The economy of Pakistan grew by 3.8 percent annually during the period 1990-1999. While less than the 6 percent annual expansion the country experienced in the 1980s, the rate is still high compared to most countries. Nevertheless, the majority of the nation’s citizens remained poor and heavily dependent on the agricultural sector for employment. This was largely a result of the country’s high rate of population increase, but political factors, such as the war of secession waged successfully by East Pakistan (now Bangladesh) in 1971 and a coup d’état in 1977 (see the History section of this article), also slowed economic growth and modernization. In 1999 Pakistan’s gross domestic product (GDP) was $58.2 billion.

The economy, which was primarily agricultural at the time of independence, is now considerably diversified. Agriculture, although still the largest sector, now contributes less than one-fourth of the GNP, while manufacturing provides almost one-fifth. In terms of the structure of its economy, Pakistan resembles the middle-income countries of East and Southeast Asia more than the poor nations of the Indian subcontinent. Economic performance compares favourably with that of many other developing countries; the GNP has increased at an average rate of more than 5 percent a year since independence. At the same time, there has been a relentless increase in population, so that, despite a real growth in the economy, output per capita has risen slowly. By 1990 Pakistan's economy was four times as large as it was at the time of independence in 1947, its population was three and a half times as large, and its per capita income was twice as large. In general, although the GNP per capita is relatively low, Pakistan does not have a high incidence of absolute poverty (the level below which a minimally adequate diet and other essential requirements are not affordable); the proportion of the population living in absolute poverty is considerably smaller than in other South Asian countries. The relative prosperity of the industrialized regions around Karachi and Lahore contrasts sharply with the poverty of the Punjab's barani areas, the semiarid Balochistan, and the North-West Frontier Province.

Pakistan is a poor, heavily populated country, suffering from internal political disputes, lack of foreign investment, and a costly confrontation with neighboring India. Pakistan's economic outlook continues to be marred by its weak foreign exchange position, which relies on international creditors for hard currency inflows. The MUSHARRAF government will face an estimated $21 billion in foreign debt coming due in 2000-03, despite having rescheduled nearly $2 billion in debt with Paris Club members. Foreign loans and grants provide approximately 25% of government revenue, but debt service obligations total nearly 50% of government expenditure. Although Pakistan successfully negotiated a $600 million IMF Stand-By Arrangement, future loan installments will be jeopardized if Pakistan misses critical IMF benchmarks on revenue collection and the fiscal deficit. MUSHARRAF has complied largely with IMF recommendations to raise petroleum prices, widen the tax net, privatize public sector assets, and improve the balance of trade. However, Pakistan's economic prospects remain uncertain; too little has changed despite the new administration's intentions. Foreign exchange reserves hover at roughly $1 billion, GDP growth hinges on crop performance, the import bill has been hammered by high oil prices, and both foreign and domestic investors remain wary of committing to projects in Pakistan.