After several experiments in economic restructuring, Pakistan currently operates a mixed economy in which state-owned enterprises account for a large portion of gross domestic product (GDP). The country has experimented with several economic models during its existence. At first, Pakistan’s economy was largely based on private enterprise, but significant sectors of it were nationalized beginning in the early 1970s, including financial services, manufacturing, and transportation. Further changes were made in the 1980s, under the military government of Zia ul-Haq. Specifically, an “Islamic” economy was introduced, which outlawed practices forbidden by Sharīʿah (Muslim law)—e.g., charging interest on loans (ribā )—and mandated such traditional religious practices as the payment of zakāt (tithe) and ʿushr (land tax). Though portions of the Islamic economy have remained in place, the state began in the 1990s to privatize—in whole or in part—large sectors of the nationalized economy.
The economy, which was primarily agricultural at the time of independence, has become considerably diversified. Agriculture, now no longer the largest sector, contributes roughly one-fifth of GDP, while manufacturing provides about one-sixth. Trade and services, which combined constitute the largest component of the economy, have grown considerably. In terms of the structure of its economy, Pakistan resembles the middle-income countries of East and Southeast Asia more than the poorer countries of the Indian subcontinent. Economic performance compares favourably with that of many other developing countries; Pakistan has maintained a sustained and fairly steady annual growth rate since independence.
At the same time, there has been a relentless increase in population, so, despite real growth in the economy, output per capita has risen only slowly. This slow growth in per capita income has not coincided with a high incidence of absolute poverty, however, which has been considerably smaller in Pakistan than in other South Asian countries. Nonetheless, a significant proportion of the population lives below the poverty line, and the relative prosperity of the industrialized regions around Karachi and Lahore contrasts sharply with the poverty of the Punjab’s barani areas, semiarid Balochistan, and Khyber Pakhtunkhwa.