Pakistan’s investment-to-GDP ratio has dropped to a record low of 13.1% in 2024 from an average of about 18% over the past four decades. Foreign direct investment (FDI) has also halved to 0.5% of GDP, as per a report published in Dawn.
The decline in investment levels in Pakistan indicates a growing gap between its economic goals and the existing policy landscape. The investment-to-GDP ratio fell from 17.2% in 2018 to 15.5% in 2019, and further plummeted to 13.1% in 2024, the report notes.
Despite the government’s aim of achieving 6-7% annual economic growth, factors like policy uncertainty, high real interest rates, and a restrictive tax system have deterred long-term investments. Businesses, the report emphasizes, need a stable policy framework for making investment decisions.
Policy inconsistencies have led to up to 80% of companies postponing or revising their investment plans due to increased economic uncertainty. Pakistan’s economic growth has averaged 2.7% since 2019, a significant drop from the 5.5% average seen during 2003-2018.
The World Bank estimates reveal a rise in Pakistan’s poverty rate to approximately 25.3% from 21.9% in 2018. Nearly 45% of the country’s population falls below the poverty line according to the World Bank’s lower-middle-income poverty standard. Moreover, Pakistan’s public debt has surged from Rs 29.9 trillion in 2018 to Rs 95.5 trillion, with interest payments now consuming nearly 70% of the federal government’s net revenues.
