EXECUTIVE SUMMARY
Overview
The 13th Five Year Plan (2024-2029) is being issued at a time when Pakistan faces multiple challenges on the economic security and development fronts with persistent falling productivity. These provide compelling reasons to make fundamental changes to approach the growth and development path. Pakistan economy is struggling to find sustainable growth path and investment for almost three decades. Half-hearted attempts to reform the economy wither interrupted due to short episodes of decent growth. Pakistan’s journey towards higher growth path is always interrupted by the tenuous spillover between growth acceleration and the external sector vulnerabilities resulting in macroeconomic instability.
The characteristics of growth experience remained more or less common. Fiscal and current account deficits reach unsustainable level, and IMF adjustment programs as a routine provided breathing space. The growth was primarily driven by higher private and public consumption beyond productive capacity of the economy that led to import based consumption. Pakistan’s consumption on average remained at 94% of GDP standing highest among peer developing countries and even in South Asia. It was classic case of growth without real economic development. The issues with the economy are given below in the light of developments experience of the last few decades.
- Falling investment (from 24% of total private investment in 2004 to 11% in 2024 in the manufacturing sector triggered pre-mature de-industrialization. SME share of the private credit fell from 17% in 2006 to 6% in 2021 this reflects shrinkage of domestic production base and export potential.
- Sluggish exports growth and higher imports to meet consumption demand widened trade imbalance.
- Subsidized imports through artificially lower exchange rate not only eroded competitiveness of the economy but also prompted deterioration of export
orientation. - Productivity and efficiency are not comparable with even regional countries.Industrial value added per worker has remained almost stagnant growing by multiple
of only 1.2 during 1991 and 2020 whereas it was more than doubled in all South Asian countries. - The existing high level of indebtedness seriously needs to significantly enhance debt carrying capacity, which could be increased through higher economic growth.
- Energy sector inefficiencies remained the key obstacle to prospects of economic revival.
- Climate related vulnerabilities remain a serious challenge which has the potential to thwart food security and asset base of the key infrastructure build in the past.
- Below par investment in fundamentals of growth like skills and capabilities, human development has constricted space for sustaining economic growth.
- The growth strategy remained alien to building strengths of economic fundamentals such as quality and inclusiveness of economic growth or human capital, upscaling technological capability, sustainable agriculture, social protection, strategic trade policy framework including diversification of trade basket, national SME policy,financial inclusion, productivity and efficiency, and above all an investment strategy for efficient resource allocation.
Our past strategies have delivered spurts of high economic growth. Unfortunately, these have not been sustainable, and have only led to boom-bust cycles. In most cases, these spurts have been ignited by favorable international developments and increases in foreign resource inflows. Historically, once these flows slowed down, so did the momentum of economic growth. This is because growth has been consumption-led and import-dependent, and not resulted in desirable levels of investment and exports. This situation must be rectified urgently. The Thirteenth Five Year Plan (2024-29) will play a pivotal role in bringing about a fundamental change in the development paradigm so far followed. In the new paradigm, ordinary people, especially those in less developed provinces and regions, will be at the center of and have ownership in the development process. The government too will need to redefine itself so that it can play an effective part in steering the economy towards achieving these goals.
New Directions for Growth Oriented Development
The key objectives of the Thirteenth Plan (2024-29) are as follows: –
- Making agriculture more productive and efficient, diverse and safe, profitable and climate resilient. Agriculture Sector growth will be obtained through crop substitution in favors of high yielding crops, efficiency of water management, infusion of technology and innovation and productivity enhancement investment by the government.
- Given the tenuous relation between growth and balance of payments crisis, focus will be on building export potential, revamping ecosystem of exports, redefining incentive’s structure.
- Applying state of the art technologies (eg. ICT) to increase productivity efficiency and faster and better-quality delivery of all especially public services.
- the Plan has set a target of USD 10 billion exports of ICT and high technology products and services,
- USD 5 billion revenue generation through freelancing and “gig economy”,
- Certification of high quality 50,000 4IR graduates and increasing the workforce with 50,000 graduates coming out of universities which will enable
more than 10,000 start-ups per year. - Moving into the knowledge economy through increased investment in
science and technology as well as improved quality of higher education.
- Socio-economic development includes investment in human capital, balanced regional development, gender mainstreaming and focusing on uplift of marginalized and poor through rural transformation.
- Health strategy makes a shift from curative to preventive and primitive care and assure provision of healthcare to all on equitable basis. The Plan aspires to develop a comprehensive and accurate health information system with incorporation of innovative technologies for informed health policy and planning decision-making. Preventing hunger and improving nutrition are integrated as an explicit objective in the Plan.
- Resources for education will be enhanced to improve the quality and delivery. These include developing a standardized curriculum and development of National
Standards for education, emphasis on training of teachers and the use of better teaching-learning methods. - CPEC was focused largely on energy and infrastructure during the first phase (2013-2020). The second phase (2021-2030) has these priorities: trade and market access,industrial development and global value chains, socio-economic development and poverty alleviation, agriculture modernization and marketing, Gwadar oil city and blue economy, regional connectivity and third-party participation.
- Using available resources in the most efficient and effective manner and curbing wasteful expenditures.-Certification of high quality 50,000 4IR graduates and increasing the workforce with 50,000 graduates coming out of universities which will enable more than 10,000 start-ups per year.
Main Pillars of 13th FYP
- The private sector will serve as the main engine of economic growth and the public sector will play a strategic supporting role by providing physical infrastructure and necessary human capital to ensure its higher productivity, efficiency and international competitiveness and help draw-in both domestic and foreign investment.
- To develop Pakistan’s human resources through significant improvements in its human development, human capital index and women’s empowerment.
- To reverse the trend of rising poverty in recent years by ensuring equitable growth, investing in people, and creating productive and remunerative decent jobs and affordable social protection.
- Moving away from top-down economic planning to close and effective coordination between the federal and provincial governments while fully respecting the demarcation of subjects under the 18th Constitutional Amendment.
Framework and Strategy – “5 Es”
- Export-led growth to reduce vulnerability on foreign loans and breakaway from the chronic boom- and-bust cycles and move towards sustained higher and stable growth.
- Economy to be driven by knowledge and innovation including through harnessing the potential of IT (information technology) and AI (artificial intelligence).
- Environment protection and climate action to safeguard the economy and peoples’ health and working lives from the negative impact of climate change and damage to the environment.
- Energy and infrastructure development to ensure or sustainable and affordable energy for all sectors of the economy through diversifying the energy mix towards renewable resources, and put in place measures to increase energy efficiency and conservation measures to promote environmental sustainability.
- Equity and Empowerment through a strategic blend of affirmative action to ensure accessibility to high quality education, and health, and social protection which will empower youth, women, persons with disability and the least developed regions of the country.
Major Economic and Social Goals
Reviving Growth
Reverse current stagflation (low growth with high inflation) through an initial phase of economic stabilization and economic reforms which will lay the foundation for
propelling the economy on to a higher economic growth from 4.2 percent in the first year of the plan to 5.6 percent by the end of the plan period averaging 5.1 percent
over the five years.
Attaining Macroeconomic Stability
Reduce the current high debt- to-GDP ratio by adopting prudent fiscal, monetary and trade-policies and breakaway from the current stop-go cycles caused through the
interaction of high fiscal deficits and resulting high current account deficits, and move towards strong sustainable growth. Raise significantly the tax-to-GDP ratio by
1 percent each year (from 9 to 14 percent) while running very low or zero primary budget deficits and privatizing loss-making state-owned enterprises (SOEs) and
reducing non-productive government expenditures.
Building up sufficient foreign exchange reserves and adopt a market driven exchange rate reflecting competitiveness against competing countries.
Reversing declining levels of investment
Reverse the current decline in investment-to-GDP ratio (a major cause of low productivity growth) from near 13 percent at present to18 percent by the end of the
plan, by creating a conducive business environment to attract domestic and foreign investment and gradually increase public investment from current 2.5-3.0 percent of GDP to a more robust 4.5 percent of GDP, and increase private investment from 9 percent to12 percent of GDP.
Investing in People
To build Pakistan’s human capital by increasing investment in human development (education and skills), with a major thrust in reducing the explosive rate of populationgro wth (2.55 percent); reducing significantly the high number of out-of-school children (26.3 million); striving for educational excellence in basic and college learning; and advancing knowledge through research and technology-based development in higher education.
To reduce significantly the current high levels of malnutrition -underweight (20 percent), stunting (40 percent), wasting (30 percent) and micro-nutrient deficiencies
(52 percent for vitamin A) – through a comprehensive nutritional policy by scaling up the most effective interventions through school and healthcare centers, especially in Balochistan, rural Sindh and southern Punjab, and increasing access to clean drinking water, sanitation and hygiene.
To significantly improve Pakistan’s current health profile which suffers from glaring deficiencies not found in countries with similar per capita income, by raising life
expectancy at birth and improving neonatal and under-five mortality rates.
To increase health expenditures during the 13th Five-Year Plan (FYP) from currently 1 percent of GDP to near 3. 0 percent and significantly improve the quality of the health system work force and improve their salary structure to ensure that qualified doctors and nurses remain in Pakistan.
Effective utilization of human capital
Encourage the creation of productive, remunerative and decent jobs, overcoming the gender gap and tapping the Pakistan diaspora for the transfer of knowledge and
skills (social remittances).
Pakistan’s labour force growth rate at between 2.5- 3 percent over the 13th FYP period and bourgeoning youth bulge will require appropriate policies to encourage
self-employment (entrepreneurship), a substantial increase in vocational training and skills development institutions and the growth of labor-intensive sectors
especially in SMEs (small and micro enterprises) and employment opportunities abroad while respecting basic workers’ rights as enshrined in ILO’s Declaration on
Fundamental Principles and Rights at Work.
A major thrust in improving the latest gender gap index (where Pakistan stands at 145 out of 146 countries) and accelerating female school enrollment and female
labour force participation rates, reduce the current 1.5 times higher rate of female unemployment as compared to males by overcoming contributory factors through a national awareness campaign on sharing of domestic and care work responsibilities, tackling women’s limited access to education and health and discouraging early marriage.
The 13th FYP recognizes the important contribution of the Pakistani diaspora which officially number around 8.5 million but could be much higher in the form of foreign exchange transfers to families in Pakistan. The FYP will provide opportunities for them for investing in Pakistan including in bonds and attractive savings schemes.
To develop well-rounded and healthy youth people during the 13th FYP by providing opportunities and space for young boys and girls to cultivate excellence in sports of their choosing.
Macroeconomic Framework

Macroeconomic Management
Prudent macroeconomic management is essential to ensure macroeconomic stability which is a pre-requisite for attracting domestic and foreign investment essential to generate strong and sustainable growth. Over the last two decades Pakistan’s record in attaining macroeconomic stability has been challenging in the face of internal and external shocks and has resulted in recurring stop-go cycles and repeated recourse to the IMF for support. Indeed, in recent years the country has faced the growing threat of default, which was avoided only through reaching and successfully implementing a 9-month Stand-by Agreement (SBA) with the IMF completed in end-April 2024.
Economic performance during the 12th FYP was affected badly by persistent external shocks (the war between Russia and Ukraine resulting in a spike in oil and foodgrain prices), the Covid-19 crisis, natural disasters (unprecedented floods in 2022 caused by climate change) – all of which resulted in low economic growth averaging 2.8 percent during the plan period, and in its last years unprecedented high inflation at well over 20 percent.
The 13th FYP macroeconomic framework is based on (a) identifying some of the fundamental structural weaknesses of the economy which accentuated the internal and external shocks witnessed during the 12th FYP and (b) instituting economic reforms to dampen, if not remove, these persistent weaknesses.
It must be recognized that the binding constraint on the economy over the last two decades has been the foreign exchange constraint which kicks in as the economy begins to grow at 4-5 percent as it results in imports far outpacing foreign exchange earnings and a rapid decline of foreign exchange reserves. This creates the risk of defaulting on the country’s foreign debts. An important factor in triggering the foreign exchange constraint is that of running of persistent high fiscal deficits.
To overcome these binding constraints far reaching structural economic reforms are needed that include raising the very low tax-to-GDP ratio, privatizing of high loss-making (SOEs), carrying out energy sector reforms to reduce the extremely high circular debt to a manageable level and increasing exports.
The macroeconomic targets set in the 13th FYP reflect these economic realities and are based on an initial period of stabilization and reforms to gradually accelerate economic growth to 6 percent at the end of the plan period with an average growth rate of 5.1 percent. This prudent approach should help avoid recurring economic crisis as witnessed in the past.

The country’s low levels of for investment, which have fallen further in recent years to just over 13 percent has been a major factor underlying Pakistan’s very low growth in productivity (as new investment brings with it the latest technology and knowledge) and low growth in output, which at under 3 percent during the 12th FYP is not sufficient to absorb productively the high growth of the labour force. This has resulted in rising unemployment (to an unprecedented 8 percent) and rising poverty (to over 39 percent) as measured by the World Bank US 3.20 per person poverty line.
Low levels of investment and resulting low growth are responsible for the country’s per capita income in 2023-24 at being only US$ 1,680 falling well behind that of Bangladesh at US$ 2,820 and India at US $2,410.
While macroeconomic instability and uncertainty have been largely responsible for low and falling levels of private investment, attempts to regain macroeconomic stability have meant strong stabilization measures to reduce demand pressures in the economy, including severe monetary contraction and high rates of interest (currently at 22 basis points). However, such measures have also led to drastically curtailing public investment (2.5 percent of GDP), while in most developing fast-growing economies it is almost 6 to 7 percent.
Foreign Investment
Levels of private foreign investment have traditionally been low in Pakistan as compared to the fast-growing economies of East and South-East Asia, and China and India, following the deteriorating law and order situation post- 9/11. The country had to bear huge direct and indirect cost being a front-line state in the war against international terrorism.
The recently set-up Special Investment Facilitation Council (SIFC) with representation from the highest civil and military leadership is a timely response to instill confidence through a one-window operation. Already there are signs of growing business interest in making investing in Pakistan especially from Saudi Arabia, the UAE, Kuwait and adjoining Gulf states.
Similarly, the China-Pakistan Economic Corridor (CPEC) has played a critical role in bringing Foreign Direct Investment (FDI) from China post -2015 and the early harvest projects in Phase-I (2015-20) which played a major role in overcoming the energy shortages and long hours of load-shedding and developing much-needed road networks. Now entering Phase III (2025-2030) CPEC established Special Economic Zones (SEZs) will encourage setting -up of
export industries by Chinese and domestic industrialists.
While macroeconomic instability and security concerns have been major factors in both domestic and foreign investment shying away, it is important to emphasize that the high cost of doing business, a discouraging regulatory framework, and inconsistent and constantly changing economic policies have played a major part in stifling private domestic and foreign investment.
The 13th FYP is being launched at a time when there are emerging green shoots signaling a revival of business confidence as reflected in the record-breaking rise in the Pakistan Stock Exchange (PSE) index, positive sighs of foreign investment from the Middle-East, a historic bumper wheat harvest the increasing momentum of CPEC and the setting-up of an active SIFC to ensure quick decision making and follow-up for rapid implementation of foreign financed projects.
The 13th FYP will create an enabling environment, reduce the cost of doing. business and streamline the regulatory framework to ensure that unnecessary controls and hindrances by the bureaucracy do not discourage private investment.
High levels of consumption including imports have been a major of factor in driving the economy onto a consumption-led import-intensive growth path resulting in an ever increasing spiral of increasing dependence on foreign-savings to finance the large savings investment gap. This has resulted in rising debt and unsustainable debt-repayments.
By concentrating on encouraging both domestic and foreign investment the 13th FYP aims at increasing domestic savings and reducing dependence on foreign borrowings by replacing these inflows with foreign investment to the maximum extent. However, the 13th FYP in cautious in projecting expected increases in private investment and private and public savings with private investment levels rising from 9.7 percent of GDP in 2024-25 to 12.8 percent in 2028-29 and national savings including remittance flows from 11.5 percent to 16.1 percent.
Reducing the External Financing Gap
The binding constraint on Pakistan moving to a higher and sustainable growth path is the emergence of a foreign exchange constraint which threatens the economy of pending default on foreign debt.
To avoid default, the country had to return to donors, borrowing from foreign commercial banks and new bond issuance. Most importantly it requires entering into a program with the IMF to instill confidence in potential lenders. The recent IMF 24th programme, the nine month Stand-by-Agreement signed in July 2023 and successfully completed in April, 2024 is a classic example of Pakistan growth story.
Since the end of 2022 the State Bank of Pakistan together with the ministry finance and commerce have followed policies which have led to an almost halving of the external financing gap ($ 12 billion in 2023-24 from $25 billion in 2021-22) and a stable exchange rate since May 2023. These policies are currently under review but will serve as an important input into new guidelines being currently drawn-up for a possible new IMF Extended Fund
Facility (EFF) which will cover 3-4 years of the 13th FYP.
To ensure sustainable current accounts and reduce the foreign exchange financing gap the following measures and policies will be undertaken during the 13th FYP:
Implementing an export- led growth strategy through enhanced export competitiveness by adopting a competitive exchange rate. Other measures will include tapping niche high-value added export markets especially in IT and software services, increasing the country’s share in the large global pharmaceutical market;
encouraging agro-based exports including livestock and fisheries; publicizing major export products; tapping demand of the Pakistan diaspora for designer clothes and services (such as TV serials, music, sports).
Following a pre-dominantly market-driven exchange rate to ensure export competitiveness with built-in stabilizers to allow temporary import restrictions when foreign exchange reserves fall below three months of imports.
Allowing duty-reduced import of raw materials to ensure export competitiveness.To reduce the foreign exchange debt-to-GDP ratio through prudent debt
restructuring, encouraging foreign direct investment and to carefully evaluate and
review all forthcoming loans including from multilateral development Banks
including World Bank, Asian Development Bank, Asian Infrastructure Banks and &
others),
Increase number of workers migrating for overseas employment by carefully
monitoring of changing skill demand especially in Middle-East and avoid creating a
growing gap between official and market determined exchange rate to ensure
remittances through official banking channels.