Outlook for 2011-15

• On the surface, the prospects for political stability are currently better than they have been for many months, thanks to the emergence in April of a relatively broad-based ruling coalition.
• Inter-party relations remain volatile, and much political conflict during the forecast period will remain highly personalised. Prospects for a significant and sustained improvement in political effectiveness are therefore remote.
• The circumstances surrounding the killing of a terrorist leader, Osama bin Laden, have tarnished the previously sterling reputation of Pakistan's army, so that in the short term a military coup is now even less likely than before.
• The US will remain Pakistan's most important donor and strategic partner. But the bilateral relationship is complex and subject to strain, and tensions will rise even further in the coming months in the wake of Mr bin Laden's death.
• Further disbursements from the emergency standby agreement with the IMF may be in jeopardy because of the Pakistani government's repeated failure to implement structural economic reforms mandated by the Fund.
• Real GDP growth in fiscal year 2010/11 (July-June) will be constrained by power shortages and the effects of floods. Growth will quicken to an average annual rate of 3.7% in 2011/12-2014/15, from an estimated 2.3% in 2010/11.

Monthly review

• On May 2nd US special forces killed Mr bin Laden, whose compound had been discovered to be located in Abbottabad, a town close to the Pakistani capital, Islamabad, and home to the country's premier military academy.
• In early May the government announced that the Pakistan Muslim League (Quaid-i-Azam), or PML (Q)-the party that had supported the previous president, Pervez Musharraf-would join the government.
• Following the decision by the PML (Q) to join the government, the Muttahida Qaumi Movement, which had been in the ruling coalition until leaving in January 2011, agreed to become part of a broader coalition.
• In late April the recently formed Pakistan Business Council, which is made up of representatives of large companies, presented a road map to try to revive the country's moribund economy.
• Remittances from overseas workers reached a new record level of US$1.1bn in March. Rising remittances enabled Pakistan to record a current-account surplus of US$99m in the first nine months of 2010/11.

On the surface, the prospects for political stability are currently better than they have been in many months, thanks to the emergence of a relatively broad-based ruling coalition. This follows the decision of both the Muttahida Qaumi Movement (MQM) and the Pakistan Muslim League (Quaid-i-Azam), or PML (Q), to join the coalition government led by the Pakistan People's Party (PPP). However, inter-party relations remain volatile, and much political conflict during the forecast period will remain highly personalised. The likelihood that there will be a significant and sustained improvement in political effectiveness is therefore still remote. Moreover, tensions between the civilian government and the army may rise again in the aftermath of the killing by US special forces of Osama bin Laden, the founder and leader of the al-Qaida international terrorist network.

The MQM had been in opposition since January this year, when it left the government after a dispute over fuel price rises, while the PML (Q) had been in opposition since its defeat in the 2008 general election. The MQM's flip-flopping indicates that it is likely to continue to try to advance its own agenda even at the expense of government effectiveness and political stability. Meanwhile, the PPP's actions in recent months have demonstrated that it will prioritise the aim of preserving the ruling coalition over other considerations. However, the party's recent policy reversals (undertaken in large part to appease the MQM) smack of desperation and serve to underscore its weakness. A major risk is that the government has set a precedent, so that any future inter-party squabbles will create a renewed threat to the existence of the coalition and will again lead officials to make concessions in order to prevent the collapse of the administration. The PML (Q)'s presence in the coalition is unlikely to alter this dynamic, since the PPP and the PML (Q) have historically had a strongly adversarial relationship.

Pakistan has a long history of military coups-it has been ruled by generals for around one-half of its existence as an independent country-and the possibility that continued bungling by a civilian government might prompt the army to assert itself politically once more can not be discounted. However, under the leadership of General Ashfaq Kayani the military has withdrawn from direct participation in politics, and there are numerous reasons why the army would prefer not to take direct control in the near future. Moreover, the circumstances surrounding the killing of Mr bin Laden have badly tarnished the previously sterling reputation of the army (and also of the Inter-Services Intelligence, or ISI), so that in the short term popular opposition to a military coup is likely to be much higher than it would otherwise have been.

The next general election must be held by 2013. Pakistan's political landscape can change significantly within the space of a few months, but it is likely that the contest will be primarily a tussle between the country's two largest parties, the PPP and the main opposition party, the Pakistan Muslim League (Nawaz), or PML (N). In October 2010 Pervez Musharraf, the former military ruler who later became the country's civilian president, launched a new party, the All-Pakistan Muslim League, from the UK, where he has lived in exile since being forced to resign as president in 2008. Mr Musharraf has vowed to contest the next general election, saying that he will return to Pakistan before the poll. He retains a degree of influence in the military but was hugely unpopular during his last months in office, and the Economist Intelligence Unit therefore doubts his ability to stage a triumphant return to politics.

The government's temporary loss of its legislative majority in January had raised the spectre of a possible no-confidence motion and a subsequent snap election. Although this threat has been averted for now, another political crisis that might lead to the fall of the government and an early poll is a possibility. The PML (N) is unlikely to push for such an outcome, however, as its victory in a snap election is not assured and because it would prefer to remain in opposition while the country remains beset by grave political, diplomatic, economic and security problems.

Pakistan will remain heavily dependent on concessional loans and emergency aid from multilateral institutions and bilateral donors. The catastrophic floods of August-September 2010 heightened this reliance, as it is estimated that billions of US dollars are likely to be required in the medium term for reconstruction. Western countries are unlikely to tie crisis-linked humanitarian aid to specific political concessions. However, the discovery that Mr bin Laden has been living in Pakistan has cast enormous suspicion on Pakistan's competence and trustworthiness as an ally in the global fight against Islamist militancy. Western countries will therefore now subject to increasing scrutiny the non-humanitarian aid that they allocate to Pakistan, and there is a risk that such funding may be curtailed.

In this context, Pakistan will welcome further offers of investment and aid from China, which is already a staunch and relatively uncritical ally. The Chinese government took pains to express its support for Pakistan in the wake of the raid that killed Mr bin Laden, and Pakistan's prime minister, Yusuf Raza Gilani, reciprocated by making hyperbolic public statements about the strength of the bilateral relationship. The fact that both Pakistan and China see neighbouring India as an adversary will continue to underpin their friendship.

Pakistan's relationship with the US, the country's most important donor and strategic partner by far, is complex and has seen bouts of significant tension. Anti-US sentiment in Pakistan is strong and has been inflamed by recent US actions and policies, and the ostensible allies are deeply mistrustful of one another at the official level. The raid on Mr bin Laden's compound has raised the possibility that the relationship may now be pushed to breaking point. US policy towards Pakistan has sought accountability and co-operation in the fight against terrorism in exchange for billions of US dollars a year in development assistance and military aid. Allegations-some veiled, some explicit-currently abound of official Pakistani complicity in Mr bin Laden's presence in the country. So too do calls to suspend aid: a bill introduced in Congress (the US legislature) on May 5th stipulates that no further US assistance to Pakistan be given unless the US government certifies to Congress that Pakistani authorities had no knowledge of Mr bin Laden's location. Were US financial assistance to be suspended, there would be significant financial and economic repercussions for Pakistan, in addition to the harm done to the country's reputation. However, there would also be important consequences for the US: Pakistan would be likely to cease all bilateral co-operation, and this would vastly complicate US efforts to stabilise Afghanistan and eventually reduce the number of its troops deployed in that country. It would also make it extremely difficult for the US to continue with its policy of carrying out surveillance and conducting targeted assassinations of suspected terrorists on Pakistani soil. Our forecast therefore assumes that despite US politicians' current rhetoric there will be no major curtailment of US financial support to Pakistan. Instead, we believe that the next few months will bring a series of tit-for-tat, retaliatory provocations (similar to the ISI's leaking of the name of the US Central Intelligence Agency's Islamabad station chief to the Pakistani media on May 9th). Periodic spats followed by periods of mutual tolerance describes the essential characteristics of the bilateral relationship as it has been for the past year or so, and the situation in the coming period would thus not represent a sea change. Nevertheless, the provocations now may be more serious than before, and the resolution of tensions on a case-by-case basis may take longer to achieve.

The events of early May have undermined Pakistan's position in relation to its ongoing differences with India. The media in India, and some Indian politicians, have long accused Pakistan of harbouring terrorists, and many observers in India viewed the discovery of Mr bin Laden in Pakistan as a vindication of this charge. In the wake of the al-Qaida chief's death, India publicly accused a number of serving Pakistani army officers of complicity with terrorist groups, including them in a list of people that it wants to be extradited to India to stand trial on charges of terrorism. Pakistan will remain concerned that India will interpret the US's unilateral action within Pakistan's borders as a licence to act similarly and launch a strike on suspected militant operations in Pakistan in the interests of Indian national security. However, the response of the Indian prime minister, Manmohan Singh, to the news of Mr bin Laden's death has been measured. The bilateral dialogue that has resumed, haltingly, following its suspension in November 2008 after the terrorist attacks on India's financial capital, Mumbai, is likely to continue.

The disbursement of the sixth tranche of funds under Pakistan's standby agreement (SBA) with the IMF has been suspended since August 2010 because of the government's failure to implement structural economic reforms mandated by the Fund. (In late December 2010 the IMF approved a nine-month extension of the SBA that had been finalised in November 2008, until the end of September 2011.) The Fund began a new round of talks with the Pakistani government on May 11th. The negotiations are expected to last until May 17th, and will focus on agreeing targets for Pakistan's budget for fiscal year 2011/12 (July-June), which is to be unveiled on May 28th. Fiscal consolidation and tax reform remain the most pressing policy issues and the focus of negotiations with the IMF. The government will find it difficult to muster the political will to implement the necessary changes, as the reforms-notably tax rises-will prove extremely unpopular.

The State Bank of Pakistan (SBP, the central bank) expects the federal budget deficit to be in the range of 5.5-6.5% of GDP in 2010/11; the shortfall in the first nine months of 2010/11 was equivalent to 4.5% of projected annual GDP. Given that a reformed general sales tax (RGST, a condition of IMF support) will not be implemented during the current fiscal year, and that spending pressures have increased owing to floods in August-September 2010, we estimate that the budget deficit will widen to 6.7% of GDP in 2010/11, from 6.3% in 2009/10. This will be considerably larger than the deficit of 4.7% of GDP targeted by the IMF, and will make 2010/11 the second consecutive year in which the budget shortfall has exceeded the Fund's target by a significant margin; in 2009/10 the deficit was 1.2 percentage points greater than the IMF target of 5.1% of GDP. Continued high government spending, coupled with delays and shortfalls in budgetary support from multilateral donors, means that we expect the deficit to narrow only slightly in 2011/12-2014/15, to an average of 5.6% of GDP.

The SBP kept its benchmark interest rate, the discount rate, on hold in March, owing to a diminution in "immediate risks to macroeconomic stability". But the rate of year-on-year consumer price inflation has been in double digits in every month bar one since January 2008, and Pakistan will continue to rely on monetary policy to tackle high inflation, despite evidence that supply-side problems (such as hoarding of foodstuffs, and destruction of crop land and grain-storage facilities in the floods), as well as the government's reliance on the SBP for deficit financing, are playing a more important part than strong domestic demand in pushing up prices. The central bank noted explicitly that it expected risks to macroeconomic stability to increase again in 2011/12, and we therefore expect monetary policy to be tightened in the second half of 2011. Assuming that inflation moderates in the second half of 2011 and remains subdued in 2012-15, we believe that the SBP will then be keen to lower interest rates to spur economic growth.

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In 2010/11 GDP growth is likely to have been constrained by shortages of energy and water, ongoing security concerns and the impact of the August-September 2010 floods. Weaker economic expansion will be mainly the result of decelerating growth in private consumption as inflation stays high and millions of people remain displaced following the floods. But the disaster will have a positive effect on public consumption and investment, as the need for post-flood reconstruction will be paramount. Such work will go ahead in spite of the government's promise to curtail expenditure in order to cut the fiscal deficit-much of the required funding will come from foreign governments and multilateral institutions. We estimate real GDP growth in 2010/11 at 2.3%, down from 4.4% in 2009/10, reflecting the damage caused by the floods. Economic expansion will accelerate to an average of 3.7% a year in 2011/12-2014/15 as growth in private consumption strengthens.

The external balance will subtract from economic growth throughout the forecast period. Growth in exports of goods and services (on a national-accounts basis) is forecast to average 6.7% a year in 2011/12-2014/15, whereas import growth will average 11.1%. The gap between export and import growth will have been widest in 2010/11, as exports have been hobbled by flood damage to the cotton crop (a crucial input for Pakistan's largest export earner, the textile industry) and also to power networks and other infrastructure (affecting the industrial sector more broadly). Export growth will recover in 2012/13-2014/15, but import expansion will also remain vigorous, boosted by continued growth in private consumption.

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Consumer price inflation stood at 13% year on year in April-the 40th consecutive month, with one exception, in which prices have risen at double-digit rates. Inflation will remain elevated in the coming months, as the floods destroyed an estimated 10-15% of farmland as well as grain-storage facilities, thereby generating supply-side pressures. More broadly, upward inflationary pressures abound: they include high international commodity prices, the fuel price rise announced in March, and the widening fiscal deficit, which has led to a resurgence in government borrowing from the central bank. However, the government's postponement of the introduction of the RGST will temper inflationary pressures to a degree. We forecast consumer price inflation at 12.5% in 2011, down from 13.9% in 2010. Inflation should then moderate, to average 7.1% in 2012-15.

The Pakistan rupee will depreciate against the US dollar by an average of 1.7% a year in 2011-15. The boost to investor confidence resulting from bilateral pledges of aid and assistance, together with intervention by the SBP in foreign-exchange markets to limit volatility, will be the principal factors limiting rupee weakness, but the main risks to our exchange-rate forecast are on the downside.

Imports contracted sharply in 2009, but import growth resumed in 2010 and will remain strong in 2011-15, in line with high international oil prices and stronger demand for basic commodities and construction materials. Export growth will be weak, as even before the floods a range of structural factors was impeding Pakistan's ability to increase its overseas sales. As a result, the trade deficit will widen steadily to reach US$24.8bn in 2015, compared with an estimated US$11.4bn in 2010. The current-account deficit will expand in tandem, from an estimated US$2.2bn in 2010 to US$10bn in 2015. As a proportion of GDP, the current-account deficit will widen from an estimated 1.2% in 2010 to 3.8% in 2015.

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On May 2nd in Pakistan US special forces killed Osama bin Laden, the founder and leader of the al-Qaida international terrorist network. Mr bin Laden's compound was discovered to be in Abbottabad, a town that lies close to the capital, Islamabad, and is home to the country's premier military academy. The US acted unilaterally on intelligence that it has gathered over the course of the past few years. It disclosed after the raid that it had not sought the permission of the Pakistani government and had not informed it of its plans before it sent four helicopters to Abbottabad from a base in Afghanistan. The US said that it feared that such advance warning might compromise the planned raid.

The Pakistani reaction was initially muted. No official response was immediately forthcoming, but the Foreign Office eventually issued a statement saying that such unilateral action on Pakistani territory must be considered a one-off event and must not be seen as setting a precedent. Meanwhile, the military and the Pakistani intelligence agency, the Inter-Services Intelligence (ISI), were immediately forced into damage-control mode, since the presence of Mr bin Laden in Abbottabad raised two very big questions. First, how could the world's most wanted terrorist have been hiding so close to the national capital, in a large and suspiciously well-fortified compound in a city with high security, without anyone being aware of his presence? Second, how was the US able to conduct the raid using four helicopters without Pakistan's army being aware of it until the operation was almost over? The Pakistani public and the domestic media are, unsurprisingly, focusing strongly on the latter point, which also raised the follow-on question in the mind of the populace of whether the army was capable of effectively ensuring the country's security and defending it from attack. In short, the incident has damaged the army's reputation for competence. On May 5th, in reference to the ostensible failure to notice Mr bin Laden's presence in the country, the army chief, General Ashfaq Kayani, ordered an investigation into what has been described by the prime minister, Yusuf Raza Gilani, and others as an "intelligence failure". The resulting report will be presented to parliament.

On May 10th Mr Gilani spoke to parliament about the incident, but his speech skirted any of these difficult questions. Instead, he emphasised the losses that Pakistan had borne in the global war on terrorism, avoided any acceptance of responsibility for the presence of terrorist leaders in Pakistan, and rejected allegations that Pakistani authorities had been complicit in Mr bin Laden's presence in Abbottabad as "absurd". Mr Gilani's remarks implicitly held the US partly to blame for al-Qaida's presence in Pakistan. For example, he spoke at some length about US support for Islamist militants in Afghanistan in the 1980s, and said that Pakistan could not be held responsible for the "flawed policies and blunders of others".

Following the killing of Mr bin Laden, Islamist groups operating in Pakistan threatened to attack Pakistani political and military targets, as well as US interests, in retaliation. Security throughout Pakistan was tightened in response.

The ruling coalition now appears more secure than for many months. In early May the government announced that the Pakistan Muslim League (Quaid-i-Azam), or PML (Q), the party that supported the previous president, Pervez Musharraf, would join the government. A power-sharing agreement signed on May 1st stipulated that the PML (Q) would be given several cabinet posts, including the newly created position of deputy prime minister, and that the PML (Q) and the Pakistan People's Party (PPP), which leads the coalition government, would contest the next general election, due by 2013, together. On May 2nd a total of 14 PML (Q) members of parliament joined the cabinet. The main opposition party, the Pakistan Muslim League (Nawaz), or PML (N), denounced the arrangement and the inclusion of PML (Q) legislators in the cabinet as hypocritical, given that the PML (Q) and PPP have a long history of mutual animosity.

Following the decision by the PML (Q) to join the government, an estranged ally of the PPP, the Muttahida Qaumi Movement (MQM), agreed to become part of a broader coalition. The MQM had been part of the ruling coalition, but it left the government in January after a dispute with the PPP over fuel price rises. The MQM is likely to be given four federal ministries as well as two state ministries. The decision by the PML (Q) to join the government gave the coalition a comfortable majority and allowed the government to refuse the MQM's demand that it be given the foreign affairs portfolio.

Many of the MQM's demands revolve around parochial concerns relating to its heartland of Karachi, the capital of Sindh province. The MQM has claimed that its party workers are being targeted in violent attacks in the city, and it also has concerns regarding recent changes to electoral boundaries. On May 3rd some parts of Karachi were placed under curfew and businesses shut following the assassination of a prominent MQM activist, Farooq Baig, and the deaths of four more people in the subsequent violence, which included arson attacks and shootings.

The government's attempt to build a broad-based ruling coalition has been further demonstrated by continuing attempts to persuade the Jamaat Ulema-i-Islam (Fazl), or JUI (F), to return to the coalition, after that party left the government in December last year. The leader of the JUI (F), Fazlur Rehman, rebuffed overtures from the PPP, and the PML (Q) leader, Shujaat Chaudhry, has therefore now been assigned the task of trying to entice the JUI (F) back into government.

In late April the recently formed Pakistan Business Council (PBC), which comprises representatives of large companies, put forward a road map for reviving Pakistan's moribund economy. At a "brain-storming" meeting with political leaders, there was a broad consensus on some of the more innovative ideas that were aired, as well as on a host of suggestions, such as the taxation of agricultural income, which have been proposed for decades but have not been implemented because of a lack of political will. (According to the PBC, taxing agricultural income, a long-standing demand of foreign agencies, is possible under existing legislation.) Among the other ideas mooted were proposals to impose a property tax in major cities, increase food subsidies for the poor, revamp education in religious schools to promote better technical skills, and increase trade with India.

On the last point, the PBC recommended specifically that Pakistan grant India most favoured nation status in order to enhance regional trade. This would mean that the currently limited "positive" list of goods that can be traded by the two countries would be replaced by a "negative" list of items, such as weapons, that cannot be traded, while trade in all other types of goods would be allowed. The PBC also recommended an increase in the number of border crossings between the two countries. It further appeared to borrow an idea that has been implemented in India, suggesting that an employment programme providing 100 days of work a year should be introduced for unskilled workers. In addition, the PBC recommended the establishment of a Ministry of Energy to help to integrate energy planning and to take steps to increase the country's power-generation capacity. It also argued that Pakistan could increase tax revenue by up to PRs400bn (US$4.7bn) a year through better enforcement of the existing tax regime.

The meeting was attended by representatives of almost all of Pakistan's political parties, including the PPP, the PML (N), the PML (Q) and the MQM. The chairman of the PBC, Asad Umar, said that the parties had agreed to bury their differences in order to revive the economy. According to Mr Umar, the council's findings will be presented to the president, Asif Ali Zardari, who will then submit them to the government for implementation. Following the meeting, the PBC agreed to set up working groups to address five different issues, which will include politicians and representatives of the private sector.

In early May a former Pakistani representative to the IMF, Ehtisham Ahmad, revealed that the Fund had described Pakistan's economic managers as "cheats and liars" who made false promises regarding plans to reform the tax system. The IMF responded that, to the contrary, it had a cordial and constructive relationship with Pakistan's economic policymakers.

Mr Ahmed asserted that the Pakistani authorities' lack of credibility may scupper the government's attempts to secure further funding from the IMF, particularly given that the government has still not implemented long-promised reforms that it agreed to enact as part of the emergency funding agreement finalised in November 2008. He also claimed that the IMF had initially refused Pakistan's request for the funds, and that the standby agreement had been concluded only as a result of last-minute intervention by the US.

The IMF had been due to visit Pakistan in the first week of May to hold the fifth review of the economy under its ongoing loan arrangement, but the visit was postponed following the killing of Mr bin Laden, owing to security concerns. Instead, negotiations between the government and the Fund commenced in Dubai on May 11th and are expected to continue for around a week.

The government has hinted at an impending salary freeze for public-sector employees despite the current rapid rate of inflation, ahead of the unveiling of the budget for fiscal year 2011/12 (July-June) that is scheduled for May 28th. The government's economic team put forward two proposals to raise an additional PRs2trn (US$24bn) in tax revenue. The first involves a reformed goods and services tax (RGST), the introduction of which has been stalled for many months; the implementation of the tax is a key condition of continuing support from the IMF. If the RGST cannot be implemented owing to a lack of political consensus, the government will consider withdrawing all tax exemptions, a move that would raise an estimated PRs1.97bn a year in revenue. The second plan involves a one-year salary freeze for public-sector workers. Last year public employees received a 50% pay rise, the burden of which fell disproportionately heavily on provincial rather than regional (district-level) governments. The central government plans to increase the tax to GDP ratio from an unimpressive 9.1% in 2010/11 to a slightly better 9.5% in 2011/12.

Remittances from overseas workers rose to a new record level of US$1.1bn in March. The previous highest level of inflows was US$993m, recorded in August 2010; the March figure represented a 38% year-on-year increase. In the first nine months of 2010/11 remittances totalled US$8bn, to record a 22% year-on-year increase. The State Bank of Pakistan (SBP, the central bank) attributed the increase to the Pakistan Remittance Initiative, which appears to have been highly effective in encouraging people to remit funds through formal channels rather than via informal networks of money-changers. The increase may also be a reflection of the difficult economic circumstances in Pakistan, which may be encouraging overseas Pakistanis to send more money home. Although current rates of growth in remittances appear unsustainable, remittances seem set to exceed the government's target for the current fiscal year of US$11bn.

Rising remittances enabled Pakistan to record a current-account surplus of US$99m in the first nine months of 2010/11, compared with a deficit of US$3.1bn in the year-earlier period. In March the monthly current-account surplus stood at US$347m. However, the trade deficit has scarcely changed. In the first nine months of the current fiscal year Pakistan recorded a trade deficit of US$11.2bn, representing a slight increase from US$11bn in the year-earlier period.

The government set an export revenue target of US$24bn for 2010/11. In the early part of the fiscal year export performance was poor. But in March monthly merchandise export receipts stood at US$2.5bn, posting a 41% year-on-year increase. In the first nine months of 2010/11 export revenue was up by 26.5% year on year, to US$17.8bn. Textile exports performed strongly in March, being up by 44% year on year. But the best-performing sector was food, exports of which were up by 56% in the month.

The SBP has released agricultural export data for the first nine months of 2010/11. The figures reveal that despite the large losses stemming from the catastrophic floods in August-September 2010, large landowners have performed well, with export receipts for rice and wheat being particularly strong. In the first nine months of the previous fiscal year Pakistan had exported 3m tonnes of rice. In the same period of 2010/11 exports stood at 2.6m tonnes, but receipts were virtually unchanged year on year, at PRs135bn, thanks to higher international food prices. Pakistan exported 900,000 tonnes of wheat in the first nine months of 2010/11, with receipts estimated at PRs30bn. Exports of fruit, vegetables and fish also performed well. Total food exports stood at PRs264bn, up by 28% year on year in US dollar terms.

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Land area

769,095 sq km

Population

156.8m (June 2006 official estimate)

Main towns

Population in millions, June 2003

Karachi: 10.1

Lahore: 5.6

Faisalabad: 2.3

Climate

Subtropical, cold in highlands

Weather in Karachi

Hottest month, June, 28-34°C (average daily minimum and maximum); coldest month, January, 13-25°C; driest month, October, 1 mm average monthly rainfall; wettest month, July, 81 mm average rainfall

Languages

Urdu is the national language. English is widespread in business circles and as a second language

Measures

Imperial system, changing to metric. Local measures include 1 seer = 0.933 kg; 1 maund = 40 seers = 37.32 kg

Numbers are still commonly expressed in crores and lakhs: 1 crore = 10m, written 1,00,00,000; 1 lakh = 100,000, written 1,00,000, although in 1978 the internationally accepted system of millions, billions and so on was introduced

Currency

Pakistan rupee (PRs); PRs1 = 100 paisa. Average exchange rate in 2010: PRs85.2:US$1

Time

5 hours ahead of GMT

Fiscal year

July 1st-June 30th

Public holidays

February 16th (Eid-i-Milad-un-Nabi); March 23rd (Pakistan Day); August 14th (Independence Day); August 31st (Eid al-Fitr); November 9th (Allama Iqbal Day); November 7th (Eid al-Adha); December 6th (Ashura); December 25th (birth of Quaid-i-Azam). (Ashura, Eid-i-Milad-un-Nabi, Eid al-Fitr and Eid al-Adha are dependent on the Islamic lunar calendar, and their dates may therefore vary slightly from those listed)

Official name

Islamic Republic of Pakistan

Form of state

Federal parliamentary democracy

The executive

Asif Ali Zardari was elected president in September 2008. Yusuf Raza Gilani is the prime minister and head of the government

National legislature

The National Assembly (the lower house) has 342 seats, 272 of which are elected on a first-past-the-post basis. Of the remainder, 60 are reserved for women and ten for non-Muslim minorities; they are allocated, on the basis of proportional representation, to parties that win more than 5% of the directly elected seats. The Senate (the upper house) has 100 members. Of these, 22 are elected by each of the four provincial assemblies, eight are tribal representatives and four are representatives from the lower house

National elections

Elections for the National Assembly took place in February 2008; the next National Assembly election is due in 2013. A presidential election was held in September 2008; the next presidential poll is due to take place in September 2013. An election for one-half of the seats in the Senate was held in March 2009; the next Senate election (also for one-half of the seats in the chamber) is due in March 2012

National government

The Pakistan People's Party (PPP) and the Pakistan Muslim League (Nawaz), or PML (N)-the two parties that won most seats in the February 2008 National Assembly election-led a coalition government until August of that year, when the PML (N) left the coalition. Since early May 2011 the government has been a coalition led by the PPP and including the Pakistan Muslim League (Quaid-i-Azam), or PML (Q), and the Muttahida Qaumi Movement (MQM) as partners

Provincial government

Elections for Pakistan's four provincial assemblies were held in February 2008 alongside the National Assembly election. The provinces enjoy considerable autonomy, and this has caused tensions with central government

Main political organisations

PPP; PML (N); PML (Q); Muttahida Majlis-i-Amal (MMA, which comprises six religious parties, including Jamaat-i-Islami and Jamiat-i-Ulema-i-Islami); MQM; National Alliance (comprising several small parties led by the Millat Party); Awami National Party (ANP); Tehrik-i-Insaf (TI); Jiye Sindh Qaumi Mahaz

President: Asif Ali Zardari

Prime minister: Yusuf Raza Gilani

Key ministers

Commerce: Makhdoom Amin Fahim

Defence: Chaudhry Ahmed Mukhtar

Finance: Abdul Hafeez Shaikh

Foreign affairs: Vacant

Industries & production: Manzoor Ahmed Wattoo

Information & broadcasting: Firdous Ashiq Awan

Interior: Rehman Malik

Investment: Saleem Mandviwalla

Labour & manpower: Khurshid Ahmed Shah

Law, justice & parliamentary affairs: Babar Awan

Planning & development: Makhdoom Shahabuddin

Privatisation: Naveed Qamar

Central bank governor

Shahid Kardar