the refugees from returning to their country. In 1999, more than 1.2 million registered Afghan refugees remained in Pakistan. Pakistan was one of three countries to recognize the Taliban regime of Afghanistan. International pressure after September 11, 2001, prompted Pakistan to reassess its relations with the Taliban regime and support the U.S. and international coalition in Operation Enduring Freedom to remove the Taliban from power. Pakistan has publicly expressed its support to Afghanistan's President Karzai and has pledged $100 million toward Afghanistan's reconstruction. Both nations are also working to strengthen cooperation and coordination along their shared rugged border.
People's Republic of China
In 1950, Pakistan was among the first countries to recognize the People's Republic of China (P.R.C.). Following the Sino-Indian hostilities of 1962, Pakistan's relations with China became stronger; since then, the countries have regularly exchanged high-level visits resulting in various agreements. China has provided economic, military, and technical assistance to Pakistan. Favorable relations with China have been a pillar of Pakistan's foreign policy. The P.R.C. strongly supported Pakistan's opposition to Soviet involvement in Afghanistan and is perceived by Pakistan as a regional counterweight to India and Russia.
Iran and the Persian Gulf
Historically, Pakistan has had close geopolitical and cultural-religious linkages with Iran. However, strains in the relationship appeared following the Iranian revolution. Pakistan and Iran supported different factions in the Afghan conflict. Also, some Pakistanis suspect Iranian Government support for the sectarian violence that has plagued Pakistan. However, relations between the countries have improved since their policies toward Afghanistan have converged with the fall of the Taliban. Both countries contend that they are on the road to strong and lasting friendly relations.
Pakistan has also provided military personnel to strengthen Gulf-state defenses and to reinforce its own security interests in the area.
U.S.-PAKISTAN RELATIONS
The United States and Pakistan established diplomatic relations in 1947. The U.S. agreement to provide economic and military assistance to Pakistan and the latter's partnership in the Baghdad Pact/CENTO and SEATO strengthened relations between the nations. However, the U.S. suspension of military assistance during the 1965 Indo-Pakistan war generated a widespread feeling in Pakistan that the United States was not a reliable ally. Even though the United States suspended military assistance to both countries involved in the conflict, the suspension of aid affected Pakistan much more severely. Gradually, relations improved, and arms sales were renewed in 1975. Then, in April 1979, the United States cut off economic assistance to Pakistan, except food assistance, as required under the Symington Amendment to the Foreign Assistance Act of 1961, due to concerns about Pakistan's nuclear program.
The Soviet invasion of Afghanistan in December 1979 highlighted the common interest of Pakistan and the United States in peace and stability in South Asia. In 1981, the United States and Pakistan agreed on a $3.2 billion military and economic assistance program aimed at helping Pakistan deal with the heightened threat to security in the region and its economic development needs.
Recognizing national security concerns and accepting Pakistan's assurances that it did not intend to construct a nuclear weapon, Congress waived restrictions (Symington Amendment) on military assistance to Pakistan. In March 1986, the two countries agreed on a second multi-year (FY 1988-93) $4 billion economic development and security assistance program. On October 1, 1990, however, the United States suspended all military assistance and new economic aid to Pakistan under the Pressler Amendment, which required that the President certify annually that Pakistan "does not possess a nuclear explosive device."
Several incidents of violence against American officials and U.S. mission employees in Pakistan have marred the relationship. In November 1979, false rumors that the United States had participated in the seizure of the Grand Mosque in Mecca provoked a mob attack on the U.S. Embassy in Islamabad in which the chancery was set on fire resulting in the loss of life of American and Pakistani staff. In 1989, an attack on the American Center in Islamabad resulted in six Pakistanis being killed in crossfire with the police. In March 1995, two American employees of the consulate in Karachi were killed and one wounded in an attack on the home-to-office shuttle. In November 1997, four U.S. businessmen were brutally murdered while being driven to work in Karachi. In March 2002 a suicide attacker detonated explosives in a church in Islamabad, killing two Americans associated with the Embassy and three others. There were also unsuccessful attacks by terrorists on the Consulate General in Karachi in May 2002. Another bomb was detonated near American and other businesses in Karachi in November 2005, killing three people and wounding 15 others. On March 2, 2006, a suicide bomber detonated a car packed with explosives as a vehicle carrying an American Foreign Service officer passed by on its way to Consulate Karachi. The diplomat, the Consulate's locally-employed driver and three other people were killed in the blast; 52 others were wounded. In September 2008, a truck bomb at Islamabads Marriott Hotel killed three Embassy staff. On April 5, 2010, heavily armed terrorists in two vehicles hurled bombs and fired at security men near Consulate Peshawar, killing four Pakistanis.
The decision by India to conduct nuclear tests in May 1998 and Pakistan's matching response set back U.S. relations in the region, which had seen renewed U.S. Government interest during the second Clinton Administration. A presidential visit scheduled for the first quarter of 1998 was postponed and, under the Glenn Amendment, sanctions restricted the provision of credits, military sales, economic assistance, and loans to the government. The October 1999 overthrow of the democratically elected Sharif government triggered an additional layer of sanctions under Section 508 of the Foreign Appropriations Act, which include restrictions on foreign military financing and economic assistance. U.S. Government assistance to Pakistan was subsequently limited mainly to refugee and counter-narcotics assistance.
The U.S.-Pakistan relationship changed significantly once Pakistan agreed to support the U.S. campaign to eliminate the Taliban in Afghanistan and to join the United States in efforts against terrorism. Since September 2001, Pakistan has provided extensive assistance in counterterrorism efforts by capturing more than 600 al-Qaida members and their allies. The United States has stepped up its economic assistance to Pakistan, providing debt relief and support for a major effort for education reform. During President Musharraf's visit to the United States in 2003, President Bush announced that the United States would provide Pakistan with $3 billion in economic and military aid over 5 years. This assistance package commenced during FY 2005.
Following the region's tragic October 8, 2005 earthquake, the United States responded immediately and generously to Pakistan's call for assistance. The response was consistent with U.S. humanitarian values and our deep commitment to Pakistan. At the subsequent reconstruction conference in Islamabad on November 19, 2005, the U.S. announced a $510 million commitment to Pakistan for earthquake relief and reconstruction, including humanitarian assistance, military support for relief operations, and anticipated U.S. private contributions.
In 2004, the United States recognized closer bilateral ties with Pakistan by designating Pakistan as a Major Non-NATO Ally. President Bush visited Pakistan in March 2006, where he and President Musharraf reaffirmed their shared commitment to a broad and lasting strategic partnership, agreeing to continue their cooperation on a number of issues including: counterterrorism efforts, security in the region, strengthening democratic institutions, trade and investment, education, and earthquake relief and reconstruction. The United States concluded the sale to Pakistan of F-16 aircrafts in late 2006, further reflecting the deepening strategic partnership.
The Barack Obama administration has reaffirmed a U.S. strategic partnership with Pakistan. In particular, the U.S. Congress passed the Kerry-Lugar-Berman (KLB) legislation to authorize $1.5 billion in non-military assistance to Pakistan annually for 5 years, which President Obama signed into law on October 15, 2009.
Along with the passage of KLB, in late October 2009, Secretary of State Hillary Clinton visited Pakistan, setting the stage for a renewed engagement with the Pakistani Government and people. During the Secretarys visit, she and Foreign Minister Mahmood Shah Qureshi agreed to a Strategic Dialogue to be held at the ministerial level for the first time. Following through on this commitment, the Secretary and Foreign Minister Qureshi co-hosted the U.S.-Pakistan Strategic Dialogue on March 24-25, 2010 in Washington, DC.
At the Dialogue, the Pakistani delegations and their U.S. counterparts engaged in sessions on agriculture, defense and security, economic development and finance, social issues, energy and water, and communications. The participants constructed deliverable goals on the issues that are crucial to both countries. In particular, these objectives included agriculture infrastructure assistance through a $30 million allocation; a pledge for the United States to work with Pakistan to make progress in the timely implementation of tax system and energy financing reforms; continued and expanded collaboration on improving quality of and access to education; cooperation on a range of technological advances to include information technologies and telecommunications such as eLearning, eGovernance, telemedicine, and mobile banking; and mapping out progress on natural gas development and agendas for future discussions on water. A letter of intent was also signed to upgrade major road infrastructure in northwest Pakistan, as well as implementation agreements for three thermal power station rehabilitation projects that will aid in combating electricity shortages in the country.
Principal U.S. Embassy Officials
Ambassador--Cameron Munter
Deputy Chief of Mission--Gerald M. Feierstein
Counselor for Political Affairs--Theodore Craig
Counselor for Economic Affairs--Christian DeAngelis
Counselor for Public Affairs--Larry Schwartz
Consul General--Christopher Richard
Defense Attaché--Rear Admiral Michael LeFevre
Consul General, Lahore--Carmela Conroy
Consul General, Peshawar--Elizabeth Rood
Consul General, Karachi--William Martin
