Pakistan

Investment & 
Operational
Climate

Pakistan has made significant progress over the last year in transitioning to a market-determined exchange rate and reversing its large current account deficit, while inflation has decreased each month of 2020. However, progress has been slow in areas such as broadening the tax base, reforming the taxation system, and privatizing state owned enterprises. Pakistan ranked 108 out of 190 countries in the World Bank’s Doing Business 2020 rankings, a positive move upwards of 28 places from 2019. Yet, the ranking demonstrates much room for improvement remains in Pakistan’s efforts to improve its business climate. The COVID-19 pandemic has had a significant impact on Pakistan’s economy. While the IMF had predicted Pakistan’s GDP growth to be 2.4% in FY2020, Pakistan’s economy is now expected to contract by 1.5% this fiscal year, which ends June 30. Despite a relatively open foreign investment regime, Pakistan remains a challenging environment for foreign investors. An improving but unpredictable security situation, difficult business climate, lengthy dispute resolution processes, poor intellectual property rights (IPR) enforcement, inconsistent taxation policies, and lack of harmonization of rules across Pakistan’s provinces have contributed to lower Foreign Direct Investment (FDI) as compared to regional competitors. The government is working on a multi-year foreign direct investment (FDI) strategy which aims to gradually increase FDI to USD 7.4bn by Fiscal Year (FY) 2022-23 from USD 2.8bn in FY2019-20.